Law360 (December 1, 2020, 7:20 AM EST) -- Law firms have performed better than they anticipated during the coronavirus pandemic by successfully transitioning to telework, cutting expenses and staying on top of billing, according to a report by Citi Private Bank Law Firm Group and Hildebrandt Consulting that was released Tuesday.
Even though firms expected a drop in client demand during the pandemic, revenue growth in the first quarter of 2020 outperformed the first quarter of 2019 and billing grew 7.4% at the end of the third quarter of 2020, the report found.
The report is based on conversations with law firm leaders and firms' responses to 2020 Citi Private Bank surveys. More than 200 U.S.- and U.K.-based firms were surveyed, according to the report.
Gretta Rusanow, head of advisory services of Citi Private Bank's Law Firm Group, told Law360 that many firms already had the technology in place for telework, meaning they were able to smoothly transition to a remote environment without burdensome costs.
"In the space of literally a week in, in mid-March, most of this industry moved remote," Rusanow said, adding that the biggest concerns facing firms as they shifted to remote work were business continuity and technology licenses.
How Firms Did in the Pandemic
by the numbers
Based on surveys of more than 200 U.S.- and U.K.- based firms, the industry saw the following changes when compared to last year:
in firms' total expenses (including compensation and operating costs)
in firms' operating expenses
in attorneys' compensation
in total attorney head count
Source: Citi Private Bank and Hildebrandt 2021 Client Advisory report
By switching to remote work, which in some places was required by state or local governments, firms were also able to cut operating expenses including the jobs of office support staff, event attendance and travel expenses, the report said.
According to the report, operating expenses were down 5.3% in 2020, while attorney compensation and total head count increased 1.9% and 1.4%, respectively. Firms' greatest operational expense during the pandemic is office rent, which they still had to pay even if their physical locations were closed, Rusanow said.
The pandemic also prompted firms to make a number of changes that they should maintain going into 2021, including paying closer attention to billing and client needs as well as addressing performance issues sooner rather than later, Rusanow said.
"The focus on billing and collections has probably been the most common trend we've seen across the industry and the direct impact it has had on firm revenue has been demonstrated in the positive revenue results seen this year," the report said.
The report also found that while law firms anticipated that clients would ask for discounts and to postpone payments, that largely didn't happen. Instead, attorneys actually found it easier to stay in touch with their clients because the pandemic kept everyone at home, Rusanow said.
Rusanow said that the firms that are most likely to succeed going forward are those that regularly reach out to their clients and have diverse practices so that when business slows in one area, firms can stay financially afloat with business in other areas.
"There are certainly a lot of positives that have come out of this experience, and we believe will accelerate changes that were already afoot before this happened," Rusanow said.
--Editing by Alanna Weissman.
Update: This article has been updated to include Hildebrandt's role in the report.
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