Parsley
Sage Rosemary & Ginsburg llp
“always a reasonable result for a
reasonable fee, always”
MEMORANDUM
To:
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Management Committee
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From:
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Mike
Marget
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Date:
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September
25, 2012
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Re:
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Legal
Industrial Complex Still Struggling with Rising Costs
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Two
big financial institutions, who bank many of the largest US law firms, recently
released surveys concerning the financial condition of the Legal Industrial
Complex.[i] While these surveys attract less attention
than pronouncements from the Federal Reserve, The American Lawyer magazine makes a big deal out of them, as do
most big firm managing partners.
The
elite law firm lending units at Wells Fargo and Citi Private Bank surveyed 115
and 176 law firms, respectively.[ii] Since some firms participate in both
surveys, it is not surprising that both banks reached the same conclusion about
big firm financial results for the fist six months of 2012:
·
Revenues
up· Expenses up more than revenues
· Profits down.
The
magazine’s takeaway: After 4+ years of
lawyer headcount reduction, staff layoffs and overhead cost reductions,
managers at the Legal Industrial Complex firms are running out of ideas for
aligning slow revenue increases with faster escalating expenses.
What’s
a law firm manager to do? Plenty
actually, but it will require some out-of-the-box thinking and nimble
execution. I’m indebted to Hal M.
Stewart (who I’ve never met), the COO at the mega-firm Chadbourne & Parke
LLC, for suggesting a list of technology-centric initiatives in an articlepublished last December. I’ve tweaked
Stewart’s list a bit to emphasize operating efficiency and lawyer productivity
improvement opportunities. Most of
these initiatives will improve the bottom line for small and midsize firms, too.
applicable to
smaller firms, too?
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||
1.
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Back office functions: outsource or relocate them to lower-cost
locations. (Selective big firms are
doing this and the trend is sure to continue.)
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√ Absolutely, especially outsourcing
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2.
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Digitize all incoming mail/Document
Management Systems: improvements in scanning technology and
integration with document management systems bring efficiencies to mail
distribution and storage-and-retrieval of correspondence; enhanced use of
client-matter databases to keep track of all relevant documents, emails,
voicemails, PDFs and filings.
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√ Absolutely,
document management is a big deal
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3.
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Reduce office rent – “hoteling” and other
efforts to reduce office space
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Probably Not
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4.
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Workflow automation to
streamline client billing process: faster processing of client charges;
electronic distribution of pre-bills; email invoice delivery (no mailing of
paper invoices); faster processing equals faster collection cycle
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√ Absolutely, available through outsourcing
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5.
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Actionable financial
data: faster, more
informative financial reports; client budgeting, especially for fixed fee and
contingency matters to gauge profitability
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√ Absolutely
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6.
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Unified messaging for
email/voicemail and lower telecommunications costs: VOIP (voice-over-Internet protocol) telephone
systems; ability to forward voicemail messages and save them (long-term) for
retrieval via case-matter database
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√ Can be accomplished
inexpensively
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7.
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Social media to
recruit associates: Facebook as a
recruiting communications tool.
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Probably makes sense
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8.
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Precedent
retrieval/Document assembly: utilize document management systems to store
prior work product for prompt retrieval to avoid duplicating prior research
or drafting; and utilize form documents integrated with specific case
management databases to draft recurring forms (e.g., pleadings;
interrogatories; motions).
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√ Absolutely, available through managed
IT services
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Let’s
be real. There is still a lot of work to
be done to realize the potential of law firm workplace technology – both in big
firms and small/midsize firms.
Value
billing, alternative fee arrangements, contingency fee windfalls and busts
aside – at the end of the day there are only 24 hours for lawyers to do what
they do – represent current clients, prospect for future clients, and all the
other things. Lawyers (and
administrators) need more time for all three.
Full Disclosure Note: 4L Law Firm Services manages – for small
and midsize law firms – all those things given the √ Absolutely references.
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[i]
“Legal Industrial
Complex” is a term applied to the 200 largest US firms identified each year by
name in The American Lawyer magazine
as having the highest gross revenue. The
published numbers there are mostly about bragging rights – to impress corporate
clients and potential lateral candidates (i.e., the richest clients use the
richest lawyers). Although the magazine
claims to do extensive due diligence on the numbers, the “real numbers” sometimes get massaged multiple times by managing partners, management committees and image
consultants before being given up for publication. The Wells Fargo and Citi Private Bank
surveys, as well as a private one conducted by PricewaterhouseCoopers, provide
comprehensive, reliable financial data, useful for peer group comparison
purposes because the data for each participating firm is kept
confidential.
[ii]
What, you might
ask, do these 2 banks get for all the time, expense and trouble of compiling
these surveys 4-times a year? They get a
“sit down” with the managing partner of each participating law firm; an
excellent time to solidify relationships with their law firm customers and to
market themselves to firms who bank elsewhere.
