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July 12, 2018

Leading study confirms that ongoing LPM training and support significantly improves performance

By Tim Batdorf and Jim Hassett

If you work at a law firm and care about its future, you must find the time to download Altman Weil’s free report of findings from its 2018 Law Firms in Transition survey.

For the last ten years, this survey “has tracked a continual shift in awareness, acceptance – and some persistent resistance to – legal market change” (p. i). This year’s report by Thomas S. Clay and Eric A. Seeger provides the best available data on law firm efficiency, profitability, pricing, staffing, productivity, and much more. 

To collect the data, Altman Weil sent questionnaires to 801 managing partners and chairs at US firms with 50 lawyers or more.  In other professions, questionnaire surveys like this typically “average [a] 10-15% response rate.”  One might assume that the response rate for a survey sent to law firm managing partners and chairs would be much lower, since they are often too busy to respond to anything that is not on fire.  But Altman Weil received an astonishing 49.7% response rate (398 firms).

The resulting report summarizes the experience and opinions of managing partners and chairs from nearly half of the 500 largest firms in the United States.  It provides information about what law firms have tried, what’s worked, and what hasn’t.  There is simply no better source for this type of up-to-the-minute insight into a rapidly changing profession. 

The findings that caught our eyes first, not surprisingly, were the ones most closely related to our interest in legal project management (LPM), starting with the fact that “Nearly unanimously, law firm leaders see a need to focus on improved practice efficiency” (p. xii).

So, what are law firms doing to meet this need?  Not nearly enough.

One survey question asked, “How serious are law firms about changing their legal service delivery model to provide greater value to clients?” on a scale from 0 (not at all serious) to 10 (doing all they can).  Less than half of firms (43%) gave themselves a rating of 6 or higher, and only 2.6% answered 9 or 10

But wait, it gets even worse.  In its most recent 2017 Chief Legal Officers survey,  Altman Weil asked the exact same question of clients.  Only 9% of clients (vs 43% of firms) rated this commitment at 6 or higher, and not one single client gave law firms a 9 or a 10.  Obviously, a huge discrepancy exists in how law firms perceive themselves vs how clients perceive law firms. Viewing these results optimistically, law firms that are committed to changing their legal service delivery model could have a significant business opportunity. 

From our perspective, the single most important graph in the 2018 Law Firms in Transition report (p. 55) is reproduced below:LFiT_EfficiencyTactics_2018B“Rewarding efficiency and profitability in compensation decisions” was the most effective tactic for improving performance, as almost anyone could have predicted.  You get what you pay for. 

Much to our surprise, however, more than half of law firms say they are already using this tactic.  Of course, the other law firms may not want to engage in the difficult process of re-evaluating compensation policies, particularly when they know how difficult those conversations can be.  And if this is the only tactic a law firm takes, it could derail significant progress for several months, if not years.  Unfortunately, in today’s market, time may not be a luxury that law firms can afford.

In addition, law firms have historically had trouble measuring and rewarding profitability.  A few years ago, when we interviewed AmLaw 200 managing partners and senior executives for our book Client Value and Law Firm Profitability, we reported that many firms are struggling with measurement, like the participant who admitted:

We don’t calculate profitability by formula.  It’s really seat of the pants. (p. 52)

As more and more firms improve the ways they measure and reward profitability, we predict that the impact of compensation on performance will increase far beyond the 47% figure in the graph above.  But again, this type of approach will likely take a few more years to fully materialize in many firms and is definitely not a “magic bullet” solution for any firm.

So, what exactly should law firms be doing now to help lawyers increase efficiency?  They should engage in “ongoing project management training and support,” because:

  • It is the highest-rated tactic for obtaining significant improvement in performance (other than changing compensation policies, as discussed above),
  • It is grossly underutilized with only one-third of law firms actually using this tactic, and
  • It is the easiest and most cost-effective way to significantly improve performance, especially when compared to other less effective tactics like systematically reengineering work processes or using technology tools to replace human resources.

Whatever tactics law firms decide to pursue, Altman Weil’s report (p. viii) concludes that law firm leaders must “pick up the pace:”

The challenge for leaders is to enlist a small cohort to start the innovation process with urgency and pace and begin to educate and bring others into the fold as rapidly as possible.  Leaders should focus daily on supporting the continued efforts of early adopters by providing encouragement, resources, time, and staff support.

We couldn’t agree more. 

For details of exactly how several leading firms have engaged this process, and the successes they have achieved to date, see the case studies section of our web page.

Full disclosure:  Altman Weil is a strategic partner of LegalBizDev, but not a single word of this post would be different if they weren’t.

 

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