Senior lawyers question law firm business model
The economic crisis has caused partners to cast doubt on the fundamental business model of law firms, while associates are living in fear of losing their jobs, according to the largest survey of the UK legal profession.
Sixty-nine per cent of managing partners and senior partners believe that the current economic turmoil will force law firms to radically change their business models, according to The Lawyer’s latest YouGov-Centaur survey of nearly 2,000 lawyers across the profession.
“That’s a fear barometer,” commented Mayer Brown vice-chairman Paul Maher. “I don’t believe 69 per cent would be saying that in any other environment. We didn’t see managing partners out in the street applauding the Legal Services Act.”
Maher said he has been questioning the fundamental business model of law firms for years – even during the boom times.
“The basic problem with law firms is that we’re annual cash vehicles,” he argued. “Because we don’t have the exit that other owner-managed businesses have, there’s this constant drive to pay out as much as you can to partners at the end of each year. People see our industry in terms of short-term gain, not in any long-term sense.”
Rank-and-file partners are barely more confident in their business models, with 60 per cent saying fundamental change is needed.
Brodies ;outsourcing partner Andrew Rigby, a ;former ;Addleshaw Goddard partner, said he has been banging this drum for a number of years.
“The way we expect every fee-earner to be a good marketer, a good lawyer and a good manager is just bizarre,” said Rigby. “You have the extraordinary situation where you have your coalface worker also acting as your manager.
The model for legal firms is fundamentally flawed. We need more of a corporate structure or to structure ourselves like the big accountants. Set rainmakers free from fee-earning and let them get out and win new business. Let the fee-earners do the lawyering.”
The managing partner of one global firm said this was a simplistic view, with many firms providing more training for lawyers, more preparation for partnership and letting partners carve out suitable roles. But he conceded that this may not be true of the majority of firms.
While partners may be questioning the very business model they have depended on for their whole careers, associates have more base concerns.
Only 15 per cent of associates felt strongly that their jobs were secure.
The chair of the junior lawyers division of the Law Society and Nortel in-house counsel Katherine Gibson said: “There’s a feeling of nervousness. Everybody’s scared about their jobs.”
This is understandable. According to the survey, 44 per cent of the UK’s law firms have already made redundancies – twice the amount previously reported.
TheLawyer.com’s Legal Job Watch has been documenting the travails of the job market since last October and has revealed that 44 of the UK200 have made redundancies. However, the YouGovCentaur research suggests that many more firms have made redundancies under the radar.
Gibson, whose organisation supports law students and lawyers, from newly-qualifieds up to those with five years’ post-qualification experience (PQE), said: “It’s a huge area of concern, especially for my members, who are at the junior end of the profession. They’re worried that if they’re made redundant and go out to the job market they’d lose out to those lawyers with more than five years’ PQE.”
The YouGovCentaur results confirm Gibson’s feelings. Only 9 per cent of associates felt strongly that they would be able to find another job easily.
That figure slumped to just 6 per cent of those at firms with turnovers of between £25m and £50m, which roughly equates to the bottom half of the top 100 firms.
Chill wind blows as two-thirds of law firm partners admit job security fears.
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Readers' comments (14)
Anonymous | 5-Jan-2009 1:10 pm
It is what it is!
I dont think the strucutre of a firm would have made a difference to the ammount of redundancies or work flow. Its largley out of the firms hands. Accountancy firms are busy not because of their trade, not their structure. And as for the associate jobs on the market, if a firm is hiring at 2-3 or 4-5 or higher they will say, they would have a need for someone at a particualr level rather than just another competant lawyer.
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Terry Silver | 5-Jan-2009 4:35 pm
oh dear
Anonymous @13:10
With spelling and grammar like that, it's no wonder you are worried about redundancy..
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GOAK | 6-Jan-2009 4:27 pm
Touche!
Absolutely appalling that in this day of age the first commentator would submit that rubbish! If this "professional" is still employed at a law firm when I'm redundant God help the profession.
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Ryan | 6-Jan-2009 7:18 pm
Snobi so n so
Who do u thnk u r u snobbs! just coz sum of uz dont write the stuk up way u do so wot. im a partner in a maggic circle firm and i eat litl boys like u 4 my t, thats y im still workin & ur not!
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Anonymous | 6-Jan-2009 8:45 pm
Question...
what is Gibson? Can't find the website...
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J. Talbot | 7-Jan-2009 9:54 am
Ryan
Ryan, if you work at a magic circle firm, I'm a Dutchman.
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Anonymous | 8-Jan-2009 2:40 pm
Brought it on themselves
It's a bit ironic that Paul Maher is unhappy that lawyers in big firms, such as his, have a year to year perspective. Given the history of purges at Mayer Brown since he took over, every partner there knows that he or she is only one bad year from being demoted or pushed out the door. Small wonder that they want their cash in the same year they earn it.
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Anonymous | 8-Jan-2009 2:49 pm
All talk and no action
My view is that as law firms are so conservative by nature, they will not (by and large) not rush to change. Firms tend to be forced into change on the whole and I anticipate that as change takes so long to put in place in most firms, the economy will have started to recover by the time that changes have gone through the various committees, sounding boards etc.
My bet is that firms in 5 years time will be structured very much as they now are, which to me is a lost opportunity.
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Anonymous | 8-Jan-2009 5:41 pm
Website
"Gibson" (See earlier post) refers to Katherine Ginson, Chair of the Junior Lawyers Division. The Website is at http://www.juniorlawyers.com
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Legal Eagle | 9-Jan-2009 10:28 am
law firms
Since the City deregulated in the early 1980s the law has seemed like a profession which pays very well. As a result we now have lots of lawyers, particularly in large firms, who joined the "profession" (ha! ha! remember that!) for the money and not much else. As elsewhere in society, quality of work has gone down, since who cares so long as you log the hours and the bill gets paid?
The client executive knows that if he uses a big firm he won't get criticised. This has all helped to produce a breed of greedy partners making a lot of money but with no long term plan save perhaps selling out to a US firm. They employ a glut of nervous assistants living an insecure but well paid existence with little job satisfaction or prospects of partnership and the certainty of their replacement by someone junior and cheaper.
Now said partners are stuck with long lease obligations and emptying offices - best to sack those assertive experienced assistants rather than reduce drawings obviously.
Yes we need management who can deal with people since lawyers are so useless at it, but only if they have real power. And a few professionals and a bit more professionalism would help. Without that what is the point anyway, you might as well be a cowboy claims handler and the public is getting wise about them.
The profession has also been badly run and distracted by the money issues. An emphasis on providing good independent advice might be a good slogan. It is unthinking greed that has got us into this recession.
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