Altman Weil Connect

Altman Weil Connect brings together news, research and commentary on the changing legal profession. We are monitoring the web for developments in law firm and law department leadership and management. Bookmark this page or sign up for the RSS feed to keep up with the latest news!

Most clients don’t want the lowest price available

October 30th, 2013 by Altman Weil

Altman Weil released its 14th annual Chief Legal Officer Survey last week, with lots of interesting data for corporate law departments as well as the law firms that serve them.  One of the most surprising survey findings involves pricing.  When asked about preferred outside counsel pricing scenarios, the over 200 Chief Legal Officers who participated in the survey overwhelmingly indicated that their preference is not for the lowest price they can get.

The survey outlined four possible law firm pricing options.  Here are client preferences:
 

  • Transparent pricing:  We want to understand how/why the price is set and have the opportunity to discuss changes - 36.4%
  • Guaranteed pricing: We want to know in advance what it will cost - 33.7%
  • Value-based pricing:  We want to pay a variable price based on the results we get - 20.3%
  • Lowest pricing: We want the lowest price available - 9.6%  
     

“If a rate discount is the only thing offered, law departments will certainly take it, but Chief Legal Officers are saying what they really want is predictability and control. So far this is a challenge that most law firms have been slow to address,” according to Altman Weil principal and survey author Dan Dilucchio.

Read it at Altman Weil

New legal industry surveys

August 8th, 2013 by Altman Weil

Here’s an update on a few noteworthy surveys that have been released this summer:

Law Firm Billing Rates

“For in-house counsel who want to do some comparison shopping on law firm billing rates, a new analysis from TyMetrix Legal Analytics and CEB shows… average hourly rate in 2012 for partners was $536.47, and for associates it was $370.25…. Partner rates went up 3.1 percent in 2012, compared to a 4 percent increase in 2011. Similarly, average associate rates increased 7.4 percent in 2012, versus 8.5 percent the year before.”

Read it at Corporate Counsel 

General Counsel Compensation:

“After across-the-board declines the previous year, compensation bounced back up in 2012 in every category of GC pay that [Corporate Counsel’s GC Compensation Survey] measures. Average total cash received rose 6.7 percent to $1,853,671, which is the highest figure we’ve seen … since 2000.”

Read it at Corporate Counsel

Law Firm Libraries:

The American Lawyer’s 12th annual Law Librarian Survey finds that, financial uptick not withstanding, the pressure to contain costs continues, clients are even more reluctant to pay for research than they were a year ago, and negotiations with vendors — never exactly a festive occasion — are still often contentious.  Overall, spending on outside vendors has held steady, with responding firms reporting an average 2013 library budget (including staff, print materials, electronic resources, etc.) of $6,194,015, compared to a 2012 average of $6,162,130. As in the past several surveys, increases in online spending were mitigated by cuts to print collections.”

Read it at The American Lawyer

A law firm gets serious about knowledge management

July 16th, 2013 by Altman Weil

Latham & Watkins is rewarding time spent on knowledege management (KM) in its bonus structure, according to The Lawyer, counting an hour spent on KM as equivalent to a billable hour. 

“Since its launch in April 2012, more than 860 KM and thought-leadership projects have started within the firm,” said [Latham’s Global Director of KM, David] Fitch. “That equates to around 50,000 hours contributed of attorney time.”

The range of KM projects Latham’s lawyers are involved in that generates credited hours includes drafting and updating of forms, organisation of precedent and know-how resources, the drafting of client alerts and other thought leadership pieces.”

Read it at The Lawyer

Changing your business model

June 21st, 2013 by Altman Weil

There’s lots of talk about the changing law firm business model, but how does a firm actually go about making such a big systemic change?  Addleshaws (a 600-lawyer UK law firm) has been working on re-engineering its service delivery model, and offers some insights on what they’ve done so far.

Read it at The Lawyer

New law school grads

June 20th, 2013 by Altman Weil

NALP has released their latest numbers on employment and starting salaries for new law school graduates.  The data represents the status of the Class of 2012 as of February 15, 2013 (about nine months after graduation).

 

  • Overall employment for 2012 grads is 85.5%, down for the 5th year in a row

  • 64.4% of graduates got a job requiring a JD, the lowest percentage NALP has ever recorded

  • Half of employed graduates found a job in private practice

  • Median law firm starting salary was $90,000, up from $85,000 last year

Read it at NALP

AFAs as opportunities

June 11th, 2013 by Altman Weil

Alternative fee arrangements, like other elements of the changing law firm business model, can be viewed as threats  or opportunities.  There’s an excellent and quick read in ABA’s Law Practice Today online magazine that suggests six ways to think about AFAs in a positive light.  Among other things the author points out that AFAs are “mechanisms for relationships,” and they “breed creative service offerings.”  We agree.

Read it ABA Law Practice Today

New survey on legal industry trends

May 22nd, 2013 by Altman Weil

Altman Weil has released its fifth annual Law Firms in Transition Survey. Conducted in March and April 2013, the survey polled Managing Partners and Chairs at 791 US law firms with 50 or more lawyers.  Completed surveys were received from 238 firms, including 37% of the 250 largest US law firms.

Some top trend data from the survey:

  • 96% of firm leaders think more price competition and greater practice efficiency are permanent changes in the legal market
  • 90% of leaders believe there will be more commoditization of legal work
  • 80% of leaders believe there will be more non-hourly billing arrangements
  • 79% expect more competition from non-traditional legal service providers
  • 45% of firms are working on more efficient legal service delivery
  • 29% of firms have changed their strategic approach to pricing since the recession
  • 91.5% of firms raised their overall billing rates for 2013, with a median increase of 3%
  • A median of 20% to 30% of all legal fees are discounted
  • A median of 10% of fees are generated from non-hourly billing

The complete 63-page survey report includes sections on industry trends, pricing and alternative fee arrangements, economic performance, law firm growth, lawyer staffing levels, succession planning, and the future of the profession.

It is available to download at: www.altmanweil.com/LFiT2013.

AmLaw 100 2013

May 3rd, 2013 by Altman Weil

The American Lawyer released its review of BigLaw economic performance for 2012 and the numbers are up, if modestly:

  • Revenue: up 3.4%
  • RPL: up 2.6%
  • PPP: up 4.2%

The magazine’s take on this:

“Revenue per lawyer is up not because firms added head count—that metric only nudged up 0.8 percent—but primarily as a result of positive economic indicators. Firms were able to raise rates, and their lawyers, as a rule, were able to bill more hours (although this varied widely by practice area). Profits followed a similar path. Net income edged up 4.2 percent, and profits per partner rose even as equity partner head count stayed flat. This suggests that firms posted real profit gains, as opposed to (ahem) adjusting their partner head count.”

Read it at The American Lawyer

Differentiating your practice

March 20th, 2013 by Altman Weil

Marketing expert Sally Schmidt is right on point the value of differentiation in today’s Attorney at Work. 

“Differentiation is perhaps the hardest concept for lawyers to embrace. I say “embrace” and not “understand” because most lawyers understand the concept of differentiation—they just can’t or don’t want to do it. Perhaps it’s because they like to handle a wide range of matters; litigators, in particular, often like to say they can litigate any issue. Perhaps they think that, by defining or limiting the scope of their message, they will lose out on opportunities: “If they think I do ‘X,’ they won’t send me ‘Y.’”

The reality is, if you are completely undifferentiated from other lawyers, people won’t send you “X” or “Y.”

Read it at Attorney at Work

Non-Equity Partnership Trends

March 12th, 2013 by Altman Weil

Since 1999, the Am Law 200 lists have tracked the number of non-equity partners in the 200 highest-grossing law firms in the United States. Between 1999 and 2012 there has been a significant change in those numbers.

In 1999, 65.5% of Am Law 200 firms had non-equity tiers; in 2012, that number had jumped to 84.5%.  Seventeen percent of all partners in two-tier firms were non-equity partners in 1999.  By 2012, 39% of all partners were in a non-equity tier.  Finally, the average number of non-equity partners in a two-tier firm went from 35.5 in 1999 to 108.8 in 2012.

The growth of non-equity partners as a lawyer category has reshaped law firms.  Many argue that the non-equity tier provides an easy way to offer the pride of partnership to associates, to introduce senior lateral hires, to increase billing rates of senior associates and elevate their status in the market — or to park underperforming equity partners.  However, it also builds a seemingly permanent class of high-priced leverage whose average billable hours are below those on either side of them (senior associates and equity partners).

It is critical for two-tiered firms to rethink their strategic intent with non-equity partnerships, including:

  • Analyzing short and long-term impacts on firm profitability
  • Rethinking non-equity compensation
  • Establishing tougher standards for entry and retention in the non-equity tier
  • Regularizing performance evaluations
  • Systematically managing transitions out of the tier

These steps will enable two-tier firms to begin the process of optimizing the productivity and profitability of non-equity partners.