N THE UNITED STATES, as well as in many other parts of the world, many law firms face an uncertain future. Part of this uncertainty is short term. In North America, many firms are still trying to cope with the economic slowdown in the third and fourth quarters of 2001. In other parts of the world, law firms are feeling the impact not only of the global effects of the North American recession, but also, in some jurisdictions, the results of uncertainty about local political or economic conditions.
The other source of this uncertainty is unrelated to the business cycle. It is the way in which the practice of law is changing in fundamental ways and faster than ever before. The maturation of legal markets in many jurisdictions has produced increased price sensitivity for some practice areas, as well as higher service expectations from more sophisticated clients. Client loyalty appears to be a thing of the past. With downward pressure on rates, stagnant productivity and increasing operating costs and associate compensation, many firms and practice groups find themselves in an apparently permanent profitability squeeze.
