Law Firms in Transition, Part 2: A Future Dependent on Change

The billable hour is dead…

Law firms as we know it can’t survive…

All the power is in the hands of clients now, with law firms at the mercy of alternative fee arrangement demands that will destroy profitability as we know it…

Altman Weil principal Thomas Clay heard it all after the start of the Great Recession in 2008.

Oddly enough, it didn’t all quite jibe with what he was seeing in his strategic consulting work with actual law firms.

“During the recession, we were hearing a lot of BS that didn’t fit with what we were seeing,” Mr. Clay said. “We looked at each other and said, ‘Let’s see what’s really going on. Let’s do a survey.’”

Thus was born the Altman Weil Law Firms in Transition Flash Survey starting in 2009.

“We simply weren’t seeing a big, astounding change in law firm behavior,” said Mr. Clay. “We saw it as more of a transition rather than a big event. That’s how we came up with the name.”

 “Law firms are slowly changing – more slowly than we think is wise – but changing nonetheless.”

From the comments in the 2017 introductory summary written by him and Eric Seeger – another principal at Altman Weil – I assumed Mr. Clay would express at least some frustration with the slow pace of change in the eight years since their first survey.

“I can’t do what I do and be a pessimist,” he said. “As a strategic consultant, law firms hire us because they want help finding a better way.

“As long as people keep asking for help, I assume they’re open to change. Lawyers are generally bright people. You just have to give them reason to change.”

As discussed in a previous post, though, there was one area where Mr. Clay was much more willing to express, if not exactly frustration, at least mild surprise.

“Disruption will come from technology, especially artificial intelligence,” he said. “AI will be a huge game-changer.

“I expected, at the very least, more exploration about AI’s potential for advancing the practice of law from our survey results,” he said.

“Don’t be a roadblock to change. Even if you don’t want to participate, let the younger people make change.”

In the vast majority of cases, the people who have decision-making power in law firms have earned their power many times over. Most spent decades earning that level of trust as senior statesmen in their firms.

The law firm world today, though, is completely different from the world in which most leaders started their careers. And it’s not all about technology changes.

One type of result from the latest survey stood out in highlighting the importance of being open to exploring new directions.

The 2017 edition includes four charts that highlight the effectiveness of certain tactics for improving law firm performance compared to the percentage of firms who say they’ve actually employed those tactics.

In each of those results – tactics to improve profitability, pricing, staffing and efficiency – the most effective action shows one of the lowest percentages of trial among law firms.

For instance, the most successful tactic for improving profitability in the 2017 survey – moving the firm to a “smaller, cheaper space” – has resulted in “significant improvement in profitability” in three out of four firms (74.7 percent) who’ve done it.

Yet of the firms surveyed, only a quarter have made such a move.

In a similar chart about alternative staffing, more than six of 10 firms who’ve created a “low-cost service center for back-office functions” have seen a “significant improvement in performance.”

But again, the percentage of surveyed firms who say they’ve tried it is extremely low: 12.4 percent.

Mr. Clay’s hope for the survey is that law firm decision-makers use the results as incentive to try new strategies and tactics.

“We use the report all the time in our work as strategic consultants. We hope others will use the data to galvanize action.”

 

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