Posted by: johnocunningham | July 2, 2013

Accelerating Market Changes Impacting Law Firms

The fifth annual “Law Firms in Transition” survey has been released by consulting firm, Altman Weil, and it highlights some of the many changes that law firm leaders are now recognizing and adapting to, including:

  • Flat or shrinking demand for legal work;
  • Competition from lower-priced, non-traditional providers; and
  • Continued downward pricing pressure, even from coveted clients that are financially secure.

Conducted in the spring of this year, the survey reportedly polled managing partners and chairmen at 791 U.S. law firms, with 50 or more lawyers. Altman Weil also noted in their report that they obtained completed surveys from 37 percent of the AmLaw 250, and 30 percent of all recipients.

What I find most interesting about this report is that only 5 percent of law firm leaders considered their partners to be “highly aware” of the changing marketplace demands, and only 2.2 percent described their partners as “highly receptive” to needs for change.  Overall, leaders gave their partners a “6” (on a scale of 1 to 10) for marketplace awareness, and just a “5” for “adaptability.” This says to me that those charged with leadership are seeing the landscape, but not communicating it well enough to their partners.

Another interesting point is that 40 percent of firms now outsource at least some non-lawyer functions, up from 15.7 percent just a few years ago, and nearly 20 percent of the top 250 law firms now outsource some of their legal work to be competitive. Thus, the days when law firms scoffed at the notion of utilizing contract lawyers and other non-traditional solutions are coming to a close.

Consistent with surveys I have done of General Counsel, Altman Weil found that non-hourly billing still remains more talked about than utilized, with alternative billing arrangements accounting for only about 10 percent of fees collected (with a greater percentage of clients pursuing hourly discounts).

Perhaps the most striking finding to some readers will be the priorities of law firm leaders. When asked about their greatest challenge on the near-term horizon, the greatest number replied that it was “increasing revenue” and “generating new business” was second. As the authors of the report noted, “It is striking – and disturbing – that delivering value to clients is… eighth on the list, mentioned by just 5.6 percent of law firm leaders.” The report also noted that “improving efficiency” is further down the list, cited by less than 3 percent of respondents.

Clearly, more law firm leaders need to grasp the business axiom that delivering value and doing so efficiently is the key to generating new business and gross revenue.

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