Business Models of Law Firms Changing
In both local and national setting, law firms are considered as big businesses. Over $250 billion annually in the United States alone are spent on legal services and the Washington area gets more than its equitable share of that figure.
There are nearly 50,000 active members of the Washington D.C. Bar, and approximately 60% of the 250 biggest law firms in the nation have their headquarters of key branch offices there. There is no other city in America than can equal D.C. when it comes to legal practice.
However, the legal industry, which once experienced stellar growth and with profits increasing at double digit rates, saw its profitability plunge as the recession deepened. The demand for legal services and outside counsel spending fell by 5% and 11%, respectively.
The recent dissolution of Howrey clearly illustrated the industry’s predicament. Because of these adverse developments, there is a growing clamor among law firms to reshape their leadership and start acting like businesses.
According to Jim Jones, former managing partner of Arnold & Porter and currently the senior vice president of Hildebrandt Baker Robbins, lawyers are now seeing a sea change in the legal industry.
“After years in which the primary focus of law firm managers has been on growth and expansion, we are now seeing the emergence of a strong buyer’s market in which clients are looking at the overall value of the legal services they receive,” said Jones.
He also added, “The emphasis going forward will clearly be on finding ways in which legal services can be delivered more efficiently and cost effectively. And that, in turn, will drive a re-examination of the ways law firms price their services, manage their work and recruit and develop their talent.”