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Law firm leaders report lawyer oversupply and 'chronically underperforming lawyers'

The continuing erosion of demand for legal services continues to be a threat to traditional law firms, according to a survey of law firm leaders in which 61 percent said overcapacity is diluting profitability.

Fifty-two percent of law firm leaders responding to Altman Weil’s Law Firms in Transition Survey (PDF) said their equity partners are not sufficiently busy. Sixty-two percent said nonequity partners are not busy enough, and 25 percent said associates don’t have enough work. A summary is here; Bloomberg Big Law Business and the Am Law Daily (sub. req.) have stories.

Eighty-eight percent of the leaders said they have “chronically underperforming lawyers” at their firms. When asked why, 82 percent identified weak business development skills and 59 percent said flat or declining market demand was part of the problem.

“Decreasing demand for legal services is endemic in the profession,” the survey said. “While reducing compensation may be an appropriate response to underperformance, it should not be mistaken for a remedial tool. Experience shows that the right response is to make a plan for improvement with a clear timeline, and to remove those lawyers who are not able to turn their performance around.”

Altman Weil sent the survey to 798 managing partners and chair of law firms with at least 50 lawyers. Forty-eight percent of the firms participated.

The survey also found:

• Sixty-five percent of law firm leaders say their partners resist most change efforts, up from 44 percent in 2015. Yet 72 percent of the leaders believe the pace of change will continue to increase. “There is a very concerning misalignment between what law firm leaders believe regarding the pace of change and what their partners believe or are willing to do,” the report says.

• Only 30 percent of law firms routinely link discounted, capped and alternative fees to changes in how work is staffed and delivered. “This is a hugely significant and extremely troubling result that goes to the heart of successful change and illustrates a critical misunderstanding in many firms,” the report says. “The strategic elements of a law firm’s business model are all interlocking gears in the same engine.”