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29 July 2013
Bradford Hildebrandt outlines the major issues facing the US legal profession in the 1990s and finds that there is much work still to be done before the arrival of the millennium
As 1994 ended, most US law firms recovered from several years of flat or declining profits, painful downsizing that often reached partner levels and cost reduction exercises that required staff lay-offs.
Being a managing partner through this period could tax the skill, patience and endurance of all of us, and many managing partners thought seriously of returning to the glory days of practising law.
Yet when we look back on the early 1990s, we may find that they were actually quite calm compared to the challenges that lie ahead.
Recently a managing partner asked me the following question; Why, after having come through the recession and having made difficult decisions to downsize at all levels which
resulted in a better economic picture for everyone, are all the lawyers here so unhappy? Within that question lies some of the basic issues that will confront the profession over the next few years.
The following issues are on the plate of almost every managing partner:
No issue is more difficult to understand than the overall unhappiness that seems to be prevalent in many firms. Yet, here is where the ability of most managing partners is at its lowest.
Any expert will tell you that with highly compensated individuals, money is not the only motivation. Without money, morale declines and no culture is immune from the problem caused by poor profitability. Yet many firms are going through cost-cutting and restructuring exercises and are chopping away the internal programmes that help morale builders, and when they are reduced too drastically, morale problems are sure to follow.
A major challenge in the future will be to instil a sense of belonging in an organisation where individuals at all levels can have an identity.
- Client relations
Most firms spend too much of their resources on seeking new clients (and incidentally, often never reward lawyers for attracting new clients) while neglecting the source of a large percentage of future business - the present client base. Clients today will not put up with arrogant, self-serving behaviour, which some lawyers think is their right.
While clients may be more price conscious than before, they respond immediately to personal attention. Let's face it, the legal product (at least in the clients' eyes) is movable. That firm which can best manage its delivery of service and educate all of its lawyers and staff will hold on to its clients and face less price competition.
Pricing is as important a management issue today as is excellent client relations. It is not just a matter of outbidding the competing firms, but as in most businesses (including law), it is a highly developed science. In fact, the issue has taken over the profession as clients are making major demands on law firms to price in a fair, often alternative, and open manner.
Most firms, unfortunately, still operate as if they were still in 1985. Being creative and skilled in pricing is a must, yet few firms can calculate what it actually costs to deliver a specific product.
Changing pricing strategies also has serious repercussions for internal management. For many firms, billable hours and billings still dictate a large percentage of management decisions and internal behaviour. Yet when a firm addresses fixed pricing or other alternatives, internal systems for management and compensation must also change.
- Global competition
It is no longer possible for most firms, regardless of their size, to ignore the changing global competition. The next five years will bring more and different competition, including the blurring of distinctions between domestic and international firms.
Additionally, the infiltration of other services providers including accounting firms, research organisations and ignoring the amount of work done by consumers on their own accord will be increasing. In order to stay visible, every firm will have to consider those facts when developing its growth and strategic needs. The basic questions involving exactly what lawyers do and how they do it will have to be re-examined.
So as one considers the problems of the 1990s, which were difficult but in many ways quite specific, it can readily be seen that the future of law firms will require more - not less - management by both lawyers and professionals who are creative and not just reactive. It will take a firm's absolute determination to continue to plan and to keep lawyers focused on their most important contribution - practising law.
Bradford Hildebrandt is chair of international legal management consultancy Hildebrandt.