Will Small, Mid-Sized and Regional Firms Benefit From the Recession?

Their lower billing rates are certainly looking a lot more attractive these days.

Will the ABA Rule Change Fuel Lateral Movement?

The ABA has adopted a new rule which seems to create more opportunities for partners to move laterally. In lowering the ethics hurdle with respect to conflicts of interest, is the ABA encouraging lateral movement or simply acknowledging what is already happening in the legal profession?

Doing Well in a Bad Economy

The key to success in a downturn is to be flexible. You may be a great technician in your particular practice area; but if the marketplace does not need your services, then you better be ready to adapt.

Are You Addicted to Success?

That's a diagnosis offered in today's WSJ (subscription req.) Maybe our culture puts too much emphasis on professional achievement.

While there is nothing wrong in striving for high levels of achievement, the problem arises when achievement becomes your principal source of self esteem. And in the current economic climate, it is easy to NOT be successful.

If you haven't been laid off, your workload may be slow. If your plate is full, maybe your colleagues are not that busy. If you are responsible for generating work at your firm, you are probably finding it harder to generate billings (unless you happen to be involved in providing legal services that relate in some way to advising distressed companies or individuals).

In the long run, I think the current economic crisis will force more lawyers to reevaluate their priorities (e.g. why did I go to law school? what do I really want to do with my life? how can I use the added free time to improve my relationships with my friends, children, spouse and family?) I've long believed that striving for balance is important in both good times and bad. I've written about this many times including a piece I called Striving for Professional Mediocrity.

Personally, I've rediscovered cooking and my wife and I are eating better. I spend more time with our children, our dog gets more exercise, I'm following up with old friends more frequently and I'm taking care of little annoying car and house related projects that have been on the back burner for a long time. It's not that I'm not working hard (in many ways, I'm focusing more energy than ever on identifying business opportunities). But I'm trying to focus more on other parts of my life to derive self esteem.

Yesterday, I played a great squash match. So what are you doing to build self esteem during these challenging times? Hint: focus on areas of your life where you have more control!

Tough Times for Biglaw Partners?

Are partners at large firms now at risk of being deequitized or terminated? So far, most of the reports of layoffs at firms have focused on staff and associates. But the legal profession is still in a recession and at least one pundit believes that trimming the partnership ranks is next.

But maybe biglaw is in for even more fundamental change. As another commentator puts it, by 2011, corporate legal dollars are not going to be supporting law firm associate leverage to the same degree. Instead:

1. Clients will just flat out spend less, drive harder bargains, and get more for their money.
2. Some work will go to outsourcers, whether onshore or off.
3. More work will go to contract lawyers or proto-associates not on any kind of partnership track.
4. Some associate time will get replaced by technology.

The meta message is that large law firms will be in retrenchment mode for some time to come.

With every change, of course, there comes opportunity. So who will the winners be? I predict the winners will be smaller law firms, legal process outsourcing companies, companies with "great" technology and large law firms who learn how to adapt.

Thinking of Switching Practice Areas?

A partner at Jones Day who serves on the firm's training committee has some good advice.

Just Say No to RFP's

In these challenging times, should a law firm respond to every RFP? Not necessarily suggests an Altman Weil consultant. It can cost between $35,000 and $65,000 in partner time to put together a proposal. Furthermore, the chances of winning the work are not necessarily that great. So before taking the plunge, ask yourself the following questions:

• Is this client a strategic target or just a one-shot opportunity?
• What are our chances of winning?
• Do we have a brand that is meaningful to this client that would give us an advantage?
• Do we have a personal relationship with anyone on the client side?
• If we got the work, why did we?
• If we didn’t, why not?

Off the Beaten Track at a Trade Show

LegalTech New York is history. As I have already indicated, the show was a nice antidote to our economic malaise. It was a reminder for me that getting out of the office to learn something new is a good way to recharge. It was also fun to talk with professionals who are trying to figure out ways that legal services can be delivered faster, better and cheaper.

I'm still following up with the contacts I made and I am still processing the mountain of information that was presented to me. I am also trying to meet my commitment to blog about some of the sessions I attended. So here goes:

Most of the conference seemed to focus on using technology to manage large amounts of corporate data and to streamline discovery. I attended one session on data privacy issues that was eye opening (many EU countries are much stricter about keeping personal data secure). There was also a lot of buzz about the social networking site Twitter. In addition, I attended a number of very good sessions on how lawyers and law firms can use social networking more effectively (i.e. use tools like blogging, Twitter, Facebook, LinkedIn, etc. more effectively.)

But the best session I attended at the conference was a workshop on Legal Process Outsourcing (LPO) sponsored by the ClutchGroup. The panel featured two representatives from the ClutchGroup, two law firm attorneys who have used outside vendors to manage large document projects, corporate counsel from a large public company and a former GC who has a lot of experience in reigning in legal expenses.

For the most part, LPO was really a peripheral topic at the conference. LPO relies heavily on technology and there will continue to be technological developments that improve the effectiveness of LPO. But LPO itself is not technology.

Nonetheless, I'm glad I stumbled on the session because in many ways, LPO itself offers a more radical departure from the traditional practice of law than many of the solutions offered by technology vendors who were at the show.

My take away from this panel was that LPO is not going to replace domestic lawyering any time soon; rather it simply provides lawyers with a way to further leverage their time with a large supply of cheap well educated labor. But in order for it to work well, it is critical that LPO vendors provide outstanding project managers to serve as the link between the lawyers in the U.S. and the lawyers in India.

It was also interesting to hear what Lynee Gore of the ClutchGroup had to say about LPO jobs in India. According to Gore, because only a small percentage of Indian law school graduates have the opportunity to work in a private law firm, LPO jobs are considered very desirable. This is in sharp contrast to the way many American law school graduates feel about doing work as a contract lawyer.

Belated Thoughts on LegalTech New York

I attended LegalTech in New York this past week and despite my best intentions, I am now just getting around to posting about the show (other than posting my interview with IncisiveMedia).

I was invited by Law.com to attend as a blogger who is part of the law.com network. (By the way, I thought this was a very smart move by IncisiveMedia, the show's sponsor. Inviting bloggers insured that LegalTech would be discussed in the blogosphere.) While I had every intention of "live blogging" about some of the sessions I attended, unfortunately, technology was not cooperating and I never got a Wifi connection (how ironic!)

Technology is not really my thing professionally although I am always looking for technology solutions for my own business and for my clients. Nonetheless, I attended the show feeling like it would give me a mood boost; and it did so in spades. It was very stimulating to be at a trade show where many people are excited to talk about their companies. This was particularly true this year because of the economic downturn. It was a nice refuge from the recruiting world where most of our clients are doing more layoffs than hires.

The exhibit halls had hundreds of vendors who represented a broad cross section of technology solutions for law firms. In reality, though, over 90% of the show seemed to focus on electronic discovery and document management. This leads me to my first observation which is: it is very hard to stand apart from the pack when there are many vendors just like you. I actually spent more time talking to vendors who are not involved in EDD. Could some of the EDD vendors done a better job of standing out? Maybe. But maybe attending this show is just defensive marketing for document management companies.

There were also a lot of sessions on issues surrounding electronic discovery. I attended an interesting session on data privacy which highlighted for me that anyone dealing with business records in EU countries needs to beware of a host of privacy laws which seem to directly conflict with common business practices.

There were numerous networking opportunities and I really enjoyed the serendipity of it all (I did not attend with a particular agenda--only a desire to recharge and maybe make some new business contacts.)

My favorite part of the show, however, were two sessions I attended on legal process outsourcing. These sessions were somewhat peripheral to the main themes of the show but to me, they were the most interesting because they called into question the fundamental way that law practice is going to change in the next decade. I'll summarize what I learned in my next post.

Beware of Your Cash Cow

When you earn your living by providing legal services to businesses, it is great to have a client that sends you a lot of work. In fact cultivating a strong relationship with a client that has diverse legal needs is an important way to ensure that your practice remains vibrant. But is it possible to develop a relationship that is too close? That's what one marketing consultant thinks.

It comes down to diversification. If you rely too heavily on getting business from one client, when things are good, they may be great. But if that client is either sold or files for bankruptcy, your cash cow can die a quick death.

Cost Cutting at Law Firms

The National Law Journal cites some interesting statistics about law firm expenses. Here are a few:

• A firm cuts costs by an average of $250,000 for each attorney let go. For each legal assistant or other staffer laid off, a law firm saves about $100,000
• For most big law firms, about 85% of their budget goes to rent and personnel costs
• Paying severance can be costly. Every $10 million saved in compensation is offset by $7 million paid in severance
• If 30% of a firm's expenses are going to associate salaries, layoffs that trim 5% of associate costs are the equivalent of just 1.5% of revenue
• Clients are demanding price cuts. The chairman of a major U.S. firm said
  "There's less diplomacy in the discussion [with clients] about discounts". "They're not inviting you to a discussion. They're saying 'it's 10 or 15%, and if you can't help us out, maybe we'll go somewhere else.' "

In addition, the article suggests that firms have increased cash availability by "deferring partner profit distributions, reducing partner draws, making cash calls to equity partners or asking nonequity partners to provide capital".

My takeaway is that all signs point to a drop in law firm profitability in the next few years. It is very hard to cut costs in a law firm. In addition, partners and senior associates who lack portable business are in the greatest danger of losing their jobs (since they cost the most to keep in place).

While none of this bodes well for large law firms, small to mid-sized firms will probably be the winners. Large firms that find ways to deliver legal services in a more cost effective manner will also prevail. Some will adopt more creative billing strategies. Others will employ technology to do what they do "faster, better and cheaper" (at LegalTech this year, it seemed clear that e-discovery is a key area ripe for cost savings). One other area where large firms may be able to cut costs is through effective use of outsourcing (using contract lawyers and working with LPO companies).

Becoming an Instant Expert

I just returned from the LegalTech show in New York where I was invited by Incisive Media to attend as a blogger. I have a lot to share about the show (not necessarily about technology), but that will have to wait a day or so as I catch up. In the meantime, here is me branding myself as an expert on Legal Process Outsourcing! And all I did was attend a couple of workshops on the subject. More to follow in the coming days.

The End of Biglaw as We Know It?

Dire predictions for Biglaw from a marketing guru.