Almost exactly twenty years ago, I was invited to speak in Australia, and while there The Australian Financial Review wrote about my speech. Since I am going to Australia this week to present a speech at the ALPMA Annual Summit, I dug up the old article and wrote this comparison of what’s changed in the last twenty years. Below are select excerpts from The Australian Financial Review published on August 18, 1004 – almost exactly 20 years ago – in black text below. My “twenty years later” comments appear in blue text below.
“[Partners] are thinking very hard about their future as lawyers because the demands of the market are changing rapidly and the shape of the big law firm of today is likely to be quite different in 10 years’ time. Certainly very different from the time when the Corner Men were mere Partners. If Julie Savarino, an articulate law firm consultant from the United States, one of the speakers at a seminar held by the Australian Law Firm Marketing Association at Freehills in Sydney, is any guide, there are other big changes in the wind. She gave a fascinating insight into the U.S. trends, which as a matter of trickle-down inevitability are ultimately adopted here [in Australia].”
1. “[Julie Savarino] pointed to the tremendous growth in negligence actions against U.S. law firms, which has meant that most of them have incorporated to limit the partners’ personal liability. Professional indemnity premiums are still going up, but at least the ski lodge is safe.”NOW 20 YEARS LATER: Since the adoption of limited liability entities in the United States in the early 1990s, virtually every U.S.-based law firm is now incorporated and/or operating as a partnership under some type of limited liability protection. An excellent move because in the United States, claims and lawsuits against lawyers/law firms alleging malpractice, negligence, conflicts, breach of confidentiality, fraud and related claims have risen exponentially. In the early 2000s, Australia also adopted limited liability entities for law firms, known as IPLs (incorporated legal practices), providing a vicarious liability shield for firm lawyers, a form many law firms chose to incorporate under.
2. “The other important insight that Ms. Savarino gave was the client pressure on law firms to perform more cost effectively.”NOW 20 YEARS LATER: Client pressure on law firms and lawyers has only intensified in the past 20 years. Alternatives to traditional law firms have absorbed/taken significant market share away from established law firms. Pressure to be more efficient has never been greater. Forward-thinking firms are proactively using technology, process management, outsourcing, partnering and other strategies to remain competitive.
3. “Tendering [a.k.a. RFPs in North America] is rampant in the U.S. Going fast are the old standing client-law firm relationships. Corporate clients are insisting on “requests for proposals” to dole out the assignments. The process forces the firms to focus on cost and strategy before the client even begins paying. A Wall Street Journal article recently quoted Ms. Savarino as saying that there’s “a lot of denial still going on” by law firms who would prefer to avoid the bidding process.”NOW 20 YEARS LATER: Comparing the results from our Use of Proposals survey conducted in 1993 (highlights were published in The Wall Street Journal – if you would like a copy, please contact me), the use of RFPs to select and cull outside legal counsel has increased approximately 700%! Yet too many law firms remain in a mainly reactive posture relative to RFPs and pitches. For example, few law firms really know or annually track just how much time and money are spent on RFP responses and pitches, and few firms have an efficient RFP process. In addition, way too few law firms have a proactive, formal client review process truly institutionalized within their firms. In the current market, rarely (less than approximately 20% of the time) are lawyers or law firms formally “fired” by in-house counsel or other clients – the clients simply stop sending new matters/cases to the incumbent firm and start sending their work to the new provider. In the current market every opportunity; every new case/matter – even with an existing client – is competitive. The vast majority of clients know at least two to three other outside lawyers equally qualified, competent, eager and available. Clients do not always go to the trouble of issuing a formal RFP, but lawyers need to embrace the fact that they are competing almost every time.
4. “Ms. Savarino also talked about the growth of the “virtual office” (working away from the desk – at the client’s or at home) and the increasing interest among professionals in lifestyle issues.”NOW 20 YEARS LATER: Law firms that currently do not allow flex-time and/or off-site work options as a standard practice are simply no longer competitive and will not be able to attract and maintain young, emerging talent or those who require non-traditional work hours.
AUTHOR’S NOTE: The excerpts quoted in black text above are from The Australian Financial Review article entitled “Time to re-assess the means of capitalising our law firms” written by Richard Ackland, published August 18, 1994 and copyrighted by The Australian Financial Review. For more information or to request a copy of The Australian Financial Review and/or the Wall Street Journal articles mentioned above, please contact Julie Savarino, Julie@BusDevInc.com, +1 734 668 7008.