Do you want to know what´s really happening in the legal market? Altman Weil´s Law Firms in Transition survey 2018 is once again an extremely valuable source of information and a must-read for all ambitious lawyers and law firm leaders. BTW: Response rate to the survey is a whopping 50%! 398 out of the 801 polled US law firms with 50 lawyers or more take this survey very seriously, and so should everyone else in the market.
Some highlights from Altman Weil´s analysis:
- After the recession, due to measure taken and the economic upswing in recent years, most firms are back to a reasonable level of financial comfort. However, this also creates feelings of false security as well as complacency. As a consequence, “in 69% of law firms, partners resist most change efforts” (three years ago the number was 44%, a sharp increase). If change occurs, it is very slow and almost exclusively reactive.
- Clients still demand greater value and efficiency and they are not going to stop wanting “reliably high-quality outcomes and client service at predictable, agreeable prices”.
- Demand for legal services is decreasing, in particular if provided in the form of law firm billable hours: ”Demand for law firm services will not return to pre-recession levels – ever. […] More work is going in-house, being redirected to non-law firm providers and being redefined or eliminated through the application of technology.”
- On the other hand, law firms are still making a lot of money, which prevents them from changing their service delivery model: ”59% of law firms are not feeling enough economic pain to motivate more significant change.”
- However, what´s at stake here is much more than how law firms survived the recession (or how they will survive the next). The critical issue for law firms is to find a sustainable business model for the long term in order to thrive in a rapidly changing market with very much increased client demands, a growing number of outside players and new technology that is changing the rules of play.
This is what Altman Weil recommends law firms to do (“We strongly recommend acting with urgency on each of these things”):
- Stop looking inward to fix your internal issues. Look outward instead and ask some hard questions: How will you become more client-centric? How will you provide more efficient legal services and added value for clients?
- Dare to experiment with new approaches to efficiency, staffing and pricing. Budget time and money for this and embrace learning from early mistakes. Build on what works.
- Pay close attention to the firm´s greatest assets: its humans.
- Differentiate your firm from your competitors. Since clients are clearly focused on efficiency and value, this is a good starting point. Then ask your clients whether you got it right.
- Don´t waste a good crisis. Find the people in your firm who have a sense of urgency and care deeply about the firm´s future. Support these people in their efforts to innovate with money and resources and leadership backup.
What are the positive news?
There are a lot of silver linings in this survey, too. Since I am passionate about efficiency and good Legal Project Management, the following ones make me especially happy:
- “Firms that have committed to ‘ongoing project management training and support’ reported significant improvements in firm performance as a result of their sustained investments. Short-term or episodic investments were not shown to deliver anywhere near the same results.”I could not have put it in better words!
- 42% of law firms routinely change the way work is delivered and projects are staffed if they give a discount or cap for a matter. Equity partners in those firms are more likely to see their profits increase. The other 58% should follow that example.
- 56% of law firms initiate conversations with their clients about matter management efficiency and 94% think that improved efficiency will be a permanent trend.
Download the Altman Weil Law Firm in Transition report 2018 here; it´s free and it´s priceless.