The New Normal

The ABA Journal is hosting The New Normal, an ongoing discussion between Paul Lippe, the CEO of Legal OnRamp, and Patrick Lamb, founding member of Valorem Law Group, about the changes occurring in the delivery of legal services.

The phrase "New Normal" describes how technology and global competition are creating a new normal of relentless change, and this past discussion focused on the next wave of value demands from GCs.

According to the article, from GCs perspective, they are now coming from a place where "most things we buy are getting cheaper while law is getting more expensive."

Which leads GCs to question how can law firms can "say you’re putting our interests first when you don’t realize global competition could put us out of business if I don’t manage every aspect of my operations more efficiently?”

We've discussed the ACC Value Challenge before on this blog, but now according to its chairman, Mike Roster, “25% in cost savings for 2011 is the new target."

Roster continues, "I've spoken to many top GCs and this is what they're planning to get to next year, and it's achievable. And by trying to get there, they’ll actually do a better job.”

The New Normal wondered if a goal of a 25% cost reduction would be a "catastrophe or an opportunity", and they postulated that in their experience "seeking modest, incremental improvements usually changes little; seeking dramatic improvements (which requires simultaneously redefining objectives, resources and constraints) often – but of course not always – leads to breakthroughs."

25% cost reductions in 2011 is no doubt an aggressive goal. It will be interesting to see how adamant GCs remain, and what tactics law firms ultimately embrace to tackle such a hefty directive.

Trends Gaining Traction in Bureau of Labor Statistics Report

The ABA Journal last week highlighted the recent U.S. Bureau of Labor Statistics Report that contained good news for paralegals.

But if you really look at the actual BLS Report, it is striking how the trends that have emerged over the last two years are now shaping projections for the legal job market.

According to the report:

• "Corporations in particular are expected to increase their in-house legal departments to cut costs. The wide range of tasks paralegals can perform has helped to increase their employment in small and medium-size establishments of all types."

There has been debate whether cost cutting is a trend during challenging economic times or whether it is the new reality, and this report seems to assume the latter.

• "Demand for paralegals also is expected to grow as an expanding population increasingly requires legal services, especially in areas such as intellectual property, healthcare, international law, elder issues, criminal law, and environmental law. The growth of prepaid legal plans also should contribute to the demand for legal services."

There has been no shortage of talk about alternative billing models, but it is noteworthy to see one gaining enough traction to factor into government labor projections.

• "Employment of paralegals and legal assistants is projected to grow 28 percent between 2008 and 2018, much faster than the average for all occupations. Employers are trying to reduce costs and increase the availability and efficiency of legal services by hiring paralegals to perform tasks once done by lawyers."

At the core of legal service outsourcing is the idea that some rudimentary, associate-level legal work can be effectively executed by lower cost regional or international lawyers. But this government report takes that idea one step further, implying that some functions can be delegated to non-lawyers, which is something clients may want to watch warily.

Challenges of Constant Connectivity and Instant Communication

A couple articles this week highlighted the challenges and considerations arising from our current state of constant connectivity and instant communication.

We've all hit 'send' on an email, only to feel that wave of doubt. Should I have sent it? Could it be misinterpreted?

If that concern with an overly hasty missive exists with email -- which at least forces us to slow down a little and compose a thoughtful (hopefully) message -- the potential for rushed and ill-considered communication exponentially increases with text messaging, which is by nature immediate and fragmented.

Other potential pitfalls of instant communication for lawyers were assessed by Samantha Southall at Law Technology News, including texts from new/potential clients, inflammatory texts from opposing counsel, texts that contain derogatory comments about colleagues or judges, and inquiries from reporters.

One of Southall's observations turns out to be the best rule of thumb: Treat every electronic response as though it is going to be seen in print, attributed to you, in a newspaper. And we'll take it one step further: Act as though your comment in that newspaper is going to be read by your mother.

The other timely article appeared in law.com, where Harry Valetk discussed the challenges of a socially networked jury.

Valetk's conclusion that trial courts must "adapt to jurors hopelessly dependent on information" includes the following focal points:

Probe jurors during voir dire on Facebook and Twitter use. Establish frequency of use and a juror's ability to refrain from using social networking tools during trial.

Monitor juror Facebook and Twitter activity during trial. Tools like Social Mention allow you to search blogs, microblogs, networks, videos and much more. This engine also allows you to create alerts for your search terms that you can have e-mailed to you daily.

Ask the trial judge to remind jurors that they may come forward to report a fellow juror's misconduct. The judge should also remind jurors about the fines and other potential consequences for failing to follow the court's ban on communicating with others about the case.

Warn jurors before and after every jury break about the court's ban on communicating with others about the case during trial, including the use of Facebook, Twitter and other web-based tools.

Explain the logic behind the presumption of juror prejudice. Jurors today may be more receptive to complying with court-ordered bans on communicating with others during trial if they understand the logic behind the ban.

Survey of Law Firm Financial Performance

Last month's midyear survey results from Citi Private Bank's Survey of Law Firm Financial Performance offered some much needed good news, however each positive nugget came tempered with caveats.

According to coverage in AmericanLawyer.com:

The Good News: Law firm expenses decreased, compared with the first half of 2009.

The Mitigating Factors: Lower expenses are largely due to the reductions in lawyer head count that firms implemented last year. Also, since these reductions took effect mainly in the second half of 2009, we will now start to see much flatter year-to-year comparisons.

The Good News: The impact of head count reductions has been positive, with productivity up about 4 percent and contribution per lawyer (revenue per lawyer minus expense per lawyer) up almost 20 percent.

The Mitigating Factors: We're coming from a low base, and there will be a bump in head count created by the new incoming class starting in the third quarter, so firms may still have excess capacity.

The Good News: Billing rates are up, trending at 4 percent. This is a good result, albeit lower than the historic 6-7 percent.

The Mitigating Factors: We have two caveats. These rate increases are before realization, and we're still hearing that realization is under pressure (though not falling as steeply as in 2009). Further, since leverage is declining, rate increases may be artificially inflated because a higher percentage of more senior lawyers with higher billing rates are doing the work.

The Good News: Net income and profit per equity partner for the first half of 2010 show improvement over the same period in 2009.

The Mitigating Factors: Given the traditional bump in fourth-quarter collections, this may not be an accurate reflection of net income and profit per equity partner for full-year 2010 and cannot be taken as a prediction.

The Good News: As a sector, demand at global firms is up by almost 2 percent.

The Mitigating Factor: Global firms underperformed the industry over the last two years.

Taken as a whole, there seem to be enough rays of sunshine to argue that we may have at least reached the bottom. But there are more than enough caveats to argue that we're still deep in the canyon.