Editor’s note: The New Normal is an ongoing discussion between Paul Lippe, the CEO of Legal OnRamp, and Patrick Lamb, founding member of Valorem Law Group. Paul and Pat spend a lot of time thinking, writing and speaking about the changes occurring in the delivery of legal services. We hope you will join their discussions.
There has been a lot of buzz about the Hildebrandt Baker Robbins/Citi Private Bank 2011 Client Advisory.
In a short blog post, it is hard to do justice to all of the details and tidbits contained in the 17-page report, so I am going to pick out just a couple of things.
First, clients’ zeal for reducing costs continues unabated. “Among the companies participating in the HLDS, for example, 51 percent reported demanding rate reductions from their outside firms in 2009 … For 2010, 54 percent indicated an intention to impose rate reductions.”
More than 70 percent of the companies in both years intended to impose rate freezes. Clients also are shifting their work to regional or boutique firms—68 percent did so in 2009 and 74 percent indicated their expectation to do so in 2010. Clients are doing more, but the net effect of this is that law firms’ billing and collection realizations are decreasing significantly, and total spending on outside lawyers decreased for the first time in memory—by 5 percent in the United States.
So how are law firms responding? It is too easy to just point out that according to the advisory, “most firms will implement modest rate increases in 2011.” The phrase “tone deaf” comes immediately to mind, but firms that increase rates are probably just insuring that their realization rates will continue to decline. But beyond this ham-handed response, it does appear that law firms are beginning to realize they need to change they way they produce work.
Firms are merging, though mergers of weak sisters rarely create a strong one. Some firms are hiring lateral partners while others seem to be “reducing their partner ranks.” While presented as a right-sizing business strategy, this phenomenon has the appearance of a “rats leaving the ship” syndrome.
And there, at the end of the report, is the comment that “there is today considerable experimentation going on across the legal market” in areas like process management, project management skills and knowledge management.
The authors expect this experimentation will expand in 2011, and focus on project management skills and “other techniques for improving efficiency …”
This type of change will not be easy. More on that point soon.
Patrick Lamb is a founding member of Valorem Law Group, a litigation firm representing business interests. Valorem helps clients solve their business disputes and coping with pressures to reduce legal spend using nontraditional approaches, including use of nonhourly fee structures, coordination with LPOs or contract lawyers, joint-venturing with other firms and implementation of project management tools to handle lawsuits or portfolios of litigation.
Pat is the author of the the recently published book Alternative Fee Arrangements: Value Fees and the Changing Legal Market. He also blogs at In Search Of Perfect Client Service.