Another BigLaw Firm Cuts Lawyers and Staff – Now What?

Law Firm Patton Boggs Lays Off 65

The above article cites another cost-cutting campaign by a large US law firm.  65 associates and staff are let go to trim costs because of reduced profits:

“Mr. Newberry said the layoff of 30 lawyers and 35 staffers were an effort to “align head count with revenue”…There were no partners who were let go, Mr. Newberry said. The firm now has 455 lawyers.  But in recent months the firm has notified 18 partners their contracts won’t be renewed unless their performance improves.”

As a general observation, law firms often cut associates and staff during tough times but don’t cut partners.  Why not cut unprofitable equity partners as well and optimize your firm’s leverage?  Cutting associates and staff boosts short-term profit but often sacrifices long-term profit by reducing leverage.  This is a real problem for most law firms, and highlights the deficiencies of the traditional democratic law firm business model.

Most law firms focus on short-term costs like associate and staff head count, but don’t address the really important “costs” such as unproductive partners and equity partner head count.  Many large law firms have 20%+ excess capacity in their partner ranks, which is a huge drag on PEP profitability.  You need to cut your ownership ranks and optimize leverage to compete with new law firm business models and ABS structures coming out of the UK. Easier said than done, however, when the owners must hold a democratic vote on who’s going first..

The Small Firm Advantage

Originally posted on Small Firm Innovation 

Large law firms today are in a real bind.  Their large clients are looking for lower legal costs, but large firms have big overheads, lots of partners to feed, and little experience in providing alternative billing solutions.  They have increased their chargeout rates significantly in the last decade, and large clients are understandably upset.  The rise of the Association of Corporate Counsel (ACC) is an indicator of just how upset they are and their need for retribution.

Small firms, on the other hand, are sitting in the catbird seat.  They have what large clients want.  They have low overheads, their chargeout rates are significantly lower than large firms, and they have lots of experience with fixed fee billing for commodity work.  They’re also hungry to get their hands on large firms’ institutional client work.  Large clients are interested in what small firms have to offer, since large firms aren’t responding to their repeated requests for alternative billing.

The time is ripe for small firms to turn their better value offering to their advantage and steal good work away from large firms.  It’s there to be had, and large clients are looking for options.  Take the advantage now.  The economy is in tough shape, and the opportunity won’t get any better for small firms. Put together an alternative billing strategy and lure away large firm partners looking for more flexibility and better work/life balance.  These partners can make more money in less time with a lean platform that’s already in place in a small firm. They can be the big fish in a small pond.  And many large firm partners are doing just that.  They’re jumping ship from large firms that have retirement policies that force them to retire in their prime practicing years.

Why not take your clients with you and create something new, that’s truly yours, and not be treated like an employee in a mega-firm where you have no say? No oppressive rules, no national firm overheads, no one telling you what to do.  Be creative, experiment a little, and have fun.  What more can you ask for?  Use the technology you want without the constraints imposed by some large firm tech department.  Use LegalZoom technology, outsource to the best lawyers available, work virtually and create virtual teams of like-minded partners from other large firms who are ready for a change.

The legal industry is in turmoil, and that’s a real opportunity for small firms. Develop a new strategic plan with a unique value proposition.  Offer value pricing and make clients very happy.  The Valorems of the world are already doing it, and have done all the groundwork for you.  Market yourself as the expert in your field on your terms, and no one else’s.  Use social media as you see fit, and take advantage of this very effective and inexpensive marketing technique that large firms just can’t seem to do as well as a small firm can.

Make your legal working life a lot easier and more fulfilling.  Work with like-minded people who want to create something new, something exciting, and something that can allow you to make twice as much money in half the time. Now that’s real work/life balance!