Archive for the ‘Law firm management’ Category

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.

More bad news on law firm financial performance

November 16th, 2012 by Altman Weil

“The drumbeat of bad financial news continued for the legal industry Thursday, as yet another survey of large law firms showed demand for their services essentially flat through the first three-quarters of the year and revenue growth for 2012 likely to fall short of last year’s single-digit gains.

The Wells Fargo Private Bank Legal Specialty Group survey found that, on average, the 115 participating firms—a group that included 60 Am Law 100 firms, 40 Am Law Second Hundred firms, and 15 boutique firms—took in 3 percent more revenue during the first three quarters of the year than they did during the same nine-month period last year. Profits, meanwhile, were up just 1.5 percent. “

The survey found billable hours down slightly for equity and non-equity partners and associates, realization rates down, and expenses up compared to the same period last year. 

What are law firms to do?  The article concludes:

“One way firms may be coping with the perfect storm of slackening demand, increased expenses, and falling realization rates is by raising their fees: Billing rates were up 3.4 percent through the first nine months of the year, and two-thirds of the firms surveyed said they plan to raise billing rates between 3 and 4 percent overall next year.”

Read it at The AmLaw Daily

3rd quarter law firm performance

November 13th, 2012 by Altman Weil

The Citi Private Bank Law Firm Group is out with its latest quarterly update on the legal profession.  Their report is based on data from 182 law firms - 131 in the AmLaw 200 and 51 others. 

“Results from the first nine months of 2012 are in, and it appears increasingly likely that the legal industry will fall short of 2011’s low single-digit profit growth. Not only did third-quarter revenue and demand growth slow from the first half of the year, demand actually posted a slight decline (-0.1 percent) compared to the third quarter of 2011, which marked the beginning of the current prolonged period of soft demand. Although expense growth also slowed during the third quarter of 2012, it continued to outpace revenue growth; in fact, the gap between the two widened, putting a further squeeze on profit margins.”

Other highlights (or lowlights) included:

  • Aside from the decrease in demand, another primary reason for the drop in revenue growth in the third quarter was a slowdown in the collection cycle.
  • Through the first nine months of 2012, larger firms generally underperformed the rest of the industry, and those with the greatest global presence fared the worst.
  • Rate increases continued at about the same pace as last year, but are still running at approximately one-half the level of historical averages.
  • After a 0.3 percent increase in 2011, equity partner head count has edged up at only a slightly greater pace (0.4 percent) through the third quarter of 2012.

Read it at The AmLaw Daily

Law firms’ greatest challenges

August 2nd, 2012 by Altman Weil

The 2012 Law Firms in Transition Surveyasked firm leaders to comment on their firms’ greatest challenges in the next 24 months.  In an Altman Weil special report, we’ve identified the top areas of concern, analyzed responses by firm size, and included a selection of sample comments from firm leaders.

Read it at Altman Weil

Law firm financial performance 2011

February 13th, 2012 by Altman Weil

Citi Private Bank is out with its preliminary report on how law firms fared in 2011.  Their results are based on data from 178 firms, including 81 AmLaw 100 firms, 47 AmLaw 200 firms, and 50 other firms.

“For law firms, 2011 was a tale of two years. The strong demand momentum coming into 2011, which continued through the first six months, caused many law firm leaders to believe that a degree of certainty had been attained. The second half of the year was a rude awakening as demand, particularly in transactional work, withered away and has yet to bloom again.

So, while revenue growth in 2011 exceeded the prior year, even greater expense growth squeezed margins and resulted in a PPEP (profits per equity partner) increase of just 3.3 percent  vs. 7.4 percent in 2010. In 2010, the industry was rebounding from a weak 2009 which made higher year-over-year increases easier to attain—not so in 2011.

Revenue growth of 4.1 percent in 2011 was due to moderate rate increases, a modest shortening in the collection cycle and a slight increase in demand. With low year-end inventory growth, the industry might be in for a slow start to collections in 2012, and if tepid demand growth continues into the year, it will create a challenging revenue environment.”

Read it at the AmLaw Daily

Innovative lawyers 2011

November 7th, 2011 by Altman Weil

The Financial Times recently released a new report, US Innovative Lawyers 2011, and published a ranking of the highest scoring firms, The FTLaw 25.  They describe their efforts as “an alternative way to measure law firm success.”

“It breaks with the ­traditional method of looking at fees and profits as the measure of success. As the category rankings are based primarily on client reviews, the FT Law 25 shows firms that were consistently found to be creating transformative solutions for clients.”

and…

“For all the firms in the FT Law 25, culture is of the utmost importance to the promotion of innovative lawyering. However, this culture does not have to be homogenous.

The ranking’s top 10 contains three firms that originate from the west coast: Orrick, Herrington & Sutcliffe; Latham & Watkins; and Paul Hastings. All three have cultures that are different from the east coast firms, but are strong innovators in their own right with a growing international footprint. Also notable are the Chicago firms of Seyfarth Shaw, Kirkland & Ellis and Mayer Brown, which bring a different but powerful style to their innovations.

What is common to all the firms in the FT Law 25 is their commitment, their ability to adapt and to work together in the best interests of business to unusual and important effect.”

The Financial Times has written a series of profiles of the top innovations - in both law practice and law firm management.

Read it at Financial Times [free registration required]

Law firm leaders are confident in face of changing marketplace

May 25th, 2011 by Altman Weil

The newly released Altman Weil Law Firms in Transition Survey 2011 finds confidence high among US law firm leaders in firms of all sizes.

Overall economic performance is rebounding, with two thirds of all firms surveyed reporting increases in gross revenue in 2010 and nearly three quarters reporting increases in revenue per lawyer and profits per equity partner.  Standard hourly billing rates are up significantly this year, with firms reporting or planning a median 4.0% increase in billing rates for 2011.  Continued reductions in overhead costs and the strategic shrinking of firms’ ownership ranks are contributing to profitability.

“If firms are finding their feet again post-recession, it is on new ground with a number of new factors in play,” said Altman Weil principal Tom Clay.  “And although most firm leaders seem to recognize the changes, it’s not yet clear whether they will be able to manage them effectively.”

Following are some selected highlights:

  • 67% of law firms reported an increase in gross revenue in 2010; revenue per lawyer was up in 73% of all firms; and profits per equity partner rose in 73% of firms.
  • Overhead costs were down in 53% of firms in 2010.
  • The amount of non-hourly billing in 2010, measured as a percentage of revenue, increased in 58% of all firms and in 81% of firms with 250 or more lawyers. 
  • Only 12% of firms report that alternative fee arrangements are more profitable than hourly billing. 
  • 27% of law firms de-equitized partners in 2010 and 16% will do so in 2011.  32% of firms made fewer partnership offers in 2010 and 18% will do so in 2011.  Larger firms are more likely to take these actions than smaller firms.  
  • 92% of all law firms plan to acquire laterals partners in 2011. 
  • 87% of law firms are planning to add associates to their ranks in 2011.   Only 18% of firms plan to remove associates this year, down from 42% in 2010.  
  • Only 18% of those surveyed think that reduced associate salaries will be a permanent trend, down from 32% who thought that last year.
  • 60% of firm leaders expect that the increased use of contract lawyers will be a permanent trend, up from 52% last year.
  • 41% of all firms believe that outsourcing legal work will be a permanent part of the new legal market. 
  • 47% of all firms are concerned that they are not prepared to deal with the retirement and succession of Baby Boom lawyers – the top concern identified.
  • 94% of law firms believe that the focus on practice efficiency is a permanent change in the profession - the number one trend identified.
  • Other top trends include more price competition (90%), fewer support staff (88%), more commoditized legal work (81%), more non-hourly billing (75%), and fewer equity partners (68%).
  • Only 16% of firm leaders expect permanently lower profits per partner.   
  • Leaders score their confidence as an “8” on a zero to ten scale when asked about their firms’ ability to keep pace with change.

Conducted in April and May 2011, the survey polled Managing Partners and Chairs at 805 US law firms with 50 or more lawyers.  Completed surveys were received from 240 firms (30%), including 38% of the 250 largest US law firms.

The full survey is available online to download at: www.altmanweil.com/LFiT2011.

R&D culture for law firms

February 4th, 2011 by Altman Weil

Innovation does not come naturally to most law firms – which is why it can be a huge competitive advantage for firms willing to take the plunge.  Paul Lippe, in his ABA Journal column “The New Normal,” cites two examples of Littler Mendelson investing in innovation in the areas of internal legal research and high-volume administrative dispute work.  Littler is:

“…making a short-term investment (and therefore necessarily impacting near-term shareholder distributions) to be able to create the capacity to deliver better value at lower costs, thus also impacting short-term revenues to some extent, but creating a better platform for long-term revenues.”

Read it at ABA Journal

Strategic planning 2011

February 1st, 2011 by Altman Weil

Strategic planning never goes out of style.  Adam Smith Esq. blogger (and AW alliance partner) Bruce MacEwen writes about a McKinsey & Company article outlining “ten tests that every solid strategy must be able to pass.”  Here they are:

Test 1: Will your strategy beat the market?
Test 2: Does your strategy tap a true source of advantage?
Test 3: Is your strategy granular about where to compete?
Test 4: Does your strategy put you ahead of trends?
Test 5: Does your strategy rest on privileged insights?
Test 6: Does your strategy embrace uncertainty?
Test 7: Does your strategy balance commitment and flexibility?
Test 8: Is your strategy contaminated by bias?
Test 9: Is there conviction to act on your strategy?
Test 10: Have you translated your strategy into an action plan?

How would your firm do? 

Read it at Adam Smith Esq.

Fewer new partners, longer partnership tracks

December 20th, 2010 by Altman Weil

The New York Law Journal writes that the number of new partner announcements while up slightly from last year, still remains markedly lower than earlier in the decade. 

“Everyone’s being cautious,” said Ward Bower, a consultant at Altman Weil Inc. “The difficult experience they’ve had in de-equitizing and downsizing in the recession has led some firms to be more cautious in who they make partner going forward.”

While slower growth in firm profits may be one reason,  firm leaders point to other factors as well, including the long term outlook for particular practices. 

The article also cites a 2010 study by the National Association for Law Placement (NALP):

“The percent of firms that reported having a seven-year track nationally has fallen from 44 percent in 2001 to 39 percent in 2010, according to data collected by the National Association for Law Placement. Meanwhile, the percent of firms reporting an eight-year track has risen from 36 percent to 46 percent.”

Read it at New York Law Journal