Altman Weil Survey: Law Firms Are Raising Rates in 2010
Altman Weil has just issues its flash survey on 2010 billing rates. Apparently, many law firms have decided to shoot themselves raise rates in 2010. The survey reports that “US law firms project an average overall increase in rates of 3.2%.” The increase will be higher in bigger firms, an average of 4%. Few firms, just 13.1%, are raising rates across the board. Interestingly, even after many firms laid off associates and froze or reduced salaries, firms are asking their clients to pay even greater increases for associates:
Thirty percent of law firms indicated they would adjust their rates by timekeeper class…. Firms that made their billing rate decision based on timekeeper class were asked to estimate their rate change within ranges for equity partners, non-equity partners, associates, counsel, contract lawyers and paralegals. The largest increase, according to the survey, will be in associate billing rates with 45.5% of firms making an increase in the 4%-6% range and 11.4% making an increase of 7% or more.
Wow.
So clients, how’s that working out for you?
Glendower: I can call spirits from the vasty deep.
Hotspur: Why, so can I, or so can any man; but will they come when you do call for them?
-- Wm. Shakespeare, Henry IV pt 1
The rising tide of fixed fees, alternative billing, and holdbacks depending on results, success fees, radical convergence and fixed retainers are all client driven methods to reduce bills and hourly fees. Let’s be completely clear on what this means: Clients, particularly those of significant economic clout are passing all of the risk on legal engagements to the law firm. The hourly fee as a the standard by which fees are calculated is headed for distinction. Nominal rises in hourly rates are therefore largely irrlevant.
Another game changer: The data base recently announced by a significant group of corporate counsel (the “ACC Value Index”) under which law firms will be rated by clients on a scale of one to five for six criteria ( [1] understanding objectives/expectations; [2] legal expertise; [3] efficiency/process management; [4] responsiveness/communications; [5] predictable cost budgeting skills; and [6] results delivered/execution]) and this data base will be available for all corporate counsel. Thus far, 1,800 evaluations have been made of 600 law firms. Currently these evaluations are being made on a general basis. Inevitably, they will likely be subdivided in to different practice areas.
Let’s also be clear on what the passing of that risk mandates: Legal work must be handled efficiently by experienced well trained lawyers. An ineluctable result is the continued disinclination by clients to pay for the training of young associates will further adversely effect net realization.
