The law firm model might be like a car that needs a tune-up, but it doesn't need to be taken to the junkyard, according to one national consultant.
"Don't scrap the model because, while it may need updating, clients want it to continue," Robert Denney told the Delaware Valley Law Firm Marketing Group earlier this month in his annual presentation of his "What's Hot and What's Not in the Legal Profession" report. "Let's not get carried away with changing the model."
He said firms should ease into the changes. In some instances, there's also a lack of movement on both the law firm and law department sides of the equation, he said.
While the push for value that's making its way through the profession isn't all about alternative fee arrangements, most corporate counsel's definition of value is lower rates and lower cost, he said. Negotiations over such arrangements aren't always being pushed by the law firms and aren't always being requested by the clients. And the sometimes "contentious" negotiations can take a lot of time and money to work through, he said.
"The billable hour ain't dead, folks," Denney said. "It's going to be around for a long time."
Denney pointed to a recent Altman Weil survey that found 75 percent of general counsel ranked their firms poorly when it came to a willingness of the firms to change their business models. Denney said that might be the pot calling the kettle black because clients aren't asking for change as much as one might think. But either way, he said, it shows all of this talk may not lead to as much change as anticipated.
Of all the changes affecting the profession in the last 18 months, Denney said the most significant development was the survival and recognition of small to midsize law firms and their increasingly important place in the market. He pointed to DuPont's increasing use of smaller firms across the country and said this trend will only continue.
"That's where the action is, folks, and that's where it's going to be," Denney said. "That's where the profitability is."
WHAT'S HOT IS COLD
Denney admits that what could change in the coming months is his list of hot and cold practices. Some that are hot are cooling and many that are cold could see potential next year.
He pointed to environmental law as a hot practice area these days but said it only takes a look at the press coverage of climate change in the last few weeks to know that might be cooling -- no pun intended.
Many large firms had been phasing out practices they viewed as commodity work, but with the advent of even newer technology and a shift in staffing models, firms that can handle the work in volume are finding it profitable, Denney said.
Litigation and alternative dispute resolution proved tricky to understand this year. While ADR normally picks up when litigation is slow, Denney said both were relatively strong this year. ADR got a boost from clients looking to save money on litigation, while commercial litigation practices were still keeping busy.
Denney said some strong industry sectors to watch out for were the financial services, health care, telecommunications, energy, pharmaceutical, insurance and automobile industries.
In looking at some practices that have been cold, Denney pointed to initial public offerings. He said the last few weeks, however, have already shown an uptick in activity in that sector. The same could be true for the recently very cold mergers and acquisitions practice. He said financial analysts he speaks with all predict that work to improve next year.
Tax has been a pretty quiet area in the last year, but Denney said that also could change with the potential for new tax laws across several industries next year. And while commercial real estate may not have hit rock bottom yet, Denney predicted residential real estate is getting warm and will pick up in 2010.
In breaking down litigation practices, Denney said class actions against banks and credit card companies are hot. Suits against time-share companies for essentially "double-booking" are also picking up, he said.
Boutique firms are also "really hot," particularly in the areas of intellectual property, bankruptcy, and labor and employment, he said.
MARKETING TOOLS AND OTHER TRENDS
Client audits or client surveys are "more critical than ever," Denney said. They can help build marketing strategies and improve relationships. He said it's important the relationship partner not do the interviews so that clients can be open to talking about any concerns.
Law firm apprenticeship models, like the one created at Drinker Biddle & Reath, could continue and Denney said he hopes they will. The models, which he likened to medical residency programs, allow for entry-level attorneys to train for a year or two rather than bill clients. The attorneys are also paid less.
Denney warned, however, that if the economy picks up, and firms start to raise rates and clients become less cost conscious, "You'll see these programs crash and burn."
Denney also noted some other trends to watch:
• As the economy starts to improve, firms are getting back to strategic planning rather than the "survival planning" they were doing in the last year, Denney said.
• As firms change their staffing models to include more contract attorneys and fewer associates, there will be a smaller number of partners, each with more responsibility, he said.
• Law firms "have taken a step back" when it comes to diversity. Denney said a disproportionate number of layoffs this year have been of minorities and women.