Did We Really Learn a Lesson?

Published August 27, 2013

It has become a cliché to say that law firms of all sizes – but especially BigLaw – have “learned their lesson” in the years after the Great Recession began. Of course, opinions vary as to what that lesson is, but generally it comes down to re-emphasizing that the interests of the client, rather than the law firm, come first. There are all kinds of ways this supposedly is being shown: by not indiscriminately adding lawyers or paying them beyond what clients will accept, by giving up automatic rate increases and developing hourly fee billing alternatives that clients want, by keeping costs under control rather than focusing on maximizing revenue. All of these are of course laudatory goals. How is the legal profession doing at meeting them?

Sadly, a good case can be made that these lessons have not been learned. The new 2013 Altman Weil Law Firms in Transition survey of leaders at nearly 800 US law firm with 50 or more lawyers shows that “business as usual” remains in 2007 mode for many of them:

  • Eight out of ten firm leaders believe “more non-hourly billing” is here to stay – but only 29% of firm leaders said their firms have significantly changed their pricing strategy since the recession.
  • Billing based on metrics other than hourly rates represents only 10% of fees collected at surveyed firms, and two-thirds of all AFAs were provided in response to client requests, compared to only about one third offered proactively by the firms.
  • Only 13% of respondents said they were “highly confident” their firms could cope with new competitive market conditions, and only 5% considered their partners to be “highly aware” of what it will take to be successful in these conditions.
  • Only 30% of firms said they have experienced a net reduction in overhead costs.
  • More than half of firm leaders still believe that growth in lawyer headcount is a requirement for their firm’s future success.
  • Almost one-third of respondents said their firm’s top challenge was increasing revenue and getting new business; 5% cited adding client value, and 3% said improving efficiency.

From the largest firms to the hundreds of thousands of sole practitioners, such responses are not just self-defeating – they are self-destructive. The need to build a collaborative relationship founded on communication and understanding the values of each client as an individual or organization is the one and only Great Recession lesson every firm should have learned.

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Audience type: Administrators, Associates, Large Law Firms, Small Law Firms, Sole Practitioners