United States: Law Firm Management By The Numbers

Last Updated: June 24 2014
Article by Stephen Mabey

On May 8, the Managing Partner Forum 2014 Leadership Conference was held in Atlanta, Ga. The conference was hosted by John Remsen Jr., president and CEO of The Managing Partner Forum. Karen MacKay of Phoenix Legal and I were fortunate enough to be part of the faculty. Approximately 85 participants from more than 75 law firms (one Canadian firm attended) participated in the day-long session that began with an address by Timothy Corcoran, president of Legal Marketing Association and Principal of Corcoran Consulting Group.

While Corcoran's presentation was well done, the three memorable quotes for me were:

  1. If you are negotiating rates one of two parties does not have confidence in the value of your service: your client or you;
  2. Pricing is not the same as rates; and
  3. Law firms should not fear the changes taking place in the marketplace, but should fear firms' inability to change!

The rough demographics of the firms attending were:

  • Less than 20 lawyers: 17 per cent
  • 20-40 lawyers: 46 per cent
  • 41-75 lawyers: 12 per cent
  • 76-150 lawyers: 19 per cent
  • More than 150 lawyers: seven per cent

The biggest changes in the participation mix this year was the increase in firms with 20 to 40 lawyers, which was up from 33 per cent last year and the drop in firms with 21 to 75 lawyers, which was down from 30 per cent last year.

The managing partners were almost split in the length of time they had been in the role with 58 per cent having been in the position less than 5 years and 42 per cent having been managing partner for six or more years.

The participants' responses to two questions about 2014 re-enforced the belief the legal marketplace is perhaps best described as being in a "steady state" with responses showing an embracing of "it is what it is" mentality (2013 responses in brackets):

  • Much better than expected. We had a very good year so far: seven per cent (21 per cent)
  • Somewhat better than expected. A solid, relatively good year: 29 per cent (not asked in 2013)
  • About what we expected. A relatively good year: 42 per cent (44 per cent)
  • Ok, but not where we want to be: 19 per cent (27 per cent)
  • Not good at all. It's been a tough year: three per cent (eight per cent)

The above opinion is supported by the answers to the second question about results for 2014 to date, where participants were asked:

What is your firm's revenue per lawyer compared to a year ago?

  • Up by more than 10 per cent on average: seven per cent
  • Up by five-10 per cent on average: 17 per cent
  • Up by one-5 per cent on average: 32 per cent
  • About the same as last year: 35 per cent
  • Down from last year: nine per cent

Again, as many legal marketplace experts have been espousing, not everyone is doing badly.

The 2014 responses by participants to the two questions on alternative fee arrangements continue to support American Lawyer Media's Aric Press' take on the move to AFAs as the "slowest damn revolution he has ever seen":

  1. What percentage of revenue does your firm achieve through AFAs?
    • Less than five per cent: 48 per cent
    • Six-10 per cent: 21 per cent
    • 11-20 per cent: 15 per cent
    • 20+ per cent: 13 per cent
    • Not sure: three per cent
  2. What's your firm's strategy with regard to AFAs?
    • We're proactively pitching AFAs to clients and they like it: eight per cent
    • We've proactively pitched AFAs, but clients aren't interested: 19 per cent
    • We offer AFAs only when clients initiate the discussion: 46 per cent
    • We haven't had to deal with it all that much: 25 per cent
    • Other: two per cent

The participants were asked to rank the top three steps/actions they were taking to maintain and grow their firms' profitability. This year's rankings may be a surprise for some lawyers and firms but when taken in conjunction with the participants' responses to the following questions the rankings make more sense (not addressing appropriateness):

  1. Do you believe the business of law has fundamentally and permanently changed in the past 10 years?
    • Yes, the changes are profound and permanent: 68 per cent
    • Yes, but the changes are mostly around the edges: 24 per cent
    • No, the legal industry will remain fundamentally the same: three per cent
    • Not sure: five per cent
  2. How hard is it to "sell" your partners on the idea of real, meaningful change in processes, practice, or the nature of their roles as partners?
    • Piece of cake: eight per cent
    • Only if someone else at our level is already doing it (whatever "it" is): 38 per cent
    • Only if it has an unequivocal, indisputable, positive bottom-line effect: 27 per cent
    • Harder than pushing a camel through the eye of a needle. Change is a four letter word in our firm: 27 per cent

So the weighted average ranking of steps being taken from most frequent to least frequent:

  • Ramp up marketing and business development program: 5.80
  • Increase efficiency, internal processes, and procedures: 5.32
  • Pursue laterals with books of business: 3.38
  • Raise/enforce expectations for production for equity partners: 3.29
  • Improve associate development program: 2.30
  • Across-the-board cuts in overhead and expenses: 1.72
  • Trim the fat among partners: 1.19
  • Trim the fat among associates and paralegals: 0.78
  • Merge/acquire other firms/groups of lawyers: 0.51

Key performance indicators are becoming more engrained in lawyers' conversations when they meet (not always with a full understanding of the ratios being discussed but don't confuse them with the facts). So the participants were asked:

If you had to pick just one metric, what do you believe to be the best barometer of your firm's overall financial health?

  • Firm-wide revenue: nine per cent
  • Revenue per lawyer: 21 per cent
  • Firm-wide profit: 25 per cent
  • Profit per partner: 15 per cent (note, the move away from this metric should be seen as a very positive development)
  • Profit as a percentage of revenue: 19 per cent
  • Average realization rate per lawyer: nine per cent
  • Other: one per cent

The last question I have selected to include in this month's column was more of a philosophical nature and one you instinctively think might reflect the degree of skepticism and pessimism associated with lawyers and law firms (not many firms and lawyers are comfortable predicting next year's revenue because you know clients could stop sending them despite a historical track record) so the answers were surprisingly positive.

What level of concern do you have about your firm's long-term viability?

  • Very concerned, but my partners feel little sense of urgency: 15 per cent
  • Very concerned, and so are most of my partners: 17 per cent
  • Some concern, but nothing we can't get through: 42 per cent
  • Little concern. We've got a plan and the future looks good: eight per cent
  • Very optimistic about the future. Our firm is well-positioned: 18 per cent

The full set of responses is available from this site as a pdf download Managing Partners Forum - Audience Polling Results.

Until next month, for all those firms fighting or not embracing change to align their firms with the "new" marketplace, I would simply leave them with this unattributed quote:

"The cost of doing nothing has never been higher!"

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Stephen Mabey
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.