Make More Rain : economic outlook, productivity

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.

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Planning Helps Law Firms Weather A Bad Economy

Admin — Tue, 04 Mar 2008 08:00:00 GMT

Although the housing market has grabbed headlines recently as the credit issues continue to unravel, the indicators have been present for several years. The businesses who planned for this are now in a better position to adjust and prosper while other businesses close their doors.

Law firms aren't insulated to market downturns. The New York firm Thacher Proffitt & Wood "informed around 50 associates that their futures at the firm were uncertain because of the collapse of the market for mortgage-backed securities, an area where the firm had had a leading practice." New York Lawyer, 11/28/2007. CitiBank and Hildebrandt released a Client Advisory predicting the "perfect storm" of indicators hurting the legal industry.

It doesn't have to be this way. The firm can retain talent even when the marketplace shifts by planning not just for economic good times but for bad times as well. How?

Retain Earnings
Rather than distribute every dollar of profit, project into the future and if indicators suggest that there may be a drop in business in a particular practice area, allocate additional funds to maintain your marketing budget and talent retention.

Prepare for the upswing
Have associates hit the road with partners to build and maintain relationships in the industry. If your client survives the poor economy it will come back stronger. Cement those relationships while mentoring associates so that when the market comes back, your firm has already done the legwork to expand the business.

Transfer Knowledge
Forms are gold, especially in document-driven industries making up transactional practices. Have associates review all firm forms against available case law and take the opportunity to build a solid foundation of accurate and up-to-date forms. Offer an incentive to create "products" representing reproducible work.

Help with the overflow
Just because one industry is hurting that doesn’t mean other areas of the firm aren’t thriving. Give associates an opportunity to absorb work from the more active areas of law. In fact, a firm recently did this when Dechert, LLP, initially layed off 13 associates, then changed its mind and re-assigned them to other practice areas.

Some associates won't have the sufficient motivation to change. That is fine. Keep the ones who do.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

When An Attorney Doesn't Fit The Firm

Admin — Thu, 28 Feb 2008 08:00:00 GMT

A recent article in the New York Lawyer entitled "Getting Fired" (requires free registration to view content) addresses a task that all managers would prefer not to have as part of their responsibilities: that of releasing employees.

The article is geared to the attorney as releasee, helping them not miss the subtle ways they are "shown the horizon".

If a conversation starts: “You seem to be distracted lately, and we are concerned that maybe this isn’t the right fit for you anymore.” - you might be getting fired.

If a conversation starts: “We think maybe you would be happier somewhere else. Let’s reassess where you are in six months. Hopefully, by then you will have found the right opportunity.” - you might be getting fired.

Suggestions when hearing words like the above? Start job hunting. In the second example, the firm is clearly giving the attorney a 6 month notice to find other employment. It isn't likely that the firm is going to reassess the attorney's performance in 6 months. More likely they will have had a replacement for 2 months and will be ready for the performance-challenged attorney to go.

Although geared to those near the door, it is also a reminder to managers of their responsibility to the firm. No one likes to fire someone, but without that part of the employment cycle, those who drag down the margin won't change. This helps neither the firm nor the employee. Not fitting into your firm culture doesn't mean the attorney is not a quality attorney. It means the attorney is not a good fit for your firm.

As the article noted, "[t]here is another . . .firm out there just waiting to snap you up! They love laterals!"

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and

services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

Marketing Advice for Lawyers During Economic Down Cycles

Admin — Fri, 15 Feb 2008 08:00:00 GMT

I had a chance to catch up with John Remsen, Jr. last week and asked him about the economic outlook for law firms in 2008. Like many, he believes we are in the midst of an economic down cycle that will affect how law firms perform in 2008.

In spite of the downturn, Remsen says that certain practices like bankruptcy, litigation and employment will do quite well. Other areas won’t be so lucky. He explained that law firms that are heavily dependent on cyclical industries like real estate should be prepared to ride the waves of the economic cycle. For example, a firm that does lots of commercial real estate transaction work can position itself as “workout specialists” during the down cycle.

Some advice from Remsen during a slowing economy:

Partners need to push work down to associates so they free up time for marketing and business development. Most compensation systems tend to reward the opposite behavior.
With this time, they should go visit top clients to thank them for their business, and learn about their issues and concerns.
Invite clients into the firm to discuss industry trends and opportunities.
Resist the temptation to cut marketing expenses. Most of your competitors are cutting back so you have a chance to stand out and solidify your position as the economy improves.
Make sure that marketing and business development activities sustain themselves consistently, in both good times and bad.

At the end of the day it is about relationships, says Remsen. He advises firms to take advantage of the down cycle to invest in relationships. In so doing, you position your firm to take off as the economy improves….as it eventually will.

John Remsen, Jr. is the founder of The Remsen Group, which in partnership with LexisNexis and others host the Managing Partner Forum. John has recently co-authored a book, The Little Black Book on Law Firm Marketing that can be purchased by clicking here.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

More Signs of Recession For Law Firms in 2008

Admin — Thu, 31 Jan 2008 08:00:58 GMT

Rob Millard's blog Adventure of Strategy takes a second look at recessionary pressures against law firms in 2008. He links to a new Client Advisory from Hildebrandt and CitiBank that is a depressing read.

According to the Advisory, 2007 started out with high expectations and ended in uncertainty. Litigation doesn't look as good since some companies appear to be settling out of potentially protracted litigation. Merck was used as the example with their recent announcement that they were settling their Vioxx claims. (Of course, news yesterday that Merck is back on the defensive may dampen that bleakness and provide hope for trial attorneys on both ends of the aisle.)

The Advisory warned of the "perfect storm" in which finance, transactional, and litigation work have all trended downward at the same time, with no offsetting surge in work related to the economic downturn itself.(p 2)

Breaking down the reasons for their bearish outlook:

The cost of leverage. The Advisory compares the economic downturn of today and 2001 and notes that the relatively high level of equity partners in 2001 in firms allowed for the use of leverage to increase profits. De-equitizing partners and increasing the barriers to equity partnership have left firms with little wiggle room to work in this economic downturn. This may be true for large firms, but it certainly isn't the case for mid-size firms who are still very much top-heavy according to the 2007 Law Firm Economic Survey from LexisNexis. If leverage was a method of bailout for large firms in the economic trough in 2001, then mid-size firms stand to profit from utilizing it in 2008. This pre-supposes firms have the will to make the admittedly difficult decisions in the more personal environment of the mid-size firm. It stands to reason that a struggling business that wants to survive will make the hard decisions to prevail in hard times. Interestingly, the Advisory argues the negative impact of increasing leverage in the firm that may necessitate a revisit to this subject. In our surveys, increased leverage has been correlative to increased income. Is the Advisory making the argument that you can be over leveraged? Is utilization of associates not the only factor?
Realization Rates. Realization rates are lower now than in 2001, placing additional pressure on increasing rate. Which leads to the next point -
Client push back. Clients, in spite of firm predictions of increasing rates, are placing price pressures on firms that place a premium on firms who are efficient at providing legal services. That, combined with lower realization rates, hurts profits.
The Challenge of Laterals. There are more lateral hires now than in 2001. According to the Advisory, laterals are the first to leave the firm when hard times hit. Perhaps for similar reasons, perhaps not, respondents to the LexisNexis 2007 Survey confirmed that they have more success with new hires than with laterals.

Lack of Offsetting Practices. It's the "perfect storm" of no transactional, litigation or finance work (although I personally think that may be a bit overstated).

Is this a pre-warning? Click here to read the Advisory in its entirety.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

Live Blogging At LegalTech 2008

Admin — Wed, 30 Jan 2008 08:00:00 GMT

I read a post from Kevin O'Keefe last year lamenting the lack of live blogging (other than from Monica Bay) at LegalTech 2007. He writes:

[P]eople on the leading edges of technology are sharing their observations and insight in real time. The result is a live discourse between not only attendees, but also by bloggers around the country. Such conferences feature bloggers and look for the excitement and discussion they create.

Live blogging is self-defining: It merely means that thoughts and ideas are posted to a blog as they happen. Bob Ambrogi, however, explains that live blogging isn't so easy at an event like LegalTech:

...I often find that I have little time for attending many of the panels and presentations -- ostensibly the main reason for being there. Simply making one's way around the exhibit hall and speaking to the many vendors and the many people you encounter along the way easily consumes a full day. Then there are the side meetings and the networking and, yes, the cocktails and dinners.

O'Keefe counters that other conferences of similar size have many live bloggers: "The fact that legal tech professionals are not following the trend is further evidence that we're lagging in adopting innovative technology."

I will be attending LegalTech next week. However, I will be spending the greater part of it in a booth. That said, I will take time to visit other vendors and see what they have going on as well as attend a session or three.

I have never attended LegalTech before and it is certainly possible I will get side tracked (especially in the LexisNexis booth I will share), but it can’t be that hard. After all, blogging in many ways is just conversation via an online medium (famous last words I'm sure).

This will be an experiment for this blog and for me. If we get a good response, I may live blog again at the ABA TechShow in March.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.