Some firms are laying off staff and associates, some firms are holding off on welcoming new partners to the equity ranks, while others are closing down. In fact, this week’s trades are filled with reports that another AmLaw 200, #131 Thacher Proffitt & Wood, is in dire straits.
I understand paying a premium fee for the expertise of marquee partners. But at what point does the client choke on the gall and close the purse strings?
The continued uptick in legal expenses means that law firms should expect clients, especially in a worsening economy, to hire more attorneys in-house and to rely more heavily on “flexible staffing,” said Pamela Woldow, general counsel and principal of Altman Weil Inc., a law firm consultancy. In addition, clients, such as pharmaceutical companies, that in the past did not demand alternative or varied fees will be “negotiating harder” for better deals on legal services, Woldow said.
So I started doing the math and came up with my own equation:
Legal Marketing Algebra
Higher rates = increase in legal expenses
Increase in legal expenses = bring more work in-house
Bring more work in house = less revenue for law firms
Less revenue for law firm = more lay offs
If your corporate clients are cutting back on expenses, laying off employees, shutting down offices or stores, closing down operations or preparing for bankruptcy, how do you justify $1,200 an hour for a lawyer?
But, then again, some people have no problem paying $5,000 for a hamburger.