Major Issues Facing Law Firms Today€¦ · 13/07/2017 · Law Firm leaders believe these to be...

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Major Issues FacingLaw Firms Today

Presented by: Derek Barto and Dave Roberts

July 13, 2017

2 © ArmaninoLLP | armaninoLLP.com

• National Legal Industry Trends

• Major Issues Facing Law Firms Today• Outside the Firm• Inside the Firm

• Alternative Models and Service Providers That are Re-shaping the Delivery of Legal Services

Agenda for Today


National Legal Industry Trends


4

Industry Trends

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

National Law Firm Starting Salary Trends


5

Industry Trends

35,000

38,000

41,000

44,000

47,000

50,000

53,000

56,000

Law School Enrollment


Comparison

6

Industry Trends


-6.00%

-5.00%

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

2005 - 2008 2009 2010 2011 2012 2013 2014 2015 2016

% Change in Supply of Lawyers % Change in Demand

Imbalance Between Supply and Demand

Supply Growth vs Demand Growth


Legal Industry Maturity Curve

GROWTH

201720001970


Industry Trends

Law Firm leaders believe these to be permanent changes:

2009

More price competition 42%

Legal work becoming more commoditized 25%

More alternative fee arrangements 27%

Fewer equity partners 22%

Higher usage of contract lawyers 28%

Reduced leverage 12%

Lower/Slow down in growth of profits 13%

Smaller first-year classes 11%

More outsourcing of legal work 11%

2017

95%

84%

81%

68%

70%

58%

47%

57%

54%

2012

92%

84%

80%

68%

66%

58%

48%

55%

46%


Industry Trends

Law Firm leaders believe these to be permanent changes:

2017

Focus on improved practice efficiency 95%

Technology replacing human resources 85%

Increased competition from non-traditional service providers 80%


Major Issues Facing Law Firms Today


Major Issues Facing Law Firms Today

• Fee Pressure and Alternative Fee Arrangements

• Competition for Legal Services (other law firms, in-house counsel, new providers)

• Commoditization of Legal Work

• Client Relationships Changing

• Innovation in the Marketplace

• Mergers Changing Competitive Balance

• Do More for Less

• Succession and Transition Issues

• Flat Profits, Compressed Partner Compensation & Under-Productive Partners

• Lower Leverage and Soft Hours (from everyone)

• Developing the Correct Vision and Strategy

• Pressure to be a Rainmaker

• Changing Firm Culture (Boomers to Millennials)

• Lack of Work-Life Balance and Unhappy Partners/Lawyers

OUTSIDE THE FIRM INSIDE THE FIRM


Outside the Firm– Outside Counsel Spending

In the next year almost 45% of corporate law departments plan to:

1. Add in house lawyers

2. Decrease Outside Counsel Spend

Buy vs Build


• The Corporate Legal Operations Consortium, (“CLOC”) is a non-profit organization consisting of legal operations professional providing education, sharing best practices, networking, establishing a professional organization and community, and driving positive changes across the corporate legal services ecosystem.

• Legal Operations is a multi-disciplinary function that optimizes legal services deliver to a business by focusing on certain core competencies.

Outside the Firm – CLOC


Outside the Firm – CLOC Core Competencies


Inside the Firm – Staffing

76% of law firms greater than 250 lawyers report their profitability is being diluted by overcapacity

56% of Firms of under 250 lawyers report the same problem


Inside the Firm – Staffing

Under 250 lawyers

250 lawyers or more

Using part-time lawyers 47% 71%

Using contract lawyers 50% 71%

Outsourcing non-lawyer functions 20% 25%

Creating a low-cost service center for back office 10% 21%

Outsourcing legal work 5% 15%

Changes in approach to lawyer staffing:


Inside the Firm – Financial

Under 250 lawyers

250 lawyers or more

Reducing compensation 96% 98%

Requiring individual plans and timelines 77% 86%

Investing in additional business development resources

70% 65%

Removing chronic under-performers from the firm 65% 93%

De-equitizing 52% 72%

Responding to under-productive partners:


Inside the Firm - Confidence of Firm Leaders

To successfully deal with the challenges facing their firms:

0%

5%

10%

15%

20%

25%

2011 2012 2013 2014 2015 2016 2017

Highly Confident


Inside the Firm - Twofold Market Failure in the Legal Industry

• Law Firms have failed to meet client demands(The trade-off between Quality and Affordability)

• Law Firms have failed to meet lawyer desires(The trade-off between Time, Money & Overall Satisfaction)


New Law Firm Models have begun to fill the demand created by these significant and long-term Market Failures

Therefore ……


Alternative Models that are Re-Shapingthe Delivery of Legal Services


• Alternative Legal Services are delivered via a model that departs from the traditional law firm delivery model.

• $8.5 billion segment of the legal services industry• US - $275 billion • Worldwide - $700 billion

• 60% of legal departments in corporations are currently using Alternative Legal Services.

• Mostly driven by pricing pressures

Alternative Service Providers


Bliss Lawyers• 15,000 network attorneys• Virtual Practice• Attorneys usually work at client sites

Axiom• Over 1,200 employees• Virtual Practice

Rimon Law• Approximately 50 attorneys across 14 offices• Can be a virtual practice, but has offices

Cadence Counsel• 200 attorneys• Virtual Practice

Alternative Service Providers


Cloudigy Law• 13 Lawyers• IP• Run like a business, low overhead

Trademarkia (Legal Force)• Patent & Trademark (approximately 30,000 Clients)• U.S., China, Europe, India• 20 Lawyers – Heavy Technology, Lower Fees

Seyfarth Shaw• Value, Efficiency, Quality• 15 – 50% reduction in cost of legal services

Flex (by Fenwick)• 45 Lawyers• Focus on Tech• Lower rates for early stage tech companies

MORE Alternative Service Providers


Questions? Contact Us:

Thank You!

Derek Barto, CPAPrincipal, Law Firm Servicesp. [email protected]

David Roberts, CPAPartner-In-Charge, Law Firm Servicesp. [email protected]

Major Issues Facing Law Firms Today€¦ · 13/07/2017 · Law Firm leaders believe these to be...

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