Legal Cost Savings: Through the Client’s Eyes
November 9, 2009 | Filed Under Cost Control
In August 2006, well before the current economic downturn, HP CEO Mark Hurd explained his philosophy on cost control to the New York Times:
”Costs and growth are different sides of the same coin,” he said. ”We will spend money to save money and save money to spend money. We will never be done looking at our cost structure.”
For strategically disciplined companies, cost control didn’t start this year and won’t end next year.
Contrast this viewpoint with a recent look at the state of law firm financial discipline from law.com. According to one industry advisor:
“Law firms were very effective at reducing expenses,” … “Now they are saying, ‘We’ve cut to the bone. We can’t cut expenses any more. Now we need to look at areas we can grow our revenues.’”
“…2010 could be a fairly good year. “Firms are much more efficient. They’re lean and mean and ready to profit.”
From a headcount perspective, some firms may have started to look at the problem. From rates and matter staffing, general overheads, and especially the use of technology, many firms haven’t even started. Their clients are years ahead of them and aren’t slowing down.
So I come out on the Mark Hurd side of the cost control coin: you are never done. Here’s one look at the client waters some large law firms may be sailing into:
Hogan/Lovells: Welcome Sign or Smoke Signal?
November 6, 2009 | Filed Under Law Firm Trends
When the story about the potential cross-border merger of Hogan & Hartson and Lovells reached the business press a week ago, it surprised me as to the size and timing of such a combination. Bruce MacEwen had already explained why it could make sense.
This week, The Lawyer reported that the merger has been approved by management. It’s certainly not on a rocket docket: partnership approvals would come in December and the merger would be completed in May, 2010.
If Hogan-Lovells happens, it’s a sign that two strong firms want to move forward aggressively when other firms are retrenching. In the meantime, I can think of a least 3 reasons why I don’t think this is a signal of a bottoming of the legal market or the start of law firm merger-mania:
1. Clients are still trying to cut back, on the number of firms used, and the costs paid to each. There is a lag between law firm work in progress and client demand. Most firms will continue to experience downward pressure.
2. The cross-border work is appealing and often high-margin. But there’s a finite amount and much of it is linked to the global economy. There’s already probably excess capacity for this work for the next 12-18 months, unless two firms match up really well in terms of clients, offices, and areas of strong expertise.
3. Some firms looking for merger partners are doing it out of weakness: to shore up practice areas, fill in for key partner departures, or reverse falling realization rates. Why would a stronger firm want to take on a weak sister when you could cherry pick their best people?
So good luck to Hogan and Lovells. Six months is a long time; the rest of the industry will likely be watching.
GM CEO: An MBA in 30 Seconds
October 12, 2009 | Filed Under Competition
In the course of a recent Town Hall meeting for GM employees, CEO Fritz Henderson spared us lawyers the time and expense of an MBA by summarizing the teachings of Michigan and Harvard regarding competition in two easy steps.
You can click on the picture to watch (move the player slider to the 30 second mark if you’re in a hurry):
So there you have it. Two ways to compete for customers with products or services:
1. As the low cost provider.
2. As a segmenter or differentiator.
Moving into the legal space, it’s clear that most large law firms, even with forced discounting, still do not want to be a low cost provider. So they try to differentiate. But clients don’t want pay premium prices for all matters (or for all attorneys on various matters). It’s hard to segment when you are trying to cross-sell or be the firm that a client converges on.
So what to do? The answer takes longer than 30 seconds.
Alternative Billing Hits the Road
September 17, 2009 | Filed Under Pricing
Some enterprising lawyers in the Motor City are taking alternative billing directly to the consumer:
If you click on the picture, you’ll hear that these attorneys guarantee a specific outcome or they waive their fee.
Perhaps one way to approach alternative billing discussions with clients is to make your proposal fit on a small sign that’s visible at 200 feet when driving 60 mph (in a 45 mph zone).
I assumed $750/hr was incentive enough
August 28, 2009 | Filed Under No Comment Required
From the WSJ’s article earlier this week with the Hollywood-esque headline, “The Billable Hour Under Attack”:
Saul Ewing in Philadelphia recently investigated a client’s potential corporate acquisition under a six-week flat-fee engagement. The matter was handled about 10% more cheaply for the client than it would have been under a billable-hour deal, said Mr. Antzis, the managing partner. He said “it was still fair to the firm” because “we were incentivized to get done in 10 hours what another lawyer at another firm may have spent 12 hours doing.”
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(Ed: A different slant for the next few Fridays: something that caught my eye and speaks for itself.)
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