Forecasting trends for 2009 is a grim business. For example, if you want to spoil your lunch, read this guy’s jeremiad(“So 2009 will be a squalid year, a planetary hostage situation surpassing any mere financial crisis, where the invisible hand of the market, a good servant turned a homicidal master…”).
Elsewhere, the professional services consultancy Hildebrandt has just issued a “Client Advisory” looking back at legal industry trends of 2008, and highlighting trends the company believes will most affect the industry in 2009.
Hildebrandt’s predictions evoke the popular fallacy* that the Chinese ideogram for ‘crisis’ combines the characters for ‘opportunity’ and ‘danger.’ According to Hildebrandt, “a financial crisis is a terrible thing to waste.” This crisis offers unparalleled opportunity to make fundamental changes in the ways firms are structured and conduct business. The Client Advisory identifies 4 imperatives for firms trying to survive or even thrive in this shifting BigLaw landscape. Here is a cheat sheet:
1. “The importance of a clear strategy”
Translation: Don’t put your eggs in one basket (I’m looking at you, Thacher Proffitt)
“Some firms that were superior performers from 2000 through 2007 significantly underperformed in 2008 as a result of their having dropped practices that could have cushioned the drop in more volatile areas.”
2. “Adjusting associate compensation structures”
Salary freezes are not a long term solution. Firms need to move away from lockstep and toward competency-based associate advancement and compensation structures. Many firms have already abandoned a lockstep model for partners, but “it is irrational to have half or more of a firm’s highly compensated lawyers on largely seniority-based salaries.”
3. “More flexible professional staff structures”
Increasingly, some portion of BigLaw work falls into the category of ‘commoditized’ services. Clients are understandably unwilling to pay high hourly rates for junior associates doing document review — hence the proliferation within BigLaw of project-specific contract attorneys and the expansion of permanent non-partner positions (e.g., “senior litigation counsel” or “special international trade counsel”). Going forward, the economic model for successful firms may well contain relatively fewer partners and associates, and more of these temporary and special counsel positions. In Hildebrandt’s analysis, this shift will require an attitudinal shift on the part of partners, who will need to accept that “a person can be a highly competent lawyer even if he/she has no desire to be partner."
Also: underperforming partners, watch your backs. The report practically accuses firms of laxity/timidity in dealing with performance issues. The recent wave of de-equitizations (e.g., Mayer Brown, MoFo) did not address the issue of underperformance directly; instead, these maneuvers created a contingent of non-equity, unhappy lawyers who are no more productive than they were before. Going forward, successful firms will “regularly winnow out those who persistently fail to perform.” (Of course, many will view this as yet more evidence of law’s descent from a ‘learned and honorable profession’ to just another coldblooded business.)
4. “Developing more efficient approaches to the delivery of legal services”
For transactional work: kill the billable hour. Customized project pricing will increasingly be the norm.
For litigation: look for growth in the ‘disaggregating’ or ‘unbundling’ of services. For example, a client might use one firm for discovery and document review, another for depositions, and yet a third for trial work.
-posted by brian
*Or is it a fallacy?
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