THE AMPERSAND As was mentioned in our last correspondence, at the urging of our communications firm, we are now distributing our newsletter twice-monthly. Apparently, they say, the traffic to our website increases when we send it out and, more importantly, they say, you appear to enjoy it. They base this on the data they review each month, the time you spend reading articles, the clicks, the bounce and other things that strike me as, at best, trivial technical statistical metrics and, at worst, a thorough though harmless violation of your privacy. But, I’m nothing if not good at taking instructions and so, herewith, our first official mid-month edition.
There is one important difference between the top of the month edition and the mid-month version. The top of the month is generally a fluffier less subtly self-promotional update about our wonderful firm, the great things we’re up to, the causes we’re supporting, the diseases we’ve cured and the high-profile searches we’re expertly working on. In the mid-month version we will attempt to provide some actual content; provocative thought leadership with an originally written article about something of interest to us and hopefully to you. Our original work will be augmented with links to several articles from actual authors that we have unearthed during the preceding month which, if we are doing this the way we’ve been told to, should have some tie in or relevance to the thought leadership piece we penned. Each month a different member of my team will write something of interest. This is news to them. Thanks guys. Kidding aside, I am fortunate to be surrounded by colleagues considerably smarter than me who actually have lots of very interesting things to say and share and I know you will benefit from their wisdom as I have.
Let me begin by picking up a theme from earlier this year. In September I wrote:
In the legal world, much has been written over the summer months about the shifting landscape. Some have predicted “the last days of big law” while others have said “don’t bury [it] just yet”. My own view is that there is a fundamental shift underway…There is a declining volume of work for an increasing number of lawyers who have a long-standing expectation that they will earn more this year than last and next year than this. I think that ship has sailed and my sense is that within 12 to 24 months we will look back on this period with the benefit of hindsight and reflect that it was during this time that something fundamental was taking root right under our noses.
Three months later, that shift is well underfoot. Yet, the most recent Altman Weil Law Firms in Transition Survey suggests that when it comes to “change preparedness” only 12.9% of law firm partners have “high” confidence in their leaders and only 5.3% of law firm partners exhibit “high” awareness of the challenges of the new legal market. In other words, when it comes to distributing lower-than-in-recent-memory firm profits early in the new year, nearly 9 in 10 partners don’t think their leadership will get it right and 9.5 of 10 will be surprised when their comp goes down. (Reminds me of the Jerry Seinfeld joke: “According to most studies, people’s number one fear is public speaking. Number two is death. Does that sound right? This means to the average person, if you go to a funeral, you’re better off in the casket than doing the eulogy.”)
One need read no further than last month’s brilliant New Yorker article The Collapse: How a top legal firm destroyed itself to see how this story can end. Spoiler alert: not well. The article is PG14 as there is some fairly salty language befitting a tale of incredible greed, bumbling incompetence, jaw dropping hubris and what happens when rapidly declining revenues collide with increasing and locked in expenses. Call it Canadian conservatism but I don’t think we will see a Dewey & LeBoeuf happen in Canada, at least on that scale. Notwithstanding the shaky confidence in law firm leadership and the apparent lack of awareness among the rank and file (arguably two ingredients in the recipe for law firm failure), there are several other required components as well and, for the most part, those are not yet evident.
I can attest to the fact that lateral recruitment among firms is down, though this is simply forestalling the inevitable succession gaps that are looming large as baby boomers retire and fewer and fewer “Gen X and Gen Y” types are chasing the dream of partnership in a law firm. Ignoring the self serving (though very sound) principle that the best organizations are always recruiting, for the moment, although very much a buyer’s market, there are few buyers to be found. This is partly attributable to fiscal restraint – along with a focus on improved practice efficiency, fewer support staff, a slow and stubborn move toward more non-hourly billing, more use of contract lawyers, smaller billing rate increases, smaller first year classes, a longer track to partnership and holding the line on associate salaries – and partly a product of the sellers preferring the devil they know over the devil they don’t, at least until we get through comp season.
In fairness, many of the firms are applying these measures with varying degrees of rigour, conviction and success. Not unlike the credit crisis that started so much of what still haunts us today, Canada did not have to bail out its banks back in 2008. When American and European banks were teetering, only one of Canada’s six major banks so much as reported a loss. Though law firms are entirely unlike banks in the way they are managed and run, good old Canadian caution will save most, though not all, firms from the brink.
The first quarter of 2014 will be telling. As firm comp committees wrestle with flat envelopes—the term used to describe the unhappy task of having to take $1 from partner A, as opposed to from the surplus, in order to give it to partner B—and individual lawyers on the debit side of that ledger begin to vote with their feet. The sellers will sell, the buyers will buy but no firm will simply implode. That’ll be the second quarter.
Please join the conversation and weigh in with your views by commenting below. We’d love to hear from you.
Regards,
Adam
This months featured articles:
+ Who earns what: Macleans compares how big or small your paycheque really is – Macleans
+ Corporate Law Departments Focus on Cost Control – Altman Weil
+ New model touts affiliated boutique firms – Law Times
+ The young and the restless: The bad rap Gen-Yers get isn’t entirely unwarranted, nut employers must find ways to engage them – Macleans
+ Canadian in-house counsel: Global practice, global leadership – Canadian Lawyer Mag
+ Chief Legal Officer Survey 2013: Pricing Preference – Altman Weil
