Trend: from smaller offices local firms are serving bigger clients
May 1, 2013
Your office is going to get smaller — it’s going to be maybe half its current size — and your firm will be building a lot of conference rooms. You’ll also be eliminating secretarial stations the next time you move or when you remodel after the next renewal of your lease.
Those are some of the long term trends for the business of law revealed recently by a principal of Altman Weil at the Tennessee State Convention of the Association of Legal Administrators. I was there speaking about marketing, billing rates and the role of traditional relationships alongside social media and sat in on the presentation.
Altman principal Ward Bower told the audience in Nashville earlier this year that the total square feet per lawyer in an efficiently designed, cost-effective law office has shrunk to 400 from nearly twice that on average pre-Great Recession.
“Lawyer offices are now works spaces, not meeting spaces,” he said. “Meetings, even between a firm’s lawyers, are held in conference rooms and not in lawyer offices. You have a lot more conference rooms of all sizes.”
There aren’t secretarial stations across from each lawyer’s office in the new economy’s floor configuration either, Bower said.
Bower made his comments while explaining the “Golden Era of Big Law” will not return. For three years the legal market has not grown and total spending has been static at $250 million in domestic fees, he said. I have a take on that statistic. Spending at Big Law firms is flat because most every corporate legal department is finding less expensive equally-credentialed lawyers in local and regional firms to do the work. We represent those firms and see work coming in to them from the Fortune 1000 every day. It’s premium rate work for the local and regional firm and being billed at 25 percent (or less) per hour than what is charged by a national.
To increase profitability big law firms will continue to merge. These will mostly be acquisitions of firms of fewer than 25 lawyers by much larger firms seeking to create broader geographic footprints, Bower said.
How successful are such mergers? Of 117 mergers since 2002 an analysis by Altman showed 77 percent resulted in increased profitability in the first year. More than 90 percent had higher profits after five years when revenues were adjusted for inflation.
After saying that, Bower admitted the profitability jump hinges on the known phenomena that five percent of lawyers leave a firm they merge with after the first year. We all well know that after five years the percentage is far higher. I represent dozens of lawyers who merged into big firms and who within a few years have left and are recreating their former local firm– and gradually taking back clients of the firm into which they merged at lower rates.
Bower also said that firms that can create a well understood and meaningful brand reported 10 percent greater profitability than firms that blended in with their competition. “You have to be known for something important to your client in a saturated market,” he said. That’s easy to say and much harder to do. So many branding initiatives produce meaningless taglines and imagery.