Blog Post

How New Law Firm Staffing Trends Are Affecting the Industry

April 7, 2021

Law firm staffing trends. So much of the legal industry’s work focuses on managing and mitigating change. Legal professionals protect their clients from unexpected market events, regulatory shifts, global and local crises and more. But it’s important for the industry to periodically take a step back and turn that lens on itself: How can we best adapt to and mitigate the changes taking place in the legal industry? As just one example, we can zoom into the market forces that are compelling law firms to adopt leaner practices and do more with less.

The COVID-19 pandemic has added to these pressures, shocking the system and — perhaps — serving as a catalyst for change in a very change-averse industry. Let’s explore some of the recent staffing trends law firms are experiencing and evaluate whether the 2020s will be a decade of transformation or more of the same for firms.

Law Firm Staffing Trends: On-Going Pressure to Get Lean

Even before the COVID-19 pandemic, law firms faced forces that encouraged them to slim down. Consider the results of one survey of nearly 800 law firms:

  • Half of all respondents reported that their non-equity partners were not sufficiently busy
  • 84 percent of firms reported having underperforming lawyers on staff
  • Half of all firms said that overcapacity had an impact on their overall profitability

Beyond merely being overstaffed before the pandemic, law firms also faced pressure from their clients to cut costs. Legal departments have placed increasing scrutiny on firms’ billing and performance, taking greater control over the scope of work and the way in which it is carried out.

In part, this is because legal departments have begun to hire more legal operations professionals, part of whose purview is the management of the legal departments’ law firm panel. According to Thomson Reuters, only 57 percent of companies had a legal operations professional in their legal department in 2017; in 2020, that figure jumped to 81 percent.

More difficult to quantify but perhaps most significantly, the changing nature of legal work is impacting how many and what kind of staff law firms can and should have on their rosters. It wasn’t too long ago that discovery could be performed in-house with little technical training; now, it requires intimate knowledge of data science and advanced eDiscovery solutions. While the growing digitization of legal work will create jobs in the long run, it means that law firms will likely require fewer lawyers and more cross-functional experts.

Law Firm Staffing Trends: The COVID-19 Crucible

Naturally, COVID-19 compelled law firms to cut costs even more. Over the course of the pandemic and according to the Thomson Reuters Law Firm Business Leader Survey,

  • 46 percent of firms reduced partner draws,
  • 36 percent discharged support staff, and
  • 11 percent discharged fee earners.

As of this writing, the growth rate for lawyer full-time equivalents (FTEs) has dropped to negative 1.6 percent — for the sake of comparison, the last time FTEs contracted at this rate was shortly after the Great Recession.

In part, these cost-cutting efforts were pre-emptive actions taken early in the pandemic to prepare for a worst-case scenario where work dried up entirely. However, firms found that while there wasn’t as much demand for their services, people still needed their legal professionals (indeed, demand for lawyers is on a rebound after the pandemic).

Interestingly, legal departments became significantly busier during the COVID-19 pandemic, but this led to less work for law firms, not more. Stuck in crisis management mode, legal departments needed to devote all of their energy to ensuring the business’s survival. A full 79 percent of legal departments have reported an increase in workload due to the pandemic, and another 89 percent cited controlling outside counsel costs as a priority. These figures support the idea that legal departments outsourced less work to their law firm panel during the pandemic — first because they were too busy to oversee the type of transactional work they would normally outsource and again because the costs were too high during a time when every penny counts.

What does this all mean for the industry?

Between the on-going pressures to get lean and the acute pain of the COVID-19 pandemic, law firms are in a unique position to change their operations for greater efficiency. Of course, if there’s anything that law firms excel at, it’s resisting change — between risk-averse mindsets, fee structures that reward billable hours rather than process improvements and partners that have more to lose than to gain from changes, it’s no wonder law firms have gained the reputation of being Luddites.

But even the most entrenched law firms may consider exploring ways to do more with less when faced with the pressures described in this blog. According to one survey, for instance, 62 percent of law firms included innovation initiatives in their strategic plans in 2020. Whether these initiatives translate into action remains to be seen, but there are promising signs. For example, Thomson Reuters reports that 84 percent of surveyed partners claimed they intended to invest in legal technology in 2020.

We can also see evidence of innovation in the growing adoption of alternative legal service providers (ALSPs). A full 79 percent of law firms and 71 percent of corporations now use ALSPs, a dramatic change from the time when law firms and corporations alike saw ALSPs as competitors to be avoided.

That perspective is changing, however. As law firms respond to staffing pressures from the pandemic, clients and technological innovation, many have found it beneficial to work with ALSPs. These organizations specialize in the transactional work — like litigation support and legal administration — that many firms have been overspending on. What’s more, because ALSPs place a greater emphasis on legal technology than firms have traditionally done, they serve as a less-risky means of bringing innovative processes and tools into firms as opposed to buying those tools and hiring associated experts outright.

The team at Exigent is constantly tracking ongoing trends in the legal industry and exploring new ways that ALSPs can support firms as they navigate the new legal ecosystem of the 2020s. To learn more about the role of an ALSP in your firm’s operations, get in touch with one of our experts today.