Analysis of a new report on $19.6 billion of approved legal department invoices reveals that to maximize firm profits, partners should focus on developing and retaining senior associates and providing clients with services in multiple practice areas. The reasons: First, the average year-over-year hourly rate increase in 2015 for associates was 7.3 percent — more than double the 3.6 percent rate increase for partners. Second, firms that provide clients legal services in multiple practice areas charge higher than average rates for most, if not all, of their services.
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For the majority of U.S. firms, those with fewer than 50 lawyers, the billing rate increases revealed by the report were not as great: a 2 percent increase for partners and 2.8 percent for their associates.
The overall percentages are distorted because the AmLaw100 controls about 25 percent of domestic legal billings. But no matter firm size, associates had greater rate increases than partners in 2015 compared to 2014. And more tenured associates had higher rate increases on a percentage basis than their younger colleagues.
The data comes from “The 2016 Real Rate Report: Lawyer Rates, Trends and Analysis” released this week by Wolters Kluwer Governance, Risk & Compliance and CEB. It confirms that after a notable slowdown in 2013, which suggested increases might be stabilizing, the legal market’s overall year-on-year rate increase again rose in 2015, to 5.4 percent. That’s the highest annual jump since 2008.
The 283-page reports allows lawyers to compare their rates with local high, low and median rates in their area overall, by practice area and size of firm.