Legally Speaking – Legal Recruiter Blog

September 15, 2008: The day everything changed. In the early hours of the morning, while most of America slept, investment bank Lehman Brothers Holdings Inc. filed for Chapter 11 protection. The U.S. economy was already reeling from the collapses, one week prior, of government-sponsored mortgage buyers Fannie Mae and Freddie Mac, which collectively owned or backed the majority of the country’s $12 trillion mortgage market. Lehman’s bankruptcy, which remains the largest in U.S. history, and the subsequent bailout of insurance giant American International Group Inc. the very next day, was enough to send the financial markets into full-blown meltdown. The impact on the country’s top law firms was profound.

For The Am Law 200, the 200 largest U.S. law firms by revenue, a decade of sustained growth came to a sudden and grinding halt. After aggregate revenues more than doubled from $41 billion to over $84 billion between 2000 and 2008, $2.4 billion was wiped from the group’s collective top lines in 2009—the first fall in overall revenue since we started tracking law firm financials in 1985. In total, 118 Am Law 200 firms saw their revenue contract in 2009 (62 in The Am Law 100, 56 in the Second Hundred).

Facing increased pressure from clients on billing rates and a dramatic reduction in demand—a recent survey by Hildebrandt Consulting and Citi Private Bank finds that demand for legal services has contracted at a compound annual growth rate (CAGR) of 0.4 percent since 2008—many firms were forced to cut costs in order to prevent their profits from plummeting.

More than $2.4 billion was trimmed from The Am Law 200′s total cost base in 2009, a fall of 4.5 percent. As a result, while total revenue for the group fell by almost 3 percent that year, net income and average profits per equity partner (PPP) levels remained broadly flat.

Much of the cost savings came in the form of painful rounds of lawyer and support staff layoffs: Am Law 200 firms collectively employed almost 950 fewer lawyers in 2009 than they had over the previous 12 months.

But despite the severity of the Great Recession, The Am Law 200 actually fared remarkably well. The $2.4 billion reduction in aggregate revenue in 2009 was recouped within the space of 12 months, with total group revenue rising $3 billion in 2010 and continuing to grow at a CAGR of 4.1 percent over the past two years. Of the 186 firms that have been present in The Am Law 200 in each of the five years since the start of the recession in 2008, 134 increased their gross revenue over that time. Of those, 122 achieved increases in net income as well. Amazingly, more than half of all Am Law 200 firms posted higher figures in each of four key metrics—revenue, net income, revenue per lawyer (RPL), and PPP—in 2012 than they did before the recession hit. To get a sense of how individual firms survived the recession, we calculated five-year CAGR growth rates for revenue per lawyer and profits per partner for the 186 firms that have consistently appeared on The Am Law 200 since 2008. To see the results of those calculations in interactive chart form, go to ” The Recession’s RPL Winners” and “Rich in Profits and Getting Richer.”

“The law is a ‘follow the money’ profession,” says Peter Zeug­hauser, founder of legal consulting firm Zeughauser Group. “As a general rule, when the economy is healthy, the legal industry is healthier, but law firms are, to some extent, less affected by downturns than many other industries.”

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Shannon Green

Corporate Counsel

05-17-2013

The U.S. legal system is the world’s most costly, according to a study released this week [PDF] by the U.S. Chamber Institute for Legal Reform (ILR). The study, conducted by NERA Economic Consulting, showed that the American system costs about one and half times more than the Eurozone average.

The NERA study compared liability costs as a percentage of a country’s gross domestic product. The 13 countries included in the study have similar levels of regulation and legal protection, leading analysts to conclude that higher costs could be attributed to more frequent and/or costly claims.

The U.S. costs were about 1.7 percent of GDP. Countries on the low end of the range—the Netherlands, Belgium, and Portugal—had costs around 0.4 percent. Legal liability costs in the U.S. were found to be about 50 percent more than costs in the U.K.

ILR president Lisa Rickard says excessive litigation is putting U.S. companies at a competitive disadvantage globally. Lawsuits create high costs for businesses, she says, and they affect consumers, employees, and the overall economy.

“The worse a litigation system becomes in a country,” says Rickard, “the more companies think twice about whether or not to do business there, to locate there, to expand there.”

A Reuters article Thursday cited antitrust plaintiffs lawyers Douglas Richards and Michael Eisenkraft, who counter the ILR survey’s conclusions. The lawyers central argument is that many of the pro-business procedures, “made on an ad hoc basis rather than through a formal rule process, have compounded ‘the problems of cost and delay that they often were ostensibly intended to solve.’ ”

ILR also released the results of a survey of 800 registered U.S. voters’ views on class action lawsuits [PDF]. Sixty-nine percent of respondents said they thought there had been an increase in abuse of the legal system over the last decade.

The U.S. Chamber of Commerce represents businesses of all sizes, and problems with the legal system are worrisome for all members, according to Rickard. “It doesn’t matter if you’re the largest company in the world or a one-person solo proprietor,” she says. “There is an equal level of concern about this country’s lawsuit abuse.”

Smaller business may be just one lawsuit away from shutting down, she says. But larger, deep-pocketed companies are usually the targets of plaintiffs lawyers. “Entrepreneurial trial lawyers target them, particularly in class action litigation,” she says, “because they know at the end of the day the company will end up settling because it’s just not worth the time, expense, and impact on shareholder value to litigate those cases.”

ILR promotes reform to the civil justice system. Rickard says there have been some recent improvements to the litigation system in the U.S., including the Class Action Fairness Act of 2005, which expanded federal jurisdiction over many large class action lawsuits. But if the litigation system is to become competitive with other industrialized nations from a cost perspective, she says that more reforms are needed.

The voter poll on class action suits raised similar concerns in the civil justice system. Eighty-nine percent of voters surveyed found it at least somewhat problematic that lawyers, not plaintiffs, receive most of the money paid out in class action lawsuits. Sixty-one percent found the practice to be a significant problem.

Of the respondents who had joined a class action lawsuit in the past, only 14 percent reported having received anything of value as a result.

Plaintiffs lawyers argue that civil lawsuits, particularly class action suits, are necessary to ensure products sold are safe for consumers. Sixty percent of respondents acknowledged that lawsuits offer at least some benefit in that respect, but just 19 percent said the benefit was significant.

“Far from helping consumers, the U.S. litigation experience really does show that consumers are not better off in terms of their pursuit of justice,” says Rickard, “and that the system really benefits the lawyers that control it more than it does the consumers.”

Please weigh in with your comments.

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It’s the eternal question. Should I do what I love, money be darned, or should I go for the big bucks, idealism be darned? Just how much should money factor into your career decision? It’s a big question, one that you can’t be expected to have a ready answer for right out of school. And it’s an ever-evolving question, the answer to which will likely change throughout different stages of your life. The answer isn’t easy, but, as always, there are both practical and personal things to consider.

Choose Your Field

Different fields have different compensation standards; research average salaries for careers in your field. Typically, for example, someone in a technical or engineering field can realistically expect to make more than someone in an arts or service field. But also keep in mind that where you start doesn’t necessarily determine where you’ll finish. Your field doesn’t have to limit you. There’s creativity to be found in utilizing your individual skills to create your own unique niche. The maxim “Do what you love and the money will follow” is often true.

Leverage Your Skills

You can also leverage your skill set and passions in different ways. If you’re an English major, a future in teaching or publishing isn’t set in stone; you could use your writing skills in the communications or public relations department of a big company. If art is your passion, consider a commercially viable creative path such as graphic design. Every industry you can think of needs a whole team of people with different skill sets behind it.

Intangibles vs. Tangibles

No matter what, there are two tangible aspects of your life to which your work is undeniably tied: money and time. What you do does determine how much you earn, and how much you earn reasonably affects other aspects of your life, like how much time it will take to pay off student loans, how much you can save, how much you can afford to spend on essentials like rent and groceries, and how much you have left over for luxuries and fun. Living on less isn’t impossible, but will involve some budgeting and prioritizing. You might have to look into free or cheap fun things to do and (gasp!) learn how to cook. In terms of time, different fields require different time commitments from their employees. An investment banker far out-earns an editorial assistant, but makes up for that money working double the hours. Are you willing to put in all the hours required in a demanding position, or would you rather spend fewer hours at work and have more free time to yourself? There’s a reason they say “time is money.” If anything, time is more important than money. No one lies on their deathbed wishing they had more money, but everyone wishes they had more time.

On the other hand, there is a huge intangible aspect of your work, the importance of which is equal to or greater than that of the tangible aspects: job satisfaction. Do you find fulfillment in your work? Do you wake up every morning dreading the day to come, or do you wake up in the morning in anticipation of it? Do the hours at the office drag or do they fly by? Hours spent at the office don’t seem like a burden if you enjoy every second.

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by Phil Stott

Published: Monday, April 08, 2013

Did you know that Amazon keeps track of all the highlights that you make on your Kindle? And that it can count up all the individual highlights to create a list that gives us a snapshot of the things in books that people respond to; things they deem to be so important, so profound, so well-written, so beautiful, that they want to mark it, to have a record that they can revisit over and over? Well, they do.

So what kind of things are on the list? This is probably the point where many will feel a sense of deflation: 26 of the top 50 most highlighted passages of all time (that’s Amazon’s styling of it anyway) are, at the time of writing, from Suzanne Collins’ The Hunger Games trilogy. Without wishing to make any judgment call on the literary merits of the various exploits of Katniss Everdeen, I’d dare to venture that perhaps “most highlighted” is not the best measure of a book’s overall value.

Having said that, the list is fairly instructive in other ways—not least in the glimpse it gives us into the psychology of why someone chooses to highlight a particular piece of text. Taken as a whole, the random quotes and snippets—from works of fiction and nonfiction, across genres from fantasy to self-help—form something that approximates a collection of advice on how to live your life, a clutch of motivational desiderata from the hivemind.

Case in point: the no. 1 most-highlighted entry is as follows:

“Sometimes things happen to people and they’re not equipped to deal with them.”—Catching Fire (The Second Book of the Hunger Games).

Again: while that may not be the most profound thought ever committed to paper (or an e-reader’s screen), it’s clearly a sentiment that appealed to the more-than 17,000 people who chose to highlight it—a thought that, perhaps, helped some to navigate challenges in their own daily lives. As such, it works just as well as advice for any situation—including work—as, say, advice doled out by the professionals (for evidence of that, check out this list of the most highlighted quotes from business texts, culled from the same source—the quality isn’t really all that different).

With all that in mind, then, here are a few more pieces of useful advice to have surfaced from the top 100—proof positive that you can find inspiration or a useful life takeaway almost anywhere:

Find Your Calling

“Those three things—autonomy, complexity, and a connection between effort and reward—are, most people agree, the three qualities that work has to have if it is to be satisfying.”—Outliers: The Story of Success (Malcolm Gladwell – #39 on the list).

“‘Pretend to be completely in control and people will assume that you are.’”—Steve Jobs (Walter Isaacson, #51 on the list).

Be Open to New Opportunities

“It is a capital mistake to theorise before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts.”—The Adventures of Sherlock Holmes (Arthur Conan Doyle – #19 on the list). Conan Doyle ‘s most famous creation sounds like he’d be right and home in the internet age—maybe he’d have gravitated towards a career in big analytics.

Know Your Limits…

“We’re fickle, stupid beings with poor memories and a great gift for self-destruction.”

“It takes ten times as long to put yourself back together as it does to fall apart.” –both from Mockingjay (The Final Book of the Hunger Games)—#12 and #4 on the list, respectively.

“Nowadays people know the price of everything and the value of nothing.”—The Picture of Dorian Gray (Oscar Wilde – #47 on the list).

Dealing with Workplace Issues

“Life appears to me too short to be spent in nursing animosity or registering wrongs.”—Jane Eyre (Charlotte Bronte—#95 on the list)

“Life in District 12 isn’t really so different from life in the arena. At some point, you have to stop running and turn around and face whoever wants you dead.”—Catching Fire (The Second Book of the Hunger Games)—#8 on the list

“When dealing with people, let us remember we are not dealing with creatures of logic. We are dealing with creatures of emotion, creatures bristling with prejudices and motivated by pride and vanity.”—How to Win Friends and Influence People (Dale Carnegie—#54 on the list).

“Parkinson’s Law dictates that a task will swell in (perceived) importance and complexity in relation to the time allotted for its completion.”—The 4-Hour Workweek (Timothy Ferriss, #63 on the list)

Failing

“EXPERIENCE IS what you get when you didn’t get what you wanted.”—The Last Lecture (Randy Pausch–#85 on the list).

Check out Amazon’s full list here.

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Ed Burke

The Am Law Daily

04-04-2013

Here’s a logic problem with practical consequences: Given that a firm’s survival depends on revenue; that revenue comes from sales; that lawyers are the ones charged with bringing in revenue; and that most lawyers can’t sell and don’t want to, which of the following should law firms do?

A) Keep depending on a handful of rainmakers with portable business.
B) Continue spending millions on marketing to support people who can’t sell.
C) Fire the CMO—again.
D) Scrap the existing compensation plan for one that truly provides a motivation for selling.
E) Teach the lawyers how to sell in a way they’ll accept.

If you doubt that the last answer is the best, consider one major law firm’s experience.

In the second session of a sales training program, several of the firm’s partners abruptly announced they had to opt out to respond to an urgent over-the-transom beauty contest. They were persuaded to stay and use the session to prepare for the pitch, so that all the participants could see the program in action.

The team garnered one of the largest antitrust cases of the decade. The astonished head of litigation, an initial skeptic, later wrote in a memo that the two things the client noted in its decision were the very two things (revolutionary for the time) that the session had stressed—gaining the prospect’s trust and showing that the lawyers knew the company. In a different pitch, the head of litigation added, there was an “unmistakable” difference between those who’d been trained and those who hadn’t.

Seldom do marketing programs produce such a “smoking gun.”

You’d think that in the ensuing 19 years, word would have leaked out about the potential of sales training. But a recent survey by The American Lawyer’s research arm found that the biggest complaint raised by young partners is that their firms don’t sufficiently prepare them to develop business.

Instead, firms have collectively spent literally billions of dollars and decades of time on an endless succession of dubious flavor-of-the-month marketing programs that don’t generate revenue.  Why? Because these programs are dictated more by what the partners will do within their comfort zones than by what works.  And then marketing—the process or the department—is blamed.

If a worker keeps blaming his tools for his failure, you don’t keep giving him more expensive tools. You teach him how to build.

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Sara Randazzo

The Am Law Daily
The legal sector added 2,000 jobs in March, according to preliminary data released Friday from the U.S. Department of Labor, the highest single-month gain in nearly a year, and the first addition of jobs in the industry since 2013 began.

Initial reports from the department’s Bureau of Labor Statistics reported a 200-job boost in the legal services industry in February based on seasonally adjusted figures, but revised data now shows that 700 jobs were lost that month. An additional 2,400 jobs were lost in January, though all data from 2013 is still considered preliminary.

The number employed in the industry as of March—1,126,900—is 9,000 higher than in March of last year. The figures have yet to rebound from their prerecession peak of 1.18 million.

Overall, the nation added an underwhelming 88,000 nonfarm payroll jobs, The New York Times reports, half of what economists expected. The unemployment rate remained nearly unchanged at 7.6 percent.

Last month, frequent Am Law Daily contributor Matt Leichter concluded that the legal sector has not benefited from what he calls the greater economy’s upward slog. Read Leichter’s full analysis here.

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Let’s be honest – many firms aren’t exactly silver-tongued at articulating what sets them apart from their competitors. They don’t always adequately impart the distinguishing characteristics that would “seal the deal” for lateral partner candidates. I think the primary reason for this is the firms want their plug to be optimistic and appetizing, and the most harmless way to do that is to use nonspecific statements or observations. For example, depending on the partner candidate, they may or may not be acquiescent to variable partner compensation. Some firms may think they are more attractive when they avoid the “nuts and bolts” specifics that may sour candidates who may be interested in the firm.

So…what’s a lateral to do?  Well, in today’s legal market, I believe it’s a good idea to go back to the basics.  It’s easy to get caught up in the complexities of the firm, but if the basics aren’t addressed, the more complex issues won’t be, either.

The first priority is to determine the pros and cons of your current situation. Second, determine what you’d like to see in your next opportunity. Once your list is complete, it will be the ruler you will use to measure each new situation you investigate. It is important that you take the lead by showing the firm how to characterize and promote itself. In order for you to determine if the opportunity is the right one for you, you MUST ask the meaty questions that will provide you the right information to ascertain if the firm: 1) is financially sound and has a well-defined outline of who it is and where it is going, 2) shares your view of how law should be practiced and 3) provides you both a financially beneficial situation and the atmosphere and opportunity to further grow your practice.

The following questions are to ask that will help you track the process and will either assist you in understanding the dynamics of the partnership or, at a minimum, will aide you in narrowing the field of firms. Some issues will be deal-breakers, others will allow for negotiation and compromise.

What business focus are you targeting? The uncertainty in today’s economy makes this a mandatory question to ask. Is the firm attempting to think ahead of the market in an attempt to anticipate the practice areas that will be most in demand in the future? How much does the firm rely on any particular practice areas? If the market for any of these legal services dwindles, what other practices will pick up the slack?

What are the firm’s plans for future growth and expansion? Any plans for new and existing satellite offices? What is the time-frame? We know expansion through mergers and acquisitions has become critical in the last several years. However, as we struggle through a recessionary economy, I think we’ll see increased attention placed on those law firms that have been conservative in opening new offices. After all, the geographic decisions a firm makes say something about the firm. This may or may not work for your practice.

How much debt does the firm have? Capital investment and ongoing debt obligations of partnership are critical issues in joining a firm as an equity partner. The prospective firm should be forthcoming about its debt and use of lines of credit. In today’s legal arena, profit per partner figures, on which we’ve relied heavily in the past, will not be as reliable as forecasts of future success. The key will be how the firm manages its business on behalf of capital partners.

What is your partnership structure? Today’s predominant structure is a two-tiered partnership. With the meaning of “partner” has changed considerably over the last decade, becoming an equity partner has, in some ways, become more difficult. Two-tiered partnerships may offer a firm more flexibility to promote lawyers without having to divide the profits. It usually also raises the entry bar to the equity level. Be sure to ask why the firm has chosen its partnership structure and if the firm has de-equitized partners in the past, and under what circumstances this occurred.

What is the firm’s compensation model? We are all acquainted with eat-what-you-kill, merit-based and lockstep partnership systems. Though we know that one is not elementally preferable to another, a firm chooses its compensation model for a reason. It speaks volumes about the firm’s culture and its business practice. I’m certain some will be more desirable to you than others. You will also want to ask who decides the compensation and if partner compensation figures are open or closed. Third, you will most definitely want to ask if aspects that are important to you (i.e. referring work and cross-selling) are rewarded in the firm’s compensation model.

How would my compensation be affected by a down year in my book of business? If your business is one that fluctuates with the ebb and flow of the economy, it is important to ascertain how a more modest year of collections will be viewed by a new firm.

Does the firm have a mandatory retirement age? Just like partnership models, the mandatory retirement age issue has been one in transition at many firms.  

Once on board, what programs does the firm have in place to facilitate my integration and aid in future success? You have a plan for growing your practice, but it is critical to know how the prospective firm plans to support you in this endeavor. The uncertainty of the direction of the industry makes this a mandatory question to ask.

Looking for more helpful information? Need expert career counseling? Visit www.grimeslegal.com or call 800-875-3820.

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What’s the on your practice?

1. Have I made measurable, positive strides toward attaining the goal which I established as my objective for this year?
2. Have I been persistent in following my plans through to completion?
3. Have I delivered service of the best possible quality I was capable, or could I have improved any part of this service?
4. Have I effectively budgeted my time to allow for business development?  My expenses?
5. Can I use my marketing budget more efficiently and more effectively during the remaining months of the year?

1. My law firm and I are compatible. We share the same values and philosophy.
2. I have/my law firm has the support staff and technology necessary to keep productivity cost-effective.
3. My/my law firm’s law practice areas are diversified enough to avoid financial risk.
4. My/my law firm’s client base is diversified enough to avoid financial risk.
5. My legal work is always done on time and the invoices go out on schedule.
6. There are at least good 3 reasons why clients should choose my/our law firm over our competition.
7. The atmosphere at my law office/law firm is positive and healthy and there are no petty politics or personality problems to deal with at my office.
8. I have the right people in my support staff.   They are well-trained and there is nothing they need to learn and no skills they need to develop in order to do a better job.

 

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We all know today’s legal market continues to evolve and it certainly presents unique challenges. With the uncertainly still looming over the financial markets, many law firms continue to streamline their ranks and trim compensation for partners whose business has fallen off. It is not uncommon to push partners into early retirement or into counsel positions for those who are no longer producing at an acceptable partner level.

So…in light of these not so attractive elements, how do you stay nimble and place yourself in a position to exact the most benefit from the current market situation? How do you maintain a vital position and keep your firm enamored with you?

Answer: Do some soul-searching and ask yourself these thought-provoking questions. If you answer them honestly, they will help you determine if you should stay the course with your current firm or start to look for new digs.

1. Are you satisfied with your firm’s reputation in the legal and business communities?
2. Is your firm well managed?
3. Are you optimistic when it comes to the financial health of your firm? Do you believe management is making the right decisions regarding the firm’s future?
4. Does your firm provide the platform you require for building your practice? Does your practice coincide with the strategic vision of the firm?
5. Is the firm committed to marketing? Does the firm provide you with the resources you need to successfully market your practice?
6. Are firm billing rates compatible with your specialty and your clients and has your firm adopted a flexible billing program?
7. Do you have the opportunity to participate in important departmental or practice decisions? If you desire a leadership role in the firm, is that a real possibility?
8. Do you feel you are compensated fairly when compared with your peers at your current firm and with those at similar firms?
9. Is your firm a good cultural fit? Do your peers share your views of work/life balance and superior client service and reputable character?
10. Does the firm’s physical surroundings provide an atmosphere where you can be productive?
11. Do you feel respected and valued by your peers? Do you respect and value your colleagues’ legal work? Are you comfortable referring your clients’ matters to them?
12. Do you receive adequate support from other partners, associates, paralegals and support staff in order to get work done in a timely fashion?
13. Is the firm committed to pro bono work and community service in a way that coincides with your values and beliefs?
14. Does the firm have a fair policy for recognizing cross-marketing and service to yours and others clients? Is there equality regarding how much work you receive from others as opposed to how much work to you throw off to others?

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