Law firm leaders are no doubt getting a lot of advice for setting a strategy to manage, survive and thrive within the current economic times.
Many turn to Hildebrandt International for counsel in good times and bad. The firm’s expertise is spotlighted in a Special Client Advisory: Fall 2008.
James Jones, the Chairman of the Hildebrandt Institute and managing director of Hildebrandt International, co-wrote the advisory with the company’s founder, Brad Hildebrandt.
It is organized into an assessment of the current legal market, the immediate steps that firm leaders should be taking to help their organizations and the significant longer-term impacts including a re-thinking of basic law firm economic models.
As Hildebrandt and Jones state in their advisory, “…it is important to remember that the present downturn in the legal market is caused primarily by reduced demand and that demand will return in time. Although there may be some restructuring in the way that legal services are delivered, the long-term prospects for the legal industry remain very good.”
In an interview for a Westcast podcast, Jones said billing rate increases were the one key factor that drove the unprecedented growth in profitability in law firms in the last six or seven years. Other factors such as the number of lawyers, their productivity and expenses have not generally contributed to profitability growth in the same time.
“But it is our guess, and I think there’s mounting evidence about this, that in 2009 firms are not going to be able to impose the same kind of across-the-board rate increases that they have routinely done,” Jones says. “What that means is firms are going to begin looking at structural ways to do their work more efficiently and in a more cost-effective way.”
Jones expects many firms to re-think their economic model, including the billable hour.
“I think you’re going to see some really tough thinking about alternatives to the traditional way of pricing legal work,” Jones says. “Perhaps a move toward more value-based approaches and maybe finally, after years and years, a little bit away from the traditional billable hour approach.”
For more insight from Jones about law firms and the current legal market, listen to his interview in the newest episode of Westcast and read Hildebrandt’s Special Client Advisory: Fall 2008.
Posted by Kevin Hunt, senior communications specialist, Thomson Reuters
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