Armanino Blog

Signs of Optimism: Highlights of the 2017 Law Firm Compensation Survey for Los Angeles/Orange County

by John Schweisberger
August 12, 2014
Our Law Firm Compensation, Billing Rates, and Benefits Survey provides unique insights into how firms are managing compensation, billing rates, staffing and more. For more than two decades, this annual survey has helped firms who want to stay competitive in their region understand rates and expectations for top talent.

Human resources and finance organizations can use the data to fine-tune their needs by position, experience and even practice area. This year we also added new geographic areas, including San Diego, the San Francisco Bay Area, Seattle/Puget Sound, Nevada and Boise.

The results from some areas indicate that things may finally be on the upswing for the legal industry. Here’s a quick look at some of the high-level findings from this year’s survey of 144 firms (totaling nearly 10,000 people) in the Los Angeles/Orange County area.

Signs of optimism

Over the past few years, our survey results have reflected the industry challenges traditional law firms have faced since the Great Recession—pressure on profits, slow or no growth, a declining number of billable hours and rising costs. For the first time since then, we’re starting to see a more stable marketplace and a modicum of optimism we haven’t witnessed in a while:
  • Higher compensation: The survey shows a 7 percent increase in average equity partner compensation and a 6 percent increase in the average base compensation for first-year associates.
  • Expected growth: Half (53 percent) of the firms in the survey expect to see more growth in the next two years, with 46 percent expecting to grow organically and 7 percent both organically and by acquisition.
  • More billers: This year saw an 8 percent increase in the ratio of billers (attorneys and paralegals) to support staff.
  • Increasing technology investments: More than 50 percent of firms invested between 2 and 5 percent of their revenue in technology, and half of the firms increased their technology budget for 2017.
Trouble spots

At the same time, law firms in the Los Angeles/Orange County area continue to deal with challenges that impact their profitability:
  • Drop in billing: Associates’ average billing rates and billable hours both dropped by 3 percent—from $346 in 2016 to $336 in 2017, and from 1,864 hours in 2016 to 1,801 hours in 2017—while compensation levels for these roles remained the same.
  • Underproductive partners: Some 67 percent of firms report unsatisfactory partner performance.
  • Overcapacity: Among law firms of more than 250 lawyers, 76 percent reported their profitability is being diluted by overcapacity. For firms of less than 250 lawyers, 56 percent reported the same problem.
Better use of resources

Since 2013, firms have been increasing their reliance on paralegals. In the five-year time span from 2013 through 2017, the ratio of paralegals to attorneys increased 25 percent. There was an average 13 percent increase in total compensation across all levels of paralegal experience during this time. While average billing rates increased by 14 percent over the five-year span, average billable hours decreased 13 percent, which tells us that firms are using expensive resources more efficiently.

Further findings

The information here is merely the tip of the proverbial iceberg. The full survey covers nearly 100 positions, including partners, attorneys, executive directors, paralegals, legal secretaries, administrators, chief financial officers and more. The comprehensive report details competitive compensation, billing rates, hours and staff ratios across many demographic segments, including practice areas, locations, firm sizes and positions.

To get the Los Angeles/Orange County report or to learn about the results for San Diego, the San Francisco Bay Area, Seattle/Puget Sound, Nevada or Boise, contact Crystal Lee at [email protected].

December 04, 2017

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