When It Comes To Law Firm Change, The More Things Change The More They Stay The Same

Why aren't law firms changing, despite knowing that they must?

In 2017, I wrote a post on Above the Law focused on client service. In that post, I referred to the 2017 Altman Weil “Law Firms in Transition” survey and concluded that “many lawyers in larger firms are refusing to change the way that they do business despite finally acknowledging that the legal profession is undergoing an industry-wide paradigm shift in ways never before seen.”

Fast forward to 2019, and it would seem that when it comes to law firms refusing to change in the face of exponential, unprecedented change, it’s Groundhog Day all over again.

For evidence of this, look no further than the Altman Weil “Law Firms in Transition 2019” survey, which was recently released. According to the results of this year’s survey, depressingly — yet predictably — and despite the passage of two years, it’s simply more of the same. Except now, since the majority of  law firms (78 percent) report that they’ve experienced a profitability bump over the past year, they now appear to be even less inclined to change with the times.

In the introduction to the survey, the authors note that law firm profitability over the past year has led to increased stagnancy:

“There has been near-universal agreement in our past surveys that the pace of change will remain high or even accelerate. Yet only 54% of managing partners said their firms’ urgency to change is higher now than it was two years ago. Success can bring about a tendency to relax.”

As a result, many of these firms are resting on their laurels rather than taking steps to increase internal efficiency. As the authors explain, this complacency is occurring in spite of an acknowledgment by law firm leaders that the pressure to increase efficiency isn’t going away:

“Law firm leaders agree almost unanimously (96 percent) that a focus on improved practice efficiency is a permanent trend in the profession.”

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According to the survey results, some firms are addressing the push for increased efficiency by using technology to improve firm processes. But they’re in the minority:

“About half of the survey respondents (48 percent) reported using technology tools to replace human resources in order to increase efficiency of legal service delivery.”

Instead, the majority of firms continue to be focused on short-term profitability, and are thus rewarding partners on that basis rather than taking steps to create more efficient internal firm processes:

“Most firms (62 percent) that have moved toward rewarding efficiency and profitability (not just absolute revenue) in partner compensation decisions have seen consequent improvements in performance. However, few firms have made serious attempts to systematically reengineer work processes (22 percent) or implement formal knowledge management programs (28 percent).”

If the majority of firms admittedly aren’t reengineering work processes, implementing formal knowledge management programs, or using technology to increase profitability, then how is it that their numbers are up? What exactly the are these firms doing to increase their revenues?

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Why, they’re simply raising their prices! As explained in the survey report, 61 percent of firms aggressively increased billing rates over the past year in order to improve law firm profitability.

In other words, large law firms continue to raise rates rather than institute change, even though the vast majority of law firm leaders acknowledge that the pace of change will remain high and that the need to improve practice efficiency is a permanent trend.

So the question remains: Why aren’t law firms changing, despite knowing that they must? Simply put, because of stubborn partners.

As the survey authors explained, the number one impediment to change in most firms was the resistance of partners to inevitable change:

“In 69 percent of firms, partners’ resistance to change is an embedded drag on progress, and recent economic successes may obscure any clouds on the horizon – at least for the short-sighted.”

The top four reasons offered by the survey respondents for failing to do more to change the way legal services were delivered were:

  • Law firm partners resisted most change efforts (69 percent up from 44 percent in 2015);
  • Law firms experienced insufficient economic pain to motivate change (66 percent);
  • Most partners were unaware of what they might do differently (60 percent); and
  • Clients weren’t asking for it (59 percent).

The last excuse — that clients weren’t asking for change — was proffered despite the fact that two of the largest competitive threats acknowledged by survey respondents were caused by clients finding alternative ways to source their legal work.

First, there are the corporate law departments which have increasingly in-sourced more legal work, something that 62 percent of respondents indicated was a trend that was taking business from them now. Second, clients are reportedly using technology that reduces the need for lawyers and paralegals, with 22 percent of survey respondents stating that this emerging trend was taking business from them currently.

These statistics serve to highlight the extreme level of disconnect in the legal profession. Law firm leaders fully understand that rapid technological changes are affecting client expectations and needs, and yet remain shortsightedly focused on increasing short-term profitability rather than focusing on meeting client demands in the long term. As a result, clients are finding new ways to obtain the legal services that they need.

Obviously, this doesn’t bode well for large firms in the long run. But why consider the long game when the short game looks so damn rosy?

Of course, the game has completely changed. Large law firms are happily winning at checkers, while the rest of the world has long since moved on to chess. Law firm leaders know this, but they’re apparently in the Charlie Sheen camp: as long as you’re winning at something, it’s all good. Winning at checkers is still winning. So why bother investing in a new board and new strategies?

In other words, the more things change, the more they stay the same.


Niki BlackNicole Black is a Rochester, New York attorney and the Legal Technology Evangelist at MyCase, web-based law practice management software. She’s been blogging since 2005, has written a weekly column for the Daily Record since 2007, is the author of Cloud Computing for Lawyers, co-authors Social Media for Lawyers: the Next Frontier, and co-authors Criminal Law in New York. She’s easily distracted by the potential of bright and shiny tech gadgets, along with good food and wine. You can follow her on Twitter @nikiblack and she can be reached at niki.black@mycase.com.

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