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Law Firm Partners Handling Larger Share of Work in Deleveraging Trend, According to ALM Legal Intelligence Survey of Law Firm Staffing Models

The November 2011 survey of partners, associates and paralegals at Am Law 200 law firms assessed the impact of deleveraging on staffing structure, performance management, client relations and morale. The survey report, "Life After Leverage: New Models of Law Firm Staffing," is available now at www.almlegalintelligence.com/NewStaffingModels.

"When times were good, law firms profited from a process known as leveraging. They charged high fees for legal work done by armies of inexperienced associates who were paid a fraction of the compensation received by the partners but were also much less productive," said Nigel Holloway, vice president of research at ALM Legal Intelligence. The trend peaked in 2008 when there were 67,600 associates employed by the 250 largest U.S. law firms. By 2010, this number had fallen 11 percent to 60,377, but during the same period the number of partners declined only marginally, by less than one percent. "That is a significant amount of deleveraging at America's largest law firms," added Holloway.

Clients are increasingly reluctant to pay for junior associates perceived as unproductive, but they will still pay higher fees for the work of experienced partners. The survey found that the trend of deleveraging is likely to continue. The largest share of respondents -- 61 percent -- said that partners have been doing more of the work relative to associates in the past three years. This number falls to 45 percent when asked about the next three years, but this is still the largest proportion of respondents. If the U.S. economy deteriorates during this period, deleveraging may accelerate.

The survey also indicates that paralegals will become more important as clients continue to demand lower fees. Respondents were asked which category of staff should be increased in their practice area and the largest proportion (52%) said paralegals. More of the routine legal work will be farmed out to legal process outsourcing (LPO) providers. But another type of outsourcing has emerged for more substantive legal work. Law firms and corporate counsel are turning to staffing firms to provide them with highly qualified attorneys on a project-by-project basis for more complex matters, even, in rare cases, for M&A advisory work.

Another interesting finding from the survey was that performance measurements at law firms are becoming more stringent. Instead of measuring performance based primarily on billable hours, firms are emphasizing business development skills and industry expertise through more frequent evaluations. Sixty-four percent of respondents said that a more rigorous evaluation system had been introduced in the past few years, with 35 percent saying that performance had improved and 34 percent reporting it had made no appreciable difference. Law firms may need to link pay to job performance before performance improves further. Fifty-four percent of respondents said it was the most important way to retain staff and remain competitive.

About ALM Legal Intelligence

ALM Legal Intelligence offers detailed business information for and about the legal industry, focused on the top U.S. and international law firms. The division's online research Web service, www.almlegalintelligence.com, provides subscribers with direct, on-demand access to ALM Legal Intelligence's extensive database of surveys, rankings and lists related to law firms and the legal industry. ALM Legal Intelligence is a division of ALM.

About ALM

ALM, an integrated media company, is a leading provider of specialized business news, research and information, focused primarily on the legal and commercial real estate sectors. ALM's market-leading brands include The American Lawyer, Corporate Counsel, GlobeSt.com, Insight Conferences, Law.com, Law Journal Press, LegalTech, The National Law Journal and Real Estate Forum. Headquartered in New York City, ALM was formed in 1997. For more information, visit www.alm.com.

ALM, The American Lawyer, Corporate Counsel, GlobeSt.com, Insight Conferences, Law.com, Law Journal Press, Law Technology News, LegalTech, The National Law Journal and Real Estate Forum are trademarks or registered trademarks of ALM Media Properties, LLC.

Teague Communications
Daryn Teague, 661-297-5292
dteague@teaguecommunications.com