As we enter the halfway point of the year, it’s timely to reflect on the recent results of Altman Weil’s annual “Law Firms in Transition” survey. Like last year, the theme continues to be one of change, namely change in demand for law firms’ services. And also like last year, firms must find ways to stand out and remain competitive. What follows are several highlights.
The survey identified a combination of forces affecting demand, including price competition, commoditization of legal work and replacement of human resources by technology. It also noted that the “most immediate threat” to demand was firms’ own clients. In fact, 68 percent of firms report they’ve lost business to corporate law departments in-sourcing more work.
The focus on efficiency is a theme that can be seen across the legal industry, and the participants of the Altman Weil survey aren’t any different. Sixty-one percent of firms said they are initiating conversations about matter management efficiency to better understand what individual clients want. And 93 percent of law firm leaders think a focus on improved practice efficiency is a permanent trend in the market. Yet, only 44 percent report that they have significantly changed their strategic approach to efficiency.
It’s clear that firms have identified this as an important trend, but they are slower to actually change. The firms that have figured this out know that technology can greatly contribute to efficiency. Fifty-two percent reported they are using technology tools in order to increase efficiency of legal services delivery, but there is still room for improvement. Using technology to automate more repetitive tasks will reduce time and increase efficiency. For example, a software that can instantly compile documents into a single PDF in minutes instead of days and can also be shared electronically with the court or among attorneys. Likewise, the fewer tools an attorney uses to prepare a matter, the more efficient the attorney will be. Multiple tools result in data loss, redundant costs, lack of collaboration and general inefficiency.
The Altman Weil survey found that firms also recognize that changing their approach to pricing strategy could be key in standing out from the competition. Fifty-four percent reported they have significantly changed their approach to pricing strategy, and 97 percent said they have used non-hourly based billing. A pricing model that many firms resisted initially, the non-hourly billing (AFA or otherwise) seems to be gaining acceptance. It has paid off for many. Eighty-four percent of firms said when they were proactive about offering alternative fees, they were as or more profitable. Speaking of being proactive, 67 percent said they have developed data on cost of services sold to support their pricing strategy. This highlights the importance of having software to track and analyze historical client data in order to make these decisions. This along with the focus on efficiency shows that when firms are more thoughtful about efficiency, they are better equipped to offer an AFA model that is profitable for them and cuts costs for their client.
84% of firms said when they were proactive about offering alternative fees, they were more profitable.
It’s well known that clients are leading industry change. So, again, the firms who are more responsive and proactive to their clients’ needs are having the most success. As the Altman Weil survey asserts, it’s not enough to simply keep pace — especially with “sluggish competitors.” For firms to get ahead — and stay ahead — they must make “vigorous” efforts.
For additional industry insight on how firms can adapt and thrive using technology, check out our latest white paper, The Agent of Change.