Altman Weil Connect

Altman Weil Connect brings together news, research and commentary on the changing legal profession. We are monitoring the web for developments in law firm and law department leadership and management. Bookmark this page or sign up for the RSS feed to keep up with the latest news!

Differentiating your practice

March 20th, 2013 by Altman Weil

Marketing expert Sally Schmidt is right on point the value of differentiation in today’s Attorney at Work. 

“Differentiation is perhaps the hardest concept for lawyers to embrace. I say “embrace” and not “understand” because most lawyers understand the concept of differentiation—they just can’t or don’t want to do it. Perhaps it’s because they like to handle a wide range of matters; litigators, in particular, often like to say they can litigate any issue. Perhaps they think that, by defining or limiting the scope of their message, they will lose out on opportunities: “If they think I do ‘X,’ they won’t send me ‘Y.’”

The reality is, if you are completely undifferentiated from other lawyers, people won’t send you “X” or “Y.”

Read it at Attorney at Work

Non-Equity Partnership Trends

March 12th, 2013 by Altman Weil

Since 1999, the Am Law 200 lists have tracked the number of non-equity partners in the 200 highest-grossing law firms in the United States. Between 1999 and 2012 there has been a significant change in those numbers.

In 1999, 65.5% of Am Law 200 firms had non-equity tiers; in 2012, that number had jumped to 84.5%.  Seventeen percent of all partners in two-tier firms were non-equity partners in 1999.  By 2012, 39% of all partners were in a non-equity tier.  Finally, the average number of non-equity partners in a two-tier firm went from 35.5 in 1999 to 108.8 in 2012.

The growth of non-equity partners as a lawyer category has reshaped law firms.  Many argue that the non-equity tier provides an easy way to offer the pride of partnership to associates, to introduce senior lateral hires, to increase billing rates of senior associates and elevate their status in the market — or to park underperforming equity partners.  However, it also builds a seemingly permanent class of high-priced leverage whose average billable hours are below those on either side of them (senior associates and equity partners).

It is critical for two-tiered firms to rethink their strategic intent with non-equity partnerships, including:

  • Analyzing short and long-term impacts on firm profitability
  • Rethinking non-equity compensation
  • Establishing tougher standards for entry and retention in the non-equity tier
  • Regularizing performance evaluations
  • Systematically managing transitions out of the tier

These steps will enable two-tier firms to begin the process of optimizing the productivity and profitability of non-equity partners.

Capital and debt

February 28th, 2013 by Altman Weil

According to a recent survey of 171 law firms (including 122 Am Law 200 firms) from Citi Private Bank, paid-in capital per partner has been increasing over the last few years, while debt levels are decreasing.

“Between 2007 and 2011, partner paid-in capital shot up by a third, from an average of $229,000 to $303,000 per equity partner; as a percent of net earnings, paid-in capital on the balance sheet went up from 21 percent to 26 percent.”

and

“As the use of partner capital rose, borrowing dropped. Only 7.4 percent of total capitalization in 2011 was borrowed, down from 10.3 percent in 2007.”

Concerns over ongoing uncertainty and volatility in the global economy was cited by firm leaders as a driver of this trend.

Read it at The American Lawyer

Law department cost cutting

February 20th, 2013 by Altman Weil

Pinhawk Law Technology Daily Digest points out a new blog post from the Corporate Executive Board on law department cost cutting and efficiency.  The CEB has analyzed in-house department budgets and identified common practices among those departments with lower than average costs, and therefore greater efficiency.  They describe nine trends, including:

  • Bringing more work in-house
  • Unbundling legal services and giving lower level tasks to non-law firms
  • Using smaller firms because they tend to charge less
  • Consolidating the department’s work with fewer firms to negotiate better rates

Law departments take note.  Law firms beware!

Read it at Corporate Executive Board

Business development is not a department, it’s a discipline

February 8th, 2013 by Altman Weil

 ”BD is not a department, ‘it is a discipline along with every other expertise in the firm.’ It can be taught—and learned.”

That’s the momey quote in Aric Press’ new article in The American Lawyer on how law firms must approach business development and client relationships in 2013.  He profiles the “Smarter Business Development Model” created by Trevor Faure, Ernst & Young’s global leader for legal services and former Tyco European GC.

Faure has set forth six traits law firms need to adopt, as well as four things all clients want.  Of course it’s not quite that simple, but it’s a very good place to start.  Worth reading.

Read it at The American Lawyer

Staffing moves save money, promote efficiency

February 1st, 2013 by Altman Weil

Several recent stories highlight law firms’ ongoing attempts to cut costs and deliver services more efficiently by rethinking their staffing models. 

The AmLaw Daily noted Kaye Scholer’s intention to move 100 back-office jobs, primarily from New York City, to Tallahassee Florida.

“The new operations center should help Kaye Scholer respond to the continuing push by clients to control costs, with Tallahassee’s lower cost of living allowing the firm to save on real estate expenses and staff salaries. [Chief Operating Officer Jeffrey] Hunter also views the move as promoting efficiency: “We think that we can provide timelier and more responsive services to partners and—in turn—their clients by centralizing those services instead of having them scattered across our New York, Washington, D.C., and Los Angeles offices,” he says.”

Read it at The AmLaw Daily

In a similar move in the UK, Magic Circle firm Allen & Overy announced they would relocate 43 US and European staff positions to their back office location in Belfast.

“With low economic growth across many developed markets, we must ensure we are operating in a way that will deliver the cost efficiencies our clients expect of us, so that we may protect the long-term competitiveness of our business,” Wim Dejonghe, the global managing partner for Allen & Overy, said in a statement.”

Read it at The AmLaw Daily 

The Legal Intelligencer reported that Blank Rome is offering buyouts “to its entire legal secretarial pool” as part of a rethinking of its secretarial needs:

“The reduction in legal secretaries is part of the firm’s overall effort to move into a more “efficient and flexible” service delivery model that better represents the fact that its younger attorneys are not utilizing secretaries the way more senior attorneys do.”

Read it at The Legal Intelligencer

2012 lateral trends

January 31st, 2013 by Altman Weil

The American Lawyer has published a new report on the lateral trends for 2012.  According to their survey, 2,691 lawyers moved in or out of AmLaw 200 law firms last year, up about 10% from 2011.

One of the key drivers of lateral movement can be a big firm failure that suddenly releases hundreds of lawyers into the market, like that of Dewey & LeBoeuf in 2012.  This is a phenomenon that Altman Weil’s Ward Bower has dubbed “the Dewey effect.”  It can also depress the law firm merger market in the short term, as we observed in the second quarter of 2012.

Setting aside extraordinary events, the 2012 lateral market was strong.

“The market’s robustness demonstrates how firms continue to rely on lateral hiring to fuel revenue growth, build practice areas, and broaden their geographic reach. “Everyone is doing it, and reasons number one, two, and three are to buy business,” says Altman Weil Inc. consultant Thomas Clay. “Laterals with books of business are in demand, and it’s not going to go away.”

Read it at The American Lawyer

Steep decline in law school applicants

January 28th, 2013 by Altman Weil

“As of mid-January, 27,891 people had applied for seats in American Bar Association-accredited law schools. That represented a 20 percent decline since last year (and 2012 was hardly a banner year itself, as the number of applicants fell by nearly 14 percent.) If the trend holds through the final months of the admission cycle, law schools would see a 38 percent crash since their peak in 2010.”

Read it at National Law Journal

Client tests for efficiency - firms fail to deliver

January 24th, 2013 by Altman Weil

There’s a wonderful article in today’s Law Technology News that illustrates the disconnect between law firms and their clients when it comes to efficiency.  Casey Flaherty, corporate counsel for Kia Motors America, has written about a test he gives law firm associates.  This test uses a few mock legal assignments to assess associates’ competence in a number of basic tech programs, but more to the point, it assesses their law firm’s ability to deliver work efficiently. Done properly, each task can be completed in 20 minutes. 

Here is his description of the results:

“Not a single associate at any of the nine firms I have audited has come anywhere close to the 20-minute mark on the first assignment. That is, all of the associates approached the assignment in ways that would have required five to 15 times longer than necessary. At $200 to $400 per associate hour, such inefficiency suggests to me that, indeed, waste is a righteous concern.

Failing my audit has repercussions. Of the nine major firms I have audited, all nine have failed — some more miserably than others. A few of these firms were auditioning for work and were not retained. Other firms, including longtime incumbents, agreed to rate reductions. One firm, for example, took an across-the-board 5 percent reduction that will be restored if they are able to pass a subsequent audit. Another firm agreed to a significant investment in associate training and has worked closely with me to upgrade a substantial number of their internal practices and processes. Finally, audit results influence my review of counsels’ billing entries.”

The author goes on to describe the tests in some depth – but don’t get lost in the details of Excel spreadsheets.  The point is that client expectations for efficient delivery of legal services have changed.  Law firms cannot, in Mr. Flaherty’s words, simply ”throw expensive bodies at a problem” any longer. 

Read it at Law Technology News

Legal sector job growth 2012

January 22nd, 2013 by Altman Weil

The Am Law Daily is reporting on Bureau of Labor Statistics job numbers for 2012, including:

  • A net increase of 7,800 legal jobs in the US in 2012
  • A growth rate of .7% from 2011 (compared to a 1.4% increase across all job sectors)

This is a drop in the bucket compared to the 60,000+ legal jobs lost in 2008 and 2009.  The question, as the article points out, is: Are most of those jobs ever coming back?

Read it at The Am Law Daily