There’s a lot of noise at the moment in the discussions of big law firms and their business. The messages can be confusing, even contradictory. Growth is over! (Except for those firms that keep growing.) Demand is down! (Oops, except maybe in the fourth quarter of 2012.) There’s a crisis in productivity! (Caused perhaps by measuring only whether more lawyer time is logged and not whether the work is getting done more efficiently.)
Pity the poor planning officer who has to make sense out of this cacophony. With everyone talking at her—consultant, vendor, banker, futurist, pundit (guilty am I)—it’s hard to hear a word they’re saying. To be fair, it’s not just the chattering classes at fault; it may be the nature of the market itself. It turns out that the Big Law world isn’t a single organism that behaves in a linear manner. Rather, it’s a series of microclimates that these days vary widely. Lawyers in the same firm—lawyers on the same corridor—are setting records for both hours and inactivity. Everyone feels the anxiety but not the same degree of pain. To paraphrase the old joke, when my partner’s practice collapses, it’s a recession; when mine dies, it’s a depression.
We may have finally reached consensus on two subjects. The first: Change is coming to the large law firms. When and for whom? How broad and how painful will it be? Will it affect me? For those questions, well, we don’t have agreement on the answers. The second is more straightforward: By word and deed, clients have driven much of the need to change. How serious are they? Is this a blip? What do they really expect?
We could guess, but the folks at Acritas, the sharp market research outfit based in Newcastle, England, had a better idea. As part of their annual interviews with a few thousand general counsel around the world, they began asking what changes these customers anticipate over the next two years. The answers are significant both for what they say about client thinking and for what they suggest about the broader challenges facing law firms and their markets.
In the survey, 84 percent of the in-house counsel named one change or another they expect to see over the next two years. Cost was the most mentioned topic. Nineteen percent anticipated changes in fee structures. Twelve percent saw a reduction in fees ahead. Eight percent predicted that cost pressures would increase. The rest—all in single digits—identified a variety of changes ranging from the application of new technologies to a bump in law firm consolidation to the transfer of more work in-house, to, at a mere 4 percent, an increase in law firm–client "partnership." For those looking for clients, please find the 9 percent who said they didn’t know what to expect and the 7 percent who didn’t "foresee any changes."
At first glance, it sounds like more of the same: In the name of cost controls, expect more demand for discounts; in the guise of appearing to change things, here come more demands for fixed or alternative fees, all cleverly geared to be discounts by another name. There is a lot of that, but these responses weren’t from knee jerks. I read more than 400 verbatim comments that Acritas assembled from their interviews. They portray a broad and splintered market, filled with clients who may have different goals but who appear thoughtful and knowledgeable about their needs and those of their firms. Alas, these are clients who are stuck with talking about fees because that seems to be the only subject where both sides have a common, if limited, vocabulary. As one in-house lawyer from a billion-dollar retail giant put it: "I do believe [our relationship with firms is] going to have to be more value-driven than rate-driven. Rates have been too big a focus over the last four years." Do we have agreement on what value-driven means? Of course not, but implicit in the lawyer’s plea is this sentiment: Whatever value means, it can mean more than money.
If it doesn’t, the law firms stand to lose. Corporate clients now swim in a sea of metrics. They and their business-side mates are measured routinely on all sorts of performance scales: skill; speed; problem-avoidance; teamwork; managing up, down, and sideways; and any other yardstick that creative human resources staffs can develop. But when it comes time for these metric-encumbered clients to measure their law firms, what’s the one set of metrics that law firms provide?
Hours and rates. Boxers call this leading with your chin.