Tips and Trends Industry Advice and Developments

What’s Hot and What’s Not in the Legal Profession in 2017

This is our 28th annual report on what’s going on in the legal profession. As in all previous reports, it is based on information my colleagues and I continually gather throughout the year from many sources — law firms, other providers of legal services, legal departments, surveys and the legal and general press.
Bob Denney

This is just a snapshot of some of the trends we predict for the profession this year.

  • Lateral hiring: While there are other reasons, the principal one is to increase revenues and, hopefully, profits. However, some statistics indicate that only about half of the lateral partner hirings achieve these objectives. One of the reasons is …

  • Lateral integration: All too often it is not adequately implemented. Some firms, such as Benesch, are using client teams and cross-office meetings to improve and accelerate integration into the firm.

  • Project management: Firms are continuing to invest in this to meet client demands.

  • Artificial intelligence: This is just being explored by a few firms. It will be the focus of next year’s College of Law Practice Management Futures Conference.

  • Competition: It’s no longer just from other law firms. It’s now coming from two other directions — nonlegal business entities like LegalZoom and from the clients themselves, who are using their legal departments as well as alternate service providers.

  • Blockchain: This is the technology behind bitcoin. It is a shared digital ledger in which items or transactions are added at the end of the chain and encryption ensures that is remains unbroken, tamperproof and error-free. It’s currently being adopted by banks. Advocates say it has the potential to “change the world,” as the internet has done.

  • Fewer equity partners: In October, The Wall Street Journal reported that the average number of equity partner billable hours in Am Law 200 firms had dropped to 1,589. The resulting impact on profits is the principal reason most of these firms are planning to reduce the number of equity partners next year, either by de-equitizing them or asking them to leave.

  • Higher partner contributions: Due to slow growth and declining productivity, some firms are requiring more contribution from their partners for operating capital rather than attempting to increase their bank loans.

  • Alternate fee arrangements: While they may account for more than half of the total legal spend, this is due mainly to large firms with clients that have a high amount of litigation and want to drive down the fees. Many clients want billing options, but most firms still cling to the billable hour structure. Therefore, despite continued predictions … the billable hour is not dead, and won’t be.

  • Cybersecurity: While many firms have developed plans for reacting to a cyberattack, many more have still not developed or implemented cybersecurity plans to prevent such attacks. One overlooked factor is what actually constitutes a breach. Some firms regard any unsanctioned access of a firm system as a breach, while others do not regard it as a breach until something — data, files or money — has been taken.

  • Mergers: These soared to a record high in 2015 and may surpass that number this year. For the acquiring firm, the objective is usually to increase revenues and, hopefully, profits. For the acquired firm, it’s usually to survive — in some form.

  • Leadership: While effective management is needed in all firms regardless of size, this is not enough. To survive, firms also need leadership to execute the vision, strategy and culture established by the leader.

  • Fewer private practice jobs for law school graduates: According to the National Association of Law Placement’s 2015 survey, although the number of jobs in large firms increased, the overall employment total was the lowest since 1996. While the percentage of graduates who obtained jobs has increased slightly, this was the result of the steep drop in overall law school enrollment, which continues. It’s not a good picture for the future. But what can be done to improve it?

  • Scamblogging: A category of online writing by debt-burdened law school graduates who are convinced their law schools misled them about their opportunities for employment.

  • Changing lawyer structure: Because many firms of all sizes are being faced with overcapacity, there will be fewer equity partners, more nonequity partners and “permanent” associates, as well as greater use of contract lawyers.

  • Changing management structure: Some midsize as well as large firms are recognizing the need for more non-lawyer managers, not only in the technology and marketing areas, but also as project management directors and chief operating officers. The term “legal engineers” is being used more widely to describe these positions.

  • Student debt: A few firms, such as Orrick, Herrington & Sutcliffe, are beginning to offer new associates cash to help them pay their student loans until they qualify to receive a bonus.

Excerpted from “What’s Hot and What’s Not in the Legal Profession,” November 2016 Legal Communique by Robert Denney Associates, Inc. Reprinted with permission.