As the recession took hold, professional firms realised they needed to do more and headcount started to be reduced. Redundancy programmes for the first few firms hit the headlines and some sector publications 'helpfully' published league tables of the firms engaging in this. That was until it was clear that all firms were making headcount reductions and the story wasn't news any more.

However, for many professional firms trading is still tough. Income levels are, at best, flat and costs are rising in line with inflation. For many this is forcing a further rethink of how additional cost savings can be made.

More senior (i.e. expensive) people are being let go and replaced with more junior people. Partners are becoming more involved in the delivery of work, rather than just managing the team, as the team has to be much smaller to accommodate the fee. The days of one secretary to one partner seem long gone and secretaries are being retrained to undertake a much wider role.

There is increasing use of non-qualified support for the partner and London and regional firms joining up informally to share work. Firms are also looking at service companies and whether these operations could also be used to sell their services to third parties and therefore become 'profit centres', perhaps branded separately from the firm.

More innovatively, previous highly competitive firms are joining together as 'buying consortia' and comparing costs of suppliers, with the firm with the cheapest supplier then sourcing goods and services on behalf of all firms in the consortia.

For most professional firms, this sort of action is seen as radical and a significant change from the practices they used to deploy. And yet, if you speak to any of the potential third party investors who are eyeing up the legal market when it becomes deregulated, there is so much more that could and should be done. When there is real focus on profitability – that is a true measure of profitability, not meaningless figures like PEP – that is when hard radical decisions are really made. Much has been talked about the legacy of the Legal Services Act, but one that might benefit us all will be clear examples of how to run really effective, lean-cost, professional services businesses.

"The cost of living is going up and the chance of living is going down"

Flip Wilson (1933 – 1998)

For further information, please contact Giles Murphy, head of professional practices.