Not insignificantly, many law firms became entangled in an ongoing competition for top legal talent, adding to their overall costs; at the same time, many also began seeing early hints that legal demand was slowing in some practice areas.

Taking stock of all this, the newly published Law Firm Business Leaders Report attempts to gauge the mindset of US law firm business leaders 鈥� managing partners as well as those allied professionals who are responsible for running their firm鈥檚 business operations and may be the proverbial canaries in the coalmine in regard to future challenges to firms鈥� bottom lines. This annual report is published by the 成人VR视频 Institute, in partnership with the Center on Ethics and the Legal Profession at the Georgetown University Law Center and the True Value Partnering Institute.

The report shows that law firm business leaders see general economic worries 颅鈥� inflation, potential recession, ongoing war, supply line disruptions, and a charged political environment 鈥� as major threats to the continuing profitability of their firms.

Concerns over general economic pressures were cited as a high risk to law firm profitability by almost one-third of those surveyed, twice the level of those who thought this in last year鈥檚 report

Indeed, concerns over general economic pressures were cited as a high risk to their law firm鈥檚 profitability by almost one-third of those surveyed, twice the level of those who thought this in last year鈥檚 report. In fact, these worries moved to 2^nd place in the list of most-cited risk concerns in the survey, up from 9^th place last year.

It鈥檚 as if there鈥檚 been an outward shift in law firm business leaders鈥� gaze toward the uncertain world outside the office. Underscoring that, law firm business leaders identified fears of outside cyber-attacks by illicit actors as their number one most concerning threat, with 42% of those surveyed citing it as a high risk to firm profitability. These fears about security breaches, hacks, ransomware demands, and data loss, marked its first appearance as a survey option choice in this year鈥檚 survey.

Of course, the report reflect only dismal thinking. In a move toward the positive, most business leaders who were surveyed said they expect at least a medium level of growth across many of their firms鈥� practice areas, and even a high level of growth in practice areas such as intellectual property and mergers & acquisitions. And more than half (52%) said they expect one key financial metric, profits per lawyer, to grow moderately over the next three years.

Yet, even as law firm business leaders begin to map out their business strategy for the next few years by taking steps to improve their firms鈥� financial performance 鈥� raising rates, improving technology, supporting more remote work, and increasing cross-selling throughout the firm 鈥� many are keeping at least one wary eye outward, on the horizon, and wondering if those darkening clouds signify a more worrisome future.

You can download a copy of the 成人VR视频 Institute鈥檚 鈥淟aw Firm Business Leaders Report鈥� by filling out the form below:

This annual report is one of the few reports in the legal landscape that focuses exclusively on the thoughts and opinions of the allied business professionals who are leading midsize and large law firms 鈥� those professionals occupying the finance and operations roles within law firm leadership. Without the duality of purpose that often comes from trying to manage a law firm while also maintaining a book of client business, these firm leaders bring a different perspective to the strategies of running a law firm.

Unsurprisingly, last year鈥檚 survey found that many of these business professionals were concerned about the broader economy and the impact it may have on future firm profitability. But after many firms posted strong results at the end of 2020, and with 2021 shaping up to be another banner year for many law firms, their concerns over the impact of economic shifts has abated.

Instead, this year鈥檚 survey found that concerns related to talent have skyrocketed into the front of firm business leaders鈥� minds. In fact, four of the top five areas rated as 鈥渉igh risk鈥� to future firm profitability relate directly to talent considerations. The top five high risk areas identified by respondents were, in order:

1. 1. 1. 1. Lawyer recruitment and retention
         2. Poaching of staff by competitors
         3. Associate salary increases
         4. Underperforming lawyers
         5. Competition among law firms over fees.

And concern over these issues is being borne out in market realities.

According to the most recent 成人VR视频 Peer Monitor Index report, for example, law firms have been experiencing heavy turnover among their professional staff, particularly among associates. Associate salary increases, which have become strikingly common in 2021, have driven record growth in law firm direct expenses. And per lawyer productivity 鈥� when compared to 2019 (the last 鈥渘ormal鈥� baseline year) 鈥� continues to slip.

You can download a copy of the here.

Yet despite these risky areas, law firm business leaders remain bullish on their firms鈥� prospects. A majority of respondents said they expect moderate to high growth in nearly every key metric of law firm profitability and have similar expectations for demand in nearly every practice area. Perhaps this buoyant mood reflects a more general sense of optimism that the waning of the pandemic-induced struggles from the past 18 months or so will lead to better days ahead.

As firms prepare for what the future will bring, many firm business leaders report that they will be re-evaluating their firm鈥檚 use of real estate, both to accommodate a hybrid working model and to continue to take advantage of some of the expense reductions experienced in the past two years.

Lateral hiring and increasing billing rates will also be key strategies many firms will likely employ, along with a greater emphasis on improving efficiency through innovative technology.

The strategies around technology are worthy of a closer examination. For the first time, this survey bifurcated the question of greater use of technology to explore the portion of use that is designed to cut costs, as opposed to the portion of use for purposes other than to cut costs. Thus, we learned that more firms said they plan to increase their use of technology for purposes other than to cut costs.

So, in what areas will tech be leveraged if not to cut costs? Looking at the firms whose leaders said they plan to either upgrade or purchase tech solutions, most uses relate to either facilitating new ways of working or enabling greater efficiency in producing work product. Firms are most likely to look at purchasing or upgrading technology for remote working, financial management, internal collaboration and client portals, market analytics, legal project management, and eBilling. On the whole, firms are most likely to upgrade their technology as a means of providing better value to clients.

Indeed, technology also provides the most fertile ground for potential law firm outsourcing, as cloud and server infrastructure, electronic discovery, and IT support were among the areas firms were most likely to either be outsourcing currently or looking to outsource in the future.

The report also details findings relating to firms鈥� plans for potential expansion domestically, concerns over firm culture brought on by managing a workforce split between in-person and remote workers, and how firms are trying to drive collaboration in an age of hybrid workforces.