April 1, 2013
Citi Private Bank Law Watch just issued its most recent Managing Partner Confidence Index for 4th Quarter of 2012. Law Watch surveyed 76 managing partners about overall confidence levels, the economy at large, hiring, expenses, etc. Results were mixed. While overall confidence levels of responding partners increased during the last quarter of 2012, there were some concerns as well.
Overall, 41 percent of managing partners have a higher level of overall confidence as compared to the third quarter of 2012, and 43 percent believe the economy at large is improving. Even more promising, 85 percent of managing partners anticipate continued revenue growth.
However, partners expressed concern over increasing pressure to discount prices and increasing expenses. In fact, 71 percent of partners project an increase in expenses and 49 percent predict that clients will continue to push for discounted services or lower prices.
While the demand for discounted services is largely a result of classic supply-demand principles, in a recent client advisory, Citi Private Bank and Hildebrandt Consulting discuss other issues that affect legal spending decisions. Two factors in particular affect client’s spending decisions:
(1) Many sophisticated corporate clients often have a better understanding of the cost of legal services than many law firms.
(2) In-house counsel, under the guidance of their company’s procurement departments, may insist on alternative fee arrangements.
To succeed, law firms must listen closely to clients and make more of an effort to understand the nature of their clients’ business.