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.
* You know, in 20 years, Republicans are going to be telling us that the federal government’s pot taxes are too high. [Washington Post]
* DLA Piper might get in trouble from bragging about the size… of its bills. [Dealbook]
* Michele Bachmann is under investigation for being a demon spawn of the fifth circle from… oh, wait sorry, they’re just looking at her use of campaign funds. [ABC News]
* Is anybody else unreasonably excited to hear what offensive, homophobic remark Justice Scalia makes today? [National Review]
* With everybody looking at gays, I wonder if this will be the day for the Supreme Court to declare the end of racism against white people while doing nothing about racism against black people with a 5-3 (Kagan recusing) decision on Fisher. [SCOTUSblog]
* So, this BlackBerry thing doesn’t seem to be going very well. [Forbes]
Last week I spoke with an In-House Insider, a Biglaw refugee turned in-house counsel. You can see what our Insider has to say about the state of Biglaw and client relations here and below.
As with the initial installment, the only changes I made to the Insider’s words were those done to protect their identity, and the Insider was given the opportunity to revise their points once I added the questions and commentary.
Again, I thank the Insider for the candid observations and thoughtful opinions on these core issues. Now, on to the discussion….
Ed. note: The Asia Chronicles column is authored by Kinney Recruiting. Kinney has made more placements of U.S. associates, counsels and partners in Asia than any other recruiting firm in each of the past six years. You can reach them by email: [email protected].
Since late last year, things have been booming in Hong Kong / China in cap markets, especially Hong Kong IPOs. M&A deal flow has recently been getting a bit stronger as well. Although one can’t predict such things with any certainty, all signs are pointing to a banner entire 2014 for the top end US corporate and cap markets practices in Hong Kong / China. This is not really new news, as its been the feeling most in the market have had for a few months now and things continue to look good.
The head of our Asia practice, Evan Jowers, has been in Hong Kong for about 10 days a month (with trips every other month to both Shanghai and Bejing) for the past 7 months (Robert Kinney and Evan Jowers will be in Hong Kong again March 15 to 23), and spending most of his time there meeting with senior US hiring partners at just about all the major US and UK firms there, as well as prospective candidates at all associate levels and partner levels, and when in the US, Evan works Asia hours and is regularly on the phone with such persons, as our the other members of our Asia team. Our Yuliya Vinokurova is in Hong Kong every other month and Robert is there about 5 times a year as well. While we have a solid Asia team of recruiters, Evan Jowers will spend at least some time with all of our candidates for Asia position. We have had long standing relationships, and good friendships in some cases, with hiring partners and other senior US partners in Asia for 8 years now.
Are you challenged by the costs and logistics of maintaining your office, distracting you from the practice of law?
Many small firms are successfully moving part—or even all—of their practice to a virtual setting. This even includes multi-jurisdictional practice spanning several states and practice areas, although solo and small partnerships are still the largest adopters of virtual law.
Can you do the same? The new article Mobile in Practice, Virtual by Design from author Jared Correia, Esq., explores how mobile technology bring real-life benefits to a small law firm. Read this new article—the next in Thomson Reuters’ Independent Thinking series for small firms—to explore how a mobile practice:
Everyone is talking about the importance of Social Media in Corporate America. But it is relatively safe to say that most law firms and lawyers are slightly behind the social curve. Most lawyers, at minimum, use LinkedIn, for networking. Some even use Twitter for pushing out short, pithy content, while many have Blogs, where they write their little hearts out. The adage “it is better to give than to receive” is not always true though in the world of Social. In the Social World – it is best to listen, give back and engage.
Social Media is a communications tool that can deeply educate you about the needs and wants of your clients and prospects when used in conjunction social media monitoring and sharing tools.
Take this quick quiz and see if you know how to use Social to help you engage more with your clients or to better service the ones you have.