The first quarter鈥檚 results extend a three-consecutive-quarter slide in the LFFI, pushing the score down to 46, the lowest quarterly index figure since Q3 2009.

Key Takeaways:

• • Transactional Practices, especially corporate and M&A work, showed signs of slowing growth in Q1.

  • Direct expenses, or lawyer compensation, continued to accelerate in Q1, weighing down the index score most heavily.

  • Overhead expenses remain below pre-pandemic levels per lawyer, but continue to grow rapidly against a work-from-home environment.

The Law Firm Financial Index is a rebranded version of the Peer Monitor Index (PMI), which 成人VR视频 has published quarterly since 2006. While the fundamental methodology to determine the index score remains unchanged, the new name reflects an effort to incorporate additional insights to give the index score further context. Like the former PMI, the LFFI is a composite score, representing the quarter-over-quarter change in drivers of law firm profitability, which includes rates, demand, productivity, and expenses. Positive factors driving firm profitability will produce a higher score.

In Q1 of this year, legal demand and rates were well in positive territory, while productivity stayed consistent with historical norms. However, like we saw in recent quarters, the impact of rapidly growing expenses, especially around hiring and retention, has overwhelmed any positives for the quarter, including this past quarter鈥檚 three-year high in Q1 demand growth.

This demand growth for law firm services remained strong, relying heavily on transactional practices, such as real estate, corporate (all), and labor & employment. Demand for mergers and acquisitions (M&A) work, however, dropped dramatically in Q1.

Without a doubt, this year already is bringing us some odd precedents, and it鈥檚 unlikely we鈥檝e seen the last of these anomalies.

On the other side of law firms鈥� ledgers, direct expenses 鈥� compensation and benefits for all attorneys who are not equity partners 鈥� weighed the heaviest on the index score, clearly illustrating the ongoing impact of an increasingly expensive talent war that鈥檚 been ratcheting up for several quarters now. In Q1, we saw outsized bonuses paid out and the announcement of three new retroactive associate pay scales, both of which left many law firms struggling to keep up.

Other overhead expenses, such as support staff compensation, technology, and knowledge management & library service expenses all grew at comparatively more modest levels. Interestingly, despite other run-away expenses, law firms seemed to be increasing their technology spending, which was up 8% in Q1, and is currently growing at one of the fastest rates the market has seen since 2014.

Will 2022 be the 鈥淵ear of Talent鈥�?

In our previous report, we had dubbed 2022 the 鈥測ear of talent鈥�, and so far, this has carried some weight, although not every effect was anticipated. As a result, we have tinkered with how the LFFI reports and displays its data.

Without a doubt, this year already is bringing us some odd precedents, and it鈥檚 unlikely we鈥檝e seen the last of these anomalies. And, unfortunately, if some of these downward trends continue, it鈥檚 likely that other critical law firm metrics 鈥� such as law firm profitability growth, for example 鈥� could mimic the LFFI鈥檚 downward plunge.

You can download the full Q1 2022 Law Firm Financial Index Report below

Simultaneously however, law firm expenses continued their upward acceleration, with compensation for associates growing by double digits. Without the beneficial low baselines of 2020 to empower the 成人VR视频 Peer Monitor index (PMI) in terms of demand or productivity, these expenses pulled the Index down 9 points, dropping the PMI for Q4 2021 to 58.

While the score may have dropped, it seems as though an exploration of legal industry鈥檚 impressive demand results could yield great insight, especially from a long-term perspective. The massive increase in corporate work in 2021 led law firms to new highs in the proportion of hours worked in these practice areas, a rise witnessed in all law firm segments. Proportional analysis, however, is a zero-sum game; and as with every such game, if one practice area gains share, then another practice area must lose share. In this case, it appears most of the relative losses over the last decade came from the litigation area.

The litigation legacy

Whether you鈥檙e fully immersed in the legal industry, or simply watching a TV drama about it, litigation has been effectively known as the Pangea of the U.S. legal market. For those who are unfamiliar, Pangea was a supercontinent that formed 300 million years ago and was comprised of all of Earth鈥檚 land masses together, effectively dominating the planet鈥檚 surface. After 100 million years, plate tectonics began to shift and break-up, with Pangea eventually becoming the seven continents and five oceans we know today. With its historic dominance, litigation could well be considered the supercontinent of the U.S. legal market.

And like Pangea, litigation continues to dominate the cultural perception of the legal industry, even as it appears that the continental break up is well underway on a more foundational level. The practice has lagged the industry overall through much of the 2010s and opened an opportunity for a significant rise in corporate and other transactional practices on a proportional basis.

During the mid-2010s, the legal industry witnessed an abundantly clear signal that the structure of dispute matters was changing. During this period, the average law firm saw 22 consecutive quarters of contraction in the litigation practice area. The economics that had emerged after the Global Financial Crisis (GFC) had given rise to growing corporate law departments and the alternative legal service provider market, both of which found fertile ground for change in litigation.

Corporate law departments immersed themselves in enhancing legal operations, working to gain efficiencies throughout their organizations, and, in turn, put pressure on their outside counsel to reduce costs as well. Alternative legal providers found their way into litigation matters in a wide array of functions, but all were centered around the tasks of litigation matters that didn鈥檛 require deep or specific expertise and were cost-inefficient. Once the remaining hours of a particular matter made their way out of that trimming process, outside counsel were left with a noticeably lighter load than they that to which they had become accustomed in prior years and decades. The lion鈥檚 share of litigation hours no longer went to large law firms.

The continuing drift

Dating back to the first post-GFC years, litigation enjoyed a high of 33% proportional share among practice areas, compared to 22% for corporate and 31% for all transactional practices. However, in the 12 years since, those numbers have changed significantly. In the beginning of 2022, litigation sits at 27% (down 6 percentage points, losing roughly one-fifth of its previous position), corporate work is at 26% (up 4 percentage points), and all transactional practices are at 37% (up 6 points). Further, it鈥檚 important to keep in mind that these shifts over a decade represents hundreds of firms and the proportion shifts themselves represent millions of hours worked (or in this case, not worked) across that decade.

Interestingly, this continental drift has been spread almost equally across the market. All firms saw their litigation practices shrink by at least 3.4 percentage points, while the Am Law Second Hundred saw the largest reduction at 4.7 percentage points. Over the same period, transactional practices in the Am Law 100 grew by a whopping 6.6 percentage points, with the Am Law Second Hundred increased their proportion by 5.9 points, and Midsize firms saw a near 5-point shift as well. As you can see in the middle portion of the below graphic, corporate general work as well as mergers & acquisitions work 鈥� the two components of the corporate (all) category 鈥� are driving most of the transactional shift.

Another facet of this issue which firms are currently facing in 2022 is how to grapple with inflation. The most obvious answer would be to raise rates to a level that will either match or exceed the extraordinary inflation levels we鈥檙e facing; however, not all practices will be able to command such heavy increases. Worked rates for the litigation practice area grew at 3.7%, while the average firm raised their rates in transactional practices by 4.9%.

Of course, the litigation practice still does, and probably always will, carry significant weight in the U.S. market and in most law firms鈥� offering portfolios. Yet the U.S. legal market already is looking a lot less like the legal market of 30 years ago, when about 40% of of an average firm鈥檚 billable hours came from the action within court rooms. In actuality, the market seems to be moving more toward a transactional practice-led market that competes with other global legal markets that share the same goals.

This evolution has taken us to a legal market that鈥檚 more fractured, its disparate parts coming into contact and collision, becoming a continental legal industry, rather than a Pangeaic one.

The PMI, produced by 成人VR视频, is a composite index of law firm market performance that represents the quarter-over-quarter change in drivers of law firm profitability, including rates, demand, productivity, and expenses. Positive factors driving firm profitability will produce a higher score.

When breaking the PMI down to its key factors, the good news is readily apparent. Demand was up 4.2% in Q4, and unlike previous quarters, this growth is mostly organic. When measured against the 鈥渘ormal鈥� year of 2019, this quarter had the fastest demand growth since the Great Financial Crisis. Further, much of this growth is on the back of transactional practices. The fastest growing legal practices in Q4 were transactional practices 鈥� real estate, corporate (general), M&A, and tax. With billing rates holding at 3.6% in anticipation of 2022鈥檚 rate increases, the industry is by no means experiencing a shortage of business.

You can download the full Q4 2021 Peer Monitor Index Report below

On the flip side, serving as demand鈥檚 nearly equal but opposite force, was expenses. Overhead expenses increased 5.8% on a rolling 12-month average as they began to push back from their pandemic lows. The source of this growth was primarily technology, office, and marketing & business development costs 鈥� much of which had sat dormant during the pandemic. As most firms have yet to implement return-to-office programs, this category is expected to only grow.

More pressing is the matter of direct expenses, which were up 8.4% on a rolling 12-month average. Some of this growth is natural, as firms grew their lawyer FTE headcount by an average of 3.8%. Under normal circumstances, direct expense growth would be expected to parallel FTE growth as increased attorney compensation and benefits are an anticipated and necessary cost to meet client demand for hours. The industry鈥檚 ongoing talent war, however, has resulted in per-FTE costs climbing, resulting in this surge of direct expenses beyond what could be contributed to natural lawyer growth.

Results in Q4 were simultaneously bolstering and worrying. The quarter was always destined to produce a score lower than the previous quarters, because Q4 2020 was when the market began its rebound, thus depriving Q4 2021 of a low-baseline advantage. The fact that the PMI for the quarter is still within the top echelon of historic scores is a solid sign of strength for the large law firm industry. The growing expenses, however, should give everyone pause.

Demand may come and go, but additional expenses like associate salaries tend to stick around.

If you look at the top 10 most-read blog posts on the 成人VR视频 Institute blog 鈥� a platform that covers those professional industries as well as courts, academia, risk & security, and talent 鈥� you can see several themes emerge that strongly attracted readers in 2021 and may offer a clue to the hot topics of 2022.

Cryptocurrency

The ups and downs of the crypto market were seemingly on everyone鈥檚 minds in 2021. The top two most-read blog posts of the year involved crypto issues, including a thought piece by Paul Marrinan, Head of Investigations at Inca Digital, about the fork in the road faced by cryptocurrency and whether it will pursue a fraudulent path populated by scammers or whether it will become a pillar of decentralized finance.

Also, a special report on the growth of cryptocurrencies around the world and how different jurisdictions are seeking to regulate them, which featured a global map identifying the regulatory 鈥渉ot spots鈥� in the crypto-realm, was also very popular with readers. Compiled by 成人VR视频鈥� Senior Regulatory Intelligence Experts Susannah Hammond and Todd Ehret, the report is due to be updated in the months ahead as cryptocurrencies continue to be a most talked about topic.

Supply chain

Keith Haurie, Vice President of Business Development for ONESOURCE Global Trade Management in the Tax & Accounting unit of 成人VR视频, wrote a timely piece that described how data analytics is transforming supply chain management, an issue that is only gaining more steam as supply chain disruptions continue to plague companies, consumers, and governments around the world. Indeed, if data analytics or any other solution can help ease this problem, as Haurie suggests, it would be most welcome.

Similarly, an informative piece by Paul Horowitz, Senior Legal Editor at 成人VR视频 Practical Law, that outlined how the 2022 tariff schedule will reflect new product streams and global environmental & social issues provided an in-depth look at how trade and taxation will be adapting to the new realities of 2022 as environmental, social, and corporate governance (ESG) issues continue to command a great importance and a greater share of our readers鈥� attention.

Future tech

成人VR视频鈥� resident Technologist & Futurist, Joseph Raczynski, wrote a couple of far-looking pieces that resounded with readers. First, his piece on Decentralized Finance asked how close we were to a truly bankless society; and another offering, describing the concept of the Metaverse and how it may impact the legal industry were both big reader favorites.

Market insight reports

As always, the proprietary reports complied by the 成人VR视频 Institute from data drawn from its resources like Peer Monitor or Sharplegal, were extremely popular, including its annual and the Legal Department Operations Index. However, one stand-out among these reports 鈥� at least in readers鈥� eyes 鈥� was the mid-year Stand-Out Lawyers survey, which detailed how top lawyers still harbor some deep concerns about their role in the post-pandemic legal environment.

ESG

As mentioned earlier, key issues of environmental, social, and corporate governance (ESG) concern are strongly resonating with corporations, and with their legal teams, tax teams, and outside law firms, as well as with other organizations. Nadya Britton, manager for Tax & Accounting content at 成人VR视频 Institute, penned a piece earlier in the year that pointed out exactly why ESG issues should be of great interest to corporate tax departments and what corporate tax team leaders need to understand to better handle these issues.

On the law firm side of things, Natalie Runyon, Director of Talent, Culture & Inclusion Content, wrote that ESG and the increase in legal clients鈥� need for transparency around these issues has pushed law firms to create new sustainability practice areas, which are likely to be source of continued investment in 2022 and beyond.

Legal marijuana

Finally, rounding out our Top 10, was Gina Jurva鈥檚 look at what increasing marijuana legalization means for those financial institutions that seek to serve marijuana distributors, growers, and retailers. As Jurva, manager for Corporate & Government content at 成人VR视频 Institute, points out, as more states legalize marijuana use, many state-based banks could see a boom in marijuana-related businesses seeking their services.

We appreciate all our readers devotion over the past year, as turbulent as it often seemed, and we look forward to serving up content that enlightens, informs, and challenges in 2022.

The PMI, produced by 成人VR视频, is a composite index of law firm market performance that represents the quarter-over-quarter change in drivers of law firm profitability, including rates, demand, productivity, and expenses. Positive factors driving firm profitability will produce a higher score.

Despite such a monumental drop, this new score is still higher than any that was achieved in the entirety of the 2010s. Legal demand has hit year-over-year high-water marks, rate increases have been solid, overhead expenses are under control, and productivity recorded the highest Q3 figures seen in three years. By nearly all major metrics, the third quarter of this year was reminiscent of the best of times for the industry, let alone those only a year removed from the depths of a global crisis.

But expenses have become the focus of the conversation and for good reason. Direct expenses saw an incredible jump of 7.2% year-over-year on a rolling 12-month basis. Some of this new growth is organic, with full-time equivalents (FTEs) increasing 2.3%; however, much of the jump comes from the much-discussed increasing salaries. This is obvious when examining expenses on a per lawyer basis, where direct expenses for the average firm grew by an eye-watering 8.0%.

The significant increase in salaries, while shading the otherwise bright performance of the market, should not eclipse it. Corporate work saw an 8.7% increase over Q3 2020 volumes, with the mergers and acquisitions (M&A) subset achieving 9.2% growth. Real estate鈥檚 advance also pushed into the double digits. Even when one parts the numerical fog 鈥� accounting for the low baselines of 2020 by using Q3 2019 instead 鈥� these areas have still undergone intense growth. When we make the comparison to 2019, corporate practice demand is up 6.2%, real estate grew 5.7%, and M&A nearly reached 5.0% growth in Q3 2021. This is no mean feat, as Q3 2019 was a strong quarter for all of these practices.

The PMI score was always destined to drop 鈥� the record-setting Q2 score was propped up by productivity figures which reflected temporary trends rather than long-run improvements. Yet this last quarter has been a litmus test for the large law firm market, a first glimpse at what may await the industry in a post-pandemic world.

You can download the full 成人VR视频 Peer Monitor Index Report for Q3 2021, which provides in-depth information on turnover, associate-specific compensation growth, and more, below:

These fluctuating baselines greatly influenced the year-over-year measurements that the 成人VR视频 Peer Monitor Index (PMI) relies upon, thus pressing the index up 22 points (a quarterly record) to a high of 84, an all-time record.

These low baselines have descended upon financial statistics like a numerical fog, obscuring the true trends beneath. In Q2 2020, industry demand fell by 5.9%, yet when shrouded in this mist, this decline takes on the guise of 7.3% growth in Q2 2021. To provide our audience with the necessary illumination to cut through the mire, we began using a 鈥渧s. 2019鈥� comparison in our latest report, which eliminates the fluctuating baseline and shows our progression from a more 鈥渢ypical鈥� year.

Within only a year after one of the worst quarters the legal market has seen since the Great Financial Crisis and ensuing Great Recession, the industry has rebounded to within 卤1% of its previous levels in terms of productivity and demand, which is welcome news for many industry observers.

By contrast, the worst quarter of demand during the previous crisis was Q1 2009 with 8.2% average contraction 鈥� and a year later demand was still contracted below even that point. While we do try to tamp down the expectations associated with a mammoth 7.3% demand increase this quarter, the historical framework still gives us reason to be quite bullish and reflects an industry that was suppressed rather than in recession.

We believe law firms are agreeing with this sentiment once looked at through the right filters, as the market now increasing its investment even more so than high-level statistics may suggest. Our usual method of expense analysis is to utilize rolling 12-month averages, which gives us the ability to cut out noise. These rolling averages are great in stable environments, but the chaos of the pandemic caused extensive interference. The result was that the large reductions to expenditures in Q2 and Q3 of 2020 masked a relative bump in both direct and overhead expenses in Q4. These movements can be seen on just a quarter-over-quarter or Q4 2020 vs Q4 2019 (pre-pandemic) basis, a format typically more prone to noise but in this case being the clearer option.

Direct expense going from a 5% contraction in Q3 2020 to more than 5% growth in Q4 2020 is most likely tied to the large bonuses which resulted from the impressive profit growth by the end of the year. Overhead in that same Q4 still contracted compared to Q4 2019, but the relative shift from being down 10% to down only about 1% is promising. When we added dotted lines to represent how Q2 2021 faired against Q2 2019, we saw overhead鈥檚 year-over-year 8.6% growth morph into a metric still down 3.9% on the prior normal year. Direct expenditure shows 鈥渞eal鈥� growth in the sense that the 2019 comparison is still up 6.3% mostly due to the salary increases seen across the marketplace.

You probably are now asking, why do you think that law firms are investing if overhead is still contracting? The answer is that overhead expenditure is a bucket with various differing expense items, and while as a whole they are contracting, when you dive deeper into these buckets the investment only becomes clearer.

Support staff compensation (34%), occupancy (25%), technology (11%), and knowledge management & library services (5%) made up 75% of all overhead expenses in 2020. These four categories were primary drivers of cost increases that led to the relative rise in Q4 2020, with growth rates among these categories ranging from 4% to 12%. In the figure above, the middle timeframe compares against the pandemic low, and we see similar trends that remain even when comparing against pre-pandemic Q2 of 2019.

What is holding back overhead expenses is not surprising. Marketing & business development as well as office expenditure haven鈥檛 been able to rebound because the lingering effects of the pandemic have continued to suppress opportunities for these activities despite there still being an appetite for them among firms. These categories account for 10% of total overhead expenditure; and with their weight, the hefty cuts in these categories have had a meaningful impact.

The figure above provides a spectacular and almost exaggerated example of how impactful using proper baselines can be for benchmarking and analysis. The apparent doubling of business development spending may give the impression that firms are wining & dining once again, but in reality, this doubling of a nearly 70% contraction still nets us a 50% contraction compared to a normal year. Office expenditure tells the same story, demonstrating how these categories smother an otherwise investment-heavy end to 2020 and mask an effort by law firms to achieve true and meaningful development in their talent, infrastructure, and technological tools.

With the fog of the baseline removed we can now see a clearer picture. The pandemic suppressed economic activity, leading to a short-term loss. Firms reacted quickly to ensure survival and as soon as they could see the light at the end of the tunnel, they reinvested those unneeded cash reserves into the future.

With a hopefully waning pandemic, those categories which are still contracting will rise again; and when this happens, we will be watching closely to see if the fog has any more hidden surprises in store.

You can download a copy of the PMI report for the second quarter of 2021 here.

At first glance the record-setting PMI can be credited to that ever-topical COVID-19 pandemic. For our purposes however, the pandemic served to create an exceptionally low baseline for compassion to current metrics. Unlike the great recession, this crisis has left the general health of the legal economy suppressed rather than damaged. As the suppression was removed the legal industry snapped back into full production.

So, there you have it: Litigation鈥檚 7.7% demand growth and Real Estate鈥檚 17.6% growth? All beneficiaries of a low baseline. Once measured against 2019鈥檚 2^nd quarter, this massive growth evaporates to -0.9% and 1.6%, respectively. Like a stage magician鈥檚 illusion, what you perceive is largely a function of where you鈥檙e looking.

Except, there is a problem. While at a first glance comparisons to the last 鈥渘ormal鈥� year of 2019 show many practices flat or down, one practice stands out from the rest as deserving of the spotlight: corporate.

Although the corporate practice group saw smaller 2021 vs. 2020 growth than real estate, its 2021 vs 2020 growth was still impressive at 12.7%. Importantly, we see that this growth is no illusion in the above figure, with 2021 vs 2019 growth at just over 11%. Quickly, let鈥檚 contrast it to litigation鈥檚 performance during the same period.

In the above chart we can see that, in a Q2 2021 vs Q2 2020 matchup, corporate work is still well ahead of litigation in growth across all market segments. Litigation鈥檚 growth certainly appears respectable here as few firms would look askance at growing only 7.7%. Yet when we zoom out to our 2019 comparison, we see litigation is still below its 鈥渘ormal鈥� baseline, having yet to recover to its pre-pandemic level.

Corporate on the other hand? Its growth appears unflappable, with Am Law 100 firms seeing 15% demand growth above 2019鈥檚 levels. Consider that litigation makes up 29% of the large law firm hours tracked and corporate lords over an additional quarter portion. This quarter鈥檚 metrics become more impressive in light of this, as corporate carries flagging practices like litigation across the finish line into Q3.

Except, once again, there is a problem.

This figure displays how practices with higher demand growth tend to have higher lawyer growth as they require an ever-increasing number of professionals to sate demand. The inverse can also be shown as practices which are shrinking tend to bleed lawyers as prospective recruits look to hotter practice areas and old hands move to where the grass is greener.

Mergers & acquisitions and general corporate are the two components of corporate (All) that in a year-to-date June 2021 vs 2020 comparison, were maintaining extremely high growth rates. Yet, they also go against the trend when it comes to recruiting. General corporate work is almost able to maintain the labor it already has despite its high practice growth. M&A has completely broken from the pack, hemorrhaging lawyers, down almost 3% YTD, even as it nears 15% practice demand growth.

The most likely interpretation? Corporate work is growing so fast that, in a labor market where new blood is a rare commodity, their lawyers are experiencing intense burnout. M&A especially is undergoing a sort of 鈥渢oo much of a good thing鈥� phase, where it鈥檚 growing so fast that the lawyers simply cannot keep up and are dropping out faster than they can be replaced.

There are three potential ways this is likely to play out. The first is that corporate law firms turn down work they would have otherwise readily accepted because their operations have reached their breaking point. Secondly, firms feel reluctant to turn down work and the revenue that goes with it, and continue to take on work from an increasingly growing pool.聽 The potential downside of this choice could be a further strain on resources resulting in reduced quality of work product 鈥� an outcome to be avoided for any lawyer. The third outcome is the most likely, as early indicators are signaling in its direction: full-time equivalent (FTE) growth increases as firms flood the market with recruiting dollars and larger salaries to attract the potential wave of associates expected to enter the market soon. In other words, the already hot legal labor market goes nuclear.

No matter which way this turns out, corporate鈥檚 Q2 2021 performance is already locked in. This was a quarter in which the practice area played the leading role in powering the overall legal market to an all-time high, a performance which in contrast to its co-stars鈥� opportunism, was all its own brilliance.

You can download the full here.

The Australian market braced itself for turbulence. Yet, come 2021, it seems that the legal market in Australia has so far managed to soar above the worst of the winds. In FY 2021, for example, the average law firm recorded 2.2% growth in demand while profits as a percentage of revenue climbed to a record 36.8%.

This is not to say that the legal market has fully escaped the threat. Australia is entering a new series of lockdowns and long-term headwinds loom on the horizon. As the rest of the continent鈥檚 economy struggles to power through, law firms are facing the reality that a post-pandemic world may well require a firm hand on the controls and an eye towards the future.

To more fully explore this market, 成人VR视频 has released its , an in-depth analysis of the market鈥檚 harrowing year, including detailed performance metrics, a review of the market鈥檚 fluctuating expense reductions, and the latest assessments on the war for talent. The report also features thorough surveys on what legal clients in Australia say make the best law firms stand out from the flock.

All of this propelled the 成人VR视频 Peer Monitor Index (PMI) forward by 22 points, the largest quarterly increase in the history of the Index, to a score of 84, which itself was an all-time record. (The PMI, produced by 成人VR视频, is a composite index of law firm market performance that represents the quarter-over-quarter change in drivers of law firm profitability, including rates, demand, productivity, and expenses. Positive factors driving firm profitability will produce a higher score.)

Of course, these figures, which may appear eye-popping at first, need to be viewed with a heavy dose of historical context. Indeed, given the pandemic and economic crisis last year, the second quarter of 2020, set a relatively low benchmark in many metrics. As a result, Q2 2021 had a relatively low bar to clear in nearly every metric. Yet the actual figures posted, in many cases, outperformed what could be considered a return to prior.

Indeed, as the Q2 report makes clear, there are plenty of positives to take away from this quarter鈥檚 results; and one way to highlight this is to compare the Q2 results to a past 鈥渘ormal鈥� Q2, rather than Q2 2020, which was anything but normal.

Thus, when we examine many of our typical metrics in comparison to those same figures in Q2 2019 we perhaps get a better idea of what Q2 numbers really mean. For example, demand in Q2 this year was up 0.6% compared to Q2 2019, which demonstrates how far we鈥檝e come in the recovery of demand for law firm services since the 5.9% YOY drop in Q2 last year. Similarly, productivity is showing that things are not as bad as they once appeared, with that metric falling only 0.5% short of the mark set in Q2 2019.

Rising demand, falling expenses

That said, Q2 demand was still historically strong and driven by the strength of M&A and other corporate work. Several other practice areas, including real estate and employment, also saw demand grow to above pre-pandemic levels. Meanwhile, overhead costs such as office expenses, continued to decline (not surprisingly), even as many firms prepare for a return to the office. Both these trends contributed greatly to the record-breaking PMI number for the quarter.

鈥淭he legal market has shown tremendous resiliency in not only withstanding but finding ways to grow amid the tremendous disruptions of the past year,鈥� says Mike Abbott, vice president of Market Insights and Thought Leadership at 成人VR视频. 鈥淔irms and lawyers are leveraging strategic and operational flexibility, as well as innovative technologies, to meet the rapidly changing needs of their clients and position their firms for continued success through conditions that remain both fluid and challenging.鈥�

You can download a copy of the PMI report for the second quarter of 2021 here:

Other firms took a longer-term view, maintaining investment and hoping such investment would provide a competitive edge as the pandemic dragged on.

Thankfully, for most, the reality wasn鈥檛 as bad as feared. Demand held up well, especially in the latter half of the year. With revenue per lawyer (RPL) remaining stable and cost per lawyer down, most firms ended up actually increasing their profitability for the year.

However, firm performance varied greatly, and the reasons for success or failure weren鈥檛 the same at every firm. Some law firms achieved both revenue and profit growth, others saw their revenues shrink and profitability fall, and many more landed somewhere between these two poles.

But why? What factors allowed some firms to flourish even during one of the most catastrophic global crises in our lifetime?

To get to the heart of these questions, 成人VR视频 Institute launched the 2021 Pandemic Performers report, which was created by rigorously analyzing the proprietary datasets available in order to best identify what helped create the circumstances that enabled certain law firms to find financial success in the face of potential catastrophe.

Those law firms that we identified as Pandemic Performers were those in the top quartile of firm performance, based on Revenue per Lawyer (RPL) growth. And by looking at other metrics that correlate well to RPL growth, our research suggests that these Pandemic Performers were more ready for this crisis in terms of culture and working practices.

Indeed, these Pandemic Performers were shown to be more resilient and able to leverage their scale, diversity, brand, and their support for their lawyers. These firms practiced good financial hygiene; and above all, they were more likely to take a long-term view.

The pandemic is, hopefully, a once-in-a-lifetime event. It is, however, quite unlikely that it will be the last crisis law firms will have to face. For those firms that want to remain or become resilient in the face of any future crisis, it is critical to explore how a long-term focus now on strengthening the firm in key areas can help.

The importance of this long-term focus is a pandemic-era lesson from which all law firms can benefit.

Download the full “Pandemic Performers 2021” report to learn all the lessons the pandemic performers had to teach law firms about their success through this past crisis: