Lawyers are billing 156 fewer hours today than 11 years ago, costing firms an average of $74,100 in lost revenues per lawyer each year. Flat demand for law firm services, declining profit margins, weakening collections, falling productivity, and loss of market share to alternative legal service providers and others, are gradually undermining the foundations of firm profitability. The report by Georgetown in association with Thompson Reuters - 'Transformation of Legal Services Market is Accelerating — Are Law Firms Ready? - said that that many of the levers firms used to help counteract the last recession (expense cuts, de-equitising partner ranks, rate increases, etc) will be less effective during the next economic downturn. The current economic expansion is now the third-longest since World War II, and the impact of the next downturn on the legal industry could be severe.
'The challenges facing law firm leaders in today’s market are daunting,' notes the report, 'but the good news is that there are many positive steps that firms can take to address them. Over the last few years, there has been mounting evidence that law firms that proactively address the needs of their clients – eg by implementing alternative staffing strategies, pursuing flexible pricing models, adopting work process changes, making better use of innovative technologies, and the like – can achieve significant success.'
Lure of failed strategies
'Sometimes, it’s all too easy to succumb to ‘the lure of failed strategies’ that may have worked in the past, to the detriment of taking bold, risky steps to deal with new challenges, such as changing client needs and expectations,' said James Jones, a senior fellow at the Center for the Study of the Legal Profession at Georgetown Law and the report's lead author. 'Firms that take proactive steps to address these serious market realignments have every prospect of doing well. Meanwhile, traditional strategies and models are increasingly unlikely to lead to future market success.'