Photographer: Daniel Acker/Bloomberg
Photographer: Daniel Acker/Bloomberg

Managing Partners Say Their Lawyers Are Underperforming and Slow to Change

The leaders of Big Law firms in the US don’t seem to be very happy with recent changes — or lack thereof — in their firms, according to a survey of nearly 400 managing partners and chairs.

In response to survey questions posed by legal management consulting firm Altman Weil, 88 percent of respondents said they have chronically underperforming lawyers, 61 percent said overcapacity is diluting their profitability, and 65 percent said their partners resist most efforts to change how to they do business. This comes at a time when most (72 percent) law firm leaders said the pace of change in the legal industry will only continue to increase in the coming years.

While law firm partners are thinking and planning strategically, they’re doing so without truly understanding the environment they’re working in, according to the survey authors.

“Adequately educating partners about current market realities is a critical first step in achieving necessary strategic change,” said Tom Clay, Altman Weil principal co-author of the survey.

The Law Firms in Transition survey, now in its ninth year, aims to track the changes in the legal market that have emerged since the recession. Survey responses were collected from managing partners and chairs from 386 of the 798 US law firms with 50 or more lawyers, including 50 percent of the firms ranked in the AmLaw 200.

Below are some key takeaways from the report:

–Firms are starting to change how they think about pricing, but they’re still thinking of it in a silo: In 2017, 39 percent of respondents said their firms had made significant changes in their approach to pricing, and 17 percent said they are considering it. But when asked if they are combining discounted, capped and alternative fees with changes in the way they staff and manage their matters, only 30 percent of firms said yes.

Business is moving in-house, and managing partners recognize that: 67.9 percent of respondents said they are already losing business to in-house legal departments, and 23.7 said corporate legal departments pose a potential threat to their firm. Over 70 percent of respondents said they had already lost business or may soon lose business because of client technology. These trends were more pronounced among larger firms: 81.6 percent of surveyed firms with over 250 lawyers said they are already losing business to in-house legal departments.

— Other legal services models are also gaining ground: Just over half of respondents said they are losing business or risk losing business to non-traditional law firms, defined as virtual firms, flat fee firms, partner-only firms, and tech-heavy firms. Less than 3 percent of respondents said they are losing business to branded managed networks of independent lawyers.

— Many law firm leaders think their attorneys are being underused: 52 percent of firms reported their equity partners are not busy enough, and 62 percent of firms said their non-equity partners are not busy enough. 25 percent of respondents said that even their associates don’t have full workloads.

— The ranks at the top of the law firm hierarchy will likely continue to shrink: 68 percent of respondents said they think fewer partners will be granted equity status in the future, and 57 percent of respondents said they are de-equitizing firm partners.

— At the same time, firms plan to grow: 56 percent of law firm leaders said they think headcount growth is necessary for a firm’s success, and nearly all respondents said they plan to pursue organic growth (97.6 percent) and lateral hires (95.6 percent) in 2017, with two thirds of respondents saying they’re looking to hire groups of laterals.

Write to BigLawBusiness at biglawbusiness@bna.com.

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