Posted by: johnocunningham | June 23, 2016

Market Share Growth for Some Law Firms, Bad News for Others

Sophisticated corporate clients are sharpening their focus on legal service efficiency and return on investment, creating opportunities for proactive law firms that are using technology, knowledge management, process improvement and project management to cut the total cost of legal products and services.

The 8th annual Altman Weil “Law Firms in Transition” survey, which included responses from chairmen and managing partners at 356 U.S. law firms with 50 or more lawyers, demonstrated that indeed proactive firms are benefiting from their ability to change with the times, while other firms are increasingly being abandoned by clients.

Firms that are proactively initiating conversations with clients about alternative fee arrangements and ways to control costs are faring best, with 84 percent of those firms reporting that their growing number of non-hourly projects are at least as profitable as their hourly projects. Overall, 65 percent of law firms are still seeing profit per partner increases, partly driven by higher rates. But in this highly competitive environment, close to one quarter of all firms saw decreasing profits per partner, and nearly half of those firms lost more than 4 percent on the bottom line.

The message should be clear by now – clients are searching for both performance and value. Firms that don’t make the cut are in trouble. That does not have to mean that firms must drop their hourly rates to survive, but they do have to figure out a way to deliver legal products and services more efficiently, giving them an opportunity to actually raise hourly rates if they can figure out how to spend fewer hours on delivery by using technology, knowledge management, process improvement and project management.

For law firms that are using these tools to deliver more efficiently, meaning faster response times and lower total costs, there is a huge opportunity developing. These firms can win market share by measuring, summarizing and communicating their improvements in turnaround times and bottom line delivery costs.

The other firms who are ignoring the marketplace push for efficiency will find themselves among the 68 percent who are losing business to corporate law departments or the 82 percent that see erosion caused by non-traditional service providers who are finding ways to compete for less.

A few of the other tid-bits from the Altman Weil survey include the following:

  • More than half of firms are using part-time lawyers and contract lawyers to deliver at lower costs (a trend that I suspect is very client-driven, based on what I hear from the staffing industry)
  • More than half of firms are now using knowledge management programs and technology tools to lower costs
  • More than two-thirds of all firms are developing data on the cost of services sold so that they can better analyze and control costs while also improving fixed fee forecasting and proposals (and most of those firms have hired pricing directors or staff equivalents to help with pricing and cost analysis)

An executive summary of the “2016 Law Firms in Transition Survey” is worthwhile reading for those in law firms who are trying to stay on the leading edge of competition for clients.



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