Law Firm Leaders Gather to Commiserate
CNN just released a poll that suggests that most Americans are angry, worried, and stressed out about current conditions in our country. The legal profession is not immune to these forces. Law firm leaders from small, mid and large sized firms gather for a two day program designed to provide guidance on what the law firm of today needs to do in order to stay competitive in a changing economy. The sponsor of the program is ALM (now IncisiveMedia).
Today, Wednesday, the program kicked off with a panel discussion that included the co-chairs, Richard Rosenbaum, President of Greenberg Traurig and Paul Pearlman, Managing Partner of Kramer Levin Naftalis & Frankel, Dan DiPietro from Citi Private Bank and Aric Press, Editor in Chief of The American Lawyer.
There was much to take away from the panel discussion. Some of the highlights, for me, included the following:
• The first half of 2009 may be as lucrative as the first half of 2008 because law firms have higher accounts receivable resulting from the work they’ve done before the financial crisis we now face. They will collect these receivables between now and the end of the first half of 2009. The key here is that law firms need to collect their A/R. If their clients fold or slow pay the law firms, this may turn out poorly. As a side note, the managing partners I’ve spoken to in the last two weeks tell me that they have not yet seen a slowdown. They’re waiting for the “other shoe to drop,” but that has yet to occur.
• Large firms are facing “the challenge of law school graduates.” Typically, law firms extend offers to more graduates than they want to take on with the expectation that there will be enough decline their offers that they will wind up with the right amount of folks. Does this sound like an Airline? Ever hear of “over-booking?” Because of the crisis, there is greater acceptance, and law firms need to determine how to deal with the abundance of acceptances.
• Being big is not necessarily good. (Sounds like former Governor of California, Jerry Brown. Everyone scoffed at him then. Maybe he was on to something.) The advice given here is to look down the road and be proactive; know what you want to be in the future and what your clients will need. Seek to match the two. Look at your firm, your strengths, your clients and how you can provide value to them.
• Prosperity between 2001 and 2007 resulted from strong demand, increases in billing rates, and increased collection efforts. Profits per equity partner rose from, in part, reducing the ranks of equity partners and increasing the ranks of other partner categories.
• Analogous time frame to today’s environment is 1991 to 1992; some say from 1928 to 1932. It’s interesting that people have different perspectives on comparisons. The blip in the 1990s was just that, a blip. In the 1920s, there was a major structural change. I, for one, believe this is a major shift … The policies of Lyndon Johnson and the Viet Nam war took a generation to overcome; I believe the policies of George Bush and the wars he commenced will require the same time frame to overcome, if we can. The current financial crisis is merely the culmination, or icing on the cake, of economic policies in place for awhile. (This is not intended as blame, there certainly is enough of that to go around; rather merely a statement of fact, and an opinion based on that fact.)
• Contrasted with the last 7 years, our difficulties today result from increased expenses and decreased revenue.
• Dan DiPietro, in The American Lawyer of August, suggested a “modest proposal.” (His words, today.) The “silver lining” he suggests may be that change averse lawyers may be willing to change today, may be willing to experiment a bit, may be willing to think outside of their traditional square box because times are tough and likely to get worse before they get better. If that is the case, then law firms will have the chance to alter their structure to be more effective for their clients and more profitable for themselves.
• Concluding this panel discussion, the moderator made 3 assumptions:
• Clients will take greater control of their matter(s)
• Attorneys must be responsive to their clients’ needs and wants (more about this when I post about David Maister).
• There are many good lawyers available. Those there is contrary opinion, the moderator suggested that the cost o f legal services will determine where business goes. But, so the other side suggests, there will always be “bet the company” matters. Our society is becoming increasingly complex and there will always be the need for lawyers. These large or complex matters will be handled by the AmLaw 100 (“Big Law”). There will be enough of these matters to keep most firms busy. Leverage was a dramatic influencer of higher profits in the early 1990s. More leverage may not be possible if the AmLaw 100 are handling highly complex matters.
• Talk to your clients; find out what they want. Inquire as to their future; anticipate how you can better serve them. Lou Brown, dean of preventive law, used to say that preventing a problem is the ultimate way to lower legal costs for clients, and the best way to bond with them. This will give you competitive advantage.
All in all, a very stimulating morning session. More to come.Tags: Management
Categorized in: Management