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Lawyer Rate Increases Remain Flat, Legal Departments Continue to Demand More Competitive Pricing
By TyMetrix, Wolters Kluwer, October 3, 2014
This post has been viewed 2,291 times.
This post has been viewed 2,291 times.
Findings from the 2014 Real Rate Report reveal four other emerging themes that legal departments should bear in mind:
- First-year associates are being used for less. Corporate legal departments are willing to pay a premium for higher quality work with less time spent, meaning that first-year associates are being used less frequently. This was evidenced by a 60 percent drop in the ratio of hours billed by first-year associates in the past five years.
- Law firm size has the largest impact on hourly rates. New to the Real Rate Report this year was an expanded analysis of more than 350 factors driving rates. Of all these factors, the size of the law firm was the most influential on rates, regardless of geography or the type of work performed. Location also influenced rates, and the range of rates varied the most in places like New York and Washington, D.C. As a result, corporate law departments have more negotiating power to shop around for the best rates in these locations.
- Rates in some practice areas are more prone to negotiation. Through an analysis that is unique to the 2014 Real Rate Report in its level of granularity, it was found that certain matters, such as corporate, mergers and acquisitions, and regulatory/compliance, had a larger range of rates for partners and associates. In some cases, rates for similar lawyers in the same practice area differed by more than $240/hour, indicating a significant opportunity for more rate negotiation and cost savings in these practice areas.
- Staffing and length of a matter drastically affect total matter costs. Increasing time that partners spend on larger matters by 5 percent can increase matter costs by as much as 10 percent. This is causing some law firms to rethink their staffing models, with larger firms using more associates than partners to staff larger matters. On top of this, junior associates were more likely to bill on matters when coupled with a tenured or senior associate, showing that there is less opportunity for junior associates to handle these matters on their own, and thus indicating a prolonged learning curve for them.
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