According to the recently released 2018 Altman Weil “Law Firms in Transition” (an annual survey they’ve been doing for a decade with invaluable longitudinal data at this point), in 51% of firms surveyed equity partners are “not busy enough.” They write (and Adam Smith, Esq. agrees) that “demand for law firm services will not return to pre-recession levels–ever” (emphasis original).
Why not? Some of the culprits include:
- Commoditization
- New technology tools
- “Non-traditional” competitors, a/k/a New Law
- The growth of in-house headcount and capability.
They count the cost in lost “productivity” (a weird usage here in Law Land that we’ve written about, but which means billable hours) at on average “hundreds of hours per attorney [compared to] before the recession” and add that “as a result, there are too many lawyers in many law firms.”
We’ve seen Citi Private Bank data confirming essentially the same metrics. Let’s say we assume average annual billables pre-recession were 1,800 and now they’re 200 hours less. That means nine lawyers today are billing what eight were then; or put rather more pointedly, one in nine of your lawyers should go (about 11%).
This brings us to our Question of the Month. Take it away, dear readers!
[poll id=”16″]If you have observations or other/better ideas, please use the comment box below, and thanks.
Alternative: There is not an established and transparent metric by which productivity is measured and a consensus within the partnership that threshold changes will lead to defined actions.
I would suggest another option though the choices above are primary. Most firms are still lacking strategic focus so they place bets across all practice groups not truly knowing where to focus. Lack of “business portfolio” practices lead to uncertainty about where to cut and where to grow. Lacking analytical market insight only exacerbates blind spots.
Thanks, Josh: Your observation about business intelligence is a very strong and insufficiently recognized one. Every day we see law firms making decisions about their business with less data than one would gather before choosing a new refrigerator. 😉
I’d love to imagine that more law firms have started to act upon the realisation that racking up hours at the levels expected in recent years is not, in the long run, healthy. But such a hypothesis feels unlikely to have much explanatory power.
I rather like AW’s clever approach of leaving people to define for themselves what “busy enough” means, with its hint (at least to me) of the problem addressed in “Toads” (P. Larkin).
No doubt the modern benchmarking/transparency approach to law firm metrics was started with good intentions, but it certainly has some interesting consequences.