Corporate clients are sending big law firms the message they’re too expensive and not stepping up on diversity, a survey by legal workflow software company BigHand finds.   

Almost 100% of law firms have seen client attrition over the last 12 months and about 80% are seeing less work from the clients who stick with them, according to the survey of 835 lawyers in law firms in North America and the U.K. 

The amount of work is dropping because companies are trying to split their matters between top-tier firms and more mid-level firms as a cost-saving measure, the report says.

“Thirty-three percent of clients found cheaper legal services elsewhere [and] 34% are reducing the number of firms they have on their panels,” the report says. 

In a silver lining to the trend, if a firm stays on a corporate client’s down-sized panel, it’s in a good position to build future business from the client. 

“Firms that can meet client expectations and secure a position on a smaller panel will be better placed to retain and improve business moving forward,” the report says.

A third of corporate clients are trying to lower their legal costs by bringing more work in-house, the report says. 

The goal of doing more work in-house has an aspirational character to it, the report suggests; companies are finding it hard to build the internal talent they need. But it’s something companies will keep striving for.

“It is taking longer for clients to build the depth and breadth of skills in-house required to manage the increased or specialized workload [but] the trend is undeniable,” the report says.  

Given corporate clients’ concerns over costs, law firms that are upping pay to attract talent could find themselves in a tough spot, the report suggests. 

Law firms are trying to attract talent because they’re losing existing talent to retirements, work-life balance issues and for other reasons, the survey finds.

Roughly a quarter of equity partners and junior associates are leaving because of work-life balance issues, which the survey finds is being exacerbated by hybrid work arrangements, in part because attorneys are finding it harder to get administrative support when they work remotely. 

“Hybrid working is … leading lawyers to more administrative work rather than engaging support staff,” says the report.

About 12% of lawyers spend about five hours a week on non-legal administrative tasks, the survey shows. That’s an inefficient use of expensive talent, the report says. 

Almost a third of firms say they’re planning to raise compensation by about 10% to attract attorneys. 

Although the report didn’t make the connection, it says corporate clients have “increased price sensitivity,” so law firms paying more for legal talent could meet client resistance.  

DEI: more than window dressing

Corporate clients are also putting their money where their mouth is when it comes to having more diverse teams working on their matters. About a third of corporate clients are taking their legal business elsewhere when firms don’t meet their diversity, equity and inclusion requests. 

“Law firms are … falling short of clients’ expectations,” the report says. “A third of firms' report losing clients because they found other firms more in line with their goals around DE&I.” 

Companies’ DEI goals aren’t just around legal work; they’re embedded in their contracts with all of the vendors they work with, the report says. As part of this broad goal, they expect law firms to step up, the report says. 

“They expect firms to commit to improving equity and they want proof these goals are being attained,” the report says. 

Almost 90% of law firms say corporate clients are asking them to provide DEI data on their matter staffing, the report says.