Measurements of Market Sentiment November 2013 Survey Methodology - - PowerPoint PPT Presentation

Peer Reporting: Measurements of Market Sentiment

November 2013

2

Survey Methodology

• An email invite to complete an online survey was sent to those who

registered to attend the 2013 Peer Monitor Client Summit.

• 15 registrants completed the survey

Economic State

Q1 The AU legal market is currently experiencing an economic down turn. Do you feel this is a permanent change or not? How long do you believe this will last?

The economy will revive from the recent economic downturn, but not to the previous extent, instead it will enter a new normal

3

54% 46%

Expectation of Downturn as Permanent Change

Yes No

0% 39% 8% 0% 54%

Already recovering 1 year 2 years 3 years Entering a new normal

Expectation of Extent of Economic Downturn

Additional commentary:

“I actually don't think it's an economic down turn but clients getting smarter in how they will engage in legal services in the future. It's now the norm! “Lots of speculative work around at the moment.” “The days of super profits for law firms are over! Sophisticated clients many with lawyers from private practice in their counsel teams are aware of law firm profitability - we are now seeing evidence of the economic profit arbitrage through pricing pressure and clients who are more willing to accept an 80% solution (or less) rather than the traditional 100% water-tight solution - for which there is a price and value adjustment downwards."

(n=13) (n=13)

How is your firm doing in comparison to your Peers?

Revenue For My Peers

• 12%
• 10%
• 8%
• 6%
• 4%
• 2%

0% 2% 4% 6% $0 $20 $40 $60 $80 $100

Millions

Peers

YTD y/y % Chg REVENUE

My Firm

GROWTH

Greatest Challenge Facing Law Firms

7% 20% 27% 33% 33% 87%

Talent retention Rising expenditures Client retention Legal matters moving in house Business development Changes to legal fee structure

Q2 What do you feel is the greatest challenge facing your firm in today's legal market? (Check your top two answers) 6

(n=15) Concerns around changes to legal fee structure outweigh

• ther firm challenges

USA: Billing Methods

Current Billing Methods

(n=65)

Change in Past 2 Years

(n=12 to 65)

Change in Next 2 Years

(n=13 to 64) Increased Stayed the Same Decreased Increased Stayed the Same Decreased Hourly rate including discount variants 67% 25% 37% 39% 19% 33% 48% Hourly rates with premium

• r discount based on result

9% 37% 50% 13% 48% 44% 8% Project, fixed fee or flat rate and subscription; includes menu pricing, portfolio pricing and retainers 15% 72% 28% 0% 81% 18% 2% Full contingent pricing (i.e., fixed percentage of result

• r deal)

4% 31% 59% 10% 36% 47% 16% Other, please specify 5% 8% 92% 0% 15% 85% 0% Q9 In 2012, approximately what % of your firm’s revenue was billed using each of the following methods? Q10 Please select how each of the listed billing methods changed for your firm in the last 2 years? Q11 What do you expect to happen for each of the listed billing methods in the next 2 years?

• Although hourly rate including discount variants is the most popular billing method, it has seen decreased

usage in the past 2 years and that is expected to continue

7

RATE SETTING

Billing Rate Growth by Practice

• 1.5%
• 1.0%
• 0.5%

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% Banking & Finance Dispute Resolution RE & Projects M&A Work Relations

• Ins. Def.

IP My Firm My Peers

Billed Rates by Title for Dispute Resolution Matters

200 250 300 350 400 450 500 550 600 650 700 750 800 My Firm Peers Partner Experience in Years Sr Associate Class in Years

Rate Progression

$275 $325 $375 $425 $475 $525 $575 Q2 '10 Q3 Q4 Q1 '11 Q2 Q3 Q4 Q1 '12 Q2 Q3 Q4 Q1 '13 Q2 Q3

Billed

My Firm Regional National $325 $375 $425 $475 $525 $575 Q2 '10 Q3 Q4 Q1 '11 Q2 Q3 Q4 Q1 '12 Q2 Q3 Q4 Q1 '13 Q2 Q3

Standard

My Firm Regional National

Discounting Strategies

My Firm Regional Peers Standard to Worked: Discounted 8.5% Increased 1% Worked to Billed: Discounted 7.3% Discounted 3.5% Billed to Collected: Discounted 5.4% Discounted 3.8% Standard Rate: $389 $585 Collected Rate: $339 $559 Total Discount $50 or 13.8% $26 or 4.4%

Firm Strategic Objectives

13

64.1% 65.0% 72.5% 80.8% 82.5% 83.3% 84.1% 88.3%

Enhance our reputation among global corporations Invest in our infrastructure Make changes to our lawyer/partner structure Be considered the best of the best Focus on and grow select practices Enhance our reputation among domestic corporations Win new business based on our firm's value Focus on becoming more efficient

% Agree - Top 3 Box on an 8 Point Scale

Firms tend to put more focus

• n domestic objectives than

global/international

Q3 What is your strategy for dealing with the current market? Please rate how much you agree or disagree whether each of the following statements is a strategic objective of your firm.

(n=15)

USA: Do you utilize Social Media?

92% 85% 92% 62% 96% 92% 92% 67% LinkedIn Twitter Blogs Facebook 250 attorneys and fewer (n=13) Over 250 attorneys (n=24-25)

Q52 Does your firm use LinkedIn? Q58 Does your firm use Facebook? Q64 Does your firm use Twitter? Q69 Does your firm use blogging?

USA: Dedicated Staff to Social Media

69% 68% 250 attorneys and fewer (n=13) Over 250 attorneys (n=25)

Q48 Do you have anyone on staff who is dedicated to social media? Q49 What is this person’s title?

• Business Writer
• Communications Manager
• Communications Specialist
• Coordinator
• Director of Marketing
• Internet Marketing Assistant
• Manager, Social Media
• Marketing and Communications Coordinator
• Marketing Assistant
• Marketing Communications Coordinator
• Marketing Communications Coordinator and

Marketing Technology Specialist

• Marketing Manager
• Marketing Specialist
• Marketing Technology Manager
• Online Marketing Manager
• Public relations specialist
• Regional Marketing Manager
• Social Media Specialist
• Supervisor of Social Media and Contact Database
• Webmaster

Top priorities for 2014 Fiscal Year

78% 78% 78% 80% 80% 80% 82% 82% 87% 96% 96%

Branding strategies Greater investment in marketing and client development Improving realization rates Talent Management Increasing average billable hours per attorney Increasing profits per partner Training lawyers in project management skills Greater use of client teams More effective partnering with clients on matter management Taking steps to further enumerate in a clear, concrete manner the value your firm delivers to its clients Increasing cross selling to existing clients

Priorities for 2013 – % Top 3 Box on a 3 Point Scale

Q4 Below is a list of topics you may or may not be thinking about as part of operating your firm in the 2014 fiscal year. For each, please select the response that best reflects the priority level your management team will assign to each over the next 12-24 months.

Increasing cross selling, enumerating firm value to clients, and effective partnering on matter management are key priorities

16

(n=15)

Tracking Your Practice Growth

• 20%
• 15%
• 10%
• 5%

0% 5% 10% 15%

Real Estate & Projects Dispute Resolution Banking & Finance Intellectual Property Employment & Workplace Relations Taxation

My Firm Peers 24% 23% 21% 14% 10% 8% Proportionality

Demand Growth by Practice

All fee earners; AU offices only

USA: Are you using Client Teams?

29% 29% 43% 52% 20% 28% Yes No, we have no plans to implement client teams No, but we are planning to implement client teams 250 attorneys and fewer (n=14) More than 250 attorneys (n=25)

Q36 Does your firm have a focused client team program?

Outsourcing

“It all depends on the size of the transaction”

Q5 In terms of strategy, what are your thoughts on Legal Process Outsourcing (LPO)? Q6 Please indicate how likely your firm is to incorporate or continue the following into your firm’s legal services delivery strategy in the next 12 months?

(n=15)

Outsourcing is a growing resource

20

33% 27% 33% 7%

Legal Process Outsourcing (LPO)

Using Will probably use Might Use Never

Outsourcing

1 = Not at all likely 46% 2 0% 3 36% 4 0% 5 = Very likely 18%

Likelihood of incorporating or continuing LPO use in next 12 months

(n=11)

What is Trending in Expenses?

Indirect Expenses per Lawyer

• 15%
• 10%
• 5%

0% 5% 10% $0 $2,500 $5,000 $7,500 $10,000 $12,500 $15,000 $17,500

Staff Comp Occupancy Office Tech Taxes Marketing Library Benefits Outside Services Recruiting

Peers YTD y/y % change

AU offices only

• 15%
• 10%
• 5%

0% 5% 10% $0 $2,500 $5,000 $7,500 $10,000 $12,500 $15,000 $17,500

Staff Comp Occupancy Office Tech Taxes Marketing Library Benefits Outside Services Recruiting

My Firm YTD y/y % change

• 40%
• 28%

10%

Growth Expenses

19%

• 51%

Law Firm Structure

23

13% 13% 53% 20%

Confidence in Current Structure

Extremely confident/ No need for change Quite confident Moderately confident Slightly confident (0%) Not at all confident/ Will need to change

Majority of firms are only moderately confident in their current law firm structure

Q7 How confident are you in the current structure of your firm v. the need to adjust to accommodate the current market?

(n=15)

Is the Structure Changing?

Hours Worked by Timekeeper Segment

• 5.4%
• 6.8%
• 0.4%

2.4%

• 8.0%
• 7.0%
• 6.0%
• 5.0%
• 4.0%
• 3.0%
• 2.0%
• 1.0%

0.0% 1.0% 2.0% 3.0% Lawyers Non Lawyers Y/Y % Change My Firm Peers

Talent/ Lawyer Growth Balance

26

13% 20% 53% 13%

Concern with Talent Turnover

Extremely concerned (0%) Quite concerned Moderately concerned Slightly concerned Not at all concerned

(n=15)

13% 27% 40% 13% 7%

Concern with Demand to Lawyer Growth Balance

Extremely concerned (0%) Quite concerned Moderately concerned Slightly concerned Not at all concerned Q8 How concerned are you with talent turnover? Q9 How concerned are you about the demand to lawyer growth balance you have been seeing this past year?

Firms have concerns with talent turnover, but even more so with their demand to lawyer growth balance.

Managing Lawyer Growth and Balance

Balance of Demand and Capacity: All Firms

• 7.5%
• 5.0%
• 2.5%

0.0% 2.5% 5.0% 7.5% Q1 2012 Q2 Q3 Q4 Q1 2013 Q2 Q3 Q4 Q1 2014 Lawyer & Demand Growth Demand Growth Lawyer Growth

Qualified fee earners; No Contractors; AU offices only; Production is Composite

• 7.5%
• 5.0%
• 2.5%

0.0% 2.5% 5.0% 7.5% Q1 2012 Q2 Q3 Q4 Q1 2013 Q2 Q3 Q4 Q1 2014 Lawyer & Demand Growth Demand Growth Lawyer Growth

Peers My Firm

Critical Changes Underway

• Better business development

data/intelligence

• Persistent focus on AFAs, benchmarking

predictable budgets

• New means of demonstrating value to

clients/need for differentiation strategies

• Resolve “identity crisis” and place some

bets on future

• Financial performance and service quality

measurement tools

• Tools and compensation to drive

collaboration

Business Development Needs Management Needs

• Rise of “big data”
• Focus on knowledge management and

enterprise search

• Decline of the portal as “hub” – rethink how

to deliver data

• Cloud-based solutions
• Changing role of Library
• New ways to train young lawyers
• Integrated litigation and corporate practice

tools that improve efficiency and quality

• Access to information on changing regs,

precedent, market-standard deal points

• Flexible delivery of content where it’s needed
• More outsourcing

Information Needs Practice Needs

Successful firms will be efficient, differentiated, and integrated