According to The Centre for the Study of the Legal Profession at Georgetown University Law Center and Thomson Reuters Peer Monitor, the market has changed fundamentally and law firms are failing to address this. In their 2015 Report on the State of the Legal Market, the authors say that the ongoing decline of law firm realisation rates combined with productivity growth will continue to be a challenge for law firms.

Fundamental changes

Whilst law firm performance was modestly better in 2014 than 2013, the review says that it  reflects ‘fundamental changes in market dynamics that have become increasingly evident since 2008. These changes include a shift in the buying habits of business clients, a persistent softness in the market for litigation services, the increasing presence of new non-traditional competitors in the legal services sector and a growing market segmentation that is rapidly separating high performing firms from the majority.'

Traditional measurements

The report says that the traditional way of measuring law firm performance may be to blame for this with its ‘focus on 'inputs' – tracking metrics like numbers of billable hours, fee growth, or utilisation – and assuming that those reflect the value of the services that a firm provides. James Jones, a senior fellow at the Centre for the Study of the Legal Profession and one of the report's authors, said that ‘the assumption that value equals the sum of all of our inputs is, on any rational basis, absurd. Surely, value from the client point of view involves many factors beyond the amount of time that a firm's lawyers invest in a matter.’