UPDATE: This article won the BigLaw Pick of the Week. BigLaw is a weekly email newsletter that provides helpful information for the world’s largest law firms and the corporate counsel who hire them.
For several years now, all us bloggers and pundits have been pushing the Chicken Little button and trying to get your attention. We all have been saying pretty much the same thing: Law firm practice and economics are morphing into a “New Normal,” major paradigm shifts impend, it’s change or die time, yadayadaya. Yes, we do get pushback from law firm leaders, to the effect of, “as far as my firm is concerned, you’re all peddling alarmist tripe because for us and our clients, it’s pretty much business as usual. And oh, yes, we had quite a nice 2013, thank you.” So are the predicted trends really trending?
Where do trends start – and where do they take hold? Where the stakes are highest. That means we can look to the largest law firms and the pushiest clients to see the signals of where we’re all headed. Things trickle down from there to smaller firms…and friends, they are trickling.
Based on my work with a spectrum of clients, here are five trends in large firms I can report with absolute confidence:
- Your firm has too many Income and Equity partners,and this is a major problem because client demand remains down and your clients have a rapidly-growing number of excellent – and cost effective – alternative sources of legal work. Partners are expensive assets if they can’t bring in the bacon, and lots of them cannot these days.
- Half of what your lawyers do now will soon be accomplished by technology or alternative (i.e., non-lawyer) providers for a fraction of what you’re charging clients. Everything routine will soon be delegated to technology platforms and solutions. Think back to the dawn of ATM’s, when you thought, “You can’t replace bank tellers with machines. Customers won’t stand for the lack of human touch.” Hah, you ain’t seen nothing yet. Incredibly sophisticated algorithms and expert systems are going to snap up commoditizable tasks so fast it’s going to make your head spin. Legal technology is attracting huge capital infusions that will allow even greater strides. Witness: already, GCs are using Neota Logic and Kiiac to accomplish work that used to go to law firm lawyers.
- Those rate increases that traditionally grew your firm’s revenues faster than any economic indicator will hit the wall. Even your most loyal clients will decline to support your firm’s swollen ranks of partners, overpaid and inefficient associates, and expensive back office functions. Corporate counsel are looking to secure truly efficient legal services from the likes of Axiom, Clearspire, Project Counsel and other tamperers of the traditional legal service delivery paradigm. Budgets for legal matters are being scrutinized with magnifying glass and fine-toothed comb, and there is decreased tolerance for increased budgets for the same work. In fact, some savvy GCs, like Cisco’s Marc Chandler, believe that budgets should decrease as a firm becomes familiar with a company’s matters. How do you like them apples?
- Your associates are not loyal to your firm. Really. Small wonder: as the cattle chute drastically narrows on the way to equity partnership, most associates know that their tenure is tenuous and their prospects dim. Firms are increasing the length of the walk down the aisle with no guarantee that there is any marriage in sight. Associates, hyper-specialized and increasingly undertrained, are anxious about their future, and they have become flight risks. Unless an associate is a gifted natural rainmaker/BD whiz, s/he knows it’s going to be impossible to make equity partner. Income partners or contract partners? Hell, the streets are awash with them. The era of the “service lawyer” is behind us, and the legal marketplace is saturated with lots of great talent. Moreover, law schools compound the labor glut by continuing to pump out 44,000 new law grads each year for only 21,000 jobs. In such a tight marketplace, associates are grabbing any job they can get, and they think nothing of jumping at any opportunity that looks better and safer, or that provides more career leverage.
- Unique Firm Cultures are a Dying Breed. Shared informal norms and values disappear quickly when competition and self-interest define the rules of engagement. “Eat what you kill” is not a recipe for collegial sharing, and today’s tightening economic squeeze and pressures on partners to deliver revenue and clients has obliterated incentives for collaboration. Your Millennials don’t buy into your firm’s culture because they see that the partners don’t walk the talk. As noted above, they can’t afford to be joiners. And your Gen Xers are not invested in firm culture because they’ve never been invested in any collective identity. As former latchkey kids, they are more autonomous and care more about business metrics than bonhomie. Your senior lawyers? They miss the good old days with their bonds of fraternity (not sorority), but they know that successor generations will soon shove them outside the igloo to freeze. Some submit passively, some kick and scream to stay atop the food chain, but none is trusting his or her future to the warm hug of their firm’s now irrelevant culture.
So, were you alarmed or comforted to be confronted by these accelerating trends? That depends on whether you and your firm are being overtaken by events or shaping events. If you are a change catalyst poised to surf the waves of change, you’re attuned to these trends and have already taken steps to maximize damage control and turn the tides of change to your firm’s advantage. If not, be prepared for the possibility that Chicken Little was right.
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