The most important findings from Altman Weil’s new survey
What’s wrong with this picture?
In the 2014 Law Firms in Transition Survey which Altman Weil released a few days ago, 304 managing partners and chairs of US firms with more than 50 lawyers were given a list of legal market trends and asked “Which do you think are temporary and which will be permanent?” 94% rated “focus on improved practice efficiency” as permanent, in a tie for the number one permanent change with “more commoditized legal work.”
But when the same survey asked “Has your firm significantly changed its strategic approach to the efficiency of legal delivery?” 35% said no and 26% said it was “under consideration” (code words for we have a committee that could decide any year now). In other words, only 39% of US firms have started to take action to deal with the most important change in their profession.
If you read the entire 131 page report (which can be downloaded for free), the good news is that there are many signs that law firm leaders increasingly understand that the world has changed and they must adapt. The bad news is that so few have started doing anything.
If you are a regular reader of this blog you will not be surprised to learn that the first section I turned to was on legal project management. I LOVED Altman Weil’s conclusion (p. viii) so much that I will quote the whole thing:
Invest in Legal Project Management
Perhaps no other long-term initiative will do more to support staffing innovation, pricing innovation, efficient delivery of services, improvements in margin and reductions in overhead than true project management training. It’s important to distinguish between a one or two day seminar which will not produce much long term value, and a systematic, hands-on approach that instills fundamental operational change. Firms that give their people the right kind of tools and training in this area will create new efficiencies for clients, improve profitability of matters, and create significant competitive advantage.
This underlines a point we have been writing about for years: traditional training to educate lawyers to understand LPM will not change behavior, any more than understanding how to run a marathon will enable you to complete one. Behavior change requires practice, whether it’s through the kinds of coaching programs we offer, or other real-life hands-on approaches. The point is, you need to do it, not talk about it.
This conclusion has also been supported by our research on Client Value and Law Firm Profitability, which will be published in a few months. When I interviewed managing partners, chairs, and senior partners and managers from 50 AmLaw 200 firms, here’s what the managing partner of one firm that invested heavily in LPM education had to say:
I think project management probably will have the longest-term positive impact, but it’s been the biggest challenge, because it’s something that hasn’t been easily absorbed by a lot of the lawyers. When busy lawyers start scrambling around, the inefficiency creeps right up.
A few years ago, traditional training in LPM became the rage in a number of firms. Several got to put out some great press releases describing themselves as leaders of the new LPM movement. But from everything we have heard, this education had little impact on the way anybody practiced law. What has worked is one-to-one coaching, as described in my book Legal Project Management, Pricing and Alternative Fee Arrangements. (A free copy of the chapter on LPM case studies can be downloaded from our web page.)
Does it matter how quickly firms move to increase efficiency and provide greater value? In our study 85% said that firms that move more quickly in providing value will gain a competitive advantage. Some respondents thought this was a life and death matter. As one managing partner said:
I think the firms that are most effective are going to do well, and I don’t think everybody will survive. In the last several years, there have been several firms that went away. And I believe that’s going to continue.
A senior partner at another firm put it this way:
I think the market’s going to shake itself out. I think firms that can’t deliver more value will fail.
If that’s not scary enough, there’s more. I have saved the most frightening news for last.
In my opinion, the most revealing question in Altman Weil’s entire research was one that was just added to the survey this year for the first time: “Which of the following is a greater driver of decision-making in your law firm in 2014: Long-term investment in new pricing and service delivery strategies to lock in your most valuable clients or short-term profitability to lock in your most valuable partners?” An astonishing 44% are looking inward at their own partners rather than outward at their clients.
As Tom Clay, the primary author of the Altman Weil survey, noted in our research report: “If a law firm cannot attract and retain good clients, nothing else matters.” At a moment in history when so many clients are demanding more value, it can be business suicide to focus on partners before clients.
The obvious explanation is that with all the lateral movement between firms, management is afraid that if they don’t focus on partners first, big rainmakers will jump ship and take their books of business with them.
But forward-looking firms are taking a longer view. In our study, one chair noted that in his AmLaw 100 firm some rainmakers were the very people who were slowing down progress. As he put it:
To be perfectly honest, some of the partners in our firm who don’t get it, don’t want to get it. They’ve got a big book of business, and they would prefer us to just leave them alone. Law firms get very nervous about this, because they worry that these big, bad actors are going to take their big, bad book of business and go elsewhere. I say “Don’t let the door hit you on the butt on the way out,” because that’s not the culture that we’re trying to build. As long as we continue to reward bad behavior, we’re going to continue to get bad behavior.
Full disclosure: LegalBizDev is a strategic alliance partner of Altman Weil. More disclosure: I began praising their annual surveys several years before we formed that relationship.