Law Firm Articles

Law Firms in Transition 2018: An Executive Summary

Now in its tenth year, with half the universe of US law firms with 50 or more lawyers participating, the Law Firms in Transition Survey has become a unique resource for insight on law firm strategy and the opinions of firm leaders. The annual survey has tracked a continual shift in awareness, acceptance – and some persistent resistance – to legal market change. As market perceptions among law firm leaders have evolved over the last decade, we have seen new operational tactics emerge and take hold in some firms resulting in real improvements in profitability and long-term sustainability.

A decade of change: 2009-2018

In 2009, US law firms were confronting the effects of the Great Recession and facing market dynamics they had never faced before. Corporate client purchasing strategies changed quickly and significantly. Clients were pulling back on large amounts of legal work, canceling projects, railing about egregious inefficiencies in law firm service delivery, and demanding and receiving enormous discounts on hourly rates. Lawyers who had consistently billed 2,000 hours a year saw their work all but dry up. Senior partners, watching their retirement accounts plummet, dug in their heels and resolved not to retire.

Law firms reacted by laying off thousands of (mostly younger) lawyers and staff and withdrew their offers to new graduates. Cost-cutting became the norm and major expenses were deferred. Many firms hunkered down and went into survival mode. Pundits, law firm leaders and, yes, some consultants issued hyperbolic proclamations that law practice would never be the same.

Altman Weil’s Law Firms in Transition Survey was born out of the confusion and anxiety of that time. Our objective was to assess the nature and disruptive influence of the recession and its aftermath, gather hard data on what law firms were doing in response to new challenges and opportunities, and determine which responses were achieving the best outcomes. We sought to provide clear, credible information that would facilitate law firm planning and operational decision making.

Ten years on, we think law firms face a different kind of threat.  The recession was a ‘known’ event (albeit severe) to be endured and managed – as law firms had done in prior economic downturns.  The threat in 2018 is broader and more nuanced, arising primarily from the sweeping force of technology evolution over the last two decades that has resulted in the commoditization and commercialization of more and more legal services.  This new threat wasn’t caused by the recession, but the recession was clearly an accelerant.

Naturally, law firms have focused on their financial health and performance in the aftermath of the recession.  Although few have recovered to pre-recession levels, most have achieved a reasonable level of ‘comfort’ on the rising tide of general economic recovery.

We think this creates a false sense of security and a mis-direction of focus in many law firms.  In reacting to the last crisis, they fail to recognize the next.  Most law firms continue to plan for short-term, incremental improvements in performance, while deferring or slow-walking more forward-looking actions to address long-term, systemic threats.

Download the Executive Summary to continue reading…

Download Executive Summary