It's hard to imagine how it's possible, but if any lawyers somehow still believe that the legal service demand downturn of the past five years was cyclical rather than seismic, two recent articles should drive the final nail in the coffin of that fantasy. Combined, they depict two scary trends that should awaken every lawyer to the need to get serious about generating his or her own business, and to find it in a very different place.
Declining demand and fee discounting
Profit participation concentrating at the top
The May 8 edition of The AmLaw Daily offers Citi Study: Law Firms Hurt by Weak First-Quarter Demand, which declares
"With demand down yet head count still growing, however modestly, productivity continued to deteriorate, averaging 1,607 hours on an annualized basis, compared to 1,669 in the comparable quarter last year, a 3.7 percent decrease. The decline in productivity continues to intensify pressure to discount fees."
The May 3 edition featured Ugliness Inside the AmLaw 100, Part 1
"Perhaps it’s not financial chicanery, but many firms admit that they’re still turning the screws on equity partner head count as a way to increase PPP. According to The American Lawyer’s most recent Law Firm Leaders Survey, 45 percent of respondent firms deequitized partners in 2012 and roughly the same number plan to do so in 2013.
While a lower threshold for profit participation makes room for more equity partners, the result over time is a Dewey-style “barbell” system: a handful of rainmakers dominating one end of the barbell, with many more so-called service partners populating the other—and rarely moving very far off it."
The pie is shrinking, and those who have it now are keeping it. (That worked out well for Dewey, eh?). As I pointed out earlier this year, you can make yourself irreplaceable to clients, or finance the stars' wealth.
Now for the good news.
When I read about a decline in "legal service demand," I hear "decline in demand for mature, well-defined legal services delivered in the traditional way." That leaves plenty of room for demand based on a) emerging business problems and b) service delivery innovation.
If we could take a snapshot of global demand for goods and services today, then compare it with one taken only six months later, we'd be surprised by the degree of change. Many products and services in demand in the first would be missing or greatly diminished in the second.
Societies, and the economies that derive from them, are dynamic. Nothing remains static. Whatever people are buying today, they'll be buying less of some time in the future.Likewise, many goods and services that will form future demand don't exist today because the problems they solve, or the needs or desires they satisfy, haven't emerged yet.
Never invest in a declining asset, which is what you do when you compete with a growing number of lawyers for a dwindling number of matters. Let the greedy dinosaurs hoard the declining demand based on the issues of the past. Begin investing your time and energy identifying and associating with the business activity that represent the "green shoots" of future demand.
While most companies eventually fade away, it's rare for an entire industry to disappear. Rather, they morph from what they are now to what they must become in response to societal changes. Recognize your industry knowledge, i.e., what you've learned about your clients' businesses, as the asset on which to base your future. Become an industry expert. You'll be surprised how easy it is, from the inside, to recognize opportunity as it evolves.