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Will the rise in corporate work for midsize firms, associate apprenticeships and equity partner reductions continue? Let’s take a look at some of today’s new trends and attempt to evaluate which may continue when the economy recovers—and which may die out.
For years DuPont’s policy with regard to the use of outside counsel was to work with a small number of large, mostly global law firms. Then earlier this year it began to assign work to an increasing number of midsize and smaller firms—a definite shift in strategy. While this has surprised some observers of the legal scene, it really continues a trend that gained momentum when this recession began two years ago. A growing number of large companies are recognizing that “MidLaw” and “SmallLaw” firms (as I like to categorize them) have many excellent lawyers and provide excellent service—and, of course, they have lower rates than the typical BigLaw firm because their overhead is lower.
And to think, just a few years ago some legal pundits were proclaiming the death of the midsize firm. The current trend shatters that prediction, as MidLaw and SmallLaw firms are not only surviving the recession but, in many cases, are doing quite well. Odds are good they will grow even stronger after this recession ends.
Some prominent managing partners believe that law students will not accept less money to receive this additional training and will, therefore, decline offers from firms that institute these apprenticeships. They may be right. But, on the other hand, look at the similarity to training in the medical profession, where many young doctors go into two-, three- and even five-year residencies to be trained in specialties. Only time will tell if this thinking gains a foothold in the legal profession as well.
But the latter point is one that may also reverse the current trend. Law firms have been traditionally undercapitalized, but today a number of firms have recognized they need more capital. Outside of accruing debt, which is not a wise step, there are only two means of raising capital: increase the capital contributions of equity partners or increase the number of equity partners. This becomes a critical and delicate choice. But either of these approaches will require serious consideration of the qualifications for becoming an equity partner.
This is an unsettling period in the legal profession, but it is also exciting in a sense. For many firms and lawyers, finding the opportunities in the moment—or, in some cases, just surviving—can depend on spotting the new trends that will continue into coming years.
Bob Denney , President of Robert Denney Associates, Inc., has been providing strategic management and marketing counsel to law firms throughout North America for over 30 years. He can be reached at (610) 644-7020.