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February is Black History Month. It’s a good time to look at Diversity, Equity, and Inclusion (DEI) in our own spheres, to take stock of how we are doing today. The common knowledge is that diversity is moving slowly at most law firms. But is there any data, particularly any granular data, over time?
Enter the NALP “2021 Diversity in U.S. Law Firms”report by the National Association for Law Placement, Inc. (NALP). I highly recommend this report for its detailed, annual data on diversity in U.S. law firms. The report is a free PDF download.
As you can see from the graph above, the growth in Black Partners has been modest. The percentage of Black Partners is 2021 is 2.22%, up from 1.7% in 2009. The NALP Diversity report shows data both for “People of Color” as well as for Black, Asian, and Latinx people. The granular view is essential as the growth of Black partners lags the growth of “People of Color.” The reality of these figures speaks for itself.
While the overall growth in diversity of Associates is improving, the growth for Black Associates is slow. From 4.66% in 2009 to 5.22% in 2021, with an apparent dip from 2011 to 2016, the percentage of Black Associates is on the slow rise again.
Below is the table from the NALP table with the detail on demographics in U.S. law firms.
I have barely scratched the surface of the rich data which the NALP report provides on diversity in U.S. law firms, including women, LGBTQ lawyers, and veterans by state and by size of law firm. My objective was to crystalize for myself what the current state of diversity for Black lawyers in U.S. law firms is today and the trend lines.
It was this time last year when began to learn how profitable law firms had been in the first year of the pandemic. That profitability cast a completely different light on the historical law firm pressure to work long hours in the office.
Therefore, I looked forward to this year’s Thomson Reuters report. There are many terrific charts in the report. Below I’ll highlight three charts, mainly to encourage you to read the entire report. You can find the report here.
This could be called “The Money Chart” in the legal market, growth in Profit Per Equity Partner (PPEP). Growth in 2021 was quite healthy, even compared to the robust growth in 2020. Mid-sized firms lead with 22.4% rolling 12-month growth.
The strong demand in legal services lead to the high turnover rate, especially amongst associates. The associate turnover rate for all firms reached 23.2% across all firms. For Am Law 100 firms the turnover rate hit 23.7%. See the report for a chart which breaks this out by firm size.
For Big Law firms “facing the retention crisis,” there was nowhere to go but up. Associate compensation rose by over 15% in the Am Law 100.
There is so much more in this report, including:
Lawyer head count growth
Hours worked per lawyer
Expense growth and overhead detail (recruiting, staff compensation, KM, and technology lead)
Demand growth by practice
The report navigates “managing the way back” and lists specific, actionable recommendations. A new, essential approach for law firms: “flexibility.”
The 8th annual Okta Businesses at Work report is a treasure trove of data. It’s fantastic that Okta shares this data. Moreover, the report is very visual, full of graphs and charts. Here are four which illustrate enterprise web application usage in 2022.
While the gap between Microsoft 365 and the rest of the pack widens, Google Workspace moves into third place.
Of Okta’s customers who use Microsoft 365, what are the most popular “best-of-breed” apps which those customers also use? One of the stories here is growing use of Google Workspace. Zoom is still growing. Reminder: this is only a picture of Okta’s customers.
Phenomenal growth by these up-and-comers, although you may not be familiar with a few of these applications. Netskope provides cloud-native security products and services. Notion is for collaboration. TripActions covers travel, credit card, and expense. Postman is a platform for building and using APIs.
You can see the steep growth in remote work here. Amongst Okta users, Palo Alto Networks Global Protect and Cisco AnyConnect are the leaders in remote access.
The notion that legal tech can reduce burn out is a huge proposition. But a very interesting topic.
I recommend this article because this question is answered by seven current or former law firm employees, from former partners to firm innovation leaders. I always like to hear from the source. 🙂
Dig into this article for more on these topics:
“constant and unrelenting pressure to bill more hours”
“the real issue of burnout is a bigger question about culture”
“Legal tech can be a part of the solution but it only goes so far.”
“Legal tech” is not the panacea for lawyer burnout. However, I think all of us in the legal ecosystem want legal technology solutions to make work easier for attorneys. We want to enable attorneys to get more or work done in less time. We want to reduce and simplify repetitive and tedious work. Software solutions have a major role to play.
FisherBroyles is a 283 attorneys law firm whose attorneys and staff are “distributed” or remote, a model which is increasingly attractive to attorneys. In their model, attorneys take home 80% of what they bill. In traditional law firms, the take home is often closer to 33%. In 2021, FisherBroyles top-paid attorney took home $6,742,540.
Managing partner, Michael Pierson, says that their hourly rates are often two-thirds what a traditional law firm would charge as there is no real estate cost.
It’s definitely working for the firm. In 2021, FisherBroyers revenue was up 30% to $136 versus $105 million in 2020.
While we may be happy to wave au revoir to 2021, one midnight does not change world circumstances. I think that the following four trends that are not likely to go away in 2022.
Our most popular blog post in 2021, by a factor of 10, was this post by our CEO, Seth Hallem, on the REvil vulnerability and the ensuing ransomware. Many IT and security people were kept busy over the July 4th weekend with the Kaseya VSA exploit. More law firms and more businesses overall were hit with ransomware than the public is aware of. At the risk of stating the obvious, this will only grow going forward.
Unicorns, IPOs, M & A, and healthy funding rounds were undefeated by the pandemic. We covered the capital infusion in #legaltech here.
Early in 2021, we learned from Thomson Reuters that Big and Mid sized Law had been very profitable in pandemic burdened 2020. Work from home meant more billable hours. Legal IT departments got attorney up and running from home in quite literally a weekend. In early 2021 the question was, would work from home end as quickly as it had begun? The profits lead one to conclude that it would not. The Delta and Omicron variants in 2021 ensured no quick ending.
Finally, in the fall of 2021 companies such as Apple and Big Law firms were gearing up for early January or February 2022 “return to the office” dates. Then Omicron swept through the globe. Now all bets are off for when, and if, companies will return to the office.
Some good, some not so good. Overall, we can be grateful for the healthy demand for legal services and that so much of legal work can be done remotely.
But the reality is that investments are clipping along at fast pace. It’s hard to keep up. I could not find a post which captured the current rounds, so I created a spreadsheet of the past 12 months of legal tech IPOs and funding rounds (Series A and higher). I’m not claiming that it is comprehensive. I’m sure that I’ve missed a few. If you have any to add or any corrections to offer, please let me know via: contact at mobilehelix dot com.
Also in November, Grammarly, another company with business in legal and beyond, raised $400 million at a valuation of $13 billion. I had to double-check that. Wow. Grammarly has a tool which corrects and improves writing.
FOMO is nothing new in Silicon Valley VC-land. But it’s new and exciting in the world of what is broadly referred to as “legal tech.” Legal tech has been known for slow adoption and conservative processes, including mainly using software which is deployed on-premises at the law firm or business entity. In many cases this changed with the pandemic. The overnight necessity to support attorneys and staff working from home catalyzed adoption of cloud-hosted software throughout legal.
Of the many announcements from Clio today, three are:
Clio Payments: Jack Newton says, “…the most frequent point of friction in attorney-client relationships is collections.” Clio Payments is integrated with the Clio cloud-based practice management platform and syncs with accounting platforms, such as Quicken and Xero.
Clio Ventures:Clio will invest in “promising early stage companies and diverse founders” developing for the Clio platform. Clio has acquired a few companies, most recently Lawyaw, a YC-backed legal document automation company, which had been a Clio partner.
Clio 2021 Legal Trends Report: I look forward to this annual report, full of timely data. The PDF is a free download with registration. I highly recommend that you take a look at it.
I’m highlighting a few points which interested me. There is much more in the report.
First Key Take-away: Client expectations have changed
As we saw in the 2020 Legal Trends Report, the pandemic understandably accelerated clients’ willingness to work with a lawyer remotely. With Clio’s annual data collection, they were able to illustrate the change from 2018 to 2021.
The report further digs into this data by stage of engagement and type of remote communication medium.
Second Key Take-away: Remote services are only part of the picture
I’ve yet to see any survey of criteria on choosing a lawyer in which responsiveness was not the top criteria. Here, “Responsiveness to questions” leads “Price transparency” by a hair. No technology, no remote or in-person meeting capability, is likely to surpass the importance of responsiveness.
Third Key Take-away: Growing firms are really growing.
This data mirrors the data which we saw in early 2021 with respect to the blockbuster year that Big Law had in 2020. See the report for a deeper dive, for example, that growing firms are more likely to be using on-line payments, client portals, and CRM.
And there is more fun stuff!
Vicariously, I like to study the hourly rates by state and by practice.
Also, the KPI data on utilization, realization, and collection rates is eye-opening.