For the decade that I have been in legal marketing, the business plans of the big-firms, and the followers, hasn’t changed much. Bill more, bill at higher rates, increase leverage, lower real estate, get rid of under-performers, shed practices, or only invest in “high value” practices.
Some firms have learned how to get their partners playing nice in the sandbox together well by redesigning compensation plans to promote cooperation, or forming productive client teams. Some firms have learned how to better integrate new partners, new practices, new offices and newly acquired firms. But not many.
I don’t like cross posting, as that would defeat the purpose of having a forum like Legal OnRamp, but I’ll try and recap a couple salient points:
Money cannot be the only reward. Right now law firms are not developing and retaining talent. The only incentive to stay right now is money … and that reward is not a business plan.
Partnership is no longer the glue that holds a firm together. If money is the driving retention factor in a firm, it is left vulnerable to the portability of clients and talent to the firm across the street when revenues take a downturn.
Job or career security at a law firm has disappeared. The bigger the firm gets, the more susceptible their partners are to becoming more like “employees.” With no support or loyalty to the employees, including partners, how can the institution expect to receive any in return?
More Hellers and Thelens to come. Why, in the face of an economic downturn, without a compelling reason to stay together, would partners who don’t really know, like or trust one another, stay together?
Firms need to invest in their partners, associates and staffs in good times and in bad. While the corporate clients are taking a financial hit, left and right, every day, where are the law firms (And accounting firms, office supply/paper vendors, building management, etc.)? Will the law firms automatically increase billable rates come January, or will they partner with their clients to weather the coming recession? Will they continue to lay off non-equity partners, associates and staff, rather than reduce their PPEP?
Today’s ABA Journal blog, Howrey Chairman: ‘We Have to Economize for Our Clients’, is based on a Washington Post article, Law Firms Tightening Belts — By Request.
Robert Ruyak, chairman and managing partner of Howrey LLP, said he began feeling the heat from corporate clients last year. With tighter budgets, legal departments at Procter & Gamble, Qualcomm, GE Healthcare and others prodded the Washington-based law firm to provide significant savings in the fees it charges.
Howrey responded: It is assigning more work to lower-paid staff attorneys and negotiating fixed fees for certain clients rather than billing by the hour. To keep up profit, the firm is hiring fewer associates and has acquired a Madrid firm to expand its antitrust practice into the booming Spanish market.
Will client partnering win out? Or will be just more of the “same-old, same old” in the end?
Washington area law firms are retooling due to a financial crisis that is bringing growing pressure from corporations and a drop in work in mergers and acquisitions, litigation and commercial real estate. At least one global firm with a D.C. office is closing, and another announced layoffs last week. Some big firms here are becoming bigger through mergers, which are up this year, or by snagging teams of lawyers from their competitors. Others are shifting to more lucrative specialties, such as bankruptcies, foreclosures and regulatory work related to implementing the bailout package, or capping salaries of associates and restructuring.