Make More Rain : economic outlook

Future of the Legal Industry

MichelleStPierre — Tue, 12 Jan 2010 22:09:00 GMT

I usually post here, and then "tweet" (using our handle @morepartnerinco ) about what I posted. Today I just have a quick post, to direct you to some activity earlier on Twitter about the future of the Legal Industry. Our colleagues over at...(read more)

LexisNexis Redwood Business Development Application Launches

MichelleStPierre — Tue, 29 Dec 2009 21:19:00 GMT

The economic challenges of 2009 have resulted in a growing demand within law firms for comprehensive client relationship, practice area and industry-footprint intelligence, as well as effective identification of the right business development opportunities...(read more)

Bankruptcy Practices at Odds with the "Story of the Year"

BoYancey — Mon, 21 Dec 2009 17:48:00 GMT

Bankruptcy lawyers have been quite busy this past year, and firms have enjoyed exceptionally high billing rates for many pieces of work . This isn't surprising; in the wake of last year's economic crisis, many companies have sought protection...(read more)

A Little Dose of Reality

RussHaskin — Mon, 14 Dec 2009 18:20:00 GMT

As 2009 closes and the legal industry is scrambling across the country, many firms are realizing that their collection pushes are not going to bring them anywhere near their original budgeted fee collections. Much of that is due to the economic conditions...(read more)

Happy Thanksgiving!

MichelleStPierre — Wed, 25 Nov 2009 14:00:00 GMT

I want to take this chance to wish all of our readers a very Happy Thanksgiving! As our CEO Mike Walsh reminded all of us here in LexisNexis US Legal Markets via email yesterday, "Today, Thanksgiving is marked by football, the Macy's Thanksgiving...(read more)

Know Your Alternatives: Capped vs. Fixed Fees

RussHaskin — Wed, 28 Oct 2009 14:51:00 GMT

In previous posts I have referred to my preference to the fixed fee arrangement . In addition I have also commented that as firms are building their repertoire and gaining trust with clients, capped fee arrangements could be the answer, especially those...(read more)

Thoughts on the ACC/Serengeti Managing Outside Counsel Survey

MichelleStPierre — Thu, 22 Oct 2009 18:16:00 GMT

The 2009 ACC/Serengeti Managing Outside Counsel Survey , as reported at Association of Corporate Counsel's annual meeting this week in Boston , has some interesting notes which are relevant to what we've been blogging about lately: Predictability...(read more)

Client Attentiveness

MichelleStPierre — Tue, 06 Oct 2009 14:25:00 GMT

I recently read an interesting article by Chris Mondics in the Philadelphia Inquirer about how some area law firms have been able to hedge against the recession woes facing many of their peers by relying on recession proof practice groups, international...(read more)

Bucking the Trend

MichelleStPierre — Wed, 05 Aug 2009 17:07:00 GMT

When I heard last night that casting is going on for Philadelphia's version of the Real Housewives series, "The Women of Rittenhouse Square," as a Philly resident, I thought to myself, "Do we have to repeat everything that is done in New York and North Jersey?"

From a purely economic perspective, better news was delivered today on the Law.com newswire in a summary from the New Jersey Law Journal on the NALP's annual salary survey. In line with the economic pressure on law firms, Philadelphia firms, along with firms nationwide, are expected to drop starting salaries for new associates.

...(read more)

Is The Worst Behind Us?

BoYancey — Mon, 20 Jul 2009 13:00:00 GMT

Some of the most recent headlines in the legal press have been aimed at the recession's impact on large law firms, and would leave one to believe that the industry is in shambles. Indeed, the world's formerly largest law firm, Clifford Chance, saw its profitability decline by a whopping 37%, while a Top 20 U.S. firm, Morgan Lewis, has just announced that it was cancelling altogether its 2010 summer internship program, after deferring start dates for 2009 hires to October of 2010. Much of the current commentary is focused on whether Morgan Lewis's decision is the first of many, and what that will mean for the industry generally, and current law students (and law schools) specifically.

...(read more)

Reducing Headcount May Lead to Less Profit in the Long Run

BrianTaaffe — Thu, 09 Jul 2009 18:00:00 GMT

Very few firms today are 100% utilized. Almost all attorneys within a firm have free capacity, and depending on the firm, this can be a large cost. With profits dropping, layoffs and delayed start dates for first year associates have been seen as a short term solution to increase profits. This may be an effective way to address utilization concerns and bring profits back up to levels that law firms have experienced over the last five years, but it may also have some long term effects related to production.

...(read more)

Too Good To Be True

Admin — Tue, 24 Mar 2009 22:04:00 GMT

Shortly after I graduated college I had just been dumped by college sweetheart, was not happy with my original career choice, and my billfold was getting smaller and smaller as the country was in a recession. Safe to say I was in a bit of a quarter-life crisis and my confidence was slightly south of nothing. That said, within my larger circle of friends I had noticed and briefly met a girl whose beauty was so striking that the room stopped every time she walked in. I and my friends...and pretty much everyone else thought there was no way she would ever be interested in a guy like me. I am no Brad Pitt to say the least. Yet to my surprise she started to actually pursue me (That should have been the first sign that there was clearly something wrong with her). On our first date we went to a bar and I remember immediately hearing whispers from other male patrons about how in the world a loser like me could be with a gal like her. Those whispers made me feel pretty good, important even.

Now here is the reality. Within five minutes of that date I realized that this girl had so much baggage that even United couldn't lose it all. In addition every time I talked with her I wanted to claw my eyes out. Even my friends who at first thought she was a knockout quickly changed tune and told me I was a moron for dating her. Every moment was full of drama, I could never make her happy, she messed with everyone's mind, had a temper that would make Chuck Norris cry, and Chuck Norris can't cry. My billfold was not only gone but would not feel the touch of debt free cash for quite some time. I still bang my head against the wall every time I think of those days. Why did I date her??? Why would I have subjected myself to that torture??? Well, reflecting back, it was because I was on the rebound, I didn't have many other prospects at the time, my self esteem was way down, the whispers made me feel like a somebody, and I just didn't have the skill yet to pick the right people to date.

Now that I have bored you with part of my dating past there is a reason why I bring this up in a law blog. Travelling from firm to firm I have heard many stories about risky clients that have been taken on within the recent past. Some of these clients promised big returns on contingency cases, yet even though the likelihood of success was slim the firms took on that work. Why you may ask? Well, in this down economy where attorneys are starved for hours worked the mere chance that maybe just maybe they could win made them take on the matter. How did it turn out? Nine times out of ten, just as you would expect. Resources were poured into the case, the firms played with house money and at the end of the day there was absolutely no return.

In other cases I have seen very risky clients being brought in who not only have poor payment history but are demanding the world when it comes to fee arrangements and terms of payment. Again the primary reason is that work is down and attorneys need hours. Right now in many minds any hour is a good hour. Sadly this is a major problem that needs to be addressed. Just like I was down in the dumps after college, so too now are many firms. Self esteem is low after a downturn in growth, layoffs of peers, and pressure to bring in any originations. Yet the idea that any work is good work is simply false. As my colleague Bo Yancey recently mentioned, understanding the opportunity for the firm with respect to what the client is offering is essential for long term sustainability. A lot of firms would be better off not taking any of this overly risky work and focusing their efforts on identifying prospects, (most likely internal ones) that can help get acceptable work for lagging practice areas until while dust clears.

We know all too well how hard this economic downturn has hit not only the legal industry but the industries that firms serve. It is a depressing time for many of us, but we still have to keep our wits about us and make the right decisions. I made the mistake of taking on a very risky venture in my dating past. Not only that but even after I knew it was a failure I kept it going for months afterward. I challenge firms to not make a similar mistake and analyze your intake process. Try your best to make the right decisions on clients despite the pressure for originations. Finally, if you realize you made a big mistake, correct it as quickly as you can before you drain additional resources. I'd like to think that my billfold would be twice as big now if I hadn't made the choices that I did. Perhaps the same can be said for many firms ten years down the line, long after this recession.

-Russ Haskin

Russ Haskin is Director of Consulting for Redwood Analytics/Lexis Nexis

RFPs: A Necessary Evil

Admin — Mon, 09 Mar 2009 21:58:00 GMT

As we’re all aware, in today’s economic climate there is a big focus on cost reduction. It’s no surprise, then, that RFP’s are being used with even greater frequency by purchasers of legal services. The concept is not new, but the extreme focus on price across a large percentage of those companies probably is. For law firms, this is not a happy consequence. Law firms incur significant expense by simply responding to RFP’s, with no guarantee of work at the end of the process. Of course, a primary reason for companies using RFP’s to begin with is to get the lowest price across all parties—which means that the “winner” of the RFP may not be getting profitable work. In an RFP process, it’s not a guarantee that the lowest price will get the business, but it’s nearly certain that “bidders” with pricing substantially above the lowest prices will be eliminated quickly from consideration.

...(read more)

Closing the Barn Door

Admin — Fri, 06 Mar 2009 01:06:00 GMT

It seems like every article, blog, lecture, or memo now starts out with the words, “In these economic times,” and then goes on to explain what should be done. In fact, I am sure we could find many articles starting out with some slight variation of this premise reading back a few days in this website. While many of the business practices and choices currently being made are a direct result of the poor performance of the economy in general, from a management consulting standpoint, there is nothing like necessity to make people actually take notice of good ideas. I would surmise that if you are using the current market conditions to employ a sound business decision, you are probably well behind the curve. A good idea today was probably a good idea 2 or 3 years ago in the days of double digit growth.

Of course I am being somewhat facetious and coldhearted. Many of the decisions made today are both painful and undesirable to all involved, but necessary due to existing conditions. That does not change the fact that, in the past, there were many ideas that could have been taken advantage of in order to improve the well-being of individual firms while they still had the option.

Suggestions on how to increase profitability and streamline efficiency have always been out there, but in good economic times it hardly seems necessary to make a change to a practice that could create more work and stifle growth in the short term for potential long term gain and stability. Just ask my wife, who has insisted for years I either paint or replace the railing on my front stoop. Why would I when, in my opinion, the railing looked fine? While there were a few cosmetic blemishes, they were barely noticeable unless you were specifically looking for them. However, as if tempting the inevitable, I leaned up against the railing last month and fell into my holly bush. Sure, my parable of reckless abandon with marital bliss and home repair may seem silly but I knew that eventually the unpainted sections of wood were suspect to rot. I also knew what my wife said made sense but it would have taken time and money, both of which I did not want to spend.

I bring this up because I was recently speaking with an individual at a firm I have worked with quite regularly over the years; they thought the idea of me thrashing about in a holly bush quite amusing. This firm has been quite successful in past years and while they understood the concept of cross selling work and that introducing additional partners to certain client relationships would potentially yield more work overall and lead to greater client retention, this firm was satisfied with their current profitability strategy did not think it necessary at the time to encourage this behavior within their firm.

I can’t say I blame them, after all “if it ain’t broke, don’t fix it,” right? Well, we won’t know for sure, but I do know that double digit growth is no longer on the horizon, or even in the rearview mirror. This client, like many others, is struggling to keep certain practice groups viable due to lack of work and significant client attrition. As for myself, I have a new vinyl railing that doesn’t need to be painted, a neatly trimmed holly bush, and am revisiting the list of home repairs given to me by my wife a few years ago.

--Derek Schutz

Derek Schutz is the Director of Programs for the Business of Law team at Redwood/LexisNexis.

Heller in the Cellar

Admin — Wed, 05 Nov 2008 00:38:15 GMT

I read this article on the downfall of Heller Ehrman with great interest. What this doesn’t say is that Heller was a firm who last year had profits per partner in excess of $1,000,000, and in 2004 was ranked 2^nd on the American Lawyer’s A List. The key takeaways are that weak leadership, and the resulting lack of direction and ability to make key decisions, doomed the firm. The dissolution of the firm was brought to bear by lenders who called in loans when the firm’s partnership numbers dwindled below what was allowed in financial covenants. In essence, a “bank run” ensued with partners leaving, which caused the banks to act. (The current financial crisis likely did not help).

There are other firms who are similarly exposed, and while law firms generally don’t have a lot in the way of “retained earnings,” it does not mean that their financial health should not be scrutinized. Fixed costs, equity partner contributions, and debt financing are all things that can bring about the end of a firm in challenging times if managed inappropriately. As a managing partner at the conference I attended last week said, “lawyers often vote with their feet.” That’s what happened here. In my view, this shows the delicate balance firms must face in building consensus while still being able to make tough decisions. Increasing profits year over year certainly helps.

- Bo Yancey