Legal Marketing & PR

Womble Carlyle says Big Law has ?changed forever?

By Jim Hassett

Last week, Womble Carlyle announced steps to reduce its annual operating expenses by $5 million, including layoffs and 10% pay cuts.  Since the ABA Journal recently noted that ?In the last 15 months, more than 10,000 lawyers and legal staffers have lost their jobs at major law firms?, the fact that another large firm is cutting costs is hardly front page news.

What is news is the way Womble Carlyle described WHY they were cutting costs in the internal memo announcing these changes:

?The world of big law firms... has changed forever.  Clients are increasingly focused on managing the costs of all legal matters... Successful firms will be those who continuously strive to improve efficiencies and find ways to minimize costs without reducing the overall quality of the services they provide... Simply stated, like the business world in general, law firms must be able to do more with less.? 

These days, it seems everyone is talking about whether the current problems are simply a business cycle downturn, or whether they are the first signs of a fundamental paradigm shift, a change in the way law firms do business.  For some historical perspective on this discussion, see Ann Lee Gibson?s excellent series of posts on Law Firm Economic Cycles.

In his December 30 post entitled Perspective, Bruce MacEwen discussed the implications: 

?If you feel that what we're going through is a ?normal,? albeit severe and protracted, recession, we know how to deal with that. Pull in your horns, sit tight, control costs rigorously, and wait for the legal industry (a lagging industry) to pull out after the real economy does. 

If on the other hand you feel that we're experiencing a generational or once-in-a-career change in the way high-end legal services are bought and sold, then you need to stand on tiptoes, rather like a sprinter entering the blocks at the starting line of a race, prepared to bolt forward as soon as there's clarity enough (in your mind) to think the starter's pistol has fired....

This is where I actually think we are. We are all about to begin running a new race, one where incumbency will count for far less than it used to, and where a premium will be put on agility, speed, and foresight...?

Clearly, Womble Carlyle believes a paradigm shift is coming.  But most firms are moving far more slowly, or not at all.  One reason is that they?ve done so well in the past.  In 2007, I wrote a post entitled ?Have Lawyers Been Seduced by Success??  

If you like money, [2007 was] a great time to be a lawyer. In Citigroup's Law Watch survey of "153 US law firms broadly representative of the industry," law firm revenue has gone up 9.8% per year since 2001. But as Bill Gates put it: "Success is a lousy teacher. It seduces smart people into thinking they can't lose." 

My discussion was inspired by Robert Herbold?s book Seduced by Success, which describes some ?destructive behaviors that are created and nurtured by success.?  My post talked about how these destructive behaviors applied to law firms, including lack of urgency and defensive thinking. 

Herbold?s first chapter explained how General Motors went from the largest auto manufacturer in the world to the brink of bankruptcy.  Very simply, they failed to adapt to a changing world.  GM?s final chapter has not yet been written, but it is obvious that it has continued to slide downhill in the two years since that book was published.  When Rick Wagoner was forced to resign as GM?s Chairman a few weeks ago, USA Today (3/31/09, p. 2A) quoted several consultants who explained why.  ?He was just too slow on the important decisions he had to make,? said one. ?What these guys haven?t figured out yet,? said another,  ?is... you have to take a whole different approach.? 

Of course, GM is not the only large company that is having trouble adapting to a changing world.  On April 4, the front page headline in my morning Boston Globe read:  ?Times Co. threatens to shut Globe, seeks $20m in cuts from unions.?  On April 12, they published a followup analysis of the Globe?s financial problems with the title:  ?What Went Wrong? - Secure in their profits, the Globe and other newspapers underestimated the impact of the Web.?  

As one expert quoted in that article put it:  ?The newspaper business was a victim of its enormous success... They put very little effort and energy into trying to imagine how the world might change and what their position would be in a changed world.? 

I believe that many large law firms are now making that same mistake. 

At the Legal Marketing Association Annual Conference a few weeks ago, Altman Weil consultant Thomas Clay described the results of The Legal Transformation Study 2020, which ?identifies key global trends and uncertainties that will shape the future of the legal industry and presents a set of planning scenarios from these forces.? 

When Clay described the fundamental characteristics law firms that will need in the future to ?succeed, thrive and compete,? his list included: 

• Courageously rethink business development models

• Achieve a leadership position in pricing flexibility ? alternative fee arrangements  

• Be nimble ? ACT in a rapidly changing marketplace  

• Take the long view, but act now  

I don?t know whether large law firms can ever be nimble, but it does seem that Womble Carlyle is taking the long view, and acting now.  

By coincidence, one of the lawyers on a panel I moderated last week for West LegalEdCenter on alternative fees in large firms was from Womble Carylye.  In a future post, I will provide details of what Womble Carlyle and other firms are doing to provide more value to clients.  Their goal, as a panelist from Morgan Lewis put it, is to ?get a bigger share of a shrinking pie.? 

Next week, I will conclude my brief series on marketing for Harvard Law students.  I apologize for interrupting that series, but I felt that this week?s post could not wait. 

Full post as published by Legal Business Development on April 22, 2009 (boomark / email).