On Monday morning, I read a Wall Street Journal article sharing the news that law firms have “regained some of their pricing power” and that hourly rates are up an average of 4.8% from 2011.
Later Monday, other news started to roll out:
- Weil Gotshal announced a layoff of 60 associates (7% of its associates) and 110 non-lawyer employees. Weil further announced that about 10% of its partners will see “meaningful adjustments” to their compensation. See articles here and here. The layoffs were explained by the shrinking market for premium legal services that are a part of the “economic realities of the new normal”. According to the firmwide memorandum that announced the action, Weil remains strong on a variety of economic indicators that have been linked to the demise of Dewey LeBoeuf.
- Jones Day announced a “reorganization, which includes a realigned management structure and the elimination of 65 positions around the Firm.” All of these positions are staff.
This follows earlier stories of firm layoffs, including:
- The closing of Epstein Becker & Green’s Atlanta office.
- Executive staff cuts at Orrick Herrington & Sutcliffe.
- Staff attorney layoffs at WilmerHale.
- Layoffs at Dickstein Shapiro.
- Staff layoffs at other firms, including Downey Brand, Edwards Wildman, and Akin Gump.
Does this signal a return to the cuts of 2008-2009? I don’t think so, though I do think it’s quite likely we will see additional layoffs and firm failures. Instead, these layoffs seem to be signs of large firms’ efforts to adjust to the “new normal,” a change that is neither comfortable nor simple.
But the trend that’s becoming clear should be a wake-up call, whether you’re practicing by yourself or in a large firm. There has never been much room for non-productive personnel in a law firm, but the measuring stick for contribution is much tighter now than it might have been in the past. And thanks to shifting client demands, smaller and less elite firms have opportunities to gain from clients unwilling to accept law firm business as usual.
Here’s what you need to know today:
- If you are a service partner, you may be at risk. I’m hearing from more and more service partners who have seen their compensation cut, sometimes by as much as 50% over the last three years, and moving to another firm may be difficult or even impossible without a demonstrated ability to bring in business. Technical expertise is only one component of a successful practice, and if you don’t have your own clients, you may soon find reduced opportunities to demonstrate your expertise.
- If you are a junior associate, you have to “learn the law,” but you’d better spend time developing your network and beginning to lay the foundation to build a practice as well. You may hear that you don’t need to worry about bringing in business yet, but you need to lay the groundwork well before you need to see results, especially in more sophisticated practice areas.
- If you’re working in a midsized or larger firm and don’t have your own book of business, it’s time to get moving and to look for ways to facilitate introductions for your firm. Even the very most junior lawyers may have an opportunity that results from conversation and culminates in an introduction to a more senior lawyer who is more likely to land the business. That opportunity won’t happen if you aren’t looking for it, however.
- If you’re working in a small firm or as a sole practitioner, you have opportunities. Larger firms are historically resistant to change, whether because of institutional beliefs and expectations or simply because it’s harder to shift the approach of a firm of several hundred (or thousand) lawyers than to shift the approach of a firm of a dozen lawyers. This is a time to reconsider practice and to look for ways to meet your clients’ (and desired clients’) needs and preferences, even those that may not have been fully expressed yet. Read Mitchell Kowalski’s intriguing book Avoiding Extinction: Reimagining Legal Services for the 21st Century for inspiration.
- Whether you’re a highly successful rainmaker, an aspiring rainmaker, a reluctant rainmaker, or a lawyer in denial, relationships matter. It’s critical that you focus on building a network that’s composed of clients and former clients, referral sources, colleagues, former classmates, and other contacts. This network is your lifeblood, whether you’re looking for business, for a job, or for a new dentist. Build it before you need it, and always seek to add more value to your network than you extract. (If this is a scary thought to you, email me and I’ll be happy to send you a list of networking resources that will help.)
The days of having a practice supported by being a “great lawyer are gone forever. In today’s economy, every successful private practice lawyer is a rainmaker who has created an effective plan for building a consistent pipeline of new business. Rainmakers harness their unique strengths and perspectives to create a cohesive, strategic, simple-to-implement plan–and they take consistent, focused action on that plan.