From reading the trade press over the last few months it’s pretty clear that the top-end of the legal business is facing serious financial pressure. Revenue is flat or down in most major practice areas. There’s overcapacity among the AmLaw 100 and there’s a steady drumbeat from corporate counsel to reduce costs. Apparently some corporate counsel have had the audacity to insist they will no longer pay $200 an hour for the privilege of training junior associates.
There’s a debate under way (among journalists, consultants and lawyers themselves) whether this economic soft-patch represents a routine cyclical downturn or a longer-term structural weakness in the market. As the American economy still struggles with the after effects of the Great Recession and the ongoing budget follies in Washington, it’s hard to know which view better represents reality. But the message from the pundits and consultants has nonetheless been clear – in the short to medium term, large law firms face a period of sustained weakness. This, the experts all seem to agree, will be true for all large firms – except those at the very top-end of the market who will continue to find corporate clients price insensitive as they go about handling the most mission critical matters.
Up until now that is. Now there’s a new and somewhat radical notion that’s been introduced into the discussion. For the first time it’s being suggested that even the firms at the very top of the heap may be facing pressure as well. And this idea does not come from some wild-eyed source but from the very bastion of the establishment itself – the Harvard Business Review. Why Law Firm Pedigree May Be a Thing of the Past is the title of a recent HBR blog post that sounds this new and alarming note.
The money quote comes in the very first paragraph. The article quotes a general counsel interviewed in a recent survey. “I would absolutely fire anyone on my team who hired Cravath.”
So let the hand wringing commence in the dark-paneled conference rooms from Midtown to the canyons of Wall Street. Accepted wisdom is being turned on its head. You may be Order of the Coif or even first in your class, but someone out there (or some powerful algorithm) is prepared to eat your lunch and upend the silver service tea-cart.
To us this indicates a shift in the tone of the ongoing debate. If even the pinnacle of the legal profession is facing such uncertainty, it suggests that the changes underway in the market are more structural than cyclical. If so, this is not an upheaval that you can ride out with a strategy based on an assumption of more of the same. Instead, it’s time to take a long hard look at how your firm can be more nimble and better positioned to meet your clients’ real needs.
And that’s precisely why we think law firms of all sizes and pedigrees stand to benefit from rebuilding as social firms.