“I don’t think it’s a seismic shift,” he added. “I think it is more incremental. I think it happens over a long period of time.”

“I’m probably more on the side where I think there is going to be a seismic shift,” said John Murphy.  He believes that the economy will drive law firms and clients both to start look-ing at alternatives to the billing rate.  

“There have been discussions the last 10 or 15 years that the billable rate is on the way out,” Murphy elaborated, “I tend to think based on the conversations I’ve had both internal in the legal industry and external to the in-house counsel that they may be serious about it this time.”

Shook Hardy & Bacon, in fact, is now at a point now where as much as 25 to 30 percent of its revenue is generated on something other than the billable hour, and that comes at a firm that does significant litigation.

He believes that the most pressing issue the industry faces is figuring out what the law firm of the future will look like coming out of this economy.

 

Leverage

In the way of background, law firms refer to the ratio of attorneys per equity partner as “leverage.” As Russ Jones noted, “Our experience is that leverage is becoming a more difficult thing to manage. The clients want the senior people. They don’t want to pay us to train first- and second-year associates any more.” According to Jones, Polsinelli Shughart has reduced its leverage quite a bit. 

This also means that the percentage of new lawyers has gone down, as have the numbers of new hires relative to the size of the firm.

Ed Spalty noted that Armstrong Teasdale was shifting “from a pyramid shape to a diamond shape” in the structure of its legal staff. Instead of having a few equity partners at the top and a large number of associates at the bottom, the firm now has a broader mid-range of attorneys who have taken a longer time to get to partnership. “I don’t see that changing in the near future,” said Spalty.

Scott Kreamer, managing partner, observed that he and his colleagues at Baker Sterchi Cowden & Rice have come to the conclusion that many good attorneys do not aspire to partnership and all that partnership entails. “There are a lot of people who don’t want to work weekends and worry about business development,” said Kreamer, “and from a leverage standpoint, that’s fine.”

“We have hired consistently over the last few years and plan to keep doing so going forward,” said Joe Hiersteiner, managing director at Seigfreid Bingham Levy Selzer & Gee, “but we are being more aggressive making sure the people we do hire are ready to be successful sooner than in the past.” Hiersteiner noted that there seemed to be less time for training than there used to be.

Jennifer Shafer of Warden Grier attributed the crunched training time to the economy. “When you are bringing people in,” she noted, “you have to identify the people who have the intangibles that you want to see.” These intangibles include being able to excel quickly and to provide essential client services. At Warden Grier, “learn by doing” is one of the models that the firm encourages.

As a way to bring new attorneys up to speed quickly, Joel Voran observed, Lathrop & Gage provides each one a personal mentor.

Foulston Siefkin has been a purely non-leverage firm, said Doug Reagan. “We’ve never viewed our associate program as a profit center.” The firm does not hire anyone unless management expects that person to become a partner.

 

(...continued)