US survey shows legal market changes
United States legal management consultants Altman Weil have released the results of their 2018 Law Firms in Transition Survey.
The survey was conducted in March and April 2018 and was sent to 801 US firms which had 50 or more lawyers. Of these, 398 (49.7%) responded.
It was the 10th annual survey, and Altman Weil says that over the last decade their survey has tracked a continual shift in awareness, acceptance - and some persistent resistance - to legal market change.
"Unlike the recession and its aftermath, the threat to law firms in 2018 is broader and more nuanced,” says Altman Weil principal and survey co-author Tom Clay.
"It's not just an economic threat. Now there are clear systemic disruptors in play that pose a threat to the sustainability of the traditional law firm business model."
Among the key findings of the 2018 survey:
Under-performing lawyers: 49% of law firms failed to meet their annual billable hour targets in 2017; 51% of all firms say their equity partners are not busy enough; 59% of firms report non-equity partners are underutilized; and 83% of firms report that they have at least some chronically under-performing lawyers.
Widespread performance volatility: While 45% of law firms report their revenue per lawyer (RPL) was up in each of the last three years, an almost equal number (44%) said their RPL was both up and down over the same period. In 11% of firms, RPL was flat or down in all three years. Firms under 250 lawyers were more likely to report performance volatility over time.
Non-traditional competitors taking market share: Aside from traditional law firm competitors, 70% of firms are losing business to corporate law departments in-sourcing legal work; 26% of firms have lost business to clients' use of technology tools reducing their need for law firm services; and 16% are losing out to alternative legal service providers. 9% of all firms are losing work to the Big Four accounting firms, and that number jumps to 27% in firms with over 1,000 lawyers.
The law firm value proposition: When asked if their law firm projects a distinct and compelling value that differentiates them from other similar firms, a full 50% of firm leaders said no. In a market characterized by intense competition for limited and shrinking demand, this lack of differentiation can be an enormous problem.
Firms not feeling enough pain: Despite under-performance, overcapacity, financial volatility, and encroaching competition from a variety of sources, 59% of law firms say they are "not feeling enough economic pain" to motivate more significant change in the way they deliver legal services.
Last updated on the 16th September 2019