BigLaw has had an incredible run since the brief recession in the early 1990s, prospering even during the dot-com bust. If the good times end, law firms will be looking to shave expenses. Where should they look? 

Dan DiPietro, client head of the Law Firm Group of the Citi Private Bank, offers Storm Warnings (American Lawyer, Dec 2007). He writes that in large law firms, “for the first time since 2001, expense growth actually outpaced that of revenue from January through June, depressing profit margins.” The biggest expense increases are in associate salaries, occupancy, and technology. In closing, he notes “2008 is rife with uncertainty…. Will a slowdown in work necessitate layoffs?”

The storm may already have begun. Two law firms cut support staff amid fears of chillier economy (San Francisco Business Times, 12/7/07) reports that “Heller Ehrman LLP cut 65 positions and Howard Rice Nemerovski Canady Falk & Rabkin PC cut 20 positions — or 8 percent and 12 percent of staff, respectively — within the last month.”

I’ve written about innovative approaches that can contain costs and improve profits.

  • Working virtually: by creating both a culture that allows more flexibility in where lawyers work, firms can improve work satisfaction and lower occupancy cost.
  • Re-thinking the role of the secretary: a combination of secretarial teams and outsourcing document processing can upgrade the role of the secretary, reduce space requirements, and improve service to lawyers.
  • Business intelligence: BI can help firms improve profits.
  • Law firms seem more willing to lay-off lawyers or staff than they are to consider changing how they work. Reductions, however painful, don’t require those left standing to re-consider how they work. Innovation and change may not save jobs in a 2008 legal recession. It offers a path, however, for a law firm to prosper, differentiate itself, and survive future cycles with less trauma.