A dozen years ago, Stephen Poor stood in front of the Seyfarth Shaw partnership and introduced an idea he would pursue until—and even after—he left the firm’s chair position last year. The idea would eventually become a major part of Seyfarth’s business, now known as SeyfarthLean, and would earn the firm a reputation as a first-mover in an area that clients are increasingly demanding: legal project management.
Then, this past May, came the layoffs. Seyfarth made headlines for laying off associates and staff, reportedly as many as 40, in part for a reduction in billable hours in the first quarter of 2017. And with layoffs come questions. What, if anything, does this say about Seyfarth’s lean strategy a dozen years in? And what does it say about the broader legal project management movement?
A Seyfarth spokesman says demand for the firm’s SeyfarthLean Consulting arm, which helps clients make their legal departments more efficient, has never been stronger. In a statement sent out at the time of the layoffs, chairman Peter Miller cited a shifting market for legal services to explain the cuts. “We’ve recently completed a careful review of our business to maximize performance and best serve our clients, while continuing to execute our growth plans,” Miller said.To be sure, Seyfarth’s layoffs can’t be viewed outside of the context of a flat-demand market for Big Law’s services. Coupled with across-the-board associate pay raises this year, many law firm consultants anticipate that other Am Law 200 firms will pursue layoffs, even if the cuts don’t make their way into headlines.
But the question of what return Seyfarth is seeing on its project management investment persists.
Laura Empson, director of the Cass Centre for Professional Service Firms and a senior research fellow at Harvard Law School’s Center on the Legal Profession, says law firms traditionally move in herds when it comes to adopting new processes and technology like those involved in legal project management. “To what extent is a first-mover advantage sustainable?” Empson says.
Seyfarth’s financial results over the past five years have mostly outperformed the Am Law 100′s. Its revenue per lawyer from 2012 to 2016 grew 11.4 percent, compared to Am Law 100-wide growth of 7.6 percent. That occurred even as Seyfarth’s five-year head count growth outpaced the industry, 15.6 percent to 10.7 percent.
But that head count growth caught up to the firm last year. Mirroring a broader trend of faltering RPL, Seyfarth’s RPL fell last year by 0.7 percent, which certainly could convince a managing partner to trim a firm’s supply of lawyers.
Miller, in an interview with The American Lawyer in March, said the firm’s financial results last year—including nearly 6 percent revenue growth—were a sign that its Lean strategy was paying off. “That investment is coming home to roost to our benefit and our clients’ benefit,” Miller said.
Seyfarth is mum about specifics as to how the firm’s lean strategy is actually retaining and winning clients. Two years ago, the firm told Chicago Lawyer magazine that SeyfarthLean Consulting, a subsidiary that houses its efficiency-focused initiatives, had worked with 100 of the firm’s clients, including 14 of the largest 20. That number has since grown to 15, Seyfarth says, while SeyfarthLean also works with 34 of the firm’s 50 largest clients.
Whatever Seyfarth’s success has been, there is no doubt other firms have made investments in the legal project management, technology and pricing area, which together help firms provide predictable budgets for clients and stick to them. There are now more than 200 employees in pricing and project management roles at roughly 100 firms, according to Reed Smith’s global director of client value Patrick Johansen (formerly Seyfarth’s practice director for its litigation department until last year), who tracks professional hires in Big Law firms. Reed Smith hired its first pricing professional seven years ago and has grown the client value team to 16 people, Johansen says.
A more recent convert is Barnes & Thornburg, which has invested in a project management capability it brands ValueWorks. The less-than-two-year-old project currently tracks legal budgets on more than 500 matters that together account for 10 percent of the firm’s revenue. More than 125 lawyers of the firm’s roughly 520 lawyers are trained on how to use the system, which relies on technology built by the vendor Prosperoware. (Seyfarth, by comparison, has invested in its own technology platform.)
“We expect that within five years, the partnership will look back at this program as the single biggest factor in the firm’s ongoing success,” says chief marketing officer Allen Chichester.
In part, that will depend on how quickly clients prioritize project management tools when making purchasing decisions. An Altman Weil study of chief legal officers last year reports that 30 percent of general counsel shifted $50,000 or more in business last year to a firm that could more efficiently manage its matters.
Bill Henderson, a professor at the Indiana University Maurer School of Law who studies the business of Big Law, says Seyfarth’s long-term view remains sound. He says the change in clients’ purchasing decisions is still in its early stages and will take “the better part of a generation” to complete. “Seyfarth is right that clients want better, faster and less expensive,” Henderson says. “But we’re not at the point yet where clients are going to consistently pick what is new and promising over a price discount. The latter can at least be understood by every buyer of legal services. Law firms and clients are climbing this learning curve together.”Gerry Riskin, a law firm consultant at Edge International, says he thinks a tipping point is not far away when law departments begin hiring law firms who best accommodate their demands for price predictability and matter management. Legal departments are going through a similar change process as law firms, he says.
“At some point, enough executives will move around in enough board meetings to say to general counsel who are just asking for price discounts, ‘Excuse me, wait a minute, what about what Corporation X is doing with their outside lawyers?’” Riskin says. “And then it’s time for the general counsel to say, ‘Yes, of course, I’ll look into that.’”