Ed. note: This is the latest installment in a series of posts Lateral Link’s team of expert contributors. Michael Allen is Managing Principal at Lateral Link, focusing exclusively on partner placements with Am Law 200 clients.
The stories about Biglaw over the past five years have been grim, but a closer inspection shows that despite a cacophony of daily doomsday stories from The New Republic, the Wisconsin Law Review, The Atlantic and other publications of varying quality, the future of Biglaw looks promising.
The size of modern-day, Am Law 100 firms allows them to downsize or expand as the market conditions dictate, but as a profession of perception, firms have to handle RIFs with care. Partners and clients might go next door if they doubt the capabilities of the firm. I have worked with partners before who moved simply because the perception of their firm’s stability was questioned by their clients….
For months, we talked to counsel about our prospects in the case. He was sanguine:
“There’s nothing to worry about here. The plaintiff put a huge number in its prayer for relief, but you can’t possibly lose that much. Plaintiff’s liability case is thin, and the damages are inflated. You’ll probably win. If you lose, you’d lose no more than $1 million on an average day. On the worst day known to man, you can’t even theoretically lose more than $5 million. I wouldn’t offer more than a couple hundred grand to settle.”
A few months before trial, we ask counsel to put some skin in the game: “It’ll be expensive to try this case, and you feel good about our prospects. We’d like you to propose an alternative fee agreement that aligns your interests with ours. We’d like to pay you less than your ordinary hourly rates in the months leading up to trial, but we’ll give you a success fee if we win. Please think about it, and let us know if you have any ideas.”
A couple of weeks pass, as counsel discusses the case with his firm’s “senior management.” When the alternative fee proposal arrives, the goalposts have miraculously moved! In the course of just two uneventful weeks, our prospects for success have changed entirely!
As we noted in Morning Docket, there’s a new survey out about corporate America’s legal spending in 2013. As noted by Am Law Daily, the LegalView Index “is based on actual dollars paid by clients, not on surveys of law firms” — so perhaps it’s more reliable than many of the other studies.
What does the survey say? Here are some highlights:
Growing up in Biglaw, I always thought pricing services for clients was easy. Conversations with clients went as follows: “Our rates range from X to Y, and are very competitive with our peer firms. If you have the audacity to ask for a break on these prices, we can offer you a 10% ‘courtesy discount,’ but will include language in our engagement letter allowing us to recoup that discount and more a few months into the engagement.” Of course, even in the mid-2000s (crazy that those days are nearly a decade ago), X was roughly the monthly lease payment on a well-equipped Honda Accord — for the least “experienced” lawyer in the entire firm — and Y was in the range approaching the monthly mortgage payment for a decent-sized colonial in a “pleasant” suburb. That was how things were priced, and depending on your firm, your rates were either considered cheap or expensive. But that categorization was always relative to other firms in your city, with a usually self-selected “peer group.” So there was always a “premium” (but unnecessary) firm more expensive, and on the other end of the pricing spectrum, a “discount shop” that could be sneered at for trying to undercut the market with low prices aimed at masking subpar legal ability.
When there was a surplus of demand for Biglaw’s services, the above approach was a tenable one. Once that surplus turned into a surfeit, firms needed to get a little more creative. At first, the tendency was to simply offer bigger discounts, with the “courtesy 10% off” turning into 25% off or more. Then clients started informing their firms of new “billing guidelines” where certain types of work would no longer be billable. Or where certain lawyers, such as junior associates whose time would no longer be paid for by clients, were magically transformed from revenue-producers for the firms that hired them to deadweight cost center investments in the “firm’s future.” Add in competition from other firms for a shrinking pie of business, and thinking about pricing became more rigorous. In fact, pricing expertise is one of the only Biglaw job skills with a growing rather than shrinking potential employment base….
There are only so many ways that we can tell our readers that the Biglaw boom years are over. Slow firm growth in terms of attorney headcount is now praised. Law firm mergers are common occurrences, if only because there’s always someone to save from a fate suffered like that of Dewey and the failed firms of yesteryear — Brobeck, Coudert, Heller, Thelen, and Howrey. Alternative fee arrangements are trending, and discounts are handed out as if clients are enrolled in fast-food loyalty programs (buy one multi-million dollar patent suit, get the next one 75 percent off!).
But just because the heyday is over does not mean that Biglaw’s all-stars are going to charge their clients any less cash. Back in the day, $1,000 per hour billing rates were considered obscene by some. Now, even in a still recovering economy, four-figure billing rates are just business as usual. In fact, some partners are edging closer and closer to a $2,000 per hour fee every day.
So which firms have the highest partner billing rates? Let’s find out…
Associates waste lots of time because senior lawyers are absolutely terrible managers. It’s not totally their fault. They think that a prestigious law degree means they’re an expert at everything. So armed with an irrelevant skill set, a complete lack of management training, and a hefty chunk of hubris, lawyers roll into personnel management sure that they know something by gut that business leaders endure hours and hours of MBA classes, Dale Carnegie seminars, and Six Sigma trainings to figure out.
Anyway, this leads to massive amounts of wasted time. The hours usually get (at least partially) billed and clients are savvy enough to know they deserve a write-off — but just how would they react if they knew exactly how their $500/hour was being spent?
Here are just a few tales of the wasted time billed to clients. Maybe you have some that top these?
Is the slowdown in Biglaw that we’ve seen since the Great Recession a long-term trend or just a temporary blip? Only time will tell, but in the meantime, the debate rages on. (The latest salvo: New Republic editor Noam Scheiber’s response to critics of his controversial article, The Last Days of Big Law.)
Because of its power, prestige, and profitability, Biglaw gets a big proportion of the media coverage that’s aimed at law firms. But let’s not overlook small firms and solo practitioners, who make up about 70 percent of American lawyers in private practice.
One often hears stories about small firms, especially boutiques formed by ex-Biglaw attorneys, that are thriving. The tales are inspiring; the small-firm lawyers talk about how they enjoy their practice more, have greater autonomy, and make the same or even more money than they did back in Biglaw.
But such information is anecdotal. How are small law firms doing compared to bigger firms on a broader level? A new survey has some answers….
[Think of hourly fees] as the equivalent of a sticker on the car at a dealership. It’s the beginning of a negotiation…. Law firms think they are setting the rates, but clients are the ones determining what they’re going to pay.
– Ward Bower, a principal at the legal consultancy Altman Weil, commenting on the ever-growing price tag for the Biglaw billable hour — and the deep discounts that are available to clients who simply refuse to pay full freight.
Jiminy jillickers! ATL editors are going all over the place over the next month or so. Or at least all over the Eastern Seaboard. If we aren’t heading to your neck of the woods on these trips, never fear, we may hit you up on the next time around. We’ve already hit up Houston, Chicago, Seattle, San Francisco, and Los Angeles in the past year.
Kinney Recruiting’sEvan Jowers is currently in Hong Kong for client meetings and still has a few slots available through October 22. Evan will also be in Hong Kong November 14 to December 15. Further, Robert Kinney has been in Frankfurt and Munich this week and is available for meetings with our Germany based readers.
One of our key law firm clients has referred us to one of their important clients in the US, Europe and China – a leading global technology supplier for the auto industry – in order to handle their search for a new Asia General Counsel and Asia Chief Compliance Officer.
Kinney is exclusively handling this in-house search.
This position will have a lot of responsibility and include supervision of eight attorneys underneath them in the Asia in-house team. The new hire will report directly to the global general counsel and global chief compliance officer, who is based in the US. The new hire’s ability to make judgement calls is going to be as important as their technical skill set background.
The position is based in Shanghai and will deal with the company’s operations all over Asia and also in India, including frequent acquisitions in the region.
It is expected that the new hire will come from a top US firm’s Shanghai, Beijing or Hong Kong offices, currently in a top flight corporate practice at the senior associate, counsel or partner level. Of course, the candidate can be currently in a relevant in-house role.
The JOBS Act created new tools for companies to publicly advertise securities deals online. As a result, thousands of new deals have hit the market and hundreds of millions in capital has been raised, spurring a wealth of new business development opportunities for attorneys.
Fund deals, startup capital raises, PIPE deals and loan syndicates are just a handful of the transactions benefiting from the JOBS Act. InvestorID FirmTM is a platform designed to help attorneys equip their clients with the workflow, marketing and compliance tools to publicly solicit a securities offering online. By providing clients with the tools to painlessly navigate the regulatory landscape of general solicitation, InvestorID FirmTM helps attorneys add value above just legal services.
The Jumpstart Our Business Startups Act (JOBS Act) went into effect in 2013 and permits Regulation D offerings of securities to be advertised publicly. This means that funds and companies can now use social media, emails and web sites to market transactions to new “accredited” investors.
However, with these new powers come new pain points. InvestorID FirmTM provides a secure, fully hosted, cloud-based platform with a breadth of tools for your clients, including: