The PA Law 100

2012

Top 100 Law Firms in Pennsylvania

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Analysis: The Forecast for 2013 A Primer for Adapting to the Legal Industry's New Normal By Aric Press F our years after Lehman Brothers died and the national economy plunged into a deep crisis, the legal marketplace remains splintered, uncertain and likely to stay that way. The Great Recession hasn't sunk all boats, nor lifted them. The health of practices varies by lawyer and practice group; within the same firm we find corridors never busier and others filled with lawyers who have little to do but pray for the patience of their partners. The stress is palpable. Jobs and status are at risk. In The American Lawyer's recent sur- vey of the leaders of the Am Law 200 — the top-grossing firms in the United States — 46 percent said they expected to de-equitize partners in 2013. More — 55 percent — expected to ask at least one partner to leave. (Five percent planned to push out at least 11.) Partnerships, unlike diamonds, aren't forever. It could, of course, be much worse. In many ways, this is a marvelous time to be a lawyer. The world grows ever more compli- cated and integrated. The need for expert legal assistance will only grow, whatever short-term setbacks individual lawyers and firms may feel. For all the supposedly dire reports about falling demand for legal ser- vices, most of them peg demand to be merely flat or down by a percentage point or two. For lawyers who came of age during the boom years, this hurts. But the pain is slight com- pared to what many of their business clients have had to absorb over the past few years. More importantly, the community of busi- ness clients who account for the bulk of legal spending in the United States has been unwilling or unable to press its advantage across the marketplace. For all the talk about discounts or alternate fee structures, the cus- tomers have not demanded sweeping changes. Acritas, the sterling British market research outfit, asked a couple thousand in- house counsel around the world what changes they anticipated over the next two years. Roughly one-third predicted some combination of increased pressure on fees or experiments with new fee structures. But 98 | PaLaw 2012 almost as many said they expected nothing to change or didn't have a prediction. That's becoming modesty, not revolutionary zeal. All of which suggests to me that what we had grown used to — the so-called Old Nor- mal — is finished, but a New Normal has not yet formed. If it's not clear what shape that will take, here are several factors that will be key in shaping it: Pricing Structures As Colin Jasper, the Australian pricing consul- tant, likes to point out, the billable hour isn't dead — it's just overused. Of all the various billing arrangements lawyers can use — from fixed to caps to retainers, etc. — only the bill- able hour puts the bulk of the risk squarely on the client. In some cases, especially when the mat- ter includes a significant number of unknown factors, that's appropriate. But when a set of tasks can be anticipated and described, why should there be any doubt about the cost? Law firms are learning from "very effective." Another 61 percent called their efforts "moderately effective — some retention or growth issues as well as some positives." For laterals, geography can be destiny. experi- ence — a recent survey by ALM Legal Intelli- gence reported that, on average, firms now handle about one-fifth of their matters on a non-hourly basis — and bringing in experts to help guide them. These pricing officers are charged with discussing fee arrangements with clients and then crafting deals that will suit the matter. According to Toby Brown, who directs pricing for Akin Gump Strauss Hauer & Feld, there are at least 130 adminis- trators doing this work at major firms. Lateral Activity There is no end in sight. According to tracking by The American Lawyer, more than 2,000 partners have moved in or out of the Am Law 200 firms every year since the turn of the century. In a recent survey of law firm leaders by ALM Legal Intelligence and Lexis, 96 percent expected to hire more laterals over the next two years. They acknowledged that this strat- egy was not a panacea. Only 28 percent rated their lateral record over the past five years as According to a recent American Lawyer sur- vey, the top three cities for lateral shopping were New York, Washington and San Fran- cisco. About 9 percent of the law firm leaders surveyed reported an interest in acquiring lat- erals in Philadelphia. All of this suggests that for the foresee- able future, there will be some level of uncer- tainty in partnerships as firms work to attract and retain some partners even as they plan to force out those they deem underperforming. Project Management Lawyers have long liked the independence of working on matters in ways best described as idiosyncratic. Until recently, the sorts of best practices and efficiency efforts that are stan- dard in other professions and crafts had not been well received in the law. But as pres- sures on costs have increased and clients have forced firms to manage to price points for some matters, firms have had to learn to operate in more orderly and predictable ways. A recent survey of medium-sized and large firms by ALM Legal Intelligence shows that about half have started some sort of

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