Can Midsize Firms Compete with the Largest Firms?
The sheer size of the largest firms is often perceived as an advantage, providing more resources, broader geographical reach and other benefits. The “2019 Report on the State of the Legal Market: A View from the Midsize Firms” from the Thomson Reuters Legal Executive Institute concludes that despite these assumed disadvantages, Midsize firms – those outside the Am Law 200 – enjoyed a strong 2018 and can continue to find solid growth.
While not on pace with their counterparts at the very top – the Am Law 100 – Midsize firms saw positive performance across all key performance measures (KPIs) last year as seen in Peer Monitor® data. Average demand growth of 0.5% compares quite favorably to the 1.6% contraction in average demand seen in 2017. Demand for Midsize firms grew even as these firms maintained average worked rate growth of 2.9%, on pace with past years.
Particularly noteworthy was the positive growth in demand for litigation practices in 2018, something not seen across the Midsize segment since 2011. This is especially significant because litigation (with 34 percent of all recorded billable hours) is the largest single practice area covered by Peer Monitor data.
The Midsize segment of the market also managed to increase productivity 0.3% – the first increase in several years – as firms managed their headcount quite effectively, averaging only 0.2% lawyer growth.
However, competition is intensifying – both from other firms, and from new emerging competitors such as alternative legal service providers. The report cautions that for Midsize firms to remain competitive in this environment, they must continue to do some of the things they’ve become adept at in the past few years. This includes prudently managing expenses, having a strategic pricing strategy, and managing lawyer growth to balance supply with demand.