Law firms are facing greater competition in a changing legal market, but they’re still not doing enough to prepare for the future, according to an annual survey released last week by legal services firm Altman Weil.
The 2018 Law Firms in Transition Survey found that law firms’ biggest concern was increasing competition, with 70 percent losing business to corporate legal departments, 26 percent losing business to the use of technology tools and 16 percent losing business to alternative legal service providers.
“Unlike the recession and its aftermath, the threat to law firms in 2018 is broader and more nuanced,” said Altman Weil principal and survey co-author Tom Clay to the Washington Post. “It’s not just an economic threat. Now there are clear, systemic disruptors in play that pose a threat to the sustainability of the traditional law firm business model.”
“The more qualitative trends identified in the Altman Weil survey align with the signs we’ve seen on the front lines inside the Am Law 200,” said Thomas Hamilton, VP Strategy & Operations at ROSS Intelligence. “While there have been some encouraging exceptions, overall there is a growing belief that the traditional law firm business model has to evolve or continue ceding ground to new and more innovative entrants.”
But despite enormous changes in the legal market, the survey also found that firms are not motivated to change—59 percent say they are “not feeling enough economic pain” to substantially change how they deliver their services, and 69 percent say they have partners that “resist most change efforts.”
“Most law firms measure their success in annual increments, but that kind of short-term thinking can create a false sense of security,” said Altman Weil principal and survey co-author Eric Seeger in the survey. “Few law firms have a long-term, market-based strategy, or recognize that by proactively embracing new methodologies and technologies they will create the differentiators they need to compete effectively going forward.”
“We’re currently at an inflection point with respect to technology adoption in law firms,” said Andrew Arruda, CEO and Co-Founder at ROSS Intelligence. “We’ve been extraordinarily lucky to work with innovative and tech-forward partners since the beginning of ROSS Intelligence three years ago, but there’s no question that as a whole there is still a huge amount of work to be done by law firms in the United States and abroad to ensure they are able to maintain their relevance and central position in the provisioning of legal services.”
The 2018 Law Firms in Transition Survey has tracked changes in the legal market for a decade, during a time that has seen a recession, more value-conscious clients, technology disruption and the rise of non-traditional competition. This year, the firm surveyed 801 American law firms that have more than 50 lawyers.
The report wasn’t all bad news—half of the law firms in the survey said that their revenue per lawyer was up during the past three years. But other findings were not as rosy: one in 10 law firms reported that revenue per partner fell or was flat during the past year. In addition, 49 percent of managing partners said that their firms failed to meet annual billable hour targets and more than half of equity (51 percent) and non-equity (59 percent) partners were underutilized.
Soojung is a content marketer at ROSS Intelligence. She is also a writer, user experience designer and former journalist who is interested in all things related to technology and startups.