Over the Christmas week, I read an Altman Weil report: 2018 Law Firms in Transition An Altman Weil Flash Survey.

It is certainly worth reading. I found this quote interesting:

Most law firms continue to plan for short-term, incremental improvements in performance, while deferring or slow-walking more forward-looking actions to address long-term, systemic threats.

And this one even more interesting:

In 69% of law firms, partners resist most change efforts. – 2018 Law Firms in Transition

Finally, here was one of the bold headings in the report:


Pay close attention to the firm’s greatest asset – human capital

 

So, what is changing?

  • More firms are merging,
  • Law firm revenue in big firms are increasing, but, there still a problem
  • Law firm size is greater
  • There are thousands and thousands of more lawyers
  • Senior partners are coasting to retirement and law firms are not developing the next generation

Merger mania. I recently read an American Lawyer article titled: Mid-Market Moves, ‘Serial Acquirers’ Drive Law Firm Merger Mania. Here is a quote from the article:

Almost every law firm we work with is actively considering its merger options in 2018, and some large firms are becoming serial acquirers.

Increased revenues per firm. I also recently read: BigLaw Growth Back in a Big Way. It included this quote:

After years of solid, if unexciting, 2 to 3 percent revenue growth, the American Lawyer’s Global 100 experienced 6.4 percent growth, amassing $105.7 billion.

More lawyers. In 1951, there were approximately 200,000 lawyers in the United States, 1 for roughly every 700 people in the nation. Skip forward to 2018 and there are 1.34 million licensed lawyers representing 1 lawyer for less than 200 persons. At this rate we are not far from the day that there will be a one-to-one relationship between licensed lawyers and American citizens.

Size of law firms. In 1960, there were only 38 law firms in the entire country with more than 50 lawyers. By 1985 there were more than 500 firms of that size or bigger. Today, a 50-lawyer firm is considered a small firm. In most cities, a firm that size is a relatively recent start-up, a merger candidate or a highly specialized boutique. Today’s largest law firms include thousands of lawyers. The average number of lawyers in the Am Law 100 is 781.

Increased Profit per Partner. Not too long ago, partners who claimed a $250,000-per-year share of profits, considered themselves well-off. But in today’s high-end, highly competitive world of business law, this would be a dangerous level of performance for a firm of any substantial size. Consider the PPP of the nation’s 100 largest law firms: In 2006, for the first time, a majority of America’s 100 top-grossing firms had profits per equity partner of $1 million or more. In 2018, 74 of the top 100 firms exceeded $1 million.

Litigation. Because large law firms are so focused on increasing profits per partner, they no longer want the kind of work that provided opportunities for young lawyers to go to court. I can remember when I started, a group of associates met at the courthouse frequently as each of us had small insurance subrogation cases, or court-appointed criminal defense cases to litigate. Now, I know litigation associates who become partners in their firms without ever trying a case. Needless to say, that can be disheartening for a young lawyer who aspires to try cases.

Firms are not Managing Transition:

In the Altman Weil report, this startling statistic appeared:

Almost 40% of firms surveyed attribute chronic lawyer under-performance to partners who are ‘coasting into retirement.’ The absence of rigorous management of lawyer and client transitions is a huge, ongoing problem in the legal profession as Baby Boomers extend their careers ever longer.

Law firms are becoming bigger and richer, and young lawyers are earning more than ever before, which seems more cause for cheer than concern. So why is our money-hungry profession in crisis, why are law firm clients dissatisfied with the quality of the legal services and why are so many young lawyers disillusioned with the legal profession?

Law firms are growing – and closing – at record rates, and our entire profession is being turned upside down. Many law firm leaders fail to recognize the need to change the main focus from profits and billable hours to clients and the development of the firm’s young lawyers.

I am reminded of our 2004 Olympic basketball team – talented losers. Compare that team to the first U.S. “Dream Team” that included Michael Jordan and Larry Bird. Those players never let their exceptional skills substitute for adherence to the game’s fundamentals.

Jordan, who often seemed like a one-man, high-flying, point-making machine, never forgot his philosophy,

“Talent wins games, but teamwork and intelligence wins championships.”

And Bird was a player so dedicated to fundamentals that he always showed up for a game hours before anyone else – so he could dribble the ball and detect any flaws on the court.Both men – and their teammates – recognized the power of focusing on the basket, not the scoreboard.

The 2004 U.S. Olympic basketball team included just as much talent but took a third-place bronze medal because they were less focused than the Argentine and Italian teams on the basics of basketball.

Partners in the 69% of law firms who are unwilling to change are focused on the scoreboard – The AM Law profits per partner – will ultimately lose to firms who understand the value of the fundamentals – training, motivating and retaining their best talent and providing exceptional service to their clients.

I recently read: The Collapse of Big Law: A Cautionary Tale for Big Med. The recession and what has followed since it was “over,” has changed US law firms forever. Here is one quote from the article:

Part of the explanation is simply economic. Since the severe recession of 2008, the number of clients willing to pay top dollar for high-priced legal service has declined precipitously. Many of the nation’s largest law firms—those employing over 1,000 attorneys, often referred to as “Big Law”—have been forced to reduce their staffs.

Work that routinely went to “Big Law” firms is now going to small and mid-sized firms with lower rates and alternative fee arrangements. Those firms need lawyers trained and coached on attracting, retaining and expanding relationships with business clients.

Is your firm ready for its new opportunity?

When did the recession end?

When did the recession end?  I found this Economist article: When did it end? I especially found interesting this quote in the first paragraph:

Industrial production has continued to grow in early 2010 as, in all likelihood, has output. By the end of the current quarter the American economy may have returned to its pre-recession peak in real GDP.

That article preceded: The Summer of Recovery in 2010. I think that was the summer when all those “shovel ready” construction projects were being constructed.

What is happening to law firms now?

The law firm recession clearly has not ended. You can read about it every day. In early March, the Boston Globe published: Corporate clients shift priorities for law firms. The article makes clear that law firms are “competing” for work they used to take for granted and that smaller firms are now attracting more of that work.

During the same week in early March, The Herald Sun, a Durham, NC newspaper published: Morningstar Law Group uses new business model about a group of lawyers who broke away from large law firms to start their own with lower overhead, lower hourly rates and a more flexible work environment.

Why is client development training more important now than it was in the booming economy? In the last few years, I have seen two distinct types of law firms. The first type is getting stronger, by hiring, training and motivating lawyers better than their competitors. It is an overused term, but those firms getting stronger are more “client focused.”

The second type looks desperate. They are hard selling like never before. Clients do not want to hire lawyers or law firms that are “needy” or “greedy’ and the hard sell conveys one or the other, or both. As noted in many articles over the last year, referenced in my posts. those firms are cutting training, laying off lawyers, not to be more valuable to clients, but rather to maintain their own profitability.

Why more training now? In addition to the obvious multiple return on investment, giving your lawyers client development training builds morale and helps keep their head in the game at a time when many lawyers are in a funk.

Client Development Training

What kind of training can you do? A few years ago, I began to take yoga classes. I was fascinated because it was the one thing I did each week that completely cleared my mind. I was totally focused on what the yoga instructor was having the class do. Over time I learned the poses and I figured I could do them on my own at home. Wrong! I could not focus the way I could in a class. I needed the yoga instructor standing over me and making sure I was doing what she was teaching.

What does my yoga class have to do with client development training, you ask? Your firm’s client development training will be more effective if done in groups and it will be more focused if you make it interactive by creating tasks. Some I have done include:

  1. Preparing a business plan with goals (Recently a group I coach paired with a colleague and went over each other’s business plan and offered suggestions)
  2. Creative article and blog writing with feedback from the group.
  3. Presentations with feedback from the group.
  4. Mock networking events (One firm where I coached had a private party in the local business club. The partners in the firm, and some of their spouses, role played clients and spouses. They really got into their roles and the event was both great fun and a great learning experience)
  5. Creating a list of sources of new client opportunities.
  6. Creating a list of client development activities that can be done each and every day.
  7. Mock presentations with video and feedback from the group
  8. Mock client pitches with feedback from the group.
  9. Mock one-on-one meeting with a new potential client.
  10. Creating a client service plan.

Client Development Webcasts

If you are a lawyer in a small or mid-midsized firm and your firm does not have a client development training program, I may be able to help you. As you may know, this year I am conducting monthly client development Webcasts. In March our topic will be Client Development 2014: The Old Tools, The New Tools and How to Use Both. Contact Joyce jflo@cordellparvin.com to sign up for this month’s Webcast or for the 12 month series.