An annual survey of law firms with 50 or more lawyers shows that more firms improved their financial performance last year and are looking to the future with more optimism than previous editions of the survey suggested.
The 2019 Law Firms in Transition Survey by Altman Weil was conducted this spring and polled managing partners and chairs at 810 U.S. law firms with 50 or more lawyers. The results included responses from 49% of the 500 largest U.S. law firms and 46% of the Am Law 200.
“It’s pretty much in line with what we’ve experienced. We’re seeing more activity across the board in all areas of practice,” said Justin G. Klimko, president of Butzel Long. “I think a lot of people had a pretty big year in 2018 in the legal profession.”
For financial gains, 78% of firms reported higher gross revenue in 2018 compared with 2017. For billing rates, 61% of firms reported that their rates were more aggressive compared with previous years.
Demand for services has also increased, with 49% of firms saying demand has been up in each of the last three years. Last year, that figure was at 40%.
In productivity, 63% of firms said their equity partners were busy enough last year, which is the first time in six years that figure was higher than 50%.
The number of firms that met or exceeded their billable hour targets in 2018 increased from 51% to 60%.
Because of those positive figures, firms reported they aren’t feeling enough economic pain to improve process efficiency, as only three of 20 tactics to improve efficiency are being pursued by more than 50% of firms.
In terms of concerns, the possibility of a broad economic recession is the top worry, while there was less concern about competition from larger firms, more differentiated firms, disruptive technologies or alternative legal service providers.
On competition, firms reported that their best asset to distinguish their firm from others was personal relationships with clients and client service.
There seems to be a lack of long-term planning among the firms, as 37% of firms reported having set goals with a horizon of five or more years.
John J. Hern Jr., CEO of Clark Hill, said his firm participated in this year’s survey and the results were not surprising to him.
“In the corporate, real estate, international trade, immigration and employment spaces, the economy drives mergers and acquisitions activity,” Hern said. “It drives the movement of people across borders because our clients are busy, they’re growing and need more employees. The movement of labor bolsters our employment practice area because people are coming and going.
“Litigation has also been stronger because clients are in a spot where they can afford to litigate as opposed to not being in such a spot during the recession.”
Klimko said Butzel Long has seen more activity in all areas of practice, and the firm is benefitting from more activity in practice areas that hardly existed a few years ago.
“A good example is cybersecurity. A few years ago that wasn’t a practice area and now we have it and so do a lot of other firms. In addition to that, the traditional areas all have increased over the past year,” Klimko said.
Regarding the trend of firms not updating their efficiency practices, Hern said Clark Hill tries to buck that trend by thinking of new ways to deliver services.
“We have a mental framework of continuous improvement so whatever we did yesterday we know won’t be good enough for what we need tomorrow,” Hern said. “The core issue is how do we provide value to clients. We have to continuously assess and reassess what we’re doing through that lens.”
Klimko said law firms are generally trying to figure out how to deliver services more efficiently while worrying about alternative staffing models and technologies that can do tasks that people did in the past.
“There are things you need to plan for beyond five years and for other things it doesn’t make sense because the world changes so quickly,” Klimko said. “You have to balance between servicing the clients and doing the work you have to do to meet their current needs and figure out what they’re going to be asking for in the future.”