Forget BigLaw; Watch BigClient
I was asked last week what I thought about the prospects for “BigLaw.” That question can result in an answer which is too long at 20 seconds or too short at two hours.
I opted for two minutes, suggesting that the sometimes pejorative term BigLaw really doesn’t do high-end corporate legal services justice. I noted that there is really no homogeneous “BigLaw Industry” per se; you have to look at what clients given firms are successfully targeting and servicing. Each “BigClient” faces its own challenges, and a law firm that helps a client compete and win will do well. Many others may continue to be profitable, but will struggle as those profits inevitably decline. Sadly, some firms won’t make it in their current form.
I had a few examples of the reality facing several companies in the “BigClient” category, but the conversation ended there (it was off the meter!).
Just such an example jumped out when I read the morning news last Friday. I saw the earnings announcement by Wells Fargo: second-quarter profits up 19 percent, beating analysts’ estimates. But there was more to this story, and a headline later that day by Bloomberg captured perfectly the BigClient world:
There is a reason Wells Fargo has has been a leader for years. They invest money opportunistically, but they always watch the cost side of the ledger. As an analyst quoted by Bloomberg noted:
“Expenses are probably between $500 million and $1 billion too high,” Marty Mosby, an analyst at Guggenheim Securities LLC, said in an interview before results were disclosed. “That’s a cushion they are whittling down.”
Now do you think legal expenses, particularly for outside services, are part of hitting this nine- or ten-figure cost reduction target?
Before his abrupt exit from HP, Mark Hurd gave this insightful quote to the New York Times in 2006:
Costs and growth are different sides of the same coin. [...] We will spend money to save money and save money to spend money. We will never be done looking at our cost structure.
So what seems normal now really isn’t totally new, is it?
The key takeaway for me: the best companies of the BigClient bunch are more focused than ever on costs. Even with a nascent signs of economic recovery. That mindset is a big reason why they became market leaders in the first place.
Cutting costs during a Great Recession is hard, but it’s almost a reflexive process. Controlling costs when not in urgent crisis-mode requires great management and even better employees.
To meet this challenge, maybe “BetterLaw” is a more productive focus for lawyers and clients alike.