legal management resources llc the current law firm landscape acc northeast law firm briefing...

Legal Management Resources LLC

The Current Law Firm Landscape

ACC Northeast Law Firm Briefing SessionMay 19, 2015

James W. Jones


Impact of the Economic Downturn

Since 2008, the global market for law firm services has been locked in an economic downturn that has profoundly impacted both the nature and intensity of competition.

The impact can be graphically seen in all of the key indicators of law firm performance – including demand growth, productivity, rate increases, realization, expense management, and profitability.


Demand Growth for U.S. Law Firm Services

2007

2008

2009

2010

2011

2012

2013

2014

-9%

-6%

-3%

0%

3%

6%

Y/Y % Change

Source: Thomson Reuters Peer Monitor


Productivity (Billable Hours per Lawyer)

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

110

120

130

140

All Lawyers Linear (All Lawyers)

Ho

urs

pe

r M

on

th



Rate Progression

Q1'05

2 3 4 Q1'06

2 3 4 Q1'07

2 3 4 Q1'08

2 3 4 Q1'09

2 3 4 Q1'10

2 3 4 Q1'11

2 3 4 Q1'12

2 3 4 Q1'13

2 3 4 Q1'14

2 3$300

$325

$350

$375

$400

$425

$450

$475

$500

Standard Worked Billed Collected



Collection Realization against Standard Rates

Q1_x000d_'05

2 3 4 Q1_x000d_'06

2 3 4 Q1_x000d_'07

2 3 4 Q1_x000d_'08

2 3 4 Q1_x000d_'09

2 3 4 Q1_x000d_'10

2 3 4 Q1_x000d_'11

2 3 4 Q1_x000d_'12

2 3 4 Q1_x000d_'13

2 3 4 Q1_x000d_'14

2 3 481%

83%

85%

87%

89%

91%

93%

95%

82.2%

85.2%

84.2%

AmLaw 100 AmLaw Second 100 Mid Size



Expense Management

2007

2008

2009

2010

2011

2012

2013

2014

-9%

-6%

-3%

0%

3%

6%

9%

12%

15%

18%

21%

3.3%

2.7%

Y/Y % Change(Rolling 12-month)

Direct Overhead



Profits per Partner

All Firms AmLaw 100 AmLaw 200 Mid-Sized0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

2011 2012 2013 2014


0.8%/Year

2.3%/Year

1.4%/Year

0.2%/Year


Longer Term Market Trends

The economic downturn experienced in the legal market over the past six years has been exacerbated by other macro forces that were beginning to impact the market in significant ways even before

All of these forces have combined to cause significant shifts in the nature of competition in the legal market.


Combination of Contributing Factors and Proximate Cause

Economic Downturn

Drive toward Commoditi-

zation

Availability of

Information

Emergence of New Service

Providers

Growth of Enabling

Technology

Unsustainable Economic

Model

Changing Client

Expectations/ Behaviors


The Result?Arguably, the perfect storm. . .

. . .and a tipping point.


Shifts in the Nature of Competition

Shift to a buyer’s market for legal services for the foreseeable future.

Clients now defining what constitutes “value” in the market.

New focus on efficiency, predictability, and cost effectiveness in the delivery of legal services.

Will require a paradigm shift in the mindset of law firms and their partners.


Shifts in the Nature of Competition (cont.)Shift to a much more competitive market for the foreseeable future – one in which supply exceeds demand.

In a limited demand market, one firm can win only if another loses.

While growth in demand for legal services will increase over time, a more competitive market is likely to remain.

Will also require a paradigm shift in the mindset of law firms and their partners.


Adjusting to New RealitiesWe are seeing a fundamental and long-term shift in the nature of competition in the legal market.

The “good old days” are not coming back.While we will ultimately see a rebalancing of supply and demand, we are not likely to see a return to a “sellers’ market” for legal services.

To be successful going forward, firms and lawyers must adjust to a new reality in which clients set the rules, and competitive decisions (in most matters) are based on efficiency, predictability, and cost effectiveness in the delivery of legal services.In this environment, clear strategic focus is more important than ever before.


New Realities Require a Broader Strategic Focus

Client Model

• Clients• Markets• Practices

Service Delivery Model

• Pricing Models• Work Processes• Technology• Infrastructure

Talent Model

• Managing Legal Talent• Training and

Development• Partnering and

Outsourcing

CoreStrategy


Flexibility Is the Key to SuccessTo be successful, firms will need to be flexible in responding to new client demands and expectations, especially around issues like –

Budgeting and cost projections,Pricing models,Scoping of work,Defining expected levels of effort,Staffing and leverage options,Partnering with other service providers (including other law firms and clients themselves),Managing lawyers and other professionals, andMaintaining transparency with clients.

One size no longer fits all.


Thank You!

[email protected]

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