Will it be a year of living dangerously, or a year of opportunity? One thing is certain –ten months from now, in December 2009, the market will have changed completely. Who will be the winners and losers of the current crisis? What new models, innovations, and proactive approaches will have ferreted out sources of growth at a time when nobody expects it? How can we prepare, given that no one really knows what further setbacks are in the cards? The watchword we propose – after “Back to the Client” in our November 2008 newsletter – will be “Back to Basics!”.

After a long period of strong growth for law firms in France and around the world between 2002 and 2007, and an indefinable year in 2008 (good for some, average for others, and bad or even very bad for some – e.g.: Heller Ehrman, the 56th-ranked US firm with half-billion annual sales, or Thelen Reid Brown Rayman & Steiner, 76th, which disappeared), there’s no denying the fact, that 2009 will be a watershed year for more than one reason. And that calls for anticipation. But with the prevailing “fuzzy” perception of the future and a market visibility that’s been reduced to a few weeks, or even a few days, how can business-law firms prepare for 2009? We feel that a return to certain basic principles is essential.

Here are a few concrete tracks for being successful – to the extent possible – for 2009:

Focus on profits rather than on sales
Given that sales growth is rarely achievable in a period of crisis, we have to concentrate on maintaining or developing margins and profits in order not to jeopardize the organization and to be able to reinvest as quickly as possible at the most favorable time. Taking on unprofitable cases is a mistake that must be avoided! That may be easy enough to say. But, how to do it? Industrial companies know their manufacturing costs to the penny. Attorneys, too, need to know their costs for each case and analyze and optimize them. How? By increasing the leverage effect? By standardizing methodologies in order to delegate more work to younger associates? After all, while we can’t raise rates in a situation like the current one, we can always try to control costs. But those costs have to be known! An audit of support functions is very probably in order (see below).


Develop a real client strategy
A return to the client is indispensable (see our Newsletter No. 1, November 2008, entitled “Developing Client Assets”). The adage that holds that winning a new client costs five times as much as securing the loyalty of an existing one is every bit as true in a crisis period. We have to focus on the clients that are most profitable and those who have the strongest potential for development in the changing economy. Then, following a precise analysis of the client portfolio, a real client strategy can be implemented; creating processes, tools, and above all business development training programs for all partners or possibly all senior associates may be worth considering.

Promote and reward work and team spirit
Partners in charge of departments, practice groups, and business areas, more than ever, need to put managing men and women at the top of their list of concerns. That doesn’t mean simply telling people what needs to be done, but also explaining how to do it – and above all, doing it yourself. The greatest difficulty for firms is not so much finding ideas for improvement, but really applying them and putting them into practice. For that to happen, the concept of accountability must be introduced, and any failure by the leader needs to be recognized. In “foul weather”, the team concept is critical and mutual support and respect even more so. It’s far better to hold onto and reward someone who teaches everybody else how to fish than someone who goes out fishing alone – and that holds true regardless of the number or size of the fish he or she brings in. That means having the courage to replace a partner in a management position who isn’t a team player. David Maister’s latest book, Strategy and the Fat Smoker, is once again a rich source of information in this area.



Concentrate on what the firm is known and recognized for
In awarding cases, clients look for established values and strong brands, but above all, they want individuals who have high-level expertise that’s recognized throughout the market. The majority of studies prove that in a crisis period, leaders post twice as much growth as their challengers do. If you were suffering from a serious disease, would you go and see a doctor with just an average reputation? Testing the waters in legal areas, markets, or sectors for which the firm is not very well known and recognized would be a serious mistake. And yes, it will have an impact on the firm’s organization! How could it not? In this area, it’s no secret that the non-equity-partner grade is likely to be the one most impacted.

Align the firm’s resources and skills to suit identified needs
For anyone who knows how to listen to the market, a few development trails are beginning to take shape (more cases involving restructurings; growth in the number of claims, disputes, and fraud cases; companies focusing on developing and defending their industrial/intellectual property rights; the probability of new regulations in the finance and insurance sectors; but also changes in the regulations now in force (Basel II, Solvency II, etc.)

Shrink the pyramid and improve leverage
The rate war and client pressure on invoices had already begun; that trend will intensify in 2009. Analyzing the human, economic, and financial aspects of each engagement is indispensable so that each partner can know (1) the “manufacturing cost” for each file, which will inform him/her on the limits within which rate cuts can be agreed to and (2) how to optimize the team with fewer people while still providing an equivalent or even higher level of quality. US firms, who are under greater pressure from the crisis, have already begun this analysis and are looking into doing more work with contract lawyers as a way of achieving more flexibility and a lower payroll, or even outsourcing certain types of processing to India – operations that are necessary for their customers but have very low added value (the margins on this type of operation can be quite considerable given that Indian firms offer hourly fees of between 35 and 50 dollars).

Audit support functions
Support functions are critical to the development of a law firm, but a rapid and meticulous analysis will need to be made in order to invest in essential support functions and disinvest in areas where years of growth have allowed “fat” to accumulate or resulted in the development of resources and budgets that do nothing to advance the strategy or further the firm’s sustainable and profitable growth.
Finally, once again, while ideas for taking action are important, implementing them is capital. We know that in order to reap 100% of the results, 100% of the effort has to be made. Unfortunately it’s also true that putting out 50% of the effort never brings in 50% of the expected results!
Everything that’s planned or needs to be undertaken will have to be announced, explained, carried out, followed up on, and controlled, at a level of 100% – the same as in any good management practice. Isn’t that what you’d call a Basic?