You would think the lead of this Legal
Times article, which follows, would be irresistible info
for me to comment upon. But
sometimes, no news is no news:
"Law firms are back — sort of.
"Revenues and profits were
up by nearly 10 percent in 2004, a clear sign that firms
have shaken off the tech bust slump.
But even as the biggest legal shops are reaping the harvest of a buoyant
economy, they face some difficult choices ahead to maintain
revenues — and to grow profits."Those are the findings of a confidential Citigroup
Private Bank study of firm finances obtained by Legal Times.
Though it doesn’t name specific firms, the annual Citigroup
study is based on the financial performance of 143 law
firms across the country and is considered by law firm
managers as one of the most important barometers of the
state of the legal business."
The problem is, I’ve just given you the ball-game. For
example, did you know that "there are only so many
hours an attorney can bill"? I
kid you not. Is it news that "firms face mounting pressures
from clients to rein in costs"? Then we have this: "If
firms are unable to continue the pace of rate increases, they will have
to find a way to perform more efficiently." This is beginning
to remind me of the classic "explanation" from a corporation
of why revenues were down: "Sales were weak." In
other words, we have recapitulated the symptom and hoped to classify
it as a diagnosis.
To be fair, I’m a dyed-in-the-wool critic of hourly billing,
and I’m also a dyed-in-the-wool apostle of firms’ collaborating
with their clients to create new joint business models that
deliver the package of legal services the client needs at
what both sides can agree is a fair overall price. I
continue to believe that’s the future.
The difference here is that after forecasting the-sky-is-falling,
it turns out there’s no immediate problem with the existing
model. Indeed,
rest assured: This is not yet a crisis (perhaps
it’s not even an "analysis"): After
all,
"as the Citigroup analysis puts it: ‘2005 is shaping
up as a busy and successful year for most law firms, although
there are some clouds on the horizon.’"
"Unsustainable trends tend to come to end" I owe to Herb
Stein, a seminal academic/public sector economist and, it
should be clear, a witty fellow as well. Credit where
due. But the hourly billing/6% annual rate rise is
not, so far as Citigroup would have us believe, threatened.
