A return to the Continental Bank strategy of the 1980’s?

Probably not. After a closer look, you see that what law departments are doing is to cut costs. To be fair, the author quotes a survey from last year that showed budget strategies included:

.. a reduction of noncore spending in areas such as travel, meetings and training. Legal staff compensation also has been impacted by salary freezes or minimal increases.

While those strategies included headcount reductions over the last 18 months, most companies are still focusing on finding cost cuts outside, especially with their external law firms. Richard Susskind noted last week that London-based companies are looking for substantial savings:

…many general counsel say that they are under pressure from their boards to cut legal budgets severely from between 20 to 40 per cent. Naturally, they are turning to their law firms to ask them to rethink their hourly rates and charging models.

It’s clear to anyone who has managed the budget of a law department that 20%+ percent cuts don’t come just from cutting back on travel and training. And beyond a certain point, cutting internal headcount garners only short-term savings, allowing some work to migrate back outside, and impacting risk control and compliance efforts.

So is there good news for law firms?

Yes, in the sense that most GCs are probably more open to new ways of doing things, at lower unit costs. This includes approaches from firms other than their current incumbents.

No, in the sense that “same wine, different bottle” probably won’t get past round one and onto the short list.

They claim over 50,000 references have been gathered from a large swath of the industry:

Lawyers, clients, marketing officers, recruiting officers, associates, and summer associates are being surveyed. In firms without marketing or recruiting officers, lawyers will be asked to provide the information asked of marketing and recruiting officers. The overall national rankings, including the highest ranking firms by practice area nationwide and the highest ranking firms in each state, will appear in U.S. News’s October edition.

Two thoughts:

1. I know US News heard a lot from deans about their law school rankings. I wonder how managing partners will react to this new legal yardstick?

2. With yet another ranking thrown into the mix, does it make it any easier for clients to find the right lawyer at a good firm for a fair price in a timely manner?

Since I haven’t touched it, and it won’t be on sale for 60 days, here are a few early lessons for lawyers from 30,000 feet:

1. Fast is the new currency. From those who have used the iPad, its first and most enduring impression is quickly it works for the user. Once people see this, they will never want to go back to old and slow.

====>Lawyers will need speed as alternative billing gains traction.

2. You must control your strategic strengths. Apple designs (and wraps tightly into IP) everything that makes products different and better for the user. They may let others manufacture, but only a few trusted vendors to ensure quality (and competition).

====>Outsourcing and convergence are tactics, not strategies.

3. Focus on a few key things and hit them hard. As Apple’s COO Tim Cook said last year “We believe in the simple, not the complex. We believe that we need to own and control the primary technologies behind the products we make, and participate only in markets where we can make a significant contribution.”

====>Does “full service firm” sound distinctive or average?

4. You must present well. Steve Jobs and crew were in great form (full event here; you can get the essence by watching the first 10 mintues and then skipping ahead to the 1:29:00 mark, where there’s about 5 minutes left). One can only imagine how many hours of prep went into 90 minutes of presenting.

====>We are practicing law in a multimedia age.

5. Price matters. Mr. Jobs summed up the iPad: the “Most advanced technology, in a magical and revolutionary device, at an unbelievable price.” He isn’t just driving value from the features, his index also has cost at its core (and an iPad base price of $499).

====>Do you charge less than an iPad?

6. Liberal Arts was worth it. What caught my eye at the end of the presentation was the second-to-last-slide (below), accompanied by these words: “We’ve always tried to be at the intersection of technology and liberal arts. To be able to get the best of both, to make extremely advanced products from a technology point of view, but also have them be intuitive, easy to use, fun to use… It’s the combination of these two things…that let us make great products like the iPad.”

====>Lawyers might just be due for a Renaissance.

What is less clear, but probably more interesting, is what comes with this new tech tool. The press invite was suitably cryptic, with the graphic below and the phrase, “Come see our latest creation…” If iTunes and the App Store was what made the iPod and iPhone unique, what new media platform will accompany the iPad or iSlate (or whatever it’s called…)? You know Apple will deliver a great piece of technology.

If there’s something new on the content creation side, something that makes text, audio and video easier to make, modify and market, it could be worth a second look for lawyers.

But not for just for getting noticed by clients; it might be something very timely for the brave new alternative billing world. More tomorrow…

(Update: It’s the iPad!)

(Photo: NY Times)

The WSJ Law Blog story cites a new report from the Citi Private Bank Firm Group. It is their 4Q09 “Managing Partner Confidence Index,” and it shows an uptick in that metric, the strongest move in over 2 years.

The WSJ rightly expresses some skepticism as to whether things are really turning around, noting macroecomic factors, and concludes thusly:

One big looming unknown for managing partners, according to the report, is whether a step-up in demand will lead to a corresponding step-up in revenue. The reason why one might not perfectly track the other, reads the report: “The difference is probably due to continued discounting pressure from clients. For many law firms, the road to recovery looks to be a long one.”

Understanding this point requires a closer look at the report, specifically the Demand indicator (bottom of page 1) of the overall index. It is up, with the explanation that:

“Nearly two in three respondents (64%) expect demand to grow over the next 12 months; 23% think it will stay flat.”

While the managing partners, profit hawks that they are, understandably focus on (hope for?) an end to discounting, I think this view of demand is the key. Two-thirds of managing partners surveyed buy into the assumption that a rebound in the economy will result in a commensurate rebound in a demand for legal services.

I think that this assumption is partially true, but misses the work going on in aggressive legal departments to attack demand (i.e. the ongoing need for legal services), who satisfies that reduced demand, as well as the pricing thereof. This requires a deep dive, a real microeconomic view of corporate legal services.

Over the last 12-18 month the focus has been doing the same things cheaper. That’s called a good start.

The next frontier for legal pioneers involves long-term savings. It may be called doing some things less, others not at all.

I don’t know how you factor this into a “Managing Partner Confidence Index,” but something tells me it’s not an easy fit.

(Update: The Legal Intelligencer has a look at this report as well).