Much ink has been spilled on whether or not we're seeing any "green shoots" in the economy. As faithful readers know, I'm not buying that theory.
Above, I wrote that:
If you believe that clients are finally serious about seeking to spend less overall on outside counsel, then they have a limited range of choices. I suspect we're seeing all three kick in:
Discounts or other rate reductions without a fundamental rethinking of how law firms perform their various functions are an extremely short-sighted and (I would argue) unsustainable trend. I have never advised a client to cut rates or offer discounts as I believe it teaches clients to behave badly.
And while clients may claim they appreciate the reduction from (say) $450/hour to $400/hour, their memory will be very short and they will scream bloody murder if you try to go back to $450 from $400--and immediately forget their gratitude at giving them a break in the first place. Also, arithmetically, perceptions work against you; the cut from $450 to $400 is a cut of 1/9th (11.1%) but the raise from $400 to $450 is a raise of 1/8th (12.5%)
The real problem with discounts, besides the quasi-esthetic objection that they display an utter lack of imagination or creativity either on behalf of the client or the firm, is that they train clients to expect discounts and in the process devalue your services.
Clients demands' for discounts and push-backs on such practices as billing for first and second year associates may, ultimately, force you to examine the question of what type of firm you are. Who, that is to say, is your real target market?
If you enjoyed the "rising tide" phenomenon of the first decade of the 2000's, when the compound annual growth rate of revenue of law firms tracked by the Citi Private Bank was nearly 11%/year--and if that was actually all you were experiencing--then you may have to face some difficult days of reckoning.
On the other hand, if--fortunate you--your firm's services seriously are worth a premium in good times and bad, then you need to have the courage of your convictions and stick to your published rate card, as it were.
The only certainty I can offer you on this score is that Mr. Market will tell you on which side of the divide you primarily stand.
The most critical question in this entire debate over what the landscape will look like "on the other side" may be whether clients who have eaten the fruit of the forbidden middle-market firm tree will find that they're satisfied and stay there. There are no a priori reasons, after all, why the quality of lawyering should be correlated with the cost of living in the firm's primary city.
We may also see graduates from the nation's top-drawer law schools increasingly migrating towards cities not counted among the capital markets centers. Why?
If this trends kicks in at noticeable scale, regional and middle-market firms may find themselves able to move readily up the talent food chain.
Please understand something here: Terrific lawyers have always broadly populated firms outside the AmLaw 50, 100, and 200, and have always populated cities of fewer than 1-million or 100,000 residents. I know that and you know that. My only point is that clients who have heretofore doubted that on general principles or simply never experienced that or never had the courage to reach outside the "safe" name-brand mainstream may at last discover it for themselves.
The counter-argument to this is that sophisticated and "premium" transactions and litigations are generally performed in major global legal and financial centers because that's where the highest-wattage brainpower tends to aggregate--and it's not just lawyers, but investment bankers, accountants, management consultants, and every other related profession requiring talent (graphic artists, marketers, etc.)
I happen to believe that the ever-accelerated interconnectedness of our world has only increased, not decreased, the desirability and necessity of people congregating in places like New York, London, and Hong Kong. But there's no copyrighting ideas and brilliant lawyering isn't limited only to certain geographic latitudes.
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CONSULTEN, OPINEN , ESCRIBAN .
Rodrigo González Fernández
Diplomado en "Responsabilidad Social Empresarial" de la ONU
Diplomado en "Gestión del Conocimiento" de la ONU
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