American Lawyer Editor Teaches the Dark Lessons of Law
I’m at the Legal Sales and Service Conference in Dallas, and Aric Press, who has been editor of American Lawyer magazine for nine years, discussed “What’s Hot, What’s Not: Law Firm & Industry Trends.” Or as he termed it, “Amid the glee, are there any dark lessons worth learning?”
First, the rich are getting richer. Collectively the 2006 highest-grossing US law firms (the AmLaw 200) generated $72.5 billion in gross revenues, he said. Average revenue per lawyer went up 7%+ in 2006. Among the top 50 mega firms, partners averaged $1.379 million in profits per partner. The top 15 firms had profits per partner of more than $2 million per year.
“These are the ‘good old days,’” he quipped. However:
Partnership has changed irrevocably. The single category that has dropped steadily among law firms is the percentage of equity partners – only 25% of the lawyers have equity status in AmLaw 100. This year 39 of the top 100 firms shrank or held steady in percentage of equity partners. There are only 20 one-tier partnerships left in AmLaw 100, and partners are abandoning name-brand firms to make more money elsewhere. The big firm partners are being wooed by other firms to get “off the lockstep system” of compensation. The new rule of partnership is that tenure is dead. “You don’t have to publish, but if you don’t produce you, you perish,” Press said. These are the good old days.
Talent wars are underway. “They are excruciating; if you win your share, you get to stay exactly where you are.” Law firms know that most associates who are hired will leave, because the firms have a work environment that is inhospitable for young parents. The associates see the mega firms as “ATM machines with legs.” The young lawyers will work only as long as it takes to pay off their student loans. Press said firms need to change the way they recruit. If they send out untrained lawyers to recruit at law schools, they can’t wonder two years later why they hired associates who don’t fit in.
Firms are changing how they govern themselves. “Firms may call themselves “partnerships” and say they make decisions by consensus, but I have yet to attend a Quaker meeting of 500 lawyers across a dozen time zones. You can’t operate a law firm as international candy store,” Press said. He said if you look closely at the law firms that have failed you’ll see leadership failure, lawyers clinging to partnership status in name only, and partners who failed to behave like owners.
Managing the generation transition. “Generation X & Y wear headphones, but they work hard, they see clearly, the myths of “stick around kid and we’ll take care of you are gone,” Press said.
The power of the personal touch
Law firms can do a lot better to keep clients happy. He offered two client service stories:
- Positive: At our company, ALM, we hire a lot of lawyers. In 9 years only got one email from CEO of company one law firm that had been exemplary. We had unpleasant situation in the West coast where we had neither the facts nor law on our side, so we decided to fight the case. (This got a big laugh.) A young west coast lawyer, a magician, got us off. The CEO didn’t say beans about it. But what prompted praise from the CEO was a letter that the lawyer sent him saying, “Thanks for the opportunity to work with you.” The CEO notified everyone in the office, saying “here’s the first lawyer to send me a thank-you note.” Whatever you do in business development services, it is good for lawyers to send out thank you notes. Your mother was right.
- Negative. A friend of mine was a partner in a top 50 law firms and became in-house counsel for major company. He arrived at work at the beginning of a big transaction -- company was buying or selling something. He called up the New York partner in charge of the transaction and asked, “I need a memo from you on the three deal points within 36 hours.” The law firm partner said “No. I don’t have time, you don’t need that memo now, and you’ll get it in due course.” My friend was stunned and he and his little group of five in-house lawyers prepared the memo themselves. What the New York partner had failed to ask is why do you need it now? There was plenty of cold revenge. The deal went off successfully and my friend never hired that law firm again.
Things to watch for:
- London. The “Magic Circle” law firms are coming off spectacular business years, they have a strong pound, and they are coming to US to recruit partners.
- The flow of lateral hires will pick up.
- Get ready for next shakeout. No one saw the last one coming
- One of major Chinese law firms will come to US to buy out an American law firm.
Tips from the Editor
- Whatever strategies you are embracing, go back and have your lawyers do something every day to generate new business. One thing that the rainmakers all have in common that not a day goes by where they’re not doing something in business development. Every day, by habit, they’re doing some business development.
- Look for opportunities to touch your clients and don’t miss them. Don’t pass them up. They are only human and want some attention.
