When analyzing growth in the legal services market for most of the past few years, the focus has largely been on Am Law 100 firms, as that has been the portion of the market that has seen the most consistent growth.
However, according to the newly released 2019 Report on the State of the Legal Market: A View from the Midsize Firms, full-year results for 2018 show that midsize law firms — defined as those law firms participating in Peer Monitor that fall outside the Am Law 200 rankings — saw positive results across nearly all key performance measures and have a good platform for additional success this year.
Midsize firms saw average demand growth of 0.5%, a substantial improvement over the 1.6% contraction in demand the previous year. This growth in demand was particularly encouraging as these firms increased their average worked rate by 2.9%, notching growth consistent with previous years where such rate increases were coupled with declining demand.
Click here to download a full copy of the 2019 Report on the State of the Legal Market: A View from the Midsize Firms.
Significantly, much of this increase in demand was driven by growth in demand for litigation practices. Midsize law firms, as a segment, have not seen a full year’s worth of litigation practice demand growth since 2011. As litigation accounts for fully 34% of all billable hours among midsize firms, successful growth in litigation is highly likely to lead to overall demand success, which was certainly the case in 2018 and could well be for 2019.
This positive performance in demand growth was well balanced with how law firms increased their headcount. Relatively conservative attorney headcount growth of only .02% for the year helped created the conditions for an average .03% increase in productivity, the first increase in productivity for the midsize segment in several years.
These results show a strong 2018 and set the stage for what could be another good year in 2019; however, midsize law firms must be cautious of continued pressure from the market. Large law firms will continue to be the go-to resource for many clients, particularly as we head into another presidential election cycle, which many commentators cite as part of the rise in Am Law 100 demand in 2016.
Further, the continued growth of alternative legal service providers will also place additional pressure on midsize firms, as they do on firms of all sizes. Careful management of expenses, balancing attorney headcount with demand performance, and effective, data-driven pricing strategies will all be vital components to the performance of midsize firms as we move through this year.