Partners in small, medium and large, international law firms regularly analyze the data in their various practice areas and have been noticing a few trends. This data has also been aggregated by Thomson Reuters Peer Monitor and Legal Executive Institute. Peer Monitor culls data from 141 firms, paying particular attention to billable hours. Peer Monitor focuses on large firms for its data.
Here is the takeaway:
Litigation work is declining among all law firms. The percentage of litigation work as part of the ratio of total law firm’s legal work has been declining for years. There were economists and law watchers who believed that litigation numbers would bounce back after the 2008 recession, but in fact that has not happened.
Litigation work is being concentrated in the largest law firms. Litigation isn’t totally dead. There are still cases to be had and billable hours to accumulate. But corporate clients are either utilizing their in-house counsel for a lot of the hours or only giving their litigation hours to so-called top tier law firms.
On the other hard, transactional work is being redirected to smaller firms. There is still plenty of legal work to be done. Peer Monitor’s data said that transactional work (real estate, tax, mergers and acquisitions, contracts and agreements) comprises 32% of all legal billable hours (compared to litigation’s 36%, which keeps decreasing). This transactional work is increasing more among the Am Law Second Hundred firms, which are the firms that rank between 101-200 in American Lawyer’s register of top 200 firms. So, this work is not going to the most expensive, elite firms. In fact, there is even evidence that corporate clients are splitting up their accounts, reserving their money for litigation for one set of law firms and using other firms for transactional expertise.
Companies are still trying to find a balance between legal work that gets done by in-house counsel and work that is done by law firms. Part of watching the bottom line is running a cost-benefits analysis. Law firms that can get excellent results in transactional work for a little less money will do so.
The Marketing Takeaway for Law Firm Management Teams: If you want to swim with the trend, then playing up your firm’s ability to manage transactional law, especially positioning your firm as more able to provide customized service at a more reasonable billable rate may position you much more favorably than the top 100 firm’s offerings.
Finding litigation work may continue to be difficult, as this work continues to be consolidated among the largest law firms. Occasional investment in experienced litigators, especially ones with experience at a top 100 law firm may be prudent, but only if that attorney has enough clout to bring his or her previous clients along to a new law firm placement.
Your law firm should also do its own data analysis on billable hours in the various practice areas to determine who and what are the true rainmakers in your firm. Finding what are your greatest revenue sources will guide how you market your firm and make hiring decisions as well as case assignments.