If you feel like you could be billing more hours and working more efficiently, you’re not alone. Altman Weil’s 2017 Law Firms in Transition Survey just looked at 386 firms and found that, well, lawyers simply weren’t busy enough.
The survey, Altman Weil says, demonstrates the “endemic erosion of demand for law firm services, increasing price competition, a need for greater efficiency, an influx of new kinds of competitors and the inexorable force of technology innovation.” Sounds about right to us.
The Biggest Trend of 2017? Underperformance
One of the survey’s most significant findings is “chronic under-performance” throughout the nearly 400 law firms surveyed:
Fifty-two percent of firms report their equity partners are not sufficiently busy, and 62% of firms said their non-equity partners are not busy enough. Lawyers other than partners and associates are not busy enough in 43% of law firms. And in 25% of firms, even associates don’t have full workloads.
That underperformance is having an impact on the bottom line. Over 60 percent of the survey respondents said overcapacity was diluting their firm’s profitability.
Most law firm leaders, 82 percent, blame weak business development skills and efforts for underperformance, while 59 percent cite declining market demand. There’s just not as much business as there once was, and lawyers aren’t fighting hard enough for the opportunities that do exist.
Business development alone won’t be enough, though. Seventy-one percent of firms are investing more in business development, while only 30 percent say their investments are paying off. Overall, business development investment was ranked as the least effective way to improve profitability.
Two other trends worth noting include:
- Ninety-four percent of respondents identify improving practice efficiency as a permanent trend, though many firms are lagging behind when it comes to making that focus a reality.
- A sizable minority of firms are making changes to their approach to pricing, but only 30 percent of firms are linking their decisions on how work is staffed and delivered to those pricing changes. “This is a hugely significant and extremely troubling result,” according to the report, as “a firm that does not consider the interaction between scope, staffing, price, project management and margin cannot achieve optimal performance.”
In an industry not always known for its innovative spirit, half of the surveyed firms said they were making efforts to test innovative ideas and methods -- an encouraging development. Those innovation efforts run the gamut, from using AI tools, to introducing flex hours and work-from-home arrangements, to creating “entrepreneur funds” to support innovative business development strategies.
But those approaches will have to overcome some significant inertia from flat-footed partners. Almost 95 percent of respondents said their partners had only a low or moderate awareness of challenges facing the legal market. Barely one percent said partners were highly adaptable to change.
It’s Not Just the Big Firms That Are Suffering
The Altman Weil survey focused on larger law firms, those with 50 lawyers or more, and 45 percent of respondents were from the 350 largest U.S. law firms. But the trends the survey identified aren't unique to BigLaw.
Lawyers twiddling their thumbs instead of billing hours, after all, isn’t just a problem for equity partners at white shoe firms. Small firms and solo practitioners are facing similar challenges. A survey by Clio, the case management software company used by thousands of solo attorneys and small firms, found last year that attorney time was often extremely underutilized.
Instead of relying on self-reporting, Clio looked at the actual, anonymized usage data from the over 40,000 attorneys who use their software. Based on that data, the average attorney was logging only 2.2 billable hours a day. That’s just 28 percent of an eight-hour day dedicated to billable tasks. Lawyers actually billed for even less, just 1.8 hours a day, writing off or reducing billing for almost 20 percent of their billable work.
There could be plenty of reasons for this underperformance. Attorneys could simply lack sufficient clients, for example, or they could be working reduced hours.
Or they could be swamped by administrative work and inefficient processes. In the traditional discovery context, at least, eDiscovery workflows are often full of inefficiencies that cost money and eat into billable hours.
If you have to wait days for your eDiscovery vendor to upload and ingest data, you’re stuck in limbo, unable to move forward on billable work.
If you have to plug all discovery matters, regardless of their size, into platforms that were designed to handle massive cases, you’re going to end up wasting significant time and effort.
If your eDiscovery platform is so excessively complex and convoluted that you have to keep referencing tutorials and training guides, that’s time you can’t bill for.
And if clients are finding ways to avoid bloated, slow discovery practices by avoiding lawyers when they can, that's billable work that won't be coming your way.
Can You Buck The Trend?
Who is taking the business that once went to firms? Sisters doing it for themselves. When it came to competition, 67.9 percent of the Altman Weil survey respondents said they were losing business to corporate legal departments taking legal work in-house, while another 23.7 percent identified that trend as a potential threat.
Clients' use of technology tools, tools that let them handle tasks traditionally outsourced to lawyers, was also taking business from more than 20 percent of respondent firms, while 51.7 percent labeled DIY technology as a threat. The bigger the law firm, the bigger the perceived threat.What's a struggling firm to do? Lawyers and legal consumers who embrace innovative approaches may be best positioned to withstand these negative industry trends. Chronic under-performance can be countered by tools that reduce downtime and allow attorneys to bill more for ancillary service offerings, taking billable work back from vendors.
Deploying scalable tools that allow for predictable pricing makes capped and alternative fees a more viable option and helps reduce overhead, whatever the firm’s price structure may be.
Cloud-based tools that can be implemented anywhere and that aren’t bound by restrictive licences (and per-user fees), allow firms to scale up or down projects as needed, keeping staffing proportional to the matter.
Want to improve business development? Drive new ventures? Reduce inefficiencies? Despite the challenges, there are real opportunities for legal professionals willing to innovate and put their clients first. As the industry continues to evolve, those who embrace change are going to be best positioned to thrive.