Four Critical Transitions: Leading Law Firms in the Post-Recession Economy

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In 2010, the Rock Center for Corporate Governance at Stanford University issued a report on the future of law firms in the post-recession economy, that concluded by saying:

We must acknowledge and respect the forces that created [current market dynamics], and fashion remedies that swim with the tide of economic change rather than rail against it.” 

The forces referred to by the authors are those which are exerting an inexorable pressure on the profession to change.  I agree with this takeaway which is, essentially:  ‘Deal with it.’

Law firms of all sizes cannot escape the pressures for change and therefore must engage in new thinking and new approaches to remain viable, stable and competitive.

In my work with law firms and my collaboration with colleagues who work for corporate legal departments, I see several of these issues rising to the top as areas where law firms will need to focus their transition efforts over the next decade.  These are efficiency in service delivery, overhead cost reduction, alternative fees and partnership standards.

Although the need for change seems quite clear, the pace that is required to effectively deal with various pressures is unclear.  For example, must a firm move to alternative fee arrangements within the next two years or suffer irreparable competitive disadvantage?  I think not. 

Must a firm immediately move away from hiring first-year lawyers right out of law school because they appear to have decreasing value, at least to major corporate purchasers?  Of course not.  

But these forces are in motion and they are accelerating partly as a result of the recent recession.  We don’t know exactly how fast firms must change — and that is vexing.  However, it is always better to look forward, anticipate the changes that must eventually occur and begin to deal with them before they create a crisis.  In fact many firms are beginning to see these issues as opportunities to establish competitive advantage.

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