Recession will Forever Change the Legal Profession
New York Times columnist and author Thomas L. Friedman recently posed this question: "What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall — when Mother Nature and the market both said: “No more.”
I think the recession will change the legal profession forever. It's the end of the law as we know it.
I remember hearing a sound in August 2007, just as the recession began, when I first heard about lawyers charging $1,000 per hour. It was the sound of a bubble popping. I’m sorry, but no lawyer who cannot shoot laser beams out of their eyes is worth that much money.
In the following months the Association of Corporate Counsel launched its “ACC Value Challenge” specifically to rein in out-of-control legal costs. Clients are in an organized revolt.
Then came the massive layoffs of law firms, as tracked by the Law.com Layoff List, which has grown rapidly from 55 law firms in January 2009 to 84 law firms by March 11. As of March 6, 2009, there have been over 7,241 layoffs (3,045 lawyers / 4,196 staff) since January 1, 2008, according to Law Shucks.
The handwriting on the walls turning into headlines in the news. Major corporations are actively seeking smaller law firms to get lower rates. Clients want cost-efficiency and an end to the billable hour.
The firms that survive the recession will:
- Have “customers” not “clients.”
- Offer flat fees per project or per procedure.
- Have rates that are markedly lower than in 2008.
- Will routinely produce budgets for all legal work.
- Be run like real businesses, which know their costs, can calculate a profit margin, and offer customers “just in time” services at the best price possible.
- Realize that customers are fickle and expect personalized service.
- Have lawyers that fly coach and stay at cheap hotels near the client’s offices, instead of the Four Seasons 5 miles away.
- Have lawyers that know their clients business, their goals, strategies and objectives, and work to help the client make more money or cut their costs.
Larry, this all makes a lot of sense. When I read this NLJ story (http://www.law.com/jsp/article.jsp?id=1202429116078&rss=newswire) I realized -- perhaps for the first time -- that billing rates are truly out of control. Much of that is, in my opinion, a function of overhead. Other than for the absolute rarest of lawyers, a $1,000 an hour is, in a word, crazy.
I recall there being some talk in the 1990s about there being some major changes in store. It only led to a higher stratification of BigLaw. It will be interesting whether this current, worse downturn will bring the changes so many counsel seek but sometimes fear to implement.
Now if you will excuse me, I have a client to visit!