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   Jan/Feb 2002


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Hot What's And What's Not In the Legal Profession

From Robert Denney Associates

Who knows what’s really cooking in the market for legal services? Law firms in the know watch their mailboxes twice a year for the arrival of the definitive lowdown from consultant Bob Denney. He’s been sharing observations about current trends for more than a dozen years. And he rarely fails to hit it right on the nose. We’ve persuaded him to let us run his "What’s Hot & What’s Not" in Law Practice Management as another way to help you get ahead! — Merrilyn Astin Tarlton, Editor-in-Chief

THIS IS OUR 13TH YEAR-END REPORT on what’s going on in the legal profession, both in the United States and around the world. The report is based on information we compile throughout the year from many sources. Some findings are obvious but should still be recorded. Others may be surprising. But, in a world of instant change and constant challenge, this is the picture at the end of 2001. — Robert W.Denney

FIRM STRATEGIES

Diversification Firms of all sizes continue to launch ancillary services. One of the latest, and timeliest: crisis management and restructuring by Duane Morris & Heckscher (Philadelphia) and DKW Law Group (Pittsburgh).Meanwhile, N.Y. state bar has shifted its position and adopted new provisions in favor of MDPs. • Improved Work-Life Balance Firms slowly realizing this is a major issue with both men and women—even more so since Sept. 11.Winston & Strawn (Chicago) one of the leaders. • "One-Firm" Philosophy Developing collaboration of practice groups and members, regardless of office location. Highly desirable for firms that have a solo-practitioner culture. Essential for megafirms but only a few, like Heller Ehrman (San Francisco), are really implementing. • Peer-to-Peer Networking (P2P) Improving productivity and client service by connecting all lawyers in every office, as well as selected clients, into a networking platform. Baker & McKenzie (61 offices in 35 countries) expects to complete soon. • Alternate Fee Structures Replacing the billable hour. Fixed rates and success bonuses most common alternatives. However, many corporate legal departments still favor the BH. • Full-Service Practice Rather than focusing on just a few areas. Balances the ups and downs that occur in certain areas. Big change in strategy from recent years. Some firms claim it’s working.

Practice Areas

RED HOT

Bankruptcy Throughout the U.S. Getting hot in the E.U. The U.S. could cool off late in 2002.

Energy Throughout the world. Deregulation one of the reasons in the U.S. Public utility lawyers in great demand—and in short supply.

Labor & Employment Adding to the fire: layoffs and arbitration clauses in employment contracts. Also, military service and discrimination. Contract negotiations in auto industry and huge financial losses in other industries portend a year of labor strife.

Litigation Always happens in a recession. Also, big upsurge in class-action suits under Fair Labor Standards Act and legal malpractice suits as dot-coms sue their lawyers.

STILL HOT

Intellectual Property While patents not as hot, trademarks making up some of the decline.

Entertainment & Sports This for the fifth straight year. Heating up in Europe.

E-Commerce

Estate Planning Tax law changes add to the heat.

Real Estate Although office vacancies climbing in major cities, residential development continues strong throughout the U.S. since Sept. 11, even more so in outlying areas owing to increase in retirements and telecommuting.

Family Law

Technology This for "old economy" companies. Many, many issues.

ADR Will heat up even more now that mandatory arbitration clauses are legal in employment contracts. 10% of the Fortune 1000 have management-conflict systems; 80% say they are studying them.

Subrogation This even before Sept. 11. Should be Red Hot before long.

Immigration Will get even hotter for solos and small firms.

Employee Benefits The main reason: which to cut back and which to keep in a down economy.

GETTING HOT

Health Care Again, but not for hospitals yet—although some are expanding their retail stores, not only to improve ambiance but also to add revenue and perhaps attract healthcare workers.

Antitrust But mostly in the E.U. (as GE learned).

Biotechnology Requires blending many areas and understanding pharmaceutical companies.

Privacy Law New regulations. Attorney-client privilege could also become a big issue.

COOL

Insurance Defense But huge increases in P&C rates could improve potential with self-insureds. Also, more firms, like Hinshaw & Culbertson (Chicago), diversifying by recycling ID attorneys from low-end commodity work into high-end litigation.

Corporate Transactions, M&A Look for a turnaround in the U.S. in midlate 2001. M&A hot in Europe owing to growth in the private equity market.

IPOs, Venture Capital They, too, will come back. IPOs already picking up.

MARKETING STRATEGIES & TACTICS

Share-of-Client vs. Share-of-Market (Or, cross-marketing vs. just seeking new clients.) As reported last year. Still more talk than action. Tends to be more successful in midsize firms with clients who prefer "one-stop legal shopping." • Relationship Marketing Also as reported last year. One of the prerequisites for successful cross-marketing. Some firms designating a "relationship manager" in lieu of the responsible attorney. • Branding But too often it means just advertising and slogans rather than determining a firm’s competitive advantages and then positioning it accordingly. • Annual Reports As reported last year. Increasing. • Promoting Clients Not just in annual reports but also on the firm’s Web site. Canada’s Bullivant Houser (www.bullivant .com) may be the first. • HR Toolkit For emerging businesses. Morgan, Lewis & Bockius includes a CD-ROM, model employee handbook, sample agreements and guidelines in the package. • Airport Office Hodgson Russ (Buffalo) opened an office at New York’s JFK for its customs, trade and transportation practices–before Sept. 11. • Interactive Web Sites Reported last year. Now Miller Nash (Portland, OR) goes a step further and lets clients access the client services staff live. Clients can also sign up for events, newsletters, etc., online. • Newsletters & Client Alerts Still effective if written clearly and concisely. 2001 Tax Act a great opportunity. • Seminars Basic tactic still works if well planned and attendee-focused. Effective for certain practice areas, like LEL, as a value-added service when given in-house for clients’ management.

OTHER TRENDS & ISSUES

Layoffs Silicon Valley firms first admitted this in August. New York firms were also cutting back (without publicizing it) before Sept. 11. Firms with large transactional practices doing the same, but quietly. Further layoffs are rumored in West Coast cities but most U.S. firms–particularly midsize ones–are, like Southwest Airlines, not laying people off.

Bankruptcy Bonuses. Two N.Y. firms have requests pending. Part of the premium billing trend.

Management/Business Training Now starting to get attention, even in CLE programs. For years the accounting profession has given CPE credit for this. Much needed because managing a law firm is tough business.

Branch Office Management Getting attention.

Disaster Recovery/Emergency Action Plans

More Technology For courtroom presentations. But constant training needed for all technology.

Consolidation One reason is regional firms going national. But could there be another reason: overcapacity?

Performance-Based Compensation For partners. Must involve more than just billable hours and collections because qualitative performance must also be recognized. Many firms wrestling with which factors to consider and how to measure them.

Merit-Based Compensation & Promotion for Associates Replaces the traditional lock-step. Blackwell Sanders (Kansas City) began this year.Will other firms follow?

Transition/Client Succession Planning Diversity A little less talk and a little more action. Pennsylvania Law Diversity Group formed in Philadelphia with 10 firms and 2 corporations to take concrete steps. Similar groups in New York, Boston and Denver. Corporations adding pressure by requiring outside vendors, including law firms, to report the numbers of, and positions held by, women and minorities.

Legal E-Commerce and Online Ancillary Businesses

Outside Auditors Fading Out Corporations, including many insurance carriers, have stopped. The reason? Relationships with outside counsel had become disastrous.

Shortage of Support Staff Legal secretaries and paralegals. Results: pay increases, stepped-up training programs and scrambling for new sources.Many firms have gone to flex-time. Some, like Ratner & Prestia (Valley Forge, PA), are training secretaries and paralegals in-house. The Bridges Program, started in Philadelphia four years ago by Dechert to train highschool seniors to become secretaries at local firms, to go nationwide.

Chief Marketing Officers Senior, highly qualified executives who not only run the marketing department but also develop strategies and sit on the executive committee.

Marketing Executive Compensation Going well into six figures in large firms in major cities in the U.S., Canada and the U.K. as many marketing execs report to the managing partner.

Non-Lawyer Managers The trend, reported in 2000, continues. In addition to chief marketing officers replacing marketing directors, chief operating officers are replacing executive directors/administrators and chief financial officers are replacing controllers. Also, more chief information officers and human resources directors.

Unbundled Services

Art Collections Not just the founders’ portraits but quality art that reflects the firm’s culture and client philosophy.

Summer Associate Programs Some smaller firms dropped them years ago to concentrate on lateral hires. Now midsize Klehr Harrison (Philadelphia) has done so. Makes sense for those that can’t compete against the large firms in law school recruiting.

Net Income per Partner Down in some firms, flat in many others, despite growth in hot practice areas. Costs keep rising but controlling them isn’t the long-term answer. Most lawyers can’t work many more hours and most firms can’t keep raising rates. Firms must innovate and develop new sources of revenue, as Littler Mendelson and Duane Morris have done. Also, they must deal with unproductive partners, which most are still reluctant to do.

Vision Even before they get into strategic planning, more firms asking: What kind of firm do we want to be? Next comes the really hard question: What kind of firm can we be?

Multijurisdictional Practice (MJP) The California Supreme Court ruling in 1998, reinforcing regulations against interstate practice, put this issue on the front burner. The ABA Commission on MJP expected to report its recommendations in May. American Corporate Counsel Association supports loosening the restrictions.

BOB DENNEY (bob@robertdenney.com) is president of Robert Denney Associates, Inc., a strategic marketing and management consultancy. He is a regular Marketing columnist for Law Practice Management.

To receive copies of the complete "What’s Hot and What’s Not" report, contact Robert Denney Associates at 110 W. Lancaster Ave.,Wayne, PA, (610) 964-1938; Fax: (610) 964-7956;www.robertdenney.com.Send e-mail requests to bob@robertdenney.com.