Altman Weil has rolled out the 2017 edition of its “Law Firms in Transition” survey. Since 2009, the highly anticipated survey results reveal valuable information about the post-recession legal market. In this post, we highlight a few key areas.
While change is happening in some law firms, Altman Weil states it’s “more slowly than we think wise.” Rather than going for “broader, deeper transformation,” only “cursory investments” are being made. And some firms aren’t making any changes at all.
The survey found that while 94 of respondents indicated improving efficiency would continue to be a permanent trend, only 49 percent have actually made significant changes to the efficiency of legal service delivery. This, states Altman Weil, shows “a frightening disconnect.”
The two efficiency techniques of knowledge management by partners and legal project management training haven’t yielded the “quick successes” and “convincing results” hoped for. Why? Because these techniques that seek to change fundamental lawyer behavior are difficult to execute. And yet, “forward-looking firms will not be deterred.” Long-term investments in behavioral change are not only important but can reap benefits. Says Altman Weil:
“Firms that pursue thoughtful efficiency initiatives and stick with them will improve internal performance and add value for clients. Firms that do not will experience competitive disadvantage over time.”
Innovation is integral to creating change. One way the industry is innovating is through artificial intelligence and technology. Based on the survey results, counsel is cautious yet optimistic about this change. Eighty-four percent reported technology replacing human resources as a permanent trend. Yet when asked about artificial intelligence and machine learning use (Watson and Ross), only 7.5 percent of respondents indicated their firm is already beginning to make use of these technological tools while nearly 29 percent are exploring the opportunities. Altman Weil affirms that there are a variety of innovative approaches that firms can experiment with to improve service delivery. Making the effort is key.
“A strategic focus in this area is an absolute necessity at the firm and practice levels. No law firm can afford to be playing catch-up as clients embrace innovative initiatives from other service providers.”
Another area tied to improving efficiency and delivering more value to clients is pricing. Altman Weil commented on the weaknesses in this area, namely the general reluctance to discuss pricing with clients as well as being too quick to accept discounts. The survey found that only 39 percent stated that their firms have made significant changes in their strategic approach to pricing and 44 percent have not.
Digging into alternative fee arrangements, usage is widespread and accepted as 93 percent reported that they used non-hourly based billing. Their reason for using AFAs was more divided – nearly 74 percent indicated AFA use was primarily reactive, while 26 percent considered it primarily proactive. The survey also measured firms’ views on the profitability of non-hourly versus hourly projects. Forty-two percent of respondents considered non-hourly as profitable as hourly projects and 15 percent found it more profitable.
Altman Weil also explored challenges coming from the non-traditional sources. Nearly 68 percent of respondents indicated corporate legal departments are taking on more work in-house, and nearly 24 percent see this practice as possible in the near future. Fifty-two percent reported that client use of technology tools that reduce the need for lawyers and paralegals was not taking away business currently but a potential threat.
And yet, Altman Weil has hope. It found that 72 percent of respondents believe that change will continue to take place. Seventy-two percent is 12 points higher, says Altman Weil, than six years ago. This increase is significant.
For concrete steps and tools that can create change and improve efficiency, LLM, Inc. offers a variety of content, including a guide to innovative legal technology which can help improve efficiency: “The Lawyer’s Guide to Legal Technology in 2017.”