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In 2014, Law Firms Need to Change or Be Sidelined Says a New Survey

The word is out for law firms to either change or be sidelined. A new research report by Georgetown Law and Peer Monitor titled, "2014 Report on the State of the Legal Market" warns that unless law firms restructure their traditional business models and accept change, they will not be able to survive against the "significant outside forces that are reordering the industry."

Emphasizing what successful and small local law firms have known for ages, the report argues that the strategy of "growth for growth's sake" is the wrong strategy for most law firms. In short, while big may be beautiful, it may not be viable for most. The report further stresses that it is more important to optimize the management of legal talent and effective pricing strategies than achieving economies of scale.

Speaking on the need of the hour, Georgetown Law Professor Mitt Regan, co-director of the Center for the Study of the Legal Profession said, "Law firms need to think more carefully and systematically about what is necessary to build sustainable organizations over the long term. That means giving serious thought both to how they provide services to clients and how they can provide opportunities for lawyers that elicit commitment and afford professional satisfaction."

Even though 2013 was a record year for law firm mergers, the survey found by a comparison of the number of lawyers in AmLaw 200 firms that there is no correlation between law firm size and law firm profitability.

The supply of legal services has exceeded demand significantly over the past five years and the market has shifted from a seller to a buyers' market. Clients are more involved than ever in their legal service providers and even fundamental decisions like staffing, scheduling strategies and modes of billing of law firms are being dictated by clients as far as their individual service relations are concerned.

While the report admits that the competition has escalated beyond expectations, it did not consider that in such atmosphere of increased competition, sometimes the only way to consolidate or acquire new business is through mergers and increase in size of law firms.

James W. Jones, lead author of the report said, "Competition in the law firm market has fundamentally changed. Many factors have contributed, but in the aftermath of the recession, the pace of change has accelerated." Jones pointed out, "Clients are increasingly focused on enhancing the value of their legal services they receive from firms [and] … Law firm leaders must focus their attention on re-thinking their basic organizational, pricing, and service delivery models in order to produce competitive success in the long run."

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