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Law Firms Need a Focused Strategy for the New Economy
Special to Law.com
October 02, 2009
Pillsbury's Craig Barbarosh
During the early days of this year, not a single business day would pass without the legal press parading the names of new entries to the list of firms that announced attorney layoffs. With the severe decline in the capital and equity markets and corresponding collapse of merger and acquisition, public offering, financing and litigation work, it seemed that nearly every large law firm (and many medium-size and small ones too) responded to the market decline by aggressively reducing the number of lawyers on their letterhead in order to "right size" relative to their anticipated workflows and reduce costs related to compensation. Partners, associates and staff were all subject to "downsizing" and the toll continued to grow every day.
Following layoffs, most firms went even further to try to reduce costs, recognizing that revenue would likely decline or, at very best, remain constant to the prior year, and that the only way to maintain acceptable levels of profitability was to cut costs aggressively. Thus, excess space was sublet (often at a loss), non-essential travel was reduced and items considered routine by many law firm partners -- gourmet dining, lavish firm events, summer associate programs -- were swiftly curtailed or eliminated.
At the same time, clients have pursued their own cost-cutting initiatives, seeking to manage external costs and obtain great control over the outside legal spend. As clients have become more sophisticated consumers of legal services, they have required alternative billing systems, fee auditors and greater oversight for work assigned to their outside counsel. Lately, many clients have come to resist and, in many cases, reject the notion of the "billable hour" in favor of other, "incentive-aligned" billing systems.
Many legal strategists have gone on record recently that the business of law is changing and firms will need to adapt to survive and thrive in this "new legal economy." In order to do so, law firms need to revisit their strategic plans and make adjustments to respond to the new business imperatives they face.
In many ways, the current economy and legal market present unique and unparalleled opportunities for nimble and opportunistic firms to achieve new levels of success. However, as in most business cycles, many of the "old ways" may no longer work and firms need to become more entrepreneurial and flexible to take advantage of the new economy.
Below are some of the issues law firms should consider as they review and adjust their strategic plans for the future:
Invest in Business Development. Effective business development is the core of any marketing plan for successful firms. While this should go without saying, many firms, in their haste to radically cut costs, have also limited business development activity to a point that impairs effective client interaction. Successful business development can be substantive or purely social (or a combination of both), but personal interaction with clients is mandatory.
Firms should encourage effective, targeted business development. While the specifics of any business development activity depend on the unique goals of each firm, it should be team-based with measurable and tracked return-on-investment.
Stay Close to Your Best Clients. Lawyers are a competitive bunch, and in the current market with reduced work allocation and fewer transactions, it is more important than ever for firms to stay close to their best clients. This goes beyond routine business development and requires regular communication at all levels with a focus on gaining a keen understanding of the clients' business and business needs. Legal pundits constantly write about the need to be "partners with your clients" and that mantra is particularly important in the current economy.
Promote the Team. Star lawyers often attain success by individual accomplishment. The great trial lawyer, the master of the boardroom, the brilliant tax strategist -- they are all known for their own resumes. However, for most firms, the bulk of revenue is generated from clients serviced by a diverse team of professionals within the firm. In the current market, it is more important than ever for firms to work together as a team (or to work as teams within the larger team) to develop, advance and foster client relationships. This notion of teamwork applies to business development, communication, cross-selling and every facet of the client relationship with the ultimate goal to create "institutional" relationships. Partners will be best served if they view themselves as stewards of firm client relationships, rather than individual "relationship partners."
