Law firms lack enough work to keep their lawyers busy, survey finds
Demand for legal services has failed to return to pre-2008-09 recession levels, and many firms say they don't have enough work to keep all of their lawyers busy, a new survey has found.
Demand for legal services has failed to return to pre-2008-09 recession levels, and many firms say they don't have enough work to keep all of their lawyers busy, a new survey has found.
Law firms cited varying reasons for the tepid work flow, but chief among them is a growing tendency of clients to take work in house, according to the survey by Altman Weil, a Newtown Square-based legal consulting firm.
Firms that specialize in litigation support such as electronic discovery also have been siphoning off work.
"Demand has been relatively flat, up in some firms and down in others," said Eric Seeger, an analyst at Altman Weil and an author of the report. "Firms have overcapacity, and that has been the case for several years now."
The survey was conducted in March and April, and queried leaders of 356 law firms on topics ranging from firms' use of alternative fee arrangements and contract lawyers to trends in revenue. The respondents included leaders of half of the nation's 350 largest firms.
John Soroko, chairman of Center City-based Duane Morris, a 700-plus-lawyer firm, said the results seemed to be in line with overall industry trends.
Soroko said that despite challenging market conditions, there are opportunities for firms that move quickly to institute alternatives to the traditional hourly billing model, such as flat fees and incentive payments for favorable outcomes.
Soroko said many desirable clients tend over time to "migrate away from straight hourly billing."
Many firms have tried to cope with lackluster fee generation by reducing the number of equity partners, essentially converting some partners to salaried staff at lower compensation. But the survey found that approach did little to relieve overcapacity or brighten firms' economic outlooks.
More than half of the firms surveyed said they had let lawyers go in the last year because there wasn't enough work. Only 38 percent of firms said demand had returned to prerecession levels.
"Firms are having trouble keeping their lawyers utilized, with half of all firms reporting their equity partners are not sufficiently busy," the study said. "Overcapacity and underutilization are worst among non-equity partners."
The study adds more detail to the picture of corporate law as having undergone a fundamental shift after the 2008-09 financial market collapse.
Then, many corporate clients cut their legal budgets, and law firms followed suit, laying off lawyers and in many cases canceling plans to hire new law school graduates.
Since then, revenue has recovered a bit, and many big firms remain enormously profitable, but the consensus among firms is that the high-flying days of unlimited rate increases and client acquiescence are a thing of the past.
Law firm leaders told Altman Weil that recruiting experienced lawyers with their own stable of clients was one way to boost profitability.
But the practice has its down sides. While 85 percent of the survey respondents said they had recruited lawyers in the last year, 47 percent said they had lost lawyers who had taken their business elsewhere.
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