November 13, 2017
Litigation Growth, Firm Investments, Not Size, Define More Dynamic, Successful Law Firms — Thomson Reuters Legal Executive Institute Study
EAGAN, Minn., — While the large law firm market has not seen sizable growth in demand for legal services in recent years, to paraphrase George Orwell, some firms may be more equal than others. The Dynamic Law Firms Study from the Thomson Reuters Legal Executive Institute found that some firms are enjoying notably stronger growth than their peers.
The study identified two groups of firms through Peer Monitor data: Dynamic --- the top-performing quartile, and Static – the lowest quartile of firms.
While demand for large law firm services declined 0.6 percent last year, the study found that the Dynamic firms (top-performing quartile) managed to grow billable hours by slightly more than two percentage points. Meanwhile Static firms (lowest quartile) displayed little growth or even negative growth.
Firm size, location and whether a firm was regional, national or global in reach made little difference in the makeup of the Dynamic firms. And while rate increases have traditionally been used by many firms as a lever to grow, substantial rate increases were not found to be responsible for much of the Dynamic firms’ recent outperformance.
Growth in litigation practices was found to be a significant contributor to the better financial results of Dynamic firms. Overall, litigation demand has been declining for more than five years, according to Peer Monitor data. However, nearly three-quarters of Dynamic firms were able to grow their litigation practices last year according to the study.
Dynamic firms also had more efficient use of their lawyers, with an average of 60 more billable hours per lawyer per year than Static firms.
On rates and collections, Dynamic firms experience much better realization. Even though Dynamic firms have an average standard rate that is five dollars per hour lower than Static firms, better realization means their average collected rate is five dollars per hour higher than Static firms.
With expenses, Dynamic firms are increasing their spending across nearly all categories, especially business development and technology, while Static firms are often decreasing some areas of spending.
“The battle for market share is becoming more intense as opportunities for growth are increasingly challenging to find,” said Mike Abbott, vice president, Client Management & Global Thought Leadership, Thomson Reuters. “The Dynamic Law Firms Study identifies some of the factors that differentiate more dynamic firms from the ones that are more static. Firms that are more proactive and strategic in their approach may be better poised to take the steps that can lead to better financial performance.”
The Dynamic Law Firms Study can be downloaded at http://legalexecutiveinstitute.com/2017-dynamic-law-firms-study/
For more information on Peer Monitor, visit legalsolutions.com/peer-monitor.
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