If you’ve been here a while, you know that I like to look back to find out whether the predictions that we made in the past ever came true – we know that the legal market likes to move slowly, but how slowly? Is the industry that we imagined ten or fifteen years ago where we really are today?
It’s hard to believe that the great recession was 13/14 years ago already, but it’s true. And that means that in the years following the recession, we were all making big promises for change and a “new normal.” (I know, I know, we’re entering yet another “new normal” following the pandemic, which of course only reminds us that the only constant is change.)
So, what was predicted? Many things, but in this article by David Lat looking at BigLaw, he quoted from a report from Citi Private Bank and Hildebrandt Consulting. They identified four tough lessons (unfortunately, the full client advisory is no longer available):
- Firms must earn demand growth
- Excess capacity squeezes margins
- Low single-digit profit growth is good
- Volatility is a fact of life
Have we learned from these?
Um. Well. Huh.
I think we can say that we’ve improved in these areas, but whether we’ve conquered them sufficiently enough to not worry about them anymore is another story.
So what were the recommended solutions? We looked at these and addressed them for mid-sized firms too in a blog post called “Mid-sized Firms and How to Adjust to the New Normal.”
- Listen to your clients: Ah, the most obvious one. Are firms doing this nine years after David’s article? Some yes, some no. It’s human nature that none of us like to hear bad news or criticism, even if it means that we can improve our relationship with our clients. But until we start to institutionalize this process, this remains a danger area for firms, of any size. We can never assume what our clients want (that includes me, by the way). There are some things you don’t need client input on, of course, but for other matters, consider getting regular feedback.
- Rethink your business model: Again, some firms did this and some did it more successfully than others. What does this mean? ATL says:
“The advisory encourages firms to consider sending certain functions to outside providers or to less expensive parts of the country or the world; to provide transparent and responsible leadership; to pay attention to firm culture, using lateral hiring judiciously rather than indiscriminately; and to maintain a strong balance sheet.”
This was probably the most successful of the three pieces of advice that Hildebrandt and Citi offered – while not every firm outsourced, we did see many firms do a better job with skillful leadership, developing firm culture, being judicious with their lateral hiring (mostly), and certainly maintaining a strong balance sheet post-Dewey. Running and treating your firm as a business continues to be one of the most effective ways to be profitable.
- Differentiate yourself: I suspect mid-sized firms have done a better job of this than BigLaw, simply because their size allows them to be nimble. It’s still challenging for a full-service law firm to commit itself to its specialties because they don’t want to limit themselves. But they seem to have learned that committing to what they are truly expert in allows them to draw clients in.
So what’s our scorecard? If I were grading firms on whether we’ve addressed the tough lessons of the recession, I’d probably give them a fairly low grade. But in terms of navigating the new environment, I’d say they’re looking at a solid B+. How we do in the next phase of “new normal” is anyone’s guess, but I’m curious to see what the next decade will bring!