New billing rate study

April 17th, 2012 by Altman Weil

Software company, TyMetrix Legal Analytics, in association with Corporate Executive Board, has announced publication of the 2012 Real Rate Report.  The report analyzes law firm billing rate trends based on data from $7.6 billion in legal bills from 4,000 law firms, issued between 2007 to 2011. 

TyMetrix shared these highlights:

  • The Most Expensive Lawyers Are Getting More Expensive. Rates for the highest billing partners ($800+ per hour) grew nearly three times faster than rates for the lowest billing partners (less than $300 per hour), and rates for the highest billing associates ($500+ per hour) grew nearly five times as fast as the lowest billing associates (less than $200 per hour).
  • Clients Are Willing to Pay a Premium for Large Law Firm Work. The percentage increase for firms with more than 1,000 lawyers was double what the smallest firms experienced. The average hourly rates from 2009-2011 for law firms with 501-1,000 lawyers increased by 13 percent compared to a 4 percent rate increase at law firms with 1-50 lawyers.
  • Lawyers Charge Different Hourly Rates to Different Clients For Similar Work.  In 2011, 90 percent of lawyers charged different rates for similar types of work. Intellectual property and commercial contracts practices had the highest percentage difference in rates (23.1 percent and 18.7 percent, respectively), while regulatory and finance/securities/banking saw the lowest percentage difference in rates (about 11 percent).
  • Higher Spend Equals Higher Rates - Consolidation Not Necessarily Associated with Lower Hourly Rates. Some in-house legal departments have had success consolidating work into a single law firm, but the data reveals that rates actually tend to increase as a law firm takes on more work from a client.
  • Use of Entry-Level Lawyers Can Add Significant Costs to Legal Matter.  The data confirms that the use of entry-level lawyers (associates with less than 2 years’ experience since passing the bar exam) continues to decline.  Notably, the data also show that matters staffed with entry-level associates tend to cost as much as 20 percent more.

Read it at TyMetrix

Needless to say, this is interesting stuff and has gotten some attention:

The AmLaw Daily talked to TyMetrix:

“What it’s really showing is that there’s an increased premium being paid for experience and expertise,” says Julie Peck, vice president of strategy and market development at TyMetrix. “Some parts of the lawyer market are able to raise rates much more quickly, and are more impervious to economic forces than others.”

Read it at the AmLaw Daily

The Wall Street Journal talked to some General Counsel about the report’s findings:

“I’m really seeing pretty much everybody across the board, big and small [law firms], trying to raise their rates. The small ones are not as successful,” said Lewis Steverson, general counsel for Motorola Solutions… “We get more push-back from the big firms.”

and

“There are a large number of lawyers today who find themselves in the uncomfortable position of being, for lack of a better phrase, commodity service providers,” said Ken Grady, deputy general counsel at footwear company Wolverine World Wide Inc. “You don’t see a lot of big rate increases being asked for in those areas, and that’s not something they expect to get.”

Read it at the Wall Street Journal (subscription required)

This entry was posted on Tuesday, April 17th, 2012 at 12:53 pm and is filed under Inside-Outside relationship, Law firm finance, Surveys. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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