May 12, 2009 5:50 PM
Survey: Law Firms Don't Expect to Make Radical Changes
Posted by Ross Todd
The law firm revolution is not upon us. So say 208 law firm leaders in response to an Altman Weil survey conducted in March and April.
"Law firms are not doing anything dramatic and are not planning to do anything dramatic [in response to the economic downturn]," says Eric Seeger, an Altman Weil consultant and coauthor of the survey, Law Firms in Transition. Altman Weil released a portion of the results Tuesday (the complete survey is available to people who register for an Altman Weil webinar scheduled for June 11). "That contradicts some of what we hear from their corporate clients who are demanding budgets, fixed fees, and discounts," Seeger says.
Altman Weil distributed the survey to 687 firms with 50 or more lawyers, asking about how the firms are dealing with strategy, growth, pricing, staffing, and business development in light of the current economy. Thirty percent of the firms responded, including 32 percent of the 250 largest firms in the country.
Drama aside, what changes are most likely to occur in the large law firm world, according to the survey? At the top of Seeger's list: the number of equity partners at the country's largest firms. Thirty-eight percent of firms with 500 to 999 lawyers say it is likely or possible that they will cut additional equity partners in 2009. Seeger describes the staffing cuts at large law firms as "more of a market correction than a seismic shift," though. "Law firms are making changes now that they’ve wanted to make for a while," he says.
Law firm respondents of all sizes identified four areas that will undergo permanent change: an increase in price competition, a longer partnership track, more use of contract lawyers, and more nonhourly billing arrangements with clients. The survey also identified four changes considered temporary: reductions in first-year associate class sizes, associate salaries, profits per partner, and associate-to-partner leverage. (Respondents from law firms of more than 500 lawyers differed from other survey takers on the leverage issue, with 40 percent of them viewing the change as permanent.)
Respondents across the board identified an increase in pricing competition as a permanent change. Still, no one is chopping rates in response to rate pressures, the survey reports. Few firms, and none with 250 or more lawyers, reduced their billing rates in 2009. "The question we're left with is whether the day of reckoning between firms and their corporate clients will actually come," says Seeger.
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