Lawyers should go where the competition ain't
In a recent NY Times article, several recent law school graduates lamented the recent economic changes, as well as they might. Big Law has, in effect, shut down their recruiting efforts and the lush $160,000 starting salaries seem to have evaporated. "Lock step" compensation models have been transformed to merit based models. And a number of law firm's recruiting programs have been either postponed or canceled entirely.
How can these recent graduates, and even some experienced lawyers laid off from their large firms, survive or even thrive? One way might be to lower one's income expectations. Where is it written that lawyers are entitled to earn $X?
Helping others deal with the intricacies of our society with its many complexities can be rewarding. Will we earn $1,000,000 by doing so? Perhaps not. Can we earn a very good income? Yes.
One suggestion is to go where the competition ain't. Go to the smaller communities, to the "second tier" communities. They are still large enough to have prospective clients with sophisticated challenges. But, many of these communities have been ignored by Big Law and even large regional law firms.
In the interim, until there is a new balancing of economics, quality law school graduates and lawyers who have left larger law firms might set up shop in these smaller areas; they might join smaller law firms even in the large cities. Here, smaller law firms have a unique opportunity to engage outstanding talent at substantially lower cost .. and expand the services they provide to their existing client base, as well as expand their client base.
What will be the impact on law schools? That is an interesting question. Big law firms have postponed and even canceled many of their recruiting efforts. That will provide a glut of talented graduates looking for a diminishing number of positions in law firms. And the anticipated assurance, guarantee if you will, of gainful employment on graduation from their school may be passing. If so, will law schools still be able to charge high tuition as they have? Will students be willing to take on huge student loans when employment is no longer assured?
Economics will continue to control the legal profession as in the past. Those economics today include greater supply of talent (lawyers), clients with greater power of the purse (reduced demand) and lawyers who are becoming more attuned to improving their efficiencies ... and thereby lower cost to clients ... and thereby again impacting the relationships between lawyers and clients.
In House Legal Department
Outside law firms are being badgered with requests/demands for lower fees. It seems that corporate general counsel have only price on their minds. This may lead to the creation of an in-house legal department. When does it "pay" for a company to create an in house law department? Is money the only factor to consider? What can outside counsel do to forestall this and retain the work?
Surgically remove lawyers
For the second day in a row, the WSJ ragged on lawyers. It's front page headline says "How to Surgically Remove Lawyers From Hospitals" .... Without reading more than the front page headline, one would think that lawyers are a problem for hospitals and need to be removed ... and here's how to do it.
But, when you turn to the Personal Journal section of the paper, the article talks about hospitals' negligence and the fact that many deaths and serious injuries/illnesses are caused by the hospitals and their staffs after the patients enter for other maladies than that which resulted in death.
The writer states that some hospitals are admitting their negligence and approaching the patients and their families with apologies and financial offerings that make sense. Under such circumstances, of course, the patients don't need to work with lawyers ... and that's one way of keeping lawyers out of the discussion. (There are other issues here from the perspective of the patient's protection; that's a subject for another time.)
The real reason for the lawyer is that the institution denies culpability and seeks to stonewall the injured party. What a novel idea -- actually talk to the injured party, admit responsibility and seek to negotiate/mediate a solution acceptable to all parties.
That, however, is not the tone of the headline, nor the attitude of the newspaper. Too bad. Truth should be the standard, not paper sales. I should admit that the headline is not false, just conveys the wrong impression of the article's content.
The Billable Hour Questioned
Today's Wall Street Journal must have read my last blog post that legal costs are controllable. Flat fee pricing is the model that is discussed in the WSJ article. The assertion is that flat fee agreements will result in lower costs for the client ... and less revenue for the law firm.
I'm not yet convinced.
The flat fee provides the client with the ability to better budget the cost of legal services. This is important for the client. It also allows the law firm with the ability to be more efficient (better staffing and use of technology) in the delivery of legal services ... and therefore more profitable. Lower costs to the client will come when there is a competitive environment and another law firm underbids the flat fee of the first law firm.
Of course, we have the same issues. Listening to the client; collaboration with the client; and loyalty from the client. Changing the pricing model does not automatically change the need for these items to create a successful, long-term attorney-client relationship.
When clients impose strict guidelines on the law firm in terms of staffing, for example, the law firm may not be able to adjust. The theory is that once the client, the major corporate client, gets a flat or fixed fee, that client should no longer care about anything but receiving a quality final product. The intricacies of get that final product should then be left to the law firm. If that happens, then the law firm can use less or more expensive staff, less or more technological improvements and younger or more experienced lawyers. The client should not care.
The undercurrent, I fear from listening to corporate counsel, is that their time has come. They want to reduce legal costs at the expense of the law firms. Partnering and collaborating, many law firms believe, are euphemisms, not reality-based. If so, the current change will be a fad, not a sea change.
Cost of legal services is controllable
In a recent conversation between Inside and Outside Counsel, Inside Counsel expressed their concern over the escalating cost of legal services.
They seemed to concur that the greatest impact on cost is not the hourly rate being charged; staffing has the greatest impact on the overall cost of legal services. The next element with the greatest impact is strategy.
Starting with strategy, if you have a "scorched earth" approach, this contentiousness will result in higher legal fees. Appropriate sometimes and not at other times. Pick your poison ... and then look at the cost involved. Next is the staffing; who you have working on a matter is significant. Is this a partner with a higher rate but greater experience who can rip through the analysis and work? Is this a young associate who will take longer to get up to speed but whose rate is lower? And what is your fee arrangement, a blended rate, pure hourly or a variation alternative fee? These are factors that general counsel are reviewing.
Another tool used by Inside Counsel to control costs is to get a budget from their law firms. In litigation matters, almost 100% are budgeted. Quite a change from the time when lawyers were saying they couldn't predict what the other side was going to do and therefore couldn't project the cost of litigation. If you can build the Empire State building on a fixed fee contract, you can budget for litigation. And that is now happening with great frequency.
Clients are wanting to assure that the legal fee is justified in relation to the value of the matter. Thus, the budget is a tool not only for the client to decide whether to go forward, but also to make sure the law firm does not get out of control.
More causes of action
Paraphrasing a quote I heard yesterday: There have been more causes of action created in the last six months than in all of recorded history before that!
What a bonanza for lawyers ... in addition to being forced to deal with changes in the market place, we now have the opportunity to add to our intellectual skills and help people with new ideas never before faced ...
How large should your retainer be?
A very interesting question was asked today on our Forum about how high one's retainer should be in order to assure payment of your billing.
The answer, I believe, is to focus more on the intake process and to assure that the client has the principal to pursue his principle; then, it is a question of educating the client sufficiently that he understands he has received what he has asked for .... in other words, that the client has received the value he bargained for.
What do you think? Share your comments.
Bandit - New addition to our family
See the newest edition to our family. It's been 10 years since our dog died and my wife refused to get another because of the emotional pain and suffering. But, suddenly, after we saw perhaps the most elegant Boxer I've ever seen during our maiden voyage in the Airstream, my wife suddenly changed course ... and we now have our own majestic rescue Boxer, age 2 to 3 years. The addition certainly will alter our lives in ways we can't yet even imagine. He's smart, good looking and very energetic. <g>
Could the addition of the right staff person or attorney similarly revitalize your law practice?
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Ste Spot
My wife calls this our satellite office. We've taken delivery of our 1968 Vintage Airstream trailer ... 1968 on the outside, 2009 on the inside. And I'm working on a new manuscript to be delivered to West Pub. next month..jpg)
