Not for the first time, and probably not the last, I find myself reading reports from the legal marketplace and wondering why lawyers are asleep at the switch.
The latest head-scratcher comes courtesy of Altman Weil and its fifth annual Law Firms in Transition Survey of 238 US law firms. Importantly, only one-third of the respondents were within the AmLaw 200 — we’re not talking about the giants here, but about firms whose lawyer complements range from 50 into the hundreds, and whose clients likely include some national companies, a lot of regional businesses, SMEs, and individuals. Here are a few highlights from the Am Law Daily report:
- 80% of respondents think the move towards non-hourly billing will continue — but only 29% had made significant changes to their own pricing practices.
- 96% believe the focus on improved practice efficiency has become entrenched — but only 45% had made significant changes to improve efficiency.
- 67% think smaller annual rate increases are also a permanent change — but between 21% and 40% of all fees at all firms are still simply being discounted.
- And despite all the foregoing, when asked to cite the greatest challenge they expect to face over the next two years, the #1 response (15.2%) was “increasing revenue.” Coming in at #8 (5.6%) was “delivering value to clients,” while the afore-mentioned “improving efficiency” — which, remember, 96% think is here to stay — finished at #11, with 2.8%.
Near as I can tell, many of these respondents must believe that permanent, radical change in the market is something that’s happening to other people. The disconnect between “This is really happening” and “We’re doing something about it” remains perplexingly wide.
Now here are the results of another survey, one that didn’t get quite so much attention, but whose implications are far more chilling. The UK’s Legal Services Board released the results of an incredibly comprehensive survey of small businesses — an astonishing 9,703 of them, ranging from solo entrepreneurs to companies with up to 50 employees. (Although the countries are different, the two survey populations suggest a high degree of overlap between the law firms and the clients in each.) Here are some of the findings:
- 38% had experienced a “significant” legal problem in the past year, almost half of which had a tangible financial impact — a total market value of £100 billion when scaled up across all small businesses.
- 91% of respondents took action to respond to their problems — but most either handled it themselves or got help from family and friends.
- Of the minority who sought formal advice, only about 40% went to members of the legal profession — the rest sought out accountant, trade associations and the like, especially for tax issues.
- Bottom line: Legal service providers were involved in just 16% of these matters. That means that roughly £84 billion worth of potential small business legal services are being resolved without the legal profession.
Oh, and here’s the kicker: When asked to assess the statement that “lawyers provide a cost-effective means to resolve legal issues,” only 13% agreed.
So I find myself wondering: faced with reliable, overwhelming, and readily available data that shows a near-complete misalignment between them and their markets, why are law firms doing so little in response? Why are firms, even while openly admitting that many essential marketplace fundamentals have permanently shifted, moving so slowly, it at all, to address these changes? I’ve previously suggested the confidence of the dinosaurs as a culprit, but I think there’s something more at work here.
When I talk with lawyers in law firms about these issues, I’m sometimes struck by the impression of powerlessness that I get. Lawyers, including partners, seem to almost shrug, as if to say, “Yes, but what can I do?” The structure and culture of the firm are presented as an unalterable reality, a mix of good and bad that’s just the way it is. The firm delivers profits, prestige, and security — albeit ever-decreasing amounts of each — but it’s also hidebound, reactionary, and highly vulnerable to change. But what are you gonna do? Priorities have been set and choices have been made, and we have to live with the results.
There are times, when confronting this malaise, that I feel like responding, with some force: “Yes, but you own the firm! It’s yours; you’re the equity owners. Nobody else is in a position to make the firm something different and better than what it is. The associates, the staff, the clients — they might not much like the state of affairs either, but it’s not their show; they consider both the firm’s successes and its shortcomings to be entirely your responsibility. If you’re not in charge, who is?”
What I would really, truly like is for more partners to accept full responsibility for their firms — to recognize the need for decisive action to adjust the firm’s bearings, to take that action, and to fully own the changes that follow. I’d like to see them act as the owners they are, not as the passive sideline observers many of them seem to have become.
To that end, I’ve decided to try introducing a third questionnaire into this mix — my own. I’ve created a very short survey — only three questions — at SurveyMonkey, and I’m making it available to anyone who wants to take it. It’s directed towards lawyers in law firms, and I hope they constitute the majority of respondents, but anyone in the legal industry is invited to take part as well.
The title of the survey is: Design Your Own Law Firm. And that’s exactly what you’re invited to do. The survey provides you with 10 features of a law firm, gives you 100 points to distribute among those 10 features any way you like, and asks you to use those limited resources to design the kind of law firm you want to be part of. Here’s a preview of the 10 features, listed in alphabetical order (they’re randomized in the actual survey):
- Affordability: The firm’s services are priced for maximum client accessibility.
- Client Service: Clients reward the firm’s efforts to provide extraordinary service.
- Community Leadership: The firm is widely praised for its active community efforts.
- Diverse Workforce: The firm is more race- and gender-diverse than its peers.
- Elite Reputation: The firm is considered among the very top tier in its market(s).
- Funded Pensions: The firm ensures post-retirement income for both lawyers and staff.
- Good Workplace: A positive, collegial atmosphere produces collaboration and referrals.
- New Lawyer Development: Junior lawyers receive superb training, mentoring and work.
- Partner Profit: Equity owners derive highest levels of annual revenue from the firm.
- Prestigious Clientele: High-profile or respected clients frequently retain the firm.
Here’s the link to the survey — it’s open today, May 23, and will stay open for either one week or until I have enough responses to draw some conclusions. Please take the survey — Note: print out your choices before pressing “Done,” so that you retain a copy — and forward it to your friends and colleagues. Be honest with your answers: give the responses you really feel, not the ones you think you “ought to” give.
I’m very interested in finding out how — when given several good options, but only a limited amount of resources — lawyers prioritize the structure and culture of a law firm. And I’m hopeful, maybe even optimistic, that by going through this process, lawyers will realize that they really do have the power to make their firms the way they want them to be.
Here’s your chance to be the architect of your law firm. You’re responsible for its priorities. What will you create?
Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.