It’s a Bullish Law Firm Environment in 2018

The general economy is strong and so is the law firm environment in LA/Orange County, according to Armanino’s 2018 Law Firm Compensation, Billing Rates and Benefits Survey.

This year’s survey again represents a broad swath of the legal industry, with data gathered from 177 law firms and branch offices throughout Southern California, which collectively employ more than 5,800 attorneys and 5,100 non-attorney staff. Human resources and finance organizations can use the data to fine-tune their needs by position, experience and even practice area. We’ve also included additional geographic regions: San Diego, the San Francisco Bay Area and Seattle/Puget Sound.

Here’s a quick look at some of the high-level findings from firms in the Los Angeles/Orange County area.

Significantly improved indicators

2018 is shaping up to be the most bullish law firm environment in years, reflecting the general economy, the strength of the current growth cycle, and the positive impacts of tax reform on the M&A market and other corporate sectors that rely on legal counsel. Among the indicators showing significant improvements for LA/Orange County area firms are:

• Higher net income: Partners saw a 10% increase in annual net income.
• Higher billing rates: Associate billing rates across all markets that we survey showed an average 20% increase.
• Improved efficiency: Leverage improved at both the associate and paralegal levels, with a 12% increase in the associate-to-equity-partners ratio, and a 13% increase in paralegals-to-attorneys.
• Expected growth: Another increase from last year, 58% of the firms in the survey expect to see more growth in the next two years.

A few dark clouds

A positive marketplace and solid indicators do not necessarily eliminate potential issues within organizations. The survey shows that law firms in LA/Orange County continue to deal with challenges such as:

• Underproductive partners: This hasn’t changed for the better despite the improved law firm environment, with 62% of firms reporting unsatisfactory partner performance.
• Lack of effective succession strategy: Even with increasing numbers of Baby Boomers aging out and retiring, 43% of firms in the survey don’t have a succession plan.
• Compensation gender gap: At the equity partner level, male partners averaged 30% higher compensation than their female counterparts.

Further findings

With unique insights into how firms are managing compensation, billing rates, staffing and more, our annual survey has helped firms who want to stay competitive in their region understand rates and expectations for top talent for more than two decades.

The full survey offers many more findings and covers nearly 100 positions, including partners, attorneys, executive directors, paralegals, legal secretaries, administrators and chief financial officers. 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 LA/Orange County report or learn about the results for San Diego, the San Francisco/Bay Area or Seattle/Puget Sound, contact Crystal Lee at [email protected].

November 26, 2018