What trends and events defined law firms in 2021? What does 2022 hold in store for the legal industry?
For the answers, look no further than the latest Legal Trends Report from our friends at Clio.
Published every year since 2016, Clio’s annual survey uses a range of approaches and data sources to deliver comprehensive insights about the state of the legal industry’s present and future. Sources include tens of thousands of Clio software users, as well as hundreds of legal professionals and legal consumers throughout the United States. This year’s report also incorporates a longitudinal study of over 1,600 law firms, grouped into three cohorts—“growing, stable, and shrinking”—based on their revenue performance over several years.
Here are a few standout themes that emerged from the data this year:
- Remote technology has become essential for attorneys and the people they serve. A large portion of legal business is now conducted almost exclusively remotely. But while countless law firms have adopted new technology to work more efficiently and better serve their clients, not every practice is able to consistently manage those platforms to the full extent of their capabilities.
- Successful firms embrace client-centric communication across multiple channels. Legal consumers expect firms to use more kinds of communication channels, with once-peripheral channels such as video conferences and text messages entering the mainstream. Nonetheless, phone and face-to-face conversations remain preferred communication methods for first-time and non-transactional interactions.
- Many attorneys struggle with efficiency. This year’s report reveals that attorneys are, on average, able to use just 31% of each 8-hour day on billable time. Although this key performance indicator (KPIs) has improved slightly over the years, lack of productive time is still a critical challenge for practices of all kinds.
The full, 73-page report is available to read here.
As we did last year, we’ve compiled some of Clio’s key findings to make it even easier for you to review 2021’s trends and plan for 2022 and beyond. Without further ado, here are several highlights from Clio’s 2021 Legal Trends Report:
Remote business is here to stay.
What started as a necessity for law firms to continue to operate during lockdown quickly evolved into an industry standard. According to the 2021 Legal Trends Report, 95% of all attorneys plan to continue to use the technology they adopted during the pandemic moving forward.
These kinds of technology include:
- Firm management software
- Client portals
- Virtual conferencing platforms
- Cloud storage
- Electronic billing and payment platforms
- Virtual document and e-signing platforms
Across firms, remote technology solutions improve efficiency and fuel growth. Throughout 2020 and 2021, firms that embraced new technology were able to grow their revenue—despite an overall economic downturn—with a 6% year-over-growth for technology-enabled firms and a 40% increase in revenue per lawyer. Perhaps it’s no surprise that 84% of all surveyed partners expected their firms to further invest in these kinds of solutions in the next few years.
Client-centric practices invest in multiple forms of communication.
Tech-enabled firms also achieve positive results in terms of client satisfaction, as legal consumers now express a high degree of preference for remote communication. Approximately 79% of clients regard the option to work remotely with a lawyer as a positive influence on their hiring decision—up from just 23% of clients who felt the same way in 2018.
Video conferencing, in particular, has become popular for first meetings and consultations, placing third (at 58%) in consumer preferences behind in-person meetings (76%) and phone calls (70%). And video isn’t the only communication platform towards which clients gravitate. Over the last year, more consumers have also embraced text messaging, social media messaging, and mobile apps.
These findings reveal that clients increasingly expect firms to use multiple communication channels—and to provide a consistently excellent experience across channels. Given the decline in in-person interactions, firms should look at adopting solutions that offer flexibility and accessibility for individuals with various needs.
As the authors of Clio’s report explain, such considerations are fundamental to designing a client-centered framework:
“To determine what’s best for law firms—or any business for that matter—legal professionals should be asking themselves: What’s best for their clients? … This mindset enables firms to anticipate their clients’ needs, often before they recognize those needs themselves. The goal is to make working with a law firm as easy and effortless as possible.”
In a remote-first world, clients still prefer highly personal experiences.
During the first stages of attorney outreach, phone calls and in-person meetings remain the top preferred methods for new clients. In terms of popularity, email, text messaging, mobile apps all trail behind in-person and phone consultations (and to a lesser extent, video conferences, as mentioned above), suggesting many new clients place significant value on real-time, one-on-one communication.
Consumers don’t favor the phone in every kind of interaction, however. Compared to online portals (66%), automated billing (61%), and mobile apps (61%), only 46% of clients surveyed by Clio would prefer to make payments over the phone.
In general, consumers prefer to use self-service, asynchronous forms of communication for transactional interactions (such as billing), but continue to choose live, one-on-one channels for key conversations (such as those involving decision-making and status updates).
Myriad factors influence a consumer’s choice of lawyer.
What motivates a client to choose one legal provider over another? The latest Clio report identifies numerous factors:
- Responsiveness to questions
- Price transparency
- Free consultations
- Availability of payment plans
- Positive online reviews
- Personal recommendations
- Online searchability
- Remote options
- Availability outside of business hours
- Availability via text or instant message
- Support for online bookings/scheduling
Notably, many of these factors relate back to communication—specifically transparent, flexible, and responsive communication. The more an attorney can “be there” (in more ways than one) for the people they serve, the better their chances of winning and retaining clients.
Sustainable growth depends on measurable insights.
For today’s law firms, dependable success is measurable success. As the authors of the 2021 Legal Trends Report write, one “striking difference” between well-performing firms and others is “their use of firm reporting tools”:
“[G]rowing firms are more likely to increase their revenues because they have access to the information and insights that help them assess how their business is performing, which also allows them to focus more attention on planning for additional, ongoing growth over the long term.
As a whole, growing firms are twice as likely to be using reporting tools than shrinking firms—a difference that reached as high as 175% in 2019."
Three fundamental KPIs any firm can measure (and which Clio has tracked on an industry-wide scale for five years) relate to billable hours:
- Utilization rate measures workload and productivity
- Realization rate measures the potential value of work performed
- Collection rate measures the ability to capitalize on work performed
Year after year, the Legal Trends Report has shown that, on the whole, legal professionals struggle with utilization. In 2020, the average lawyer surveyed billed only 2.5 hours of an 8-hour workday.
Why do many attorneys fail to maximize billable hours? One major reason ties into a theme that’s surfaced multiple times in this article: client communication. Countless legal professionals lose countless hours every day due to routine distractions and unexpected interruptions such as phone calls.
At the same time, attorneys are generally feeling more overwhelmed than in previous years.
Just 7% of lawyers believe that law school adequately prepared them to run a business, and only 23% say their bar association helped with business training. Consequently, 76% of attorneys reported that they felt tired and overworked.
The bottom line: The challenge for firms and attorneys is to meet clients’ expectations for communication and availability while maximizing productive time. The most effective way to do this is through the right technology, ongoing performance measurement, and a client-centered approach in every aspect of business. But legal professionals can’t do it all alone—they need help and resources to reclaim their hours and energy.
For details and comprehensive information, be sure to read Clio’s 2021 Legal Trends Report.
Looking for practical tools and insights you can use to improve client communication and billable hours? Check out our new and improved law practice resource hub.
