Titled “Law Firms in Transition 2012,” the Altman Weil “flash survey” polled managing partners and chairs at 792 U.S. law firms with 50 or more lawyers. “Completed surveys were received from 238 firms (30%), including 40% of the 250 largest U.S. law firms.”
The executive summary provides a sober outlook of what’s ahead:
“The question is no longer whether to expect permanent changes in the competitive environment—those changes have arrived and are here to stay. Strong majorities of law firm leaders believe the practice of law will be permanently characterized by pricing pressures, further commoditization of legal work, new forms of competition and thus a need for improved practice efficiency.
“Firms have done the urgent things necessary to support profitability in the short term. Maintaining and growing profitability will be much more difficult going forward and will require addressing key elements of the business model.
“As for growth in volume, a return to the previous level of legal matters—if that occurs—will not result in previous levels of billable hours at high billing rates. The forces of commoditization have taken hold.”
I found some of the findings surprisingly specific and helpful. For example, the following broad conclusions were paired with specific findings:
- “Opportunity still exists for firms that are willing to make the effort to figure out how to use alternative fee agreements effectively.”
- “The pre-recession associate hiring binge is over, replaced by much more cautious and conservative hiring policies.”
- “The retirement of the Baby Boom generation is a significant concern.”
Perhaps most interesting to me were the findings about hiring and training, for in almost no other area are lawyers and law students most affected. Altman Weil found:
“Firms continue to explore and invest in alternatives to hiring and developing newly minted lawyers:
- Nearly a quarter of firms intend to increase their number of non-partner-track associates in 2012.
- More than 80% of firms plan to maintain or increase their number of contract lawyers and paralegals in 2012, who in many cases will do work that associates used to do.
- Two-thirds of firms (66%) think increased use of contract lawyers is a permanent trend—a 14-point jump since 2010.
- Looking five years ahead, firms expect more reductions in partner-track associates than in non-partner-track associates or paralegals.”
In what may be one of the most candid bits of law writing to be penned in 2012, the researchers added:
“The cost of training will shift from the backs of clients to law firms. ‘Accidental training’ while billing huge numbers of hours is not a workable strategy going forward. Clients won’t allow it.”
“Accidental training”—you’ve got to love that.
Another helpful commentator reviewed the survey results and concluded:
“The 2012 Law Firms in Transition Survey reports that 92% of law firm leaders believe that more price competition will be a permanent fixture of the post-recession legal marketplace. This is more than twice the 42% who thought so in 2009 when the survey was first conducted.
“In 2012, 84% of firm leaders think more commoditization of legal work will be a permanent change, while only 26% of those surveyed thought that was the case in 2009. In 2012, 68% of firm leaders believe that there will be fewer equity partners in law firms than in the past, up from 23% who held that opinion three years ago. Today 55% of respondents think smaller first-year classes are a permanent trend, compared to a mere 11% who thought so in 2009.”
The survey also asked about confidence levels among law firm leaders, and their concerns for the future. Chapter coverage includes a focus on clients; economics and profitability; alternative fees; lawyers and staff; growth; and succession planning.
Do these findings reflect your own experience, and your own predictions? Even if you’re uncertain how to respond to its findings on hiring and the like, what do you think about “the forces of commoditization”? Are clients more likely to see legal work as a commodity today? And what outcomes flow from that?Follow @azatty