2014: Law Firms in Transition

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When Altman Weil created the Law Firms in Transition Survey in 2009, there was a lot of hyperbolic commentary in the marketplace about the end of the billable hour, a coming wave of law firm collapses and the like. We wanted to know what law firm leaders were actually doing, analyze the most important trends as they took shape over time, inform law firms and industry observers as to the nature and pace of change in the profession and give practical advice on how law firms could compete more effectively in a challenging environment. To do this, we polled the chairs and managing partners of U.S. law firms with 50 or more lawyers, and we have continued to do so annually.

Now in its sixth year, the survey has largely achieved its original mission. Looking at six years of trend data, certain developments could not be clearer. The combined forces of intense competition, technological advances, commoditization of services, flat demand and more demanding buyers have created a legal marketplace that few law firm leaders now expect to return to the good old days of 6 to 8 percent annual rate increases, ever-rising law firm profitability and plenty of work for everybody. Those days have passed.

Rather, today’s leaders recognize that the legal economy will continue to be characterized by pervasive price competition, more commoditized legal work, technology replacing human resources, competition from nontraditional providers and more non-hourly billing, resulting in smaller annual billing rate increases, fewer equity partners, increased lateral movement, more contract lawyers, more part-time lawyers, reduced leverage, smaller first-year classes, fewer support staff, slower growth in profits per partner and a clear need for improved practice efficiency.

For better or worse, the playing field has become permanently redefined. Size, brand and client loyalties no longer always carry the day. As with any market disruption, there will be winners and losers. However, firms can pursue clear strategies to be among the winners.

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