New Altman Weil survey reveals law firm leaders understand the problem, but not the solution (Part 1 of 2)
For many years before we formed a strategic partnership with Altman Weil, we have looked forward to studying their annual surveys of where law firm leaders see the profession today, and what they predict for the future.
We are especially fans of their Law Firms in Transition surveys, which since 2009 have tracked how managing partners and chairmen view the forces of change, and what they are doing about it. The 2013 Law Firms in Transition survey, published a few weeks ago, summarized the opinions of managing partners and chairs from 238 firms, including more than a third of the AmLaw 200.
This year’s survey found that law firm leaders are more aware than ever before that the legal market is changing permanently, including greater pricing pressure, shrinking demand, growing commoditization and an increasing pace of change. As survey author Tom Clay summed it up, the belief in these trends shows an:
ongoing evolution of thinking… including some dramatic shifts in opinion since 2009. However, there is less evidence of tangible changes in how law firms operate.
My favorite question in the survey asked “Which of the following legal market trends do you think are temporary and which will be permanent?” 14 trends were listed including more contract lawyers, fewer support staff, more non-hourly billing and increased competition from non-traditional service providers. Two answers were tied for the top, with 96% of respondents saying they were permanent: A focus on greater practice efficiency and more price competition.
What are law firms doing about these permanent changes in the marketplace? Not enough.
When a follow-up question asked “Has your firm significantly changed its strategic approach to the efficiency of legal service delivery?” only 45% said yes. The response to a similar question about pricing was even weaker: only 29% said they had changed their strategic approach. (Both numbers are likely to go up, since 33% said they are currently considering changes in efficiency, and 17% said they are considering changes about pricing strategy.)
More generally, law firm leaders were asked: “What will be your firm’s greatest challenge in the next 24 months?” The top three answers were old school: increasing revenue (15%), new business (15%) and growth (12%). All three would have made a lot of sense as the primary focus of leadership in 2005, 2006 or 2007, when the legal market was growing. But if Bruce MacEwen is correct in his book Growth is Dead, most leaders who consider them the greatest challenge in the next 24 months should be thinking less about how to get bigger, and more about client needs.
The fourth challenge they listed – profitability – is better than the first three, since it reflects a new focus on differentiating between clients in an important way that law firms have traditionally ignored.
But, as Clay noted:
[The top] four are internally-focused, tactical issues with the primary purpose of protecting the status quo in law firms… It is striking (and disturbing) that delivering value to clients appears only at number eight on the list, mentioned by just 5.6% of law firm leaders. Improving efficiency is eleventh on the list of twelve challenges, cited by only 2.8% of respondents. Law firms that do not put client needs at the top of their priority lists misunderstand what is driving the forces of change in the legal market in 2013. If firms would focus their considerable resources on truly understanding and aligning themselves with each client’s interests, they would be much more likely to achieve their financial goals.