Legal Industry Survey Shows Consensus on Trends, Gap in Responses

Large Firms Surpass Small Firms in Strategic Change Efforts

Newtown Square, PA, May 14, 2014 – The sixth annual Law Firms in Transition Survey shows broad consensus among law firm leaders on the changing nature of the US legal market in 2014, as well as an emerging gap between larger firms and smaller firms in their response to those changes.

“Many firms, especially firms with fewer than 250 lawyers, are not making sufficient investments in a future they acknowledge will be different – and different in seemingly predictable ways,” says Altman Weil principal and survey co-author Tom Clay.

Large majorities of law firm leaders responding to the survey agree that greater price competition, practice efficiency, commoditization of legal work, competition from nontraditional service providers, and non-hourly billing are all permanent changes in the legal landscape.  For the most part, these are changes that have been imposed upon them from without – from more demanding clients and more competitive newcomers who are challenging the rules of legal service delivery.

When asked about the most likely change agent in the legal market over the next ten years, 34% of law firm leaders identified corporate law departments as the force most likely to lead change; 32% chose technology innovation; and, 15% selected non-law-firm providers of legal services.  Only 10% of respondents believe that law firms will take the lead in reinventing the legal market.

Firm leaders also agree on the consequences of the shifting marketplace, although with less unanimity.  Most expect to see smaller annual billing rate increases, fewer equity partners, more part-time and contract lawyers, reduced leverage, and slower growth in profits per partner. 

On issues of strategic change, this year’s survey showed larger firms (those with 250 or more lawyers) clearly doing more than their smaller-firm colleagues. 

Nearly half of all firms with 250 or more lawyers report changing their strategic approach to pricing, while only 22% of firms with 50 to 249 lawyers are doing so.  In the area of efficient legal service delivery, 54% of the large firm group are pursuing change, compared to 34% of the smaller firms.  On lawyer staffing strategy, 59% of larger firms report making significant changes as opposed to 41% of the smaller firms. 

“Larger firms’ bias for longer-term strategic change is most likely a pragmatic response to greater pressure they are feeling from the large corporate clients that larger firms are more likely to serve,” according to Clay. 

The survey asked law firm leaders which was the greater driver of decision-making in their firms in 2014: “Long-term investment in new pricing and service delivery strategies to lock in your most valuable clients,” or “Short-term profitability to lock in your most valuable partners.”  The overall response showed firm leaders nearly split – 56% said long-term, client-focused investment was the greater driver, and 44% chose short-term profitability to hold on to key partners. 

Larger firms were somewhat more likely to be driven by long-term considerations.  Mega-firms – those with 1,000 or more lawyers – clearly broke from the pack on this question.  Eighty-six percent of that group indicated that their decision making is long-term in nature and designed to lock in clients.

Clay cautions smaller firms to take note:  “Regardless of the reasons, once one segment of the market starts moving toward a new more client-focused model and resetting market expectations, other firms will need to fall in step or they will inevitably fall behind.”

Survey Methodology
Conducted in March and April 2014, the Law Firms in Transition Survey polled Managing Partners and Chairs at 803 US law firms with 50 or more lawyers.  Completed surveys were received from 304 firms, including 42% of the 350 largest US law firms.

The complete survey report includes sections on industry trends, pricing and alternative fee arrangements, efficiency of legal service delivery, lawyer and non-lawyer staffing, law firm growth, economic performance and the future of the profession. 

It is available to download at: www.altmanweil.com/LFiT2014.

About Altman Weil
Founded in 1970, Altman Weil, Inc. is dedicated exclusively to the legal profession.  It provides management consulting services to law firms, law departments and legal vendors worldwide.   The firm is independently owned by its professional consultants, who have backgrounds in law, industry, finance, marketing, administration and government.   More information on Altman Weil can be found at www.altmanweil.com.

Contact Information

Survey Co-Authors:

Thomas S. Clay
(610) 886-2015
tsclay@altmanweil.com

Eric A. Seeger
(267) 908-9781
eseeger@altmanweil.com

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