Iridium Technology and LawVision recently released the results of our 3rd annual law firm profitability survey that assessed the sentiment and performance of large law firms in the heart of the pandemic.
Highlights of the survey include the following key themes:
- Profitability is a critical topic today as it was pre-pandemic, but now firms are pushing harder to enable those metrics and drive change
- While many firms performed exceptionally well during 2020 (due to the combination of resilient demand, cost-cutting, and timekeeper mix), law firm leaders are anticipating and building towards what comes next in their profitability priorities and their impact
- The pandemic has pressed firms harder to explore profitability dimensions in new ways, as described below
The table below (from the survey) highlights the many projects that firms are working to address profitability:
We were intrigued to see projects like timekeeping practices and inventory management come to the forefront, along with profit education and training. We also observed emphasis on staffing efficiency projects and new talent strategies like contract partners. In contrast, it was interesting to see a pullback in rate projects in 2020. However, we expect this to reverse. Now in 2021, with the salary wars, rising talent cost pressure will incent firms to raise rates or return to rate strategies more in line with pre-pandemic times.
More broadly, profit metrics help to inform firm innovation, so it is natural to see projects that start with efficiency leading to more expansive strategic projects.
The above represents summary points from our full survey, a 40-page detailed report covering many topics, including profit modeling, reporting, profit transparency, systems/tools, profit analytics, and of course, detailed nuts-and-bolts questions discussing allocation methods, costing partners, handling business development expenses, profit scenarios and among other topics.