What drives a successful law firm? Often, the answer involves learning from the success of other law firms. Lawyers are steeped in a culture that thrives on evidence and precedent, and when it comes to how to run a successful law firm, these tendencies run just as deep.
To this end, Thomson Reuters created the Dynamic Law Firms study several years ago. The goal of this research is to identify law firms that have found measurable, consistent success over a period of years across a number of metrics, such that these firms can be studied to determine what sets them apart and leads to their success.
Today, we publish the most recent iteration of that research, the 2020 Dynamic Law Firms Report (available below for download.)
This report and its predecessors are based on metrics derived from Thomson Reuters Peer Monitor and key insights from Acritas, now part of Thomson Reuters. In origination this research, we first establish which firms saw the best growth in revenue per lawyer, overall firm profit, and average profit margin, then explore what makes these firms different, both quantitatively and qualitatively. These top performing firms we identify as Dynamic firms, while those firms that struggled to grow, and in some cases contracted in these key metrics are identified as Static firms.
The difference in performance between the firms in the Dynamic and the Static populations is large. Over the course of the three years we examined, Dynamic firms grew average revenue per lawyer at more than 6%. For Static firms, this metric was essentially flat.
Dynamic firms grew average total profit by more than 14% and profit margin by nearly 5%. The average Static firm declined in both these measures.
A few other key findings from the report:
- Dynamic firms are more likely to be recognized for having business savvy lawyers who understand their client’s business and deliver strategic, practical advice. Business acumen is a skill these lawyers work hard to develop by keeping their business and industry knowledge up to date. They also recognize it as a differentiator.
- Dynamic firms have partners who lead a strong team, which helps to justify the increased leverage in clients’ eyes.
- Dynamic firms were more effective at attracting higher-value work through a brand proposition that creates confidence in their ability to handle complex M&A or litigation. These firms also commanded more credibility in the boardroom, which gave in-house counsel more confidence in selecting them for high-stakes matters.
- Dynamic firms were investing more heavily in marketing and business development.
- Investment in technology was increasing in both Dynamic and Static firms.
- Finance functions at Dynamic firms were more likely to garner praise from members of those firms, particularly with regard to their ability to support budgeting and billing procedures and, maybe even more crucially, by providing profitability analysis.
This most recent edition of the Dynamic Law Firms Report also posed some unique challenges. The onslaught of COVID-19 raised an interesting question: Had those firms which came out on top as Dynamic firms as of the end of 2019 built success on top of a growing economy but in a way that was still highly susceptible to downturns, or had they built resiliency as well?