Before it’s too late to miss the brief window of opportunity for prognostications about the New Year, here’s one more.
But first, let’s back up a bit.
By almost anyone’s lights, 2009 was dreadful for our beloved industry, even appalling. According to LawShucks, BigLaw laid off (read: fired) 12,196 people, of whom 4,633 were lawyers and 7,563 were staff. This, of course, ignores the reality that layoffs are surely under-reported.
Ugly enough, and the raw statistics don’t remotely speak to the genuine, and too often borderline-tragic, realities of defenseless professionals finding themselves “redundant” (as the Brits either charmingly or bureaucratically term it), highly talented and expensively educated one and all. Worse, these people find themselves on the curb for reasons that either had nothing really to do with their performance or, if it was tagged to performance, for demerits that would probably not have had fatal repercussions a year or more ago.
For better or worse, that’s not what I want to talk about here.
Adam Smith, Esq. is about the economics of law firms, and that’s our topic.
Everyone, I believe, long ago wrote off 2009 in their own minds as far as financial rewards go.
- Associates are inured to salary freezes or even rollbacks.
- Staff expect the same.
- Everyone but everyone expects bonuses to be downsized compared to last year.
- Many non-equity partners, as far as I can tell, count themselves lucky to still be onboard.
- And of course, equity partners expect PPP to be flat to down anywhere from 5% to 25% or more. (You’ve heard the joke that “flat is the new up?” Chase Bank is rolling out a new campaign that “save is the new spend.” Can you say “The End of History– I don’t think so.”? This new mantra is foreign matter to the American DNA, and will be rejected by the host if it seriously attempts to implant itself in our expectations.)
Financial results for 2009 are, of course, just beginning to trickle out, and if past disappointing years are any guide–none of course remotely comparable to this–firms will not be rushing to punch the “send” button to announce their figures. Indeed, as is our wont, we will want the aircover of other firms announcing bad or worse numbers before we try to sidle our news into the media slipstream around 5:00 pm on a Friday before a holiday weekend.
But 2009 is not really on the agenda any more. We know about 2009 ad nauseum, we’re done and we don’t want, frankly, to hear much about it any more.
Which brings us to 2010.
I don’t know about you, but I can take one bad year in stride. We all would prefer not to have to face a bad year, but as long as everyone in sight is more or less in the same boat, you can live with yourself, roll with the punch, and wax philosophical about the arc of a 40-year career. Your spouse, family, friends, and professional colleagues will all understand.
Not so for 2010. People will want to know why 2010 will be different, and better. This is a potentially perilous topic.
A few fortunate firms will be reporting results that are on par or even better with 2008. But I predict the vast majority will be down on year-on-year comparisons, certainly in terms of reported PPP and even more certainly in terms of internally realized and distributed PPP. At too many firms, capital calls are up, distributions are delayed, and the future is unclear.
The most important question as we enter 2010 is very simple: “What now?” And “Why different and better?” This is the question that will be coming from your partners, associates, and staff as we grind out of the repercussions of late 2008 and 2009.
What’s your answer?
The answer had best be persuasive, credible, and, perhaps most difficult, consistent with who your firm is and what has gone heretofore. You can’t realistically turn the place around if that means making it something it never was, never ought to be, and isn’t what your people signed up for.
In other words, the priority for senior management for 2010 is not just “making the numbers”–challenging as that will surely be–it’s giving people a reason to believe.
Why will 2010 be better? How, exactly? How does this fit my image and vision of the firm? Not just how does it advance my career, but how is it something I can buy into, hearts and minds? “Trust us” as a response won’t cut it.
And if you get this wrong?
I predict 2010, not 2009, will be the big year of shakeouts in the composition of the leading firms–and I mean that across the board, whether you define your peer group of competitive and therefore “leading” firms as the Global 50, the AmLaw 50, the AmLaw 200, or regional firms in your local market.
The dynamics are fairly simple: People wrote off 2009, but they’re not prepared to write off 2010. By “2010” I really mean the foreseeable future of their fortunes at your firm. If this was the “Great Reset,” then you should have re-booted, re-imagined, and re-invigorated your firm by about this time. If you haven’t, “2010” really means “as far as the eye can see.”
In turn, people’s faith in how 2010 may turn out at your firm depends on their faith in the strategic vision of the firm. Is it credible? Ownable? Distinctive? Why, again, is 2010 going to be better than 2009?
If you don’t have a compelling answer to that, be prepared for bad news on the people front. We often say it, but sometimes the obvious is worth repeating: Within five or ten city blocks of your offices (all of them), there are probably two dozen buildings containing 50 or 60 elevator banks leading to the reception areas of major competitors. How hard is it, really, for someone to choose another elevator bank?
At the outset, I promised you a prediction for 2010. At the risk of your revisiting this in January 2011 and finding what follows utterly wrong (Adam Smith, Esq., on principle, never deletes anything from our archives), it’s simple:
- We will see more firms fail;
- And more “surprising” firms fail;
- More firms merge;
- And more”surprising” mergers
in 2010 than we have in a long long time. Economics may be the proximate cause, but a failure of vision and belief will be the core cause.
Happy New Year.
