Welcome back to the Big Law Business column on the changing legal marketplace written by me, Roy Strom. This week, we look into whether Big Law partners will accept more change in how they price their services. Sign up to receive this column in your inbox on Thursday mornings.
Big Law firms are slow to change. I’ve been saying that for years.
But a survey released this week suggests Big Law partners are warming up to new ways of pricing their work.
The top challenge to managing a pricing function inside a law firm is attorneys resisting change, according to 53% of respondents in the survey by the Legal Value Network and Blickstein Group. But looking to the future, only 40% viewed lawyer resistance as a top challenge.
Now, a 13% drop isn’t a monumental difference. The billable hour won’t be going away any time soon. It’s a change worth noting though, when you remember just how stuck lawyers have been.
Altman Weil has been asking law firm leaders since 2013 how “serious” they are about providing greater value to clients by changing the way they delivery legal services.
For eight years, law firm leaders never wavered in admitting they are nowhere near “very serious.” On a 1-10 scale from “not at all serious” to “doing everything we can,” law firms each year gave a response of 5.
By the way, Altman Weil asked clients to rate law firms on the same scale, and they never gave them better than a 3.
David Cambria, chief services officer at Baker McKenzie and a co-author of the Legal Value Network and Blickstein Group report, said the urgency the pandemic brought to law firms may lead to an acceptance of change on pricing issues.
“That may have helped condition both the buyer and the seller in the marketplace to not only sell your legal services differently, but to buy them differently across a wider array of practice groups,” Cambria said.
While pricing matters differently doesn’t appear to me to be an obvious result from the pandemic, the upheaval has helped partners work through other changes nobody otherwise would have expected.
Associates can now work from home, something partners opposed in the pre-Covid, “if-you’re-not-here-then-what-are-you-doing” office culture.
And partners are using technology a lot more. They’re using software to collaborate on work projects, just like every other industry transitioning away from a heavy in-office culture. It will likely lead to more efficient legal practices.
It doesn’t hurt that for many partners, the pandemic has brought with it a spike in compensation. That could make them more open to change, or at least serve as some evidence that change is not inherently bad.
But even if partners are newly emboldened to try new things, some are still pessimistic that adopting new pricing strategies will be among the experiments.
Richard Burcher, managing director of law firm pricing consultancy Validatum, isn’t optimistic lawyers will adopt new pricing methods in part because of the hefty profits the current model generates for partners.
“Try and tell a partner making $2 million a year that they’ve got it all wrong and need to change,” he said. “That’s going to fall on deaf ears.”
Burcher added, “Lawyers are change averse, risk averse, and cost averse. Combine that with no burning platform, and the handbrake on the machine is just about fully on.”
Worth Your Time
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On Law Firm Financials: Big Law firms are starting to report their financial results from 2020, and Greenberg Traurig says revenue jumped nearly 5.5% to $1.73 billion in 2020. Meanwhile, Citi Private Bank’s Law Firm Group said 2020 was a good year for the 50 largest firms, which saw revenue jump 8% and profits per equity partner grow 15%.
On Law Firms: Freshfields signed a 10-year lease on new office space in Redwood City, Calif., marking its commitment to its Silicon Valley expansion with a space that will feature large outdoor patios. Freshfields made a splash last summer when it hired five partners from rival firms to start its office in the region.
On ALSPs: Revenue for alternative legal service providers reached $13.9 billion by the end of 2019, a new Thomson Reuters survey says. That’s compared with $10.7 billion at the end of 2017. Meanwhile, UnitedLex tapped the Big Four for a slew of senior hires, Sam Skolnik reports.
That’s it for this week! Thanks for reading and please send me your thoughts, critiques, and tips.