Martini Consulting, LLC Homepage

Survey Says: Ante Up, Lawyers

We love surveys.  All these years working with lawyers and we’ve come to feel that data is boss.  Ideas are exciting, sure, but facts are everything.  And when it comes to market data on the legal services industry, year after year, we’ve watched figures weave a certain narrative.  Lately, it’s not a cheerful story. The sky’s not falling, there’s no cataclysm to speak of, but there are troubling developments that law firm partners–and their marketing professionals–need to tackle head on.

Let’s look at three benchmark reports, Altman Weil’s Law Firms in Transition Survey, Altman Weil’s Chief Legal Officer Survey, and the Citi Private Bank Law Firm Group annual state of the market. Here are the topline findings that concern us:

  • 40% of corporate legal departments plan to cut spending on outside law firms in the next year, reported Altman Weil.
  • 67% of law firms surveyed by Altman Weil say they are losing business to corporate law departments that are in-sourcing legal work; another 24% of firms see this as a potential threat going forward.
  • Partners are “not sufficiently busy” according to Altman Weil’s findings. An astonishing 61% of firms say overcapacity is diluting profitability.
  • According to Citi’s findings, large law firms experienced a 3.6% increase in revenue in the first nine months of 2015, but that increase was almost entirely the result of higher rates.  Demand increased only 0.6%, and productivity actually decreased by .5%.

The takeaways here are straightforward.  It’s a supply and demand problem. Lots of lawyers, less work and staying profitable will prove increasingly difficult in the days ahead.

What’s a firm to do? Most firms start with expense management. While cutting fat is good, it’s not a growth strategy and obviously has diminishing returns. Now you’ve got 16 lawyers relying on one (unfortunate) assistant.  What does that have to do with getting more clients in the door and doing more work for existing clients?

Since firing partners is the ‘Voldemort solution’ (must not be named), we better figure out why corporate law departments send out less work and how smarter fee paradigms and service models can change that calculus.  And a firm’s profitability.

We need to get nimble.  We need to recognize that doing business the way we’ve always done it isn’t sensible just because it’s comfortable.  In fact, we’re more innovative when we’re a little uncomfortable.  So get your leaders in a room.  Commit to these six principles:

+      Anticipate what clients need

+      Stay in touch and listen actively

+      Become a recognized expert

+      Price work fairly and creatively

+      Manage work prudently

+      Ask for business

Six things.  Become obsessed with these six things.  Because the profitability problem isn’t solved by hiking rates.  It is only addressed by hiking the value proposition. Ante up.