The new associate mantra: Keep quiet - With layoffs piling up, associates do their best to fly under the radar.
With law firms unloading scores of attorneys amid the economic downturn, associates are finding that the balance of power has shifted away from them and into the hands of law firm managers. Gone are the days — as recent as a year ago — when firms had to pile on the perks to keep associates from jumping ship. With few ships for associates to jump to these days, young attorneys are increasingly reluctant to raise any issue that might put an unwanted target on their backs.
Friday, May 8, 2009
Tuesday, May 5, 2009
Life After Souter
With the announced retirement of Supreme Court Justice Souter, what lies ahead? As far as the political ramifications for President Obama and the nomination process, a new NLJ article "After Souoter"aims to answer that questions.
See also: Seven candidates who could be chosen by President Obama for the Supreme Court.
See also: Seven candidates who could be chosen by President Obama for the Supreme Court.
Friday, May 1, 2009
New Fee Structure For Law Firms - Forbes.com
New Fee Structure For Law Firms - Forbes.com: "Only in the past 10 years have law firms begun to think about bringing professional managers into parts of the firm which are often run by committee--without an individual responsible for directing any part of the business. The challenge for law firms, he says, is to find a new way to introduce professional lines of responsibility and management without destroying the firm's collegial and consensual nature, which inspires trust and, in the end, benefits clients.
'One mustn't knock the partnership structure,' he says, 'but one needs to see how to build on top of that structure to maintain the positive elements of a partnership with the positive elements of a well-run corporation.'"
'One mustn't knock the partnership structure,' he says, 'but one needs to see how to build on top of that structure to maintain the positive elements of a partnership with the positive elements of a well-run corporation.'"
New Fee Structure For Law Firms - Forbes.com
New Fee Structure For Law Firms - Forbes.com: "unlike a corporation with professional managers, a law firm's shareholders--its partners--are also expected to run the business day to day. 'Therefore, they have great difficulty letting go and allowing other people to take on responsibility for finance or strategy or human relations.' In many firms, he notes, the highest fee-producing lawyer is viewed as a good lawyer and is automatically chosen to run the practice group, whether or not he or she is an effective manager."
New Fee Structure For Law Firms - Forbes.com
New Fee Structure For Law Firms - Forbes.com: "Law firms also tend to celebrate individual rainmaking partners, but no one individual can supply the kind of comprehensive service today's clients demand, Ryan adds. While 'rainmaking is virtuous,' he says, 'strategic account management is a team game. The question is how do you let the rainmaker continue to grow the business and discover the needs of the client, but integrate other people from the firm into the team?'"
New Fee Structure For Law Firms - Forbes.com
New Fee Structure For Law Firms - Forbes.com: "another emerging model is the 'virtual' firm, which acts as an intermediary between clients and lawyers who have left big firms in order to work on a freelance basis. An example is Axiom Legal, a New York-based company that hires lawyers for temporary assignments. Axiom clients include Google ( GOOG - news - people ), Dow Jones, NBC and General Electric.
Axiom lawyers used to work in big firms and are well-trained but didn't want to join the 'whole rat race,' according to Chatain. The clients receive service similar to a major law firm at less cost. 'Almost everyone is happy,' says Chatain, except for the traditional law firm, 'which is unhappy because it actually trained the lawyers.'"
Axiom lawyers used to work in big firms and are well-trained but didn't want to join the 'whole rat race,' according to Chatain. The clients receive service similar to a major law firm at less cost. 'Almost everyone is happy,' says Chatain, except for the traditional law firm, 'which is unhappy because it actually trained the lawyers.'"
New Fee Structure For Law Firms - Forbes.com
New Fee Structure For Law Firms - Forbes.com: "law firms in Europe are now undergoing a period of rapid deregulation following passage of Britain's Legal Services Act of 2007, which allows for alternative business structures and non-lawyer ownership of firms, Burbank notes. 'It is quite conceivable that within 10 years, you will have a largely deregulated legal profession in the U.K. and Europe. Given the phenomena of globalization, it's hard to imagine this won't put incredible competitive pressure on large American law firms."
Tuesday, April 7, 2009
With the Downturn, It’s Time to Rethink the Legal Profession
Image via WikipediaThe economic downturn is hitting the legal world hard. American Lawyer is calling it “the fire this time” and warning that big firms may be hurtling toward “a paradigm-shifting, blood-in-the-suites” future. The Law Shucks blog has a “layoff tracker,” and it is grim reading. Top firms are rapidly thinning their ranks, and several — including Heller Ehrman, a venerable 500-plus-lawyer firm founded in 1890 — have closed."
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Monday, April 6, 2009
Rethinking the law office
In lean times, firms measure savings by the square foot - Karen Sloan - April 6, 2009
"One-size-fits-all attorney offices? The mere idea might prompt a gasp of horror from a law firm partner with a spacious corner office, but real estate experts say the slumping economy is prompting firms to look closely at how they use their space and how they can be more efficient and save money.
Adopting one universal office size for both associates and partners — which cuts down on total square footage needed — is just one of many ideas law firms are exploring in order to reduce real estate expenses.
"Firms are very concerned with real estate right now," said Bella Schiro, the vice president of occupancy analysis and planning at real estate services firm Jones Lang LaSalle, based in Chicago. Schiro's job is to help law firms use space more efficiently. "They are really taking a hard look at their space because they don't want to be using more of it than they need to."
It's no wonder law firms are turning a critical eye to their real estate needs. After payroll, real estate is typically their second-largest fixed expense. Law firms often occupy space in prime metropolitan locations that come with hefty price tags.
"As you consider the percentage of your budget that you spend [on office space], you have no alternative, really, but to look at how you can more efficiently use your space," said Sally King, the regional chief operating officer at Clifford Chance.
Two approaches
Real estate specialists who work with law firms say they are seeing two approaches to cutting those costs. The first approach involves short-term changes that have an immediate impact on expenses, such as renegotiating leases or subletting unneeded space, said Thomas Doughty, an international director at Jones Lang LaSalle and chairman of its law firm group.
The second focuses on long-term changes in how firms utilize the space they have, such as downsizing to one office size or putting two associates in one office.
Renegotiating a lease is perhaps the most obvious way a law firm can reduce its real estate costs, though the feasibility of renegotiating varies, depending on the individual circumstance of the firm.
For example, a firm with a lease that expires in less than three years has a better chance of convincing its landlord to renegotiate, as do firms that rent space in partially filled buildings, said Blanks. In the same vein, firms that are locked into a long lease may also find landlords to be less willing to modify the lease terms, Doughty said.
Subleasing unused space is another option for law firms, since many firms have drastically reduced their attorney and staff head counts through layoffs. But real estate experts warn that law firm offices are notoriously difficult to sublease because they are generally suitable only for other firms, and reconfiguring office space for another purpose is expensive.
Beyond short-term cost savings measures, firms are starting to discuss how they can use space more wisely.
Doughty said U.S. law firms have long lagged behind the corporate world and their overseas counterparts when it comes to occupancy efficiencies. For instance, it's common for associates in U.K. firms to work in open areas known as bullpens, instead of private offices.
Law firms can make a number of modifications to save space, which include opting for one size of office, housing associates in interior offices for longer periods of time, reducing the size of libraries and opening suburban offices to cut down on the space needed in expensive downtown locations.
Some firms are already taking that step. New Jersey firm Saiber plans to relocate from its downtown Newark location to the suburb of Florham Park in November — about a half-hour drive away.
"It's a cost savings," said managing partner Bill Maderer. "We're able to get more space for the same amount of money, or less."
By modifying how they use space, law firms can realistically trim between 10% and 20% from their real estate costs as long as landlords allow them to unload their unneeded space, Doughty said.
The one-office-size idea may make the biggest splash, since office size and location are often seen as workplace status symbols.
In the past, senior partners held client meetings in their office, meaning they warranted more space, Blanks said. But most meetings now take place in conference rooms, eliminating the need for very large offices, he said.
Some of the past reluctance on the part of U.S. firms to make serious changes in office layout and size can be traced to what Doughty calls the "global war for talent."
Because firms have needed to vigorously compete for top legal talent, offering up a large office with a nice view was one way to sweeten the deal and let attorneys know they were valued. But maintaining profits per partner has largely usurped the importance of large offices, and partners now seem more open to these types of measures, Doughty said.
"One-size-fits-all attorney offices? The mere idea might prompt a gasp of horror from a law firm partner with a spacious corner office, but real estate experts say the slumping economy is prompting firms to look closely at how they use their space and how they can be more efficient and save money.
Adopting one universal office size for both associates and partners — which cuts down on total square footage needed — is just one of many ideas law firms are exploring in order to reduce real estate expenses.
"Firms are very concerned with real estate right now," said Bella Schiro, the vice president of occupancy analysis and planning at real estate services firm Jones Lang LaSalle, based in Chicago. Schiro's job is to help law firms use space more efficiently. "They are really taking a hard look at their space because they don't want to be using more of it than they need to."
It's no wonder law firms are turning a critical eye to their real estate needs. After payroll, real estate is typically their second-largest fixed expense. Law firms often occupy space in prime metropolitan locations that come with hefty price tags.
"As you consider the percentage of your budget that you spend [on office space], you have no alternative, really, but to look at how you can more efficiently use your space," said Sally King, the regional chief operating officer at Clifford Chance.
Two approaches
Real estate specialists who work with law firms say they are seeing two approaches to cutting those costs. The first approach involves short-term changes that have an immediate impact on expenses, such as renegotiating leases or subletting unneeded space, said Thomas Doughty, an international director at Jones Lang LaSalle and chairman of its law firm group.
The second focuses on long-term changes in how firms utilize the space they have, such as downsizing to one office size or putting two associates in one office.
Renegotiating a lease is perhaps the most obvious way a law firm can reduce its real estate costs, though the feasibility of renegotiating varies, depending on the individual circumstance of the firm.
For example, a firm with a lease that expires in less than three years has a better chance of convincing its landlord to renegotiate, as do firms that rent space in partially filled buildings, said Blanks. In the same vein, firms that are locked into a long lease may also find landlords to be less willing to modify the lease terms, Doughty said.
Subleasing unused space is another option for law firms, since many firms have drastically reduced their attorney and staff head counts through layoffs. But real estate experts warn that law firm offices are notoriously difficult to sublease because they are generally suitable only for other firms, and reconfiguring office space for another purpose is expensive.
Beyond short-term cost savings measures, firms are starting to discuss how they can use space more wisely.
Doughty said U.S. law firms have long lagged behind the corporate world and their overseas counterparts when it comes to occupancy efficiencies. For instance, it's common for associates in U.K. firms to work in open areas known as bullpens, instead of private offices.
Law firms can make a number of modifications to save space, which include opting for one size of office, housing associates in interior offices for longer periods of time, reducing the size of libraries and opening suburban offices to cut down on the space needed in expensive downtown locations.
Some firms are already taking that step. New Jersey firm Saiber plans to relocate from its downtown Newark location to the suburb of Florham Park in November — about a half-hour drive away.
"It's a cost savings," said managing partner Bill Maderer. "We're able to get more space for the same amount of money, or less."
By modifying how they use space, law firms can realistically trim between 10% and 20% from their real estate costs as long as landlords allow them to unload their unneeded space, Doughty said.
The one-office-size idea may make the biggest splash, since office size and location are often seen as workplace status symbols.
In the past, senior partners held client meetings in their office, meaning they warranted more space, Blanks said. But most meetings now take place in conference rooms, eliminating the need for very large offices, he said.
Some of the past reluctance on the part of U.S. firms to make serious changes in office layout and size can be traced to what Doughty calls the "global war for talent."
Because firms have needed to vigorously compete for top legal talent, offering up a large office with a nice view was one way to sweeten the deal and let attorneys know they were valued. But maintaining profits per partner has largely usurped the importance of large offices, and partners now seem more open to these types of measures, Doughty said.
Saturday, April 4, 2009
NYT Editorial
With the Downturn, It’s Time to Rethink the Legal Profession By ADAM COHEN April 1, 2009
The economic downturn is hitting the legal world hard. American Lawyer is calling it “the fire this time” and warning that big firms may be hurtling toward “a paradigm-shifting, blood-in-the-suites” future. The Law Shucks blog has a “layoff tracker,” and it is grim reading. Top firms are rapidly thinning their ranks, and several — including Heller Ehrman, a venerable 500-plus-lawyer firm founded in 1890 — have closed."
The economic downturn is hitting the legal world hard. American Lawyer is calling it “the fire this time” and warning that big firms may be hurtling toward “a paradigm-shifting, blood-in-the-suites” future. The Law Shucks blog has a “layoff tracker,” and it is grim reading. Top firms are rapidly thinning their ranks, and several — including Heller Ehrman, a venerable 500-plus-lawyer firm founded in 1890 — have closed."
Wednesday, March 25, 2009
FASB proposes lease accounting changes
Image by Getty Images via Daylife"According to the World Leasing Yearbook 2009, in 2007 the annual volume of leases amounted to US$760 billion. However, the assets and liabilities arising from many of those contracts cannot be found in entities’ balance sheets. "
This is because leases are splits leases into two categories: capital leases and operating leases. If a lease is classified as a capital lease, assets and liabilities are recognised in its statement of financial position. For an operating lease, the lessee simply recognises lease payments as an expense over the lease term.
Per the Snapshot, if this principal is adopted, the lessee would be required to account for:
- an asset - for its right to use the leased item (the right-of-use asset)
- a liability - for its obligation to pay rentals.
What about renewal options and other lease rights? The FASB proposes that lessees do not "have to recognise renewal, termination or purchase options separately. Instead the lessee would determine whether the option will be exercised."
That seems pretty straightforward, but there are some significant implications.
Take, for example, a tenant with a five-year lease with a renewal right thereafter of an additional five-year term. The tenant would not be required to recognize the renewal option as a separate asset. "Instead, the lessee would determine the most likely outcome—will the lessee exercise its option or not? If exercising the option is the most likely outcome, the lessee would recognise a right to use the real estate for 10 years and an obligation to pay 10 years of rentals."
However, let's be honest. An existing tenant is at a disadvantage in any negotiation because the landlord knows that there are considerable costs involved with a tenant's decision to move its operations. Generally, a tenant's only way to counter this and regain any leverage is if the landlord belives they will actually move.
If that tenant's financials are available on public record, does the tenant's bargaining position diminish if the landlrod knows that the tenant is telling its investors that it is so likely to stay, that it is willing to take a liability on its books? This is one to watch.
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Tuesday, March 24, 2009
Wolf Block law firm to dissolve
Image via WikipediaProposed mergers with two 500-lawyer firms — Philadelphia’s Cozen O’Connor in 2007 and Florida’s Akerman Senterfitt in 2008 — fell through after lengthy, public negotiations. After the Akerman Senterfitt deal collapsed after Labor Day, Alderman said the firm would not entertain other merger possibilities until after its fiscal year ended on Jan. 31. Soon after the end of the fiscal year, when partners collect their year-end compensation, some of the firm’s partners began peeling off. "
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Friday, March 20, 2009
Nonequity partners more profitible
Secondly, their billing rates are higher, and every hour worked has a higher margin as against the allocation of fixed overhead to them as timekeepers.
Thirdly, they tend to have some book of business, just not enough to justify a full equity partnership position. This provides some breadth and stability to the enterprise business base.
Fourthly, they tend to have some real expertise and help out in landing new cases.
Fifthly, they tend to contribute to the administration and partnership duties, from recruiting, mentoring new associates, all manner of committees, etc., thus spreading the burden among a wider group.
Sixthly, it tends to be very easy to project based on years of past experience what the contribution to the bottom line of the firm will be, and their compensation and benefits packages are correspondingly tailored so that the firm makes a profit spread from every one of them."
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Monday, March 16, 2009
Cap rates could reach late-1990s levels
Image via Wikipedia
With investors unable to leverage the property the way they would have in 2005, the return on "cash investment" plummets, Schuchts said. Making the deal riskier, buyers also face the prospect of tenants not renewing leases or going bankrupt.
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Four-day work week becoming more common
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Thursday, March 12, 2009
Shrinking Legal Labor market
Image via Wikipedia
According to the National Law Journal, a report last week by the U.S. Department of Labor’s Bureau of Labor Statistics revealed that the number of individuals employed in legal services shrank by 4,200 in February. The data also shows about 21,000 jobs were lost in the U.S. legal sector in the past year.
Tuesday, February 17, 2009
Leaving Lockstep Behind
Image by dbking via Flickr"The proposal: Abandon the lockstep compensation approach toward associate pay in favor of a system that aligns pay with the performance of the individual associate and the firm, and significantly shifts the bulk of total compensation to this variable component. A performance-based pay structure would go a long way toward helping firms keep top legal talent, and it would serve firms better financially. "
The idea has been around for awile , but has seen little acceptance by the top firms. The current upheaval could be the best opportunity for it to get serious consideration.
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Monday, February 16, 2009
Black Thursday
Image via Wikipedia
"Six prominent firms sent packing more than 700 attorneys and legal staffers, in what may well become known as Black Thursday in the legal industry. DLA Piper; Holland & Knight; Goodwin Procter; Bryan Cave; Epstein Becker & Green; and Dechert all confirmed layoffs on Thursday (2/12/09), adding to what has become a brutal contraction of legal jobs. Faegre & Benson also confirmed on Thursday that it initiated layoffs on Wednesday, while Cozen O'Connor confirmed that it let go of staffers on Tuesday."
See full article at: Six law firms cut more than 700 lawyers and staffers on 'Black Thursday' at Law.com.
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Law Firm Hiring Crisis Ahead?
Image via Wikipedia"If present trends continue in the big firm market, we are heading toward -- you pick the cliche -- a paradigm-shifting, blood-in-the-suites, terror-on-the-campus hiring and retention crisis. The "economic reset" that General Electric's Jeffrey Immelt has tagged seems likely to force changes in the way firms recruit, pay and/or retain their lawyers. The market for labor has changed and, for now at least, there's no normal to which it can return."
And that is just how it starts. Press points to several key issues:
- Demand for legal services is flat or down. Since some areas of law are seeing healthy workloads and growth, that means that some practice areas are seeing dismal workloads.
- Haggling between business generators and other equity partners are likely to grow, as firms identify who is bringing in business and who is not.
- Law firms depend on attrition (up to 25% of assoicates annually) as part of their historical structure. With few people leaving on their own, the layoffs we are seeing are the firms' way of making that happen.
- Lower starting salaries.
- Wage freezes and cuts
- Delayed start dates for new assocaites
- Fewer summer associates
- More layoffs
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Saturday, February 14, 2009
800 Law Firm Jobs Lost in One Day
Image via WikipediaAlmost 800 associates and legal staff nationwide returned home jobless Thursday after eight firms conducted mass layoffs, citing an unprecedented downturn in demand. And the bloodletting is likely to continue.
"There will be more," said consultant Peter Zeughauser. "Materially more. I'm aware of some big ones coming up."
See full article.
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Wednesday, February 11, 2009
Vision for Big Firm - 2011
Image by Getty Images via DaylifeWhether this is accounted for as hourly billing or "value billing" is not particularly strategic, except that to measure differently will, of course, incentivise firms to be more thoughtful about how to structure work.
Where will those dollars go? Four places.
1. Clients will just flat-out spend less, drive harder bargains and get more for their money.
2. Some work will go to outsourcers, whether onshore or off.
3. More work will go to contract lawyers or proto-associates not on any kind of partnership track.
4. Some associate time will get replaced by technology.
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Wednesday, January 28, 2009
Wide legal spectrum for Madoff claims
Image via WikipediaA primary issue will be attempts by the bankruptcy court to reclaim improper payouts to early investors, a process known as "clawback." [See "Madoff investors may be on the hook for 'clawback' suits."] But the issues do not stop there. An interesting nuance is the fate of funds sent out of the United States. Many Madoff investors were funds and investors based in Europe.
"'Will that result in a tug of war between aggrieved European investors and aggrieved U.S. investors?,' asked Howard Kleinhandler, a partner at Wachtel & Masyr in New York."
Other potential areas of controversy include suits and allegations involving:
- Funds sent out of the United States
- Difference in state laws regarding how far back the clawwbacks may go
- Defining a "fraudulent conveyance" of payments by Madoff to early investors
- Potential liquidations of offshore feeder funds if they can't repay investor claims
- Recovery from a federal program designed to repay victims of failed brokerages
- Negligence of feeder funds worldwide for failure to uncover Madoff's alleged fraud
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The View From 3L
Image via Wikipedia
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Monday, January 19, 2009
FT.com / Companies / By region - BofA set for further jobs cuts
Image by Getty Images via DaylifeFT.com / Companies / By region - BofA set for further jobs cuts: "BofA set for further jobs cutsBy Greg Farrell in New York
Image via WikipediaPublished: January 19 2009 23:44 | Last updated: January 19 2009 23:44
Bank of America is expected to make several thousand employees in its capital markets businesses redundant, starting this week, according to executives familiar with the matter.
The cuts, most of which are expected to be in New York, come three weeks after BofA acquired Merrill Lynch. They reflect the consolidation of the bank’s sales and trading businesses under the control of Tom Montag, who joined Merrill last year from Goldman Sachs."
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Tuesday, January 6, 2009
Madoff: How to Get Away With It
Image via WikipediaAre you wondering how how Madoff's scheme got past the SEC? Allan Sloan's of Fortune.com. says that regulators routinely miss gargantuan frauds because they're not looking for them."You're likely to get caught if you run a few inches outside the baseline, because regulators are set up to catch that," wrote Sloan. "But run so far that you're playing on a whole different ball field? You can get away with that if you're enough of a financiopath, and your luck holds."
Thanks to AmLaw Litigation Daily for pointing out the article.
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Monday, January 5, 2009
Is high leverage model of firms set to change?
Image via WikipediaOver the last couple decades, high leverage--the practice of having each equity partner supported by three or more associates or income partners--was accepted as a basic tenet of profitability. But is the pyramid an unstable structure? Our report includes a chart ranking the Am Law 100 by leverage.See full article at: From the January Issue of The American Lawyer: Past the Tipping Point
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