The results from the 2010 Managing Partners Survey largely mirror what media reports have shown over the last year: layoffs have subsided, younger associates are being hired in significantly smaller numbers, if at all, contract attorneys are taking their place and the number of firms that saw increases in either revenue or profits in the last year shrunk substantially.
But perhaps the most interesting finding from the survey is one that seems to go against the grain. When asked what actions they took to retain profitability levels between June 2009 and June 2010, 65.2 percent of respondents said they increased billing rates, up from 38 percent last year who said the same. And that was by far the biggest choice for controlling profitability, followed by the 48 percent of respondents who said they reduced entry-level hiring.
That comes as a bit of a surprise in a climate where clients are looking for non-hourly fee arrangements and reductions in costs. With the reportedly wide use of discounting billable hours, the rate increases may just be a way to get rates at a high enough point that law firms don’t lose money when discounting them.
Results of the survey show that fewer clients are paying bills without a hassle, while many more are asking questions. When asked about how clients reacted to bills in the last year, 76.9 percent of respondents said clients sometimes ask for reductions, which was up from 64.3 percent who said so last year. On the other hand, only 19.2 percent said clients paid without much hassle, down from 32.1 percent who were able to say that in 2009. Fewer than 4 percent of respondents both this year and last year said clients always demand discounts.
The only other methods of maintaining profitability firms used more frequently this year as compared to last were reducing lateral hiring, reducing entry-level hiring and reducing marketing costs. Nearly 39 percent of respondents said they reduced marketing costs and 34.8 percent cut lateral hiring.
Layoffs, de-equitizations, reductions in compensation and deferrals were all used less frequently than they were last year. And despite a prediction from consultants that equity partners would be next on the chopping block now that associates and non-equity partners were let go, fewer firms anticipate de-equitizing partners in the coming year. While 21.4 percent of respondents said they planned to de-equitize partners between 2009 and 2010, only 8 percent said they planned to do so between 2010 and 2011.
Though the 29 respondents to this year’s survey only offer a snapshot into the world of law firm management, the responses give a good idea of what is happening in Pennsylvania law firms. The bulk of respondents have more than 125 lawyers.
For all of their efforts, more firms were less successful in growing their revenue and profits. The majority of firms saw a decrease in gross revenue, which largely mirrors what happened nationally among Am Law 200 firms. But while many Am Law 200 firms were able to increase profits due to a number of cost-cutting measures, fewer of the Pennsylvania respondents to the Managing Partners Survey were able to do so.
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