The Wall Street Journal carried a column on November 11, 2013, “Big Law Mergers Questioned," that contained two blinding glimpses of the obvious – one explicit, one implicit. The explicit one was straightforward, yet seemed to elude the understanding of the writer: that in pursuing mergers to create ever-bigger organizations, law firms are simply following the paths of their clients. We saw this in the 1930s and 1940s and later when unions became larger in order to do battle with management. Today law firms are combining in order to be more respected, better received, and perceived as players in the corporate world. Small law firms supposedly can’t play in the same ballpark as a very large customer (corporate America).
Does merging law firms to make them bigger actually make them better? The answer is “yes” only when the parties have thought through what they want to accomplish and what synergies exist between them. One has to be old enough to recall that corporate America once thought that “bigger was better” when viewing itself. Then these conglomerates seemed to collapse of their own weight. The phrase, “getting back to core competencies,” became the watchword and large enterprises began breaking up into smaller units.
That’s where we get the second “blinding glimpse” – the smallest unit in a law firm is the lawyer. And corporate client after corporate client in the Journal article said that the individual lawyer is most important to them. “We hire lawyers, not law firms,” the GC of Hewlett Packard said flatly. There is some disagreement over this assertion.
Theoretically teams institutionalize the work done for a given client as they involve other firm lawyers in the delivery of legal services, even if one lawyer remains the client’s primary contact. But in a megafirm of thousands of lawyers, team members are interchangeable.
When you have a problem with your car, do you contact GM or Toyota headquarters, or the friendly mechanic at your neighborhood garage? Even neighborhood garages grow, but their size is infinitesimal compared to GM or Toyota. There is a limit to "bigger is better" beyond which "core competencies" begin to falter. Firms are kidding themselves if they think bigger by itself makes them better. And clients, often wanting to be close to the center of the law firm, will still engage a smaller, but yet large (regional) law firm.
Life After Law, What Will You Do For the Next 6000 Days? My soon- to-be-released book is a guide to why aging baby boomer lawyers should be planning for their next career. The ABA has concluded that 400,000 lawyers will retire in the next 10 years. That is equivalent to the entire membership of the ABA, the largest volunteer organization in the world!
According to a different report, without reference to law, 10,000 people retire daily!
Look for a dramatic change in our culture as we seek to learn how to live longer, productive lives in different careers. Of course, the economy will also change as older folks become the dominant consumers in this country.
It's no secret - lawyers butt heads. But, when it happens, do you keep your clients' best interests in mind, or do you seek dominance instead?
In today’s Wall Street Journal, staff writer, Jacqueline Palank discusses the Justice Department’s attempt to control fees that bankruptcy lawyers seek. Creditors and employees may, at times, be a bit disgruntled by such fees. So, now, the U.S. Trustee Program appears to be entering the fray.
Before going further, it should be noted that i) any fee sought by an attorney must first be approved by the client going into bankruptcy; ii) the fee cannot be paid before a Bankruptcy Court Judge approves the fee request; iii) the legal fees most often are a pittance compared to the debts of the company and thus have little or no impact on either the creditors or the employees. In fact, the current proposal is limited to companies whose assets and debts exceed $50 million, hardly your "normal" bankruptcy.
The only reason for focusing on the legal fees is that this is a topic that makes good reading in the tabloids, including the WSJ. While the quoted hourly rate received by some attorneys seems high, by comparing this to the compensation received by incompetent CEOs and others in the C-suite offices, it is insignificant. Why don’t the tabloids focus on the cause of the bankruptcy? Why not focus on the compensation of the management team, oftentimes earning historically astronomically higher multiples compared the lowest paid employees of the company? Why not seek redress against the management that is responsible for bringing the company to its knees? Although this focus may be more important for us to understand how our economic system works, it clearly is not sexy enough to sell many papers.
The U.S. Trustee is proposing, according to the writer, several new approaches to control lawyers’ fees, including:
• Though the lawyer applicant must disclose his/her hourly rate now, the Department wants the lawyer to disclose the lowest, highest and average hourly rates the law firm charges in all its matters.
• The Department wants the lawyer applicant to create and disclose to the Court a budget for legal expenses. This budget would, necessarily, disclose to all involved, including the creditors who are adversaries of the bankrupt, the legal strategy to be engaged in by the client.
In the 1960s, the Supreme Court ruled that it was anti-competitive for bar associations to maintain a listing of suggested fees for different types of work. This listing, in particular, helped younger and newer lawyers set their fees at rates that were more in line with more senior lawyers. Not having such a list would compel lawyers to set their own fees, the theory being that lawyers would then be more competitive with one another to the consumers’ benefit. The Trustee by its first proposal ignores this. The existing disclosure already provides information that tends to be anti-competitive. Law firms can see what others are charging and price their services accordingly, causing rates to slowly increase over the years.
Intruding into practice areas, such as general business matters, estate planning, tax work, and other areas of work performed by the firms who also do bankruptcy work has no bearing on the special expertise of large company bankruptcy lawyers. No area of law other than bankruptcy requires such disclosure for court approval. Fees are left to be negotiated between attorney and client. Other than precedent, there is no reason disclosure should be made here either. But, the process should not be extended. “Transparency” is a bogus issue. This is not some backroom conspiracy. All the proceedings are public and must be approved by the Court before attorneys are paid anything.
Budgets are good. I recommend them to my attorney-clients with whom I consult. This is a process, however, between the client and the attorney. By requiring that these budgets, which reveal legal strategy, be made public, the U.S. Trustee is saying that bankrupt companies have no rights. They have no right to advocacy; they have no right to develop a strategy that might affect creditors' claims; and they have no right of privacy. This is clearly contrary to the U.S. Constitution and our entire judicial system. While the bankrupts, and their inept management, may have proceeded down an economically unwise path, they still have rights to seek the best of what is left to them in their economic environment.
Don’t worry about the lawyers hourly rates once the bankruptcy petition is filed. They are regulated first, by the client, and second, by the Court. Who is watching the compensation of the management team before they enter bankruptcy? Why are they not punished with fines, or worse, for malfeasance and negligent management tactics? Why are they allowed to benefit so expansively at the expense of their workers? Why don’t the tabloids focus their sharp light there?
Oh, I forgot, the tabloids need to sell papers, they are part of the industrial complex that both Presidents Washington and Eisenhower warned us about as they left office.
Rules against lawyers sharing fees with non-lawyers might need to be loosened to allow U.S. firms to compete globally. The proposal says that any firm with non-lawyer owners must have “as its sole purpose providing legal services to clients.”
This is the foot in the door.The next thing you'll see is Latham & Watkins, or other billion dollar law firm opening offices in Wal-Mart or Target stores for curbside service. This is not necessarily a bad thing. It will certainly bring the law to the people ... And it will certainly change the perception of the law.
I've always maintained that the rules of professional conduct are controlled by the large firms, AmLaw 100 and 250. When their economic needs change, the rules get changed and the sole and small firm practitioners have to adapt accordingly. In other words, the rules are not made in a vacuum, not made because of their inherent righteousness or goodness. They change and are made to serve the economic interests of the few ... oh, if the public is served, so much the better.
But if you're a solo, watch out ... your interests may not matter. Such has been the case in recent times when solos' interests were not protected, in fact hurt, by changes in the rules .. But, here, to allow the larger firms to complete on a global scale, we see the rules begin to change and allow allied professions to join in the ownership of law firms, not merely as allied professionals independently serving the same client.
Economics control .. as always ... even here in the rules of professional conduct.
Departures from large law firms continue. And more than one person is now asking what is the "normal" rate of departures? One estimate suggested 7%.
We are living in an environment that many people call a “new normal.” Our economy, as well as the legal community, has been turned upside down in the last couple of years. There is no ”typical” answer that has emerged yet. Departures are sometimes voluntary for better opportunities (or retirement) and sometimes involuntary where law firms are seeking to adjust their supply of lawyers with their clients’ demand.
As I mentioned in a recent interview in the New York Times, older lawyers are being asked to leave law firms when their productivity declines. That didn't happen so frequently in the past. Generally, the age factor is only coincidental with the decrease in productivity. Though sometimes it is directly correlated because of a change in attitude by the experienced practitioner who wants to slow down and spend more time in other adventures. This tends to be a personal decision, not a trend. We have many lawyers in their 70s and 80s still active and capable contributors to their clients and the profession.
At the other end of the spectrum, newer lawyers who are not asked to become a partner in a firm believe their opportunities will be greater with another firm. They seek to make a lateral transfer from their existing firm to another one. The second law firm may accept them because they see a skilled practitioner, someone who received training at the expense of another law firm, who will fill a gap in their business model. This comes when they want to grow and enhance their capacity for clients or begin a new practice area to enhance their service offerings for existing clients. The nes lateral fits well under these circumstances.
Then, there are the new law school graduates who are finding the pipeline from education to practice being clogged up by the decrease in client demands and oversupply in some law firms. It will take several years for this phenomenon to adjust. Until then, I don’t think we can say there is a “typical” law firm departure rate.
Venice, CA – June 6, 2011. Award-winning law business management coach and consultant Ed Poll is bringing his nationally recognized practices, tips and advice to bar associations, law schools and other top venues across America this summer.
The tour will include 15-20 stops throughout the US from June through September 2011, starting on the West Coast and heading East. Tentative tour stops include Portland, Seattle, the San Francisco Bay Area, San Jose, Dallas, Oklahoma City, Kansas City, Chicago, Nashville, Memphis, Columbus, Cleveland, Washington, DC, Atlanta, Philadelphia, New York City and Boston. For more information about the tour, please go to www.lawbiz.com/roadshow
The tour, which is sponsored by Fujitsu ScanSnap and others, will include presentations for CLE credit on law practice management issues, on topics such as Managing Client Expectations, Collecting Fees and Getting Paid, Metrics of Financial Performance, Tips for Increased Revenue, and The Exit Strategy: Succession & Retirement.
Presentations will include time for Q&A and will be followed by a special Coach’s Corner coaching session. In this unique format, Ed will offer coaching help to one or two attendees about their specific law business management issues, within the group context. This allows the entire audience to watch the interaction and consider how they may apply the discussion to their own specific situation.
“For the first time in American history, thousands of lawyers have been laid-off,” said Ed Poll. “Lawyers need to know more about The Business of Law® in order to survive, let alone thrive, by effectively meeting the needs and expectations of clients. This tour will help address many of the challenges facing the sole practitioners and small firms today.”
About Ed Poll
Recently quoted in the New York Times and the ABA Journal, Ed Poll, founder of LawBiz Management, is a nationally recognized expert in law practice management. He helps attorneys and law firms increase their profitability by consulting with them on issues of internal operations, business development, and financial matters. Poll brings his clients a solid background in both law and business. He has 25 years experience as a practicing attorney and has also served as CEO and COO for several manufacturing businesses. In 2010, he received the first ever Lifetime Achievement Award from the California Bar Association’s Law Practice Management and Technology Section.
Poll is the author of numerous publications that have become the definitive works in the field, including 18 books, CDs and DVD collections. His newest offerings are Growing Your Law Practice in Tough Times (West Publishing, 2010) and 8 Steps to Greater Profitability: The Lawyer’s Guide to Prosperity (LawBiz Management, 2011). He has also authored books on business planning for attorneys, improving collections, buying and selling law practices, disaster preparedness and recovery, and exit strategies for legal practitioners. His offerings are available at LawBizStore.com.
Poll hosts the LawBiz Forum, an interactive community for the legal profession, as well as the LegalPadTM video series. He is a columnist for several publications geared to the legal community, including the Massachusetts Lawyers Weekly and Legal Management, and hosts regular webinars for West Legal Management. Poll earned BS and JD degrees from the University of California, Los Angeles, and an MBA from the University of Southern California.
About LawBiz Management
LawBiz Management is the nation’s leading firm dedicated to managing the Business of Law® . The company focuses on helping lawyers reach their goals and law firms improve their practices by increasing revenues, improving profits, and reducing the stress of the practice experienced by lawyers. Among the services offered are coaching, consulting, speaking and managing firm retreats. LawBiz Management also consults on the buying and selling of law practices.
Last week, I had an accident. A preoccupied driver who admitted she didn’t see me failed to yield the right of way and turned left before I could see her. My bicycle hit her right front fender. You can see a picture of the damage to the car. Sometimes, it's better to hit than be hit. Because I hit her car, rather than she hitting me, I am alive and still walking, albeit with some difficulty. The fireman and paramedics said they'd never seen such damage to a car from a bike. “... Either the car was made of plastic or you are a man of steel!...”
If I were made of steel, I would not be so sore and bruised as I am still today. My thighs and quads have turned colors I never knew existed; like burnt toast. The bike down tube is cracked and very good, beautiful and cherished Orbea Orca carbon fiber bike is history. I'm lucky, frankly, to be alive ... The alternative is not appealing.
Once things settled down, several days later, and a mechanic suggested that some manufacturers offer deep discounts for bike frame replacements needed because of a crash, my wife found the e-mail address for Orbea and sent them this note: “...My husband was involved in a traffic accident with his 2008 Orbea-Orca .... He is apparently okay with major bruising but his beloved Orbea has a damaged frame on the post between the seat and the pedals. Is there an incentive Orbea offers to encourage customers to replace a damaged bike with Orbea? ... Thank you.
CANNOT MAKE THIS UP
The company response follows: “Good morning, Thank you for contacting with Orbea! In case of accident, Orbea’s Warranty is null and void. Sincerely, ...”
We never entered a warranty claim; that was never in my mind. My wife was merely checking out the status of their crash program. Some companies retain the loyalty of their customers by allowing them deep discounts to replace a damaged bike (product) and then studying the returned item for future research and improved manufacturing processes. My wife’s response was classic understatement: “We were not expecting to file a Warranty claim. We understand that some bike manufacturers give a discount on purchasing a new bike when a bike has been in an accident. You might consider doing the same. We are in the market now for a new bike. Thank you for your concern.”
Lessons here are legion.
First, listen to your customer’s comments and requests. This reminds me of the classic instruction from a lawyer to his client: Listen to the question. Answer only the question. Then shut up! Wait for the next question. Don’t answer what you think should have been the question.
Second lesson: Everyone in your firm represents the organization. If a receptionist is rude, if a secretary fails to give you a message; if an associate is ill-prepared for a conference or court appearance, this reflects poorly on you as the senior lawyer and the firm as a whole. Education and training is not limited to the lawyers in the firm. Everyone needs to take continuing education programs to maintain and elevate skills and service levels.
Third lesson, don’t “piss off” the economic buyer (in this case, my wife) in your organization or you will never retain the business, and accompanying revenue.
Fourth lesson, live your life for now. There may not be a tomorrow. Yes, we have to keep an eye on the future, saving, planning and preparing. But, don’t do so without having some joy and value (your subjective opinion here) each day that passes. For me, the pleasure and reward is a vigorous bike ride, especially as a reward for something I did during that day. Whatever it is for you, “just do it.”
I’m sure you can provide other valuable lessons from this experience. Contact me or write your comment below. Let’s see how many lessons we can create from this one true-life experience.
(Note: The California State Bar President asked California lawyers to contribute to the State Bar's efforts to provide legal services to those in need. Following is an open letter to the President; his letter is set forth below.
I agree with you completely. There is a tremendous "justice gap." I'm glad the State Bar is seeking to do something about this. I wonder, however, why the State Bar doesn't expend the same energy on helping its own members, lawyers. One study reported by the State Bar several years ago indicated that 50% of lawyers in this state earn less than $100,000. Just think, if the State Bar would actually help its members be more effective with their clients, be more efficient in the delivery of their services and, yes, be more profitable, members of the Bar would then i) be less tempted to invade client trust accounts (a public service issue) and ii) have money to contribute to narrow the "justice gap."
Instead, however, the Bar does things that are perceived by our members to be antithetical to the interests of lawyers … The list is rather long and I won't bore you here with issues on which I've spoken before. But, until you (the organized, mandatory Bar) works with its members … until you (the organized, mandatory Bar) has as at least one of its primary goals the interests of its members, you have a great deal of courage (some might say gall) to ask struggling lawyers to contribute more than they already do.
If our Bar were a voluntary Bar, I suspect less than 50% would join … Then we would not have governance issues imposed on us by the legislature. Of course, we would also be far more interested in the thoughts and concerns of our members than is currently the case.
Clearly, these are my own thoughts, not those of any Section or other body of the State Bar … but these thoughts were clearly expressed to me just this morning by another attorney. I thought you should know, considering you're asking us for money.
And let me take this opportunity to wish you and your family the best of the holiday season. You've taken on a very tough job, some would say a thankless job, and I wish you great courage and strength.
FROM THE PRESIDENT OF THE STATE BAR OF CALIFORNIA
As you renew your State Bar membership, I am writing to make sure you are aware that one of the most vital roles of the State Bar is to distribute funds to support legal aid to low income people. Please join these efforts by supporting the Justice Gap Fund. I am asking you to join me in two ways:
- When you pay your 2011 State Bar dues, please donate $100 or more to support legal aid for low income people. All gifts are tax deductible; and every dollar goes to help those in need. You can even make a gift online at http://calbar.org/justicegapfund. Donors of $1,000 or more will be recognized as “benefactors” of The Justice Gap Fund.
- Share this email with your colleagues and friends and urge them to contribute. Last year, only about 4% of California lawyers contributed. If every member of the Bar were to donate the recommended $100 amount, more than $20 million would be raised for the Justice Gap Fund. Even if every attorney were to donate only $25, there still would be over $5.4 million available to provide services to vulnerable Californians.
The “justice gap” is the gap between the number of people who need legal services and the resources available to provide those services. There simply aren’t enough resources to provide legal services to all of those in need. Every day legal aid intake workers have to turn away people who are struggling with heartbreaking legal issues. The Justice Gap Fund is one way that we, as lawyers, can help to close this “justice gap.”
According to the California Budget Project, in 2009 more than 5.6 million Californians were living below the federal poverty line -- $21,756 for a family of four. (A full-time minimum wage worker makes about $5,000 less than that.) If working a full-time job is not enough to ensure that your family has enough to eat, how do you cope when your sick child is wrongfully refused insurance coverage, when your husband begins to show the strain of unemployment by abusing your children, or when your elderly mother is evicted because her landlord’s house was lost in a foreclosure? When low-income people cannot afford an attorney to help them claim what is right and fair, legal aid is there to help. But the system is so overburdened by the sheer number of people who need help, many of those people now have nowhere to turn.
Closing this gap is one of the most important things that the State Bar does, and we’ve never needed your help more to ensure that access to justice, the very underpinning of our society, is truly available to all.
A major player in the IP field announced that its merger plans with another IP firm have been called off. The assertion is that there were conflicts issues with one major client that could not be resolved and the client would not waive the conflict. While I may be dubious about the veracity of this assertion, sitting on the outside, it does happen.
But, then the firm announces that "... the downturn in patent litigation persists, with fewer cases being filed and more settling earlier.... (C)ases coming in are smaller with tighter budgets and leaner staffing expectations...." And this results in firings/terminations/layoffs (say it anyway you want, the people are gone) of lawyers and staff. In other words, the troubled economy is still having its impact on law firms.
So far, so good. But, then the firm also announces that it sees an increase in patent prosecution, counseling and reexamination work, particularly in the electronics and software practice and the firm will hire first-year associates. Again, from the outside, it looks like the firm is firing experienced lawyers who get paid 3X and will hire first year associates who will get paid 1X. You fill in the numbers. When industry does this, it's called "age discrimination." It may also be called "stupid" because it negatively impacts the morale of the organization ... and you don't build a loyal, cohesive and capable workforce by seeking the least expensive team members. Why couldn't the firm offer the presumably lower paying jobs to the experienced folks? In this economy, they might not like it, but they'd rather stay employed and working with colleagues they know and like and trust. And, the organization will look like a caring place to work, making needed economic changes but also sensitive to the needs of its current work force.
Just seems to me to be a better way to do things. And, at the very least, the PR ineptness of these announcements coming on the heels of one another is just astounding.
Bullies cost you money! Addressing this topic is not a "soft skill" but one that goes right to the "bottom line." Tolerate bullying in the workplace and you will experience lost time, lost ncentive and lost resources when skilled staff take time off from work, lose motivation or suffer stress burnout and leave the job for another. The cost to business is in the billions of dollars annually.
The converse is true. Creating a culture of collegiality, cooperation and teamwork creates enhanced performance, greater successes and even higher profits.
Bullying, by definition, is unwelcome behavior including unwarranted or invalid criticism, exclusion and isolation, being singled out and treated differently, and being humiliated in front of others. One study shows that younger women suffer bullying at the hands of older women ... but this phenomenon is not limited to women ... and sexual harrassment is only one aspect ...
Male clients find often find that how they respond to the bullying tactics of their male superiors is a critical feature of whether they succeed in the law firm and whether they make partner or are asked to leave. Irrespective of how they deal with bullying tactics such as imposition of unreal time deadlines and nitpicking of their draft documents, the psychological toll on the lawyer is humongous ... including stress in their home life.
In one such experience, I helped a client negotiate his way with the supervising partner through a particularly stressful project. On its conclusion, I suggested that he stop on the way home to buy flowers for his wife. I explained that his wife had been a "passenger" through his recent difficulties ... and that since he had come out the other side successfully, he needed to share some of the good times with her ... She had supported him without knowing the details and deserved recognition for her efforts. He later reported that his consideration was a huge success!
Had the firm's culture not tolerated this bully, their productivity and profitability and bonding would have been significantly higher.
Yes, bullying is exaggerated in times of recession and credit crunch, if allowed ... But, it need not be.
Welcome to the first ever LawBiz® photo caption contest! All week you’ll have the opportunity to post captions for the picture above of the newest edition to my family, Bandit, a 2-3 year old boxer. Be creative, be serious, be funny – post whatever you think the caption for this photo should be.
At the end of the contest period, we’ll choose a winner who will receive a FREE copy of my book The Business of Law2nd ed., (valued at $120) and a FREE ½ hour consultation with me.
There are a few rules to this contest, so please take note:
· No more than five (5) entries may be submitted per person. Limit of one (1) per day.
· Entries should be submitted as comments and must include email addresses.
· Entries must be received by 5pm PST on Friday, September 25, 2009 to be considered.
· No lewd language or vulgarities. Such language will disqualify entry and will be removed by the administrator.
· Have fun!
A winner will be picked by Wednesday, September 30, 2009 and announced here on the blog. Good luck!
What are you doing about recruiting? Most of the larger firms have either delayed entry of those to whom they extended offers ... by a few months, at least. And some have outplaced these folks to public interest activities for a year with only a stipend.
More law schools are experiencing reduced recruiting efforts ... And the real hurt will be felt by 1L students because of the blockage in 3L and 2L's.
What do you see for the future recruiting efforts for your firm and for the industry?
And how does this phenomenon impact the recruiting of lateral associates/partners to smaller law firms?