Business of Law

Half of firms miss billing goals and majority of partners resist change, says new survey

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A rapidly changing and more competitive legal market means half of U.S. law firms are not meeting their billable hour targets and nearly seven in 10 partners resist efforts to change, according to a new survey from Altman Weil.

While largely rebounding from the recession 10 years ago, the 2018 Law Firms in Transition survey says firms are now met by “a more volatile marketplace characterized by client demands for greater value at lower prices, non-traditional competitors taking market share and new technologies disrupting the status quo.”

According to the report, 49 percent of law firms failed to meet their annual billable hour targets in 2017, while 51 percent say their equity partners are not busy enough; 59 percent report non-equity partners are underutilized; and 83 percent report they have some lawyers who are chronic underperformers.

The survey says 45 percent of respondents reported their revenue per lawyer (RPL) rose in each of the last three years, while nearly 44 percent reported that their RPL was mixed. Just over 11 percent reported flat or declining RPL.

“Unlike the recession and its aftermath, the threat to law firms in 2018 is broader and more nuanced,” says Tom Clay, Altman Weil principal and survey co-author, in a release. “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.”

Altman Weil’s numbers track similar findings from other studies.

A 2018 report from Georgetown University and Thomson Reuters tells the story of a stagnated legal market. Since 2010, demand for law firm services has been flat; collection of billed time is down; and attorney productivity is on a slow slide.

Illustrating the decreased demand, Altman Weil’s survey found 70 percent of reporting firms are losing business to in-house law departments, 26 percent have lost business to improved technology tools in direct competition with law firm services and 16 percent are losing business to alternative legal service providers.

Interestingly, 9 percent of law firms say they are losing work to the Big Four accounting firms—Deloitte & Touche, Ernst & Young, KPMG and PricewaterhouseCoopers. That percentage triples when only considering firms with over 1,000 lawyers. Forty-six percent of all firms said the Big Four were a potential threat.

While the Big Four do not claim to practice U.S. law, some of the firms have set up law firms in the U.S. to practice international law, like PwC’s ILC Legal, which opened last year in Washington D.C. Others offer legal adjacent services like e-discovery and process management.

While these larger trends creating a more competitive market are not new, the report notes that half of firms “do not project a distinct and compelling value that differentiates them from” competitors. Adding to their trouble, 69 percent of firms have partners that “resist most change efforts.”

At the same time, 85 percent of reporting firms say they are talking with clients about pricing. Nearly 80 percent believe that non-hourly billing is a permanent trend.

This is the 10th year of the survey. Conducted in March and April, the survey attempted to poll managing partners and chairs at all U.S. firms with 50 or more lawyers—801 in total. Surveyors received responses from 398 firms. This included 45 percent of the 500 largest American law firms and 52 percent of the AmLaw 200, according to the release.

The data was not published with the survey.

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