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LawBiz® TIPS – Week of April 18, 2017

Large Firms Are Growing Small Firms Are Not

A legal newspaper recently asked its readers to respond to a series of questions. Admittedly, the survey was not scientific nor large. But, the answers did portray an interesting picture of its respondents.

The gravamen of the survey was to test the confidence level of lawyers based on size of firm. The survey asked the respondents to answer questions based on their opinion of the likelihood that (i) they would hire in the next 3 months, (ii) whether their billabe hours would grow, (iii) whether they expected their physical facilities to expand, (iv) whether they expected increased investment in technology or marketing, and (v) confidence in the strength of the legal economy.

The average of the responses was between zero and 100. The responses also were separated by size of firm. On average, the larger the firm, the more positive was the response.

Expansion of facilities was the least affirmative at all stages of response. I suspect that the rationale here was that increasing technology permits more productivity with less space and fewer people. And each responding group indicated an expectation of greater technology and greater marketing efforts in the future. And of course, staying current with modern technology is now a requirement under the rules of professional conduct, whether implicit or explicit.

In larger firms, in addition to the technology expansion, there is an increased likelihood of hiring; no indication of whether the new hires will be lawyers or paralegals. The tendency from my own experience is that the new hires will be paralegals, to be paid a lower rate and whose work will be supervised by lawyers in the firm already. This, coupled with increased technology, will permit greater productivity at a lower cost than in the past. The net result will be more rapid and efficient completion of work, thus encouraging the legal product to be produced at a lower cost.

The larger firms’ responses indicates a growth in billable hours, along with new hires. This needs to be reviewed in greater detail in future surveys. Billable hours generally means number of hours multiplied by an hourly rate. However, the billable hour is more likely to be abandoned by the smaller law firm in order to remain competitive. Value, irrespective of billable hour, is more likely to be asserted by the smaller firm. And in such circumstances, the growth of the number of hours may not register. The consumer of legal services will be more concerned about the result and total cost. The lawyer will be concerned about conveying his/her position in the legal market to gather clients - this is a marketing effort, and profit from that position. It also will require an increased flow of communication between lawyer and client to be sure the lawyer provides what the client wants (vs. what the lawyer thinks the client needs) in a timely and cost-conscious manner.

This survey produced interesting responses and a variety of possible conclusions. Certainly the overall result of this survey is to encourage follow up surveys of a similar nature. I eagerly await the results of the next survey.

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Large Firms Are Growing Small Firms Are Not

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