"The NLJ 250 collectively employed 9,567 fewer lawyers in 2010 than it did in 2008, a decline of nearly 8 percent in headcount, with the 10 largest firms in the U.S. alone losing more than 1,000 lawyers last year. This is just the second time in the 34-year history of the NLJ 250 survey that the nation’s largest law firms have experienced a net reduction in employed lawyers for two consecutive years."
This group of law firms, the largest of which is Baker & McKenzie at 3,700+ lawyers, makes up less than 5% of the attorney population. Their growth, like all corporate growth, has its expansion and contraction phases. There are at least two questions that come to mind:
1. Is this contraction permanent? Is this contraction a reflection of the entire industry?
2. Does this contraction reflect a major shift in the way legal services will be delivered in the future?
My crystal ball does not give me the answers. But, I believe that
i) even sole and small firm practitioners felt the change;
ii) though the numbers in the survey reflect 2008 as the base year, there does seem to be a cautiously upbeat attitude among lawyers today. More lawyers are contacting me with the serious questions of how do we make our practice better, how do we grow our practice … in other words, lawyers are starting to come out from their caves, a bit shell shocked, but ready to understand the needs of clients and focus on providing solutions to their clients;
iii) it’s not the contraction that will cause the shift in the way services are delivered, it’s the continuing evolution of technology that will impact the delivery of services. And this conclusion would have been the same with or without the contraction. It’s just that, because of the contraction, we’re more sensitive to the changes. But, these changes began before 2007-2008, and they will continue after 2011.
Lawyers have to be more sensitive to technological changes and how these changes can improve their efficiency and mode of delivery. Clients certainly are and they are looking for those lawyers who can reduce their legal costs (not necessarily hourly rate). Thus, even the decades-old billing and pricing models will be subject to pressures that mere conversation failed to impact until now.
As Oprah said yesterday while interviewing the President and First Lady, "… keep your eyes on the prize." Know what you want in your practice. Know what your clients want from you … what is the ultimate solution they are seeking by engaging your services? Stay focused and you will have happy clients … happy clients pay their bills … happy clients refer their colleagues and friends … While doing good, you will be able to do well.
In most states, strict compliance with trust accounting regulations is required. Where such regulations require a paper trail that includes retaining canceled checks and other features of an older era, lawyers are inadvertently out of compliance. How? Why?
The banking industry has moved on. They are into the electronic age and we have not kept up. For example, few banking institutions, if any, still return canceled checks. They send photocopies and, after a short time, destroy the canceled checks. See the federal Check Clearing for the 21st Century Act.
In August, 2010, the American Bar Association’s House of Delegates adopted the new Model Rules for Client Trust Account Records to replace the Model Rules on Financial Recordkeeping, in effect since 1993. The ABA rules now enable lawyers to use electronic tools to comply with Model Rule 1.15 concerning holding clients funds and property.
Check your State rules — not all states have updated their regulations.
McKinsey & Co. released a report stating that ‘inadequate career development has kept women from reaching the top rungs of the corporate ladder…" The same is true in law firms who correspondingly have low numbers in top management.
The report said "…companies need to spend more time coaching women …" Corporate America understands this; when lawyers learn to understand this, they will become better lawyers.
The coaching process works for athletes, works for top executives in Corporate America; and works for others who want to increase their revenue and decrease their stress. A side benefit of great importance an increase in one’s self-esteem. Lack thereof is one of the greatest impediments faced by most professionals, probably because our standard is "perfection." I know no one who is able to reach that standard. Coaching can show us how important "progress" is without worrying about reaching an impossible level of perfection. Having someone walk the plank with you who understands these issues and can enable you to progress is important. As with an athlete, having a coach can be the difference between a very successful practice and a modest practice.
The States are now using more creative ways to increase their revenue. If they can’t raise taxes, they increase the cost of parking tickets. What used to be a few dollars is now close to $100. What used to be $100 for a moving violation is now $468 for making a right turn on a red light where not permitted.
And, now! Where a taxpayer is delinquent on taxes due and owing, financial institutions subject to a new California law must provide to the Franchise Tax Board (the State equivalent of the Internal Revenue Service) on a quarterly basis the name, record address, and other information for those people who maintain an account at the financial instiution.
The cost of this new initiative will be paid by banking consumers on opening new accounts. And/or banks may decline to open accounts for depositors who are on the delinquent tax debtor list.
How do you get on this list? Fail to pay a demand for payment for 30 days. Nothing is said about the right of the taxpayer to protest the validity of the State’s demand.
Technology is becoming a bill/tax collector … First, for deadbeat dads who have a job or who receive money from the government. Now for those who have money in a financial institution but don’t pay their taxes to the State. And, as we know from recent exposes, we are being tracked by the use of our Smartphones. And tracking us by the use of our credit cards at gas stations, ATM machines, seems to be commonplace.
Develop a complete profile; make sure your profile is not merely a resume but, rather, an expression of your persona. Be authentic. Remember, this is for your friends and people you want to befriend. This is the advice from every social media expert I’ve heard.
Yet, it now seems that this “rich” profile is the very substance of Facebook’s billions of dollars of ad revenue. They are mining our profiles and selling targeted advertising to companies for a very healthy profit. That’s our privacy they’re selling, without our overt consent and certainly without any share of the profit.
Usually, a commercial transaction is a two-way transaction. You buy a service or product from someone in exchange for money. The third party who makes the service or product is also compensated by a previous two-party transaction. In this case, Facebook and the marketer are in a two party relationship. But, the third party (we who are participants or members) is not involved – we are not compensated by Facebook for creating our profile for their use. Nor are we told that they will make lots of money by selling the very information of our personal lives that we place there.
Only a short time ago, we believed that non-lawyers would be able to participate in the ownership of American law firms. The pressure, so we believed, would come from the British Empire. Australia already allows this and it will soon be permitted in England. But, not the U.S. … until now.
The District of Columbia permits non-lawyer ownership to the extent of 25% interest in a law firm. And, now, North Carolina has a bill before its Senate that would allow 49% non-lawyer ownership.
One argument is that law firms have expanded and are now very large organizations. In order to grow, they need additional capital … and capital is best raised in the capital markets, not from individual partners of law firms … and that means non-lawyer ownership. While large law firms are looking more and more like their corporate clients, it is still a stretch to suggest that law firms should raise outside capital.
Do law firms need to grow? Why can’t corporate clients’ interests be served well by smaller regional law firms? Why does the corporate law firm have to be as large as the client? We saw unions grow in both size and power in response to corporate and management growth and power. And we now see unions fighting to stay alive. Will that also happen to large law firms of the future? Will technology enable small groups of lawyers to be effective in large corporate representation?
Some argue that the rules of professional conduct wouldn’t bind non-lawyers in matters of confidentiality and charging reasonable fees. Further, the very independence of lawyer’s judgment might come into question. But, the rules have been bent, if not changed or discarded entirely, when large firms’ economic interests were at stake. So, it will be fascinating to see who argues on which side and how this issue develops.
Is it possible that this issue will finally cause the break up of the mandatory (integrated) bar association into State licensing agencies on the one hand and voluntary bar associations on the other hand … with the latter being the home of sole and small firm practitioners banding together to serve their own economic interests?
