Note: This post was originally published by Loretta Ruppert.
In today’s legal economy, it’s not enough to be a good lawyer and practice law.
Whereas in the past a law firm evaluated performance of junior and senior associates and acted accordingly, these days even partners are being targeted.
But this is not totally new news. In a recent Wall Street Journal article, cuts to law firm partners have been occurring pretty heavily since 2009, even though they trended downward a little in 2012.
Partners = Poor R.O.I.?
But it’s easy to see why partners continue to be under a microscope:
- They are a high cost to the firm and if they are not performing, they are cutting into the firm’s profits.
- The expectations to bill more hours or bring in new business—across the board—are increasing.
This explains why some partners are getting pay cuts while others are shown the door.
According to a recent American Lawyer Magazine poll, more than half of the managing partners and chairmen were planning on axing up to five partners in 2013. Bottom line: billable hours matter, and some partners are billing around 1,300 hours a year, far short of the industry benchmark of 1,900.
New Economy, New Rules
Increased competition and shrinking client pools mean law firms are being forced to innovate with strategy, and develop new lines of business. Otherwise, they shut the doors.
And it’s not so easy to raise rates anymore.
With firms unbundling services, and shingles being hung by thousands of lawyers who were laid off since late 2008, the race is fierce. The Financial Times published an article on this topic, Firms Grow Smarter on Strategy. Because the legal market has been relatively flat, firms are looking at other ways to grow revenue.
It’s a dog-eat-dog world today, and times are tough. You can’t bill for work you don’t have, and clients are getting savvier and more demanding in a buyer’s market.
To make the most of the new year, law firms would be wise to turn the microscope on their structure and business plan, and retool their strategy to succeed.
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