The Year Wasn’t So Bad for Law Firms in the Second 100
The law firms in the top 100 got a lot of press last year, with news of declining profits, frozen salaries and staff and lawyer layoffs.
The year was considerably better for midsize law firms in the second 100, according to a legal consultant writing in the Connecticut Law Tribune. “In early 2009, we spent several months touring around talking to clients and contacts all over the country. In those conversations, we found that, as bad as Wall Street firms were doing, other firms were doing surprisingly well,” writes Peter Giuliani, a partner with Smock Sterling Strategic Management Consultants.
Among the 100 largest law firms, 65 reported declines in profits per equity partner, while 35 saw flat or increased profits, Giuliani says. But among the second 100, the ratios were reversed, with 65 reporting flat or rising profits and 35 reporting declines.
He attributes the better numbers for midsize firms to practice diversification, a model “focusing on a limited range of complementary practices in which you can offer significant value compared to fees.”
A Web-based survey of nearly 100 midsize law firms conducted by Giuliani’s company had other encouraging findings:
• Only 4 percent reported they weren’t doing well in 2009. Fifty-three percent said they were doing much better than they had expected.
• Only about 7 percent reported that their clients were focusing on cutting costs. Sixty-five percent said clients were most concerned with the value received relative to fees paid.
The findings weren’t as encouraging for associates or those who enjoy law firm perks:
• About 65 percent planned to reduce associate salaries across the board. Fifty-five percent planned to reduce summer associate programs.
• Virtually every firm planned to cut costs. “After all, a recession provides a lot of ‘cover’ for cleaning up mistakes made in times of plenty,” Giuliani writes. Sixty percent of firms planned to cut back on meetings, retreats, events or other noncompensation expenses.
