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As expected, Q1 of 2011 is the fourth quarter in a row that Dan DiPietro and Gretta Rusanow (chairman and senior client advisor, respectively, at Citi Private Bank’s Law Firm Group) have delivered bad news about the legal industry.  They did, of course, present us with the good news first, followed by a major “however…”

The Citi Q1 2011 Report led off with the exciting news that there was a 3.7% industry increase in revenue — based largely on interviews with the upper end of the market.

However, they go on to say that:

  • The largest segment saw growth in expense per lawyer outpace growth in revenue per lawyer.
  • The next largest segment experienced zero growth in demand in the first quarter of 2011.
  • Compensation expenses rose during this period.
  • Operational expenses continue to increase, likely due to IT and other infrastructure projects that had been delayed for two years.

We were intentionally a bit snarky about the issue of lawyer complacency in our last post, but DiPietro and Rusanow say it plainly:

“Our fear is that with healthy profit increases in 2010, and the increases in revenue and demand seen in this first quarter, the mood is swinging from panic to complacency, when it needs to go from panic to urgency.

Unless law firms are ready to touch the "third rail," i.e., partner compensation, cost control has reached its limit. The only remaining solution is to increase the number of effective revenue-generators. Firms need larger, better sales forces.  They can either hire them, or train their own lawyers to be that sales force.

Mike O'Horo

RainmakerVT is the modern, affordable solution to training a large number of lawyers.