AmLaw's Law Firm Leaders Survey Finds Recession-Prompted Internal Changes Are Here to Stay and May Be the Reason for BigLaw Optimism

"The American Lawyer's 2010 survey of leaders of Am Law 200 firms, which suggests that many of the changes implemented during the recession - smaller associate classes, postponed start dates for new hires, reductions in the equity pool and scaled-back profit expectations - are here to stay, at least for a while," writes The American Lawyer's Claire Zillman in Law Firm Leaders Survey 2010: The New Normal. Zillman reports that 60% of the respondents "said the downturn has produced a fundamental shift in the legal marketplace, and a smaller proportion, 32 percent, said the downturn had caused their firm to adjust its business model." 

The article offers the following findings from the Law Firm Leaders survey:

Employment

• 87% of respondents said their law firms' 2011's incoming class will be the same size or smaller than their (usually already reduced) 2010 class.
• 46% percent reported their law firms deferred first-year starting dates in 2010, but only 17 percent said they anticipate doing so in 2011.
• Almost 70% said that they plan to ask partners to leave in 2011, and 31 percent said that their firm plans to deequitize partners.
• 55 percent said that their firm had used contract lawyers, up from 44% a year ago.

Billing

• 91% said that their firm used a flat fee for entire matters in 2010, compared to 82 percent in 2009.
• Nearly 93% report that their firm used a flat fee for some or all stages of matters last year, up from 78%.
• Ninety percent said that their firm used incentive or success fees in 2010, up from 75 percent in 2009.
• 73 percent of respondents said that their firm did contingency work during 2010, the same percentage as in 2009.
• 85% report that more clients are requesting discounts, down slightly from last year's 92%.
• 90% say they are preparing to increase their billing rates by 5 percent or less, up from 77% a year ago. Another 7% said that they plan to boost rates more than 5 percent; 4% of respondents planned to make that same increase last year.
• Nearly 47% said that clients have refused to pay for work done by first- or second-year associates.

Profits Predictions for 2011

• About 41% report their firm's 2011 profits per partner to rise by 5 percent or less while 38% predict profits per partner growth of more than 5 percent.

Zillman concludes her summary of the survey's findings with this telling stat and comment:

Overall, about 70 percent of respondents said that they were somewhat optimistic about 2011, and 10 percent said that they were very optimistic. Ironically, the recession—and the tough measures it spurred—is part of the reason.

NLJ's 2010 Law Firm Billing Survey. On Dec. 6th, the National Law Journal announced the release of its 2010 Law Firm Billing Survey. Survey findings are available behind the pay wall but the blurb reported that "the average firmwide billing rate — a combination of associate and partner rates — increased by 2.7% in 2010, according to our annual survey of hourly billing rates. It's the second straight year of growth rates less than 3%, which is a far cry from the standard 6% to 8% increases from 2004 until 2008 and just slightly higher than the rate of inflation." [JH]