Some folks are asking whether your new lateral partner have any unwanted baggage? In some instances, the new firm accepted partners from the old firm with the understanding that the lawyer would bring over clients from the old firm as well as his "unfinished business." This provides for immediate billing .. and therefore an opportunity to acquire great talent at a very low or zero cost.

These firms, and others, have gone into bankruptcy to collect funds to pay the firms' creditors. In a law firm, the major assets "walk out the door every evening. Computers, furniture  and real estate are of minimum value, if any, in a law firm. Accounts receivable are a major asset, though often difficult to collect from clients when they know there will be little serious effort to collect.

But, when the partners from the old, now defunct, law firm went, they generally took "their" book of business with them ... and the "unfinished business" of the clients that went with them. One argument is that clients have a right to seek their own choice of lawyer. And the other argument is that the partner and new law firm benefited, resulting in a profit to the new firm that truly belongs to the old firm.

This battle will be fought for years, I suspect. But, the reality of our world is that anyone can sue anyone else, even if wrong. In the meantime, the largest pool of cash available to the trustee in bankruptcy for the defunct firms is the new firm and, perhaps, the lawyers, individually, from the old firm. Whether legitimate or not, new firms have been economically compelled to settle many of such claims in order to go on with the new firm business.

The new firms thought they were getting a steal! Maybe. But, I'm reminded of the old say that "...if it looks too good to be true, it probably is too good to be true." There is a cost to everything, even a very attractive, new lateral partner with great talent and a great book of business.

In order of priority, one needs to get the work … marketing. Then, one must do the work. Production. Next, one needs to get paid. Finance.  These are the three legs of the stool. The successful lawyer/law firm must focus on collections. Less than a 90% realization/collection rate is a symbol of future trouble.

In this lawyer’s situation, she is successful in the collection phase. In fact, it’s difficult to imagine a higher success rate when you have little to no accounts receivable.

The focus, then, needs to be on marketing, getting more work to fill the pipeline. These are separate and distinct issues. Relish in your success  collecting your billings and address the marketing  to attract more clients.

No wonder that in 1995, the USPO concurred with me that "The Business of Law" was a unique phrase and granted my request for a registered mark. Major law firms still, as Denny confirms, require that "managing partners" maintain a full client load of billable time. There may be some concessions, but by and large, they are evaluated on their client production rather than their effectiveness in keeping the firm together and moving forward.

I think of the analogy with Lee Iococca. Though he was given credit for designing and producing the Mustang, he could no longer perform the design or product management functions in his position as CEO and later Chairman of Chrysler. How is it that law firms believe the managing partner (CEO) of a multi-million dollar professional service organization can do more than an industry giant?

I've written about this and now have a major newspaper interested in talking with such lawyers to inquire whether such work is still available and how the lawyer is handling the fee.

Please contact me directly at edpoll@lawbiz.com

Thanks.

I suggested that he walk away from this bottom down thinking. Instead, I suggested he look at the situation bottom up, and get his real estate broker involved to earn his keep.

First, figure out what you want to pay for monthly and/or annual rent. You can do this in a number of different ways. You can say that historically I've earned X% profit on Y number of revenue dollars; when I move into new quarters, I will earn more revenue because (better facilities, closer to prospective clients, larger space to hire more staff, etc.) and therefore, with the same percentage for occupancy cost, I can pay more .... and that number is $X.

Or you can say my revenue is likely to stay the same even after the move (or I'm not sure and I want to be conservative) ...  and don't want to pay more than the same rent I'm paying now. That number is $X.

With that number in mind, tell your broker to find you the space you require (with the specifications you want) for that amount. Don't worry what words are used, whether base rent or common area charges, etc. The lease contract must state that the maximum annual rent will be $X.

If the broker says that you can find plenty of space for that amount, great; if he says you're crazy, there is no space for that amount, then you have choices to make: Work harder, work smarter to earn more revenue/profit to pay the higher rent, reduce your profit and take-home pay, or join forces with another to share the space and cost of the space.

But, don't let others dictate how you should think. Don't let the system force you into a thinking pattern that will confuse you or prevent you from knowing what your cost of operation will be.

As in other instances, the Bar fails to protect its members who pay their salaries and fails to protect the public by availing attorneys with affordable negligence insurance.

 

I'm very excited about the new book ... and encourage you to take advantage of West's offer. You can also see the new offering at LawBiz.

Richard Susskind has written a book suggesting that lawyers may become obsolete unless we make some dramatic changes.

I see nothing unusual about his conclusion … that legal work will be unbundled and that the work that is more mundane and routine will be systematized and perhaps even automated. Technology advances provide us with opportunities that didn’t exist before. We can, today, create better product for less money. Technology is only one aspect. Globalization is another. And this isn’t just for the large law firms. A client of mine, in Texas, opened an office in India for the specific purpose of document review and document production – it’s done for less money more quickly … And he can get a faster turnaround because of the time difference.

Law is slow coming to this process. My background is in manufacturing. I’ve owned and operated several companies. In order to retain prices, not to increase prices, we would do everything we could to automate. When automation, reducing the amount of labor costs, would go no further, we reduced the size of the container. For example, we would go from 32 oz to a 22 oz jar or a 10 gal. container to a 5 gal. container.

When we have time of challenge as we do now or changes in our economy and culture, we have the opportunity to innovate for improvements in products and services. We have the opportunity to create new demand. I see this beginning to happen in our parts of our economy. It will have to happen in the legal profession, nay the legal business (The Business of Law®), if we are to continue to serve our public as we know.

One large firm managing partner cited an even more frightening fact:  Many lawyers have been given generous severance packages in order to obtain liability waivers/releases and to keep the goodwill of those departing. In other words, they won't feel the impact for 6 to 12 months after leaving. We will see a ripple effect. As bad as it is now, it will get worse .... Unless the federal government is able to pull the rabbit out of the hat.

Our country was built with credit. One of the major thrusts for the Obama administration is to get banks to start lending again. Banks didn't do this with the first half of the major funding passed in the Bush administration. They horded the money to protect their own balance sheet. Will they do it with the second half, and with other bailout handouts?

Today, I had a conversation with a banker. He said that the federal regulators are requiring a higher capital input from the buyer than ever before. "In the old days" (not that long ago), one could buy a building for very little down payment (10%, e.g.),  Today, loan to value ratio has to be 30% and in many cases 40 and 50%  This is not the way to growth.

With this type of stagnation of credit, one can be assured that the prices for real estate will continue to slide downward with ever greater consequences.  And with continued worsening of our finances, law firms and lawyers will be further impact. If we have too many lawyers today for the work available (as discussed in an earlier post), demand will continue to shrink, and additional law firm layoffs will result.

Why would a lawyer make such a move when the change in his/her compensation would not be deemed significant and certainly would not alter the life style of the lawyer. Compensation is almost like the stock price of a large corporation. Because the lawyer has always achieved at high levels, the lawyer may feel less valued than the lawyer who earns even a small amount more than the first lawyer. And this would suffice to change law firms. Because of this movement, however, the cultural differences that used to distinguish one firm from another are flattening ... which means that one firm is looking more like other firms, with fewer differentiating characteristics than before. When one firm looks like others, there will be more difficulty in “branding” the firms ... and less reason to engage one firm over another. Then, price may become the major differentiating factor for clients. Another result may be increased alcoholism, unhappiness and depression among lawyers who see very little reason to stay involved and engaged with his/her law firm.

3.    Whether law is a business or profession is an interesting question, though not so important in today’s world. In part, one’s answer depends on how you define “profession.” A professional, by at least one definition is one who collaborates. The current law practice is not so collaborative as before. We are now far more competitive and far less collaborative than ever. Does this make us less “professional”? More business-like? One of my clients recently told me how a senior partner refused to give him credit for his business origination success. If this firm were more collegial and collaborative, and less competitive internally, this would not even be discussed. Perhaps we are less professional, though not more business-like.

4.    Lawyers exist in a hierarchical law firm environment but are individually power-centric. They command the associates working on their matters, and the staff surrounding them. This is contrary to the client-centric attitude that GCs must have to survive and thrive within their corporate organization. Thus, many private law firm lawyers could not survive within the corporate environment.

5.    The “second season” for lawyers will be dramatic as more than 400,000 lawyers (“baby boomers”) will retire in the next 10 years. This is equivalent to the entire membership of the American Bar Association. What will these lawyers do? Will they sell their law practice? Will they close the doors and walk away? How will they engage themselves in their remaining time? Where will the replacement lawyers come from?

The legal profession has experienced many changes in the last 10 years since I obtained the trademark, The Business of Law®.  There will be many more changes in the next decade, for sure, as large law firms begin to mirror their large corporate clients more closely. And sole practitioners, the vast majority of the profession, strive to survive.

And in your law practice, the fact that you haven’t paid sufficient attention to “The Business of Law”® doesn’t’ mean you shouldn’t/can’t start now. Today is Labor Day, hopefully a day of rest for you … start tomorrow to work “on your business,” not just “in your business.”  And build something of value (otherwise known as goodwill) that can be passed on to your family, your estate, when you’re ready to retire. You don’t have to just close the doors and walk away.

Shame on you for thinking that public defenders owe more to society than other lawyers, public officials or average citizen.  Mr. Moore seems to believe that becoming a government employee, a public defender, means that one's human and normal rights are checked at the door. 

Yes, becoming a lawyer does mean that there are certain rights and responsibilities one takes on that are not required by others.  However, I do not hear Mr. Moore suggesting that all lawyers owe a pro bono obligation to society, or that government officials are not entitled to seek increased compensation or that Corporate America has a social responsibility to its customers and a responsibility to its shareholders by keeping CEO compensation within reasonable boundaries or, for that matter, that the State Bar owes a duty to the public to require that all attorneys have malpractice insurance.  And, I don't hear that the State Bar owes a duty of any kind to its members, let alone  obtaining a program of low cost malpractice insurance so that attorneys could then better protect the public they serve. That would be spreading responsibilities too far. He's concerned only about limiting the compensation of public defenders.

Why then showed public defenders not be entitled to come together as any other group of employees in order to seek better conditions of work.  Does Mr. Moore mean that the government can give any compensation, no matter how low, to public defenders and that the public defenders should be grateful to receive it?  What about district attorneys?  If they were to organize, as some have, does Mr. Moore likewise believe that there is a violation of the constitutional rights of citizens?

His argument is disingenuous and should be placed in its proper context. More to the point, why does Mr. Moore not argue that it is the responsibility of government and its citizens to make sure that defendants receive the best possible representation by compensating public defenders fairly and in accordance with compensation generally received in private law firms?