Not So Fast

This time last month the Bureau of Labor Statistics released their preliminary report for May, initially indicating an increase of 300 jobs added to the legal services sector. While not a large increase, any ray of sunshine is more than welcome these days.

Unfortunately, that report turned out not to be accurate. The adjusted numbers in the final report for May actually show a loss of 600 legal services jobs.

And it doesn't get any better, with June's preliminary report showing a decline of another 3,900 jobs last month.

All tallied, the unpleasant math totals more than 22,000 legal sector jobs that have been eliminated over the past twelve months.

This squeeze on legal staffing is also a primary driver for one of the most significant emerging trends identified in the Altman Weil survey we discussed last week.

More than 50% of those surveyed expect the use of external, non-headcount, contract-based attorneys (both domestic and international) to become a permanent part of their business models.

As The Legal Intelligencer noted this week, GC's face "increasing workloads, hiring freezes, and budget crunches that prevent significant use of outside counsel." And the solution for many is the strategic use of lower-cost project-based attorneys.

Increased reliance on contracting with outside attorneys on a project basis may be a timely solution -- born out of current necessity -- but it also seems to be one that will become an ingrained component of many firms' and departments' business models.

Law Firms In Transition

Legal consulting firm Altman Weil's annual survey is appropriately titled "Law Firms in Transition 2010".

The survey reports that law firms are in the process of determining how to institutionalize large scale changes to both how firms are staffed and how work is delivered.

In terms of staffing, the survey found that:

• In 2009, 44 % percent of the firms laid off associates

• 53% reduced or discontinued hiring first-year associates

• 64% shrank their summer associate programs
  

For 2010:

• 10% of the firms plan to cut associates
  

• 38% plan to reduce or discontinue hiring first-year associates

• 54% plan to shrink their summer programs

In terms of how work is executed and delivered:

• 39 percent of the law firms used contract lawyers in 2009, while 53 percent may in 2010, and 52 percent expect that contract lawyers will become a permanent part of their staffing plans.

• Nearly 10% of firms outsourced or offshored legal work in 2009, and 28% of law firms expect outsourcing of legal work to be permanently adopted in the future.

According to the survey, many law firms do still remain skeptical of outsourcing and offshoring and will likely adopt them only when pushed by clients.

But, as the survey itself notes, this level of resistance that some firms feel towards outsourcing is similar in nature to the resistance firms previously felt towards alternative fee structures.

So, how do firms now feel about those alternative fee structures they once opposed? According to the survey:

• 94.5% of law firms offer some alternative fee arrangements (AFAs), and all firms with 150 or more lawyers do so.

Clearly, law firms -- pushed by the demands of clients -- moved past their early resistance to alternative fee arrangements.

Combine that historic precedent with the fact that last year 67 % percent of law firms made cuts in support staff, 43% cut paralegals, and 44% cut associates. Since much of the legal work that is successfully outsourced is associate-level work, additional movement on outsourcing seem likely.

Teaching Project Management

Project Management for attorneys seems to be on everybody's mind right now.

We posted last week about Orrick, Herrington & Sutcliffe creating a career track for legal project management.

This past week, Legal Intelligencer reported on a firm-wide initiative undertaken by Dechert LLP in conjunction with legal consultants Altman Weil to train their attorneys in project management.

The article quotes Altman Weil's Pamela Woldow, addressing a number of topics, including:

Initial Trepidation:

• "I think lawyers like to believe that everything they do is unique and complex and the truth is there are some parts of representation that are complex, but there is an awful lot that is rather easily mapped."

• While litigators often get the blame for being the most averse to using project management because cases can take unexpected turns, Woldow said finance attorneys, though "battle wounded" in the recession, have been the most resistant to the training.

Process:

• The training breaks down a matter from the earliest stages of assignment to the end, with an emphasis on a lot of up-front communication with the client about expectations and defining the scope of the project.

• The training sessions for partners included no more than 20 partners at a time, from varied practice groups. They were brought in for four- to six-hour sessions and taught the concepts of project management and tools to implement it. Lawyers visually mapped out matters related to their practice to see how the process works.

The Changing Landscape:

• "I do spend most of my time with GCs and in-house counsel and the message beyond the recession is that they want their law firms to operate more like businesses and deliver their services more efficiently and cost effectively."

• "From a law firm perspective, this type of process is enormously effective when operating on an alternative fee arrangement because, if they are going to be profitable, they cannot operate the way they have in the past."

• The push for efficiency among large law firms has largely been driven by cost concerns from clients and the need to make good on the alternative fee arrangements that are often seen as a solution to these cost concerns.

• While certain matters may prove more challenging than others in terms of implementing project management techniques... there are enough clients out there demanding these types of services that firms have to embrace this.

It certainly seems that project management is not just a fad with a limited shelf life.

Large Firms Resisting Change?

As readers of this blog know, much of our focus is on emerging trends in the legal profession. And, at this juncture in time, most observers agree that the profession is in the midst of some profound changes in the business of law.

A flattening, global market; legal process outsourcing; captive offshore legal departments, virtual attorneys and virtual associates; web based legal products; evolving business and billing models; and the U.K.'s Legal Services Act 2007 are just a handful of emerging trends adding new colors to the legal canvass.

However, a recent study indicates that for all the talk and analysis, there may be significantly less change or innovation taking place in large firms. At least significantly less than GC's would like.

As reported this month at law.com, a survey released a few weeks ago by Altman Weil had this to say about General Counsels' opinions regarding the large firms with whom they work:

"75 percent of the responding chief legal officers rated their law firms between zero to four on a 10-point scale, indicating their opinion that firms had little or no interest in change. Only 5 percent of the respondents ranked their outside law firms between eight to 10, with 20 percent falling somewhere in the middle.

"This is a dramatic vote of no confidence from chief legal officers," Altman Weil Principal Daniel J. DiLucchio Jr. said in a statement. "Either many law firms just don't understand that clients today expect greater value and predictability in staffing and pricing legal work, or firms are failing to adequately communicate their understanding and willingness to make real change. In either case, it's a big problem."

This perception on behalf of GC's comes after more than 60% of respondents reported putting legitimate, non-negligible pressure on their law firms to change their value proposition.

So, given what appears to be some dissatisfaction in the degree of change being offered by large firms, it can't be encouraging for these firms to know that the survey also reported that 40% of GC respondents expect to give less work to outside firms this year.

To put that number in perspective, from 2000 through 2007, that expectation never surpassed 20%. Now, in a matter of two years, the expectation to give less work to outside firms has doubled.

While this may simply be a temporary blip fueled by the sour economy, history tells us that this window of time may well see some alternative models take hold that will provide GC's with the evolution they are seeking.