Hard Times Ahead for Law Firms?
After years of exuberant growth, are law firms now headed for a downturn? That's one of the predictions offered by legal consultancy Hildebrandt and Citi Private Bank in what they describe as their first downbeat Client Advisory since the economic slowdown of 1998. In an effort to temper the bad news, however, the Advisory concludes:
The legal profession is extremely resilient, and the demand for legal services will undoubtedly continue to grow, albeit perhaps at a somewhat slower pace. The growth rates that we predict for 2008 -- 6 to 8 percent for overall revenues and 3 to 5 percent for net income -- are in no means bad...It is only against the extraordinary run of the last six years in the legal market (with overall double-digit growth on an annual basis) that these figures may seem disappointing.
The Advisory also identifies a variety of challenges that firms will face headed into 2008, including "continuing issues of low productivity, particularly within the ranks of non-equity partner lawyers." Sounds like we may see a few more firms purging non-equity partners as Mayer Brown did last year.
The WSJ Law Blog follows up on the possibility of layoffs or demotions of partners, rather than associates. Mass associate layoffs can prove problematic because if the economy picks up, firms are left without the ability to staff cases. Moreover, partners cost more than associates and are often less productive. As a result, firms are likely to become more ruthless about “weeding out those attorneys who are not performing as well as they should,” says Mr. Hildebrandt.
Prospects for firms aren't any rosier across the pond. The Times Online reports that the U.K.'s top firms are worried about the impact of a worsening global economy on business prospects. From the article:
Just over half of managing partners surveyed by Smith & Williamson, the professional services adviser, said that they were concerned about the impact a worsening global economy will have on their business. Last year, only 17 per cent expressed the same fear. The survey also said that profits, which have surged to record levels over the past decade, are likely to suffer this year as they come under increasing pressure from flattening revenues and increasing costs from salaries and other expenses.
So what can law firms or individual lawyers do to protect themselves from all of this doom and gloom?
Jane Genova at Law and More recommends a variety of what she terms disruptive strategies, such as blogging on narrow niche topics, getting active in political campaigns and pro bono work to gain access to new clients.
What are your predictions for 2008? Are the predictions as dire as they sound? Or does the economy offer a convenient excuse for law firms to cull unproductive partners without generating the kind of negative publicity that Mayer Brown did?
Posted by Carolyn Elefant on January 29, 2008 at 04:59 PM | Permalink
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