Blawg Review #235


On this 80th Anniversary of the Stock Market Crash of 1929, I am pleased to host Blawg Review and dedicate Blawg Review #235 to The Great Recession.

How has our current crisis changed the practice of law and affected our careers as attorneys? Fortunately for me, there was no shortage of reading material on the subject this past week.

The news from large law firms continues to be mostly bad; though there was at least one flicker of hope reported on Above the Law this week. So do any lawyers have job security in this economy? Maybe only lawyers who have their own business.

Lawyers who don’t want to build a practice may look to government as an alternative employer. But those hoping to get a position in the White House Counsel’s office may have to wait a while longer.

What if you like private practice and your firm isn’t giving you the support you need to successfully find clients? Maybe the time is ripe to hire a coach. Or if you decide that launching your own firm is the way to go (or your only option), the Wisconsin Law Journal highlights 10 Terrific Law Practice Management Blogs that teach you what you never learned in law school.

If you do launch your own practice, perhaps a reality TV show can help to market the firm. But then again, prior attempts at this have failed.

There are classic mistakes to avoid in trying to sell your legal services. There are also a lot of obstacles that can get in your way of success when you are building a practice (particularly for associates at large firms.)

Small Firm Advantages

Smaller firms can benefit from current conditions in the marketplace for legal services. IMHO, large law firms are simply accelerating their own demise by creating an army of cheaper competition with all the layoffs that have taken place.

To the extent that large firms can continue to be competitive in these difficult times, they need to find ways to deliver value. Don Frederico, a large firm veteran and President-Elect of the Boston Bar Association, suggests that the message of the Great Recession is not simply that lawyers need to get out there more (e.g. with social media). He suggests that lawyers ask themselves the following questions:

1. Am I providing maximum value to my clients?
2. Am I prepared to share in the risks of bad outcomes (and will my clients share in the rewards of success)?
3. How do my clients define “success” in the matters for which they engage me?
4. Do I understand my clients’ business?
5. How can I enhance the level of service I provide to my clients?
6. Am I doing enough to hone my skills and stay current in my field?
7. Am I, or is my firm, meeting my clients’ expectations in the areas of diversity, community service and pro bono? Am I demanding these commitments of myself, regardless of my clients’ expectations, simply because they are the right things to do?
8. Are my marketing efforts only trumpeting my abilities and experience, or are they also providing valuable information to my clients and contacts?

If you are Still Gainfully Employed, Don’t Go it Alone

If you do manage to be one of the lucky ones who gets to keep your job, don’t make the mistake of going it alone. Ask for help when you need it. No one will doubt your competence if you do. In fact as Bruce MacEwen suggests, even leaders at law firms should be seeking help from their key advisers.

Social Media is a Good Area to Seek Out Help

The rules of social media use are still being developed but one thing is clear: social media will pay an increasing role in marketing professional services as we exit the Great Recession.

What if you are not that familiar with social media or how to use it effectively? Learn. Find someone to help you. The desire to keep learning and growing is what separates a star lawyer from a superstar.

Should bosses be friending their subordinates? An emphatic no from some employment lawyers. But what happens in law firms when associates are friends and one becomes a partner? (Not a big risk in these economic times where the chances of making partner at a large law firm are not much greater than the chance of being struck by lightning twice.)

Speaking of social media policies, how should a law firm police the behavior of employees who may be wasting time on social media. Blocking doesn’t seem quite right because there are legitimate business uses of social media.

If you are looking to develop a social media policy for a company or for your law firm,
the Association of Corporate Counsel has a great paper on the subject-Social Networking for Companies: Leading Practices in Leveraging Social Media for Business, Creating Social Networking Policies and Using Social Media in Hiring (though I believe you need to be a member of the Martindale Hubbell Connected Social Media Policy Group in order to view this)

If you have any doubt about the importance of participating in the use of social media, watch the Youtube video shared by Jim Calloway (via Gerry Riskin).

Susan Cartier Liebel makes a compelling case that use of social media is not optional for lawyers.

[A]ll things being equal, people will do business with those they know like and trust. And as much as those would like to dismiss the power of followers and online referrals and connecting on Facebook they do so at their own peril.

But at least one PI lawyer thinks that using Twitter raises the specter that clients will see that you are doing non-business things during work hours (i.e. clients will question your commitment to their case or to the practice of law more generally.)

Are Law Schools Responding to the Changed Marketplace?

What about law schools? Are schools modifying their course offerings to address changes in the job market? Stephanie West Allen suggests that there is a growing interest in courses dealing with behavioral economics and social psychology at top law schools. She links to some of her prior posts where she cites her concerns that these fields can lead the legal system in the wrong direction (pushing us away from taking personal responsibility for our bad acts).

Certainly many of us would like to figure out why no one is taking personal responsibility for the crazy financial engineering and risky financial products that lead us into the Great Recession. But then again, behavioral economics teach us that government can influence our behavior in a positive way by directing our default choices.

More generally, are law schools modifying their course offerings to address changes in the job market? Shouldn’t curriculum be modified based on what is needed in the marketplace? Yes says one commentator and no says another.

How Should Law Firms be Reacting to the Great Recession?

Law firms should take note of:

[T]he rise of merit compensation, multisourcing, non-lawyer stakeholders and the demands made on leadership generally and practice group management specifically; the decline of mergers, hourly billings, big real estate holdings, compensation generally, and fixed levels of staffing.

In other words, transition is the keyword. Your competitors are leaving no stone unturned in their search for an edge in a difficult market–neither should you.

There is evidence to support some of these trends. Take for example research on alternative billing.

In terms of compensation, firms need to focus on the short term to prevent the flight of valued partners. Reducing associate compensation should also be a part of the equation. But should lockstep really go?

Cost Control is Driving In-House Decision Making in the Great Recession

According to a study done by the consulting firm Hildebrandt, “…more work is being brought in-house, alternative fee arrangements are in high demand and spending is shrinking. The rate of increase for inside and outside legal spend and compensation slowed in 2008.”

This past week at the Annual Meeting of the Association of Corporate Counsel, the ACC released a study showing that for the first time in three years, controlling the costs spent on outside counsel is a top priority for in-house legal chiefs (compliance is now second). Also noted in the study is that the “use of alternative fee structures rose to 61 percent of in-house counsel and fixed fees about 38 percent. Project retainers (15.4 percent) and contingency fees (10.5 percent)”.

Meanwhile at the ALI-ABA ACLEA 2009 Summit, panelists predicted a number of important trends on the way: law firms will start acting like clients and will demand law schools teach more of what law firms need; Altman Weil’s Ward Bower predicted “deferral of law school graduates is a losing proposition for the graduates and the firms. The industry is more likely to see reduced starting salaries combined with apprentice programs moving forward. While firms will still have to write off time in that model, it will be a more affordable investment than paying the higher salaries”. He also said that “globalization of clients will continue to force even small firms to deal with matters abroad or represent foreign clients in the United States. Large and quick law firms will have the competitive advantage, he said, but smaller firms can compete with the use of technology”.

Also, U.K.’s Legal Services Act of 2007, which when it takes effect will allow law firms to raise capital like a public company will impact even U.S. law firms (particularly as we come out of the recession and firms have money to spend.)

Can Outsourcing to India be Part of the Cost Control?

If you want to leverage your time with resources from India, how do you know that the vendor you choose is keeping your data secure? Matthew Sullivan has some answers.

And get beyond the headlines when you see articles discussing the potential problems with outsourcing. Law.com’s use of the headline “Legal Pitfalls of Outsourcing May Outweigh Benefits, Says New Survey” doesn’t tell the story contained in a recent study by Kroll, Inc. on corporate fraud. LegalEase Solutions writes “The survey never intimates that the risks outweigh rewards. The survey simply says do your due diligence. Just like you would do in any other business capacity.”

Where Did it All Start?

There are numerous pundits ready to weigh in on the causes off the current economic downturn. Was it sub-prime lending? Credit default swaps? Or simply the fact that borrowing money was cheap and easy?

Will better regulation of the financial markets prevent this in the future since trying to educate consumers doesn’t work in a complex economy?

“[The]..classical ideal of face-to-face, issue-by-issue negotiations that underlies contract law is simply inapt for the modern economy. Acting as if we can simply give people better educations and then send them out on their own in a world of basic contract law ignores the change that mass consumerism wrought on the notion of contracting. … Pushing the education angle inadvertently pushes us back in the direction of this outmoded way of thinking about contracting.”
The Dark Side of the Great Recession

Thankfully we don’t read about lawyer suicides every day; but the story of Mark Levy, an associate who was let go from Kilpatrick Stockton, is particularly chilling.

And are law firms suing their clients with increasing frequency during these hard times? It is hard to see how much good can come from this though $2,000,000 will buy a lot of legal pads for your office.

Where is it All Heading?

Change is coming to a law firm near you. If things haven’t changed already, they will. The marketplace for legal services is fundamentally different then it was two years ago. So how will we all survive the Great Recession? As the Rabbi at my temple said in September on the Jewish New Year: Gam Zeh Y’avor (this too shall pass).

Blawg Review has information about next week’s host, and instructions how to get your blawg posts reviewed in upcoming issues. Next week’s host is the New York Personal Injury Law Blog.

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