Two new forecasts revealed a reluctance by in-house counsel to choose high-priced “pedigreed” firms, and a preference for smaller firms that offer efficiency, predictability and cost-effectiveness. The best brand to have for corporate clients in 2014 is “We're not Biglaw!”
The 2014 State of the Legal Market by Thomson Reuters and Georgetown Law School found that:
- Once a firm grows larger than 100 lawyers, diseconomies of scale set in that require more resources to achieve uniformity in quality.
- The brand value of the largest and historically most prestigious firms are losing some of its luster.
- Corporate clients are not interested in “one stop shopping.”
- GCs have formed AdvanceLaw, an organization of 90 general counsel of major global companies that vet law firms for efficiency and amass detailed information about the cost of legal services at the most granular level.
- Corporate dollars are flowing away from the largest, full-service law firms (750+ lawyers) and into smaller but “large enough” law firms.
Clients define “value” as: efficiency, predictability, and cost effectiveness in the delivery of legal services, quality being assumed. The smart marketing move is to build a brand around these three qualities.
“A disruptive transformation in the legal market may well already be underway,” said the report darkly.
Profits will grow
There was good news in the Citi Hildebrandt 2014 Client Advisory, which predicted the law firm profits will grow around 5 percent in 2014. Alternative legal providers that deliver faster, cheaper and better solutions than traditional law firms will see double digit revenue growth.
A small number of firms have hired pricing director to do battle with the corporate procurement teams. Smart firms (only 47%) are implementing formal client feedback programs to cement their relationships and capture greater market share.
Both reports said there are way too many lawyers compared to the available legal work, meaning that to gain a client, a law firm has to take one away from another firm. It's a buyer's market as we all know, meaning that clients are going beyond standard alternative fee arrangements and demanding pre-negotiated discounts.
The marketing keyword for 2014 is “efficiency.” Tactics range from assigning lower-cost, non-partner-track lawyers on files, thinner margins, fewer staff, project management training for partners and associates and even jettisoning “less profitable senior partners.”
The Citi report concluded, “The legal profession may be at an inflection point, where the supply and demand imbalance may begin to rebalance. If this is true, it would seem to us that the economics of the profession will improve. … Past recessions, where the doomsayers wanted to declare the end of the legal profession as we know it, were proven wrong. We think those doomsayers will be proven wrong again.”