A newly released infographic from Thomson Reuters’ Legal Executive Institute and Peer Monitor suggests that strong rate growth, a key factor for many firms in controlling profitability, may actually be counterproductive.
The data was presented for the first time last week at the Legal Executive Institute‘s Law Firm Leaders Forum.
According to the research, firms that grow their rates more aggressively may actually be negatively impacting their revenue potential. Last year, the average law firm grew their worked rates by 2.7%. So far this year, firms that have grown their rates faster than last year’s average have seen their fees worked (a proxy for revenue) grow by an average of 2.4%. But those that have grown rates at a pace slower than last year’s growth have seen their fees worked grow by an average of 3.2%.
What’s more, rate growth doesn’t seem to be a key factor in which firms are successful. According to the same study, firms that had solid profit growth grew their rates at about the same pace as firms that saw profits shrink. What made a difference with those successful firms was better utilization, productivity, leverage and realization.