Daily Dispatch

BOB DENNEY'S 27th ANNUAL TRENDS REPORT

2015 What’s Hot and What’s Not in the Legal Profession

By | Nov.30.15 | Daily Dispatch, Innovation, Law Practice Management, Legal Marketing, Trends, What's Hot and What's Not

What's Hot and What's Not 2014

To read the most recent “What’s Hot and What’s Not” report on trends affecting the legal profession, click here.

This, our 27th annual report, has been the most difficult of all to write because of the volume of continuous, sometimes conflicting, changes affecting the legal profession — which many firms still have not recognized or accepted. As always, “What’s Hot and What’s Not in the Legal Profession” is based on information we compile throughout the year, not only from clients and many other firms but also from surveys, legal departments and providers of legal services and support to law firms and their clients.

As with past reports, some findings are not new. We include them because they continue to affect the profession. Other findings have not yet been widely recognized, but we feel they have already made or will make a significant impact.

The resulting picture is a montage of a legal profession that will continue to change, not just in 2016, but for years to come.

PRACTICE AREAS AND INDUSTRIES

Red Hot

Cybersecurity. In large firms (where security is also a red hot operational issue — as it should be in all firms).

Regulatory. Due to continuing increases in government regulation in many areas, not just OSHA. This is a major concern of general counsels and corporate management.

Hot

White-Collar Crime. We classified it as getting hot in our mid-year report. The Justice Department has since launched a program to prosecute not only corporations, but also individuals for corporate and financial malfeasance.

Labor & Employment. Will become red hot for many reasons including increased OSHA enforcement in the construction, oil and gas industries and teachers unions ramping up efforts to organize charter schools.

Mergers & Acquisitions. For those firms that already have a strong practice. This will continue unless the economy stumbles.

Elder Law. Although not discussed much, this area continues to grow because people need to make changes in their estate plans due to living longer.

Health Care. But see “Industry groups” under “Other Trends and Issues.”

Technology. But see “Industry groups” under “Other Trends and Issues.”

Gay Marriage Rights. In states that ban same-sex marriage.

Immigration. In firms that already have this practice. It could get red hot even before the election.

Financial Services. But see “Industry groups” under “Other Trends and Issues.”

3D Printing/Disruption. In the firms that have this practice.

Getting Hot

Real Estate & Construction. Commercial has become hot in many parts of the country. Residential will continue to have mixed readings even after interest rates rise.

Pro Bono. Because firms want to give back to their communities and they need to take on work to train younger lawyers whom clients will not pay for.

Warm

Alternative Dispute Resolution. Has been around a long time and is a cost-saving alternative to litigation.

Energy. Will become hot again as the movement against fossil fuels continues and oil prices rise.

Cold

Bankruptcy. As it always is until the economy takes a turn for the worse.

Mixed Reading

Environmental. It is surprising to us how this varies across different parts of the country.

Intellectual Property. Patent Prosecution and Trademarks continue to be at least warm if not hot because of the continued growth of social media and branding. However, the picture on Patent Litigation is mixed. Some surveys of legal departments conclude that it will cool down in 2016. However, while a few IP firms and litigators expect that two SCOTUS decisions may eventually reduce the amount of patent litigation, they all report heavy caseloads. In addition, patent trolls continue to file suits and the pharmaceutical industry is the source of much patent litigation.

Commercial Litigation. Except for “bet the company” cases, many major firms have been reporting declines. There are at least four reasons for this: 1) Corporations have been increasing the size of their legal departments and are handling more cases themselves; 2) clients are more prone to settle out of court to save cost; 3) non-law service providers are doing more discovery and document management, and some are also providing other services — all at less cost than firms can afford to charge; and 4) growing use of technology such as 3D printing. These trends are irreversible, but many firms have not recognized them.

New practice areas. See “New sub-specialties” under “Other Trends & Issues.”

HOT GEOGRAPHIC MARKET

Washington, D.C. A number of firms have opened offices in D.C., and others are expanding existing offices due to continued increases in government regulations and enforcement as well as in public affairs and lobbying work.

MARKETING & BUSINESS DEVELOPMENT

Pricing directors. Usually based in the Marketing/BD department, they continue to be hot in AmLaw 200 firms. In addition to being involved in developing responses to RFPs, the PD is often involved in project management. In mid-size firms that have addressed the issue, the COO usually fills the role of PD.

Marketing technology specialists. Also getting hot in AmLaw 200 firms.

Responsive web design (RWD). A hot issue among marketers playing catch-up to provide the best reading and navigation with a minimum of resizing and scrolling across a range of desktop and mobile devices.

Client interviews. As reported at mid-year, their importance continues to be recognized but there is debate over who should conduct the interviews. My associates and I introduced client surveys to the legal profession over 30 years ago. Our experience is that it depends on what the firm’s objective is. If it is to cement client relationships, the managing partner is usually the best person — if properly prepared. To obtain feedback on client service and quality of work, the relationship/responsible partner is usually the best. For meaningful information for market analysis and strategic planning, the CMO or a third party is best.

Social media. Except for Facebook, it continues to be hot. Firm websites and blogs are still among the most effective online means for reaching in-house counsel and potential clients, but some marketing experts say they may be surpassed by …

Content syndicators and aggregators. Platforms like JDSupra, Mondaq and even LinkedIn enable a firm to push its content to other sites and services.

Video news broadcasts. In October, Epstein Becker & Green announced the launch of a weekly video news broadcast called “Employment Law This Week.” It will be anchored by a partner and supported by a production team that includes six other attorneys.

Advertising. Whether online, print, TV, radio, billboards or even bus exteriors, advertising continues to be the principal marketing strategy for personal injury lawyers as well as others.

“Super Lawyers,” “Best Lawyers,” “Leading Lawyers” lists. They continue to proliferate, but because firms and lawyers pay to be on many of these lists (which most of the public doesn’t know), they are really nothing more than advertising.

“What is the ROI?” It continues to seem like a smart question to ask, but marketing legal services is not the same as advertising soup or cereal, where sales can be compared directly to expenditures. Except for personal injury cases or when a firm is marketing a “packaged service,” such as a simple will or uncontested divorce, most online legal marketing is still about building a reputation and brand, or law firm awareness over multiple coordinated efforts.

Chief marketing officers. In many large and some mid-size firms, the position continues to become more strategic in operations as well as in driving firm growth plans. But the problem is that, while CMOs are being given increased responsibility in many firms, few firms give them the authority they need to be as effective as they could be.

Sales professionals. Some firms have employed non-lawyers to make contacts and develop leads. It took accounting firms several decades to achieve worthwhile results from this strategy. Even with all the changes occurring in the legal profession, this is one strategy that has not been successful and may never be in our lifetime. However …

Business development training and coaching can be productive, especially for younger lawyers.

Lateral entries. Lateral hiring continues to be one of the hottest growth strategies in mid-size and larger firms. But the desired results — new clients and growth — are often not as expected.

LEGAL BUSINESS TRENDS & ISSUES (NEW, OLD, HOT OR COLD)

Cybersecurity. As noted under “Practice Areas,” this is also a red hot operational issue in large firms. It should be red hot in all sizes of law firms.

New practice area sub-specialties. A number of new ones have surfaced in a small but growing number of firms, for example: 3D Printing, Drone Law, Brand & Digital Governance, Biometric Recognition Technology, and Social Media Defamation.

Industry groups. Two years ago we first reported that a few firms were forming industry groups as opposed to practice groups. This trend has slowly gained momentum. Recently, Schwabe, Williamson & Wyatt reorganized its practice structure into six industry groups: Technology, Health Care, Real Estate & Construction, Ports & Transportation, Manufacturing & Distribution, and Natural Resources. However, in defining this as a “go-to-market strategy,” Schwabe, like the other firms that have adopted this structure, has recognized that industries are actually broad marketing groups that include multiple practice areas. This is what recognized authority Patrick McKenna calls “sub-industries.” Some examples:

  • Health Care can include at least 15 areas such as finance, regulatory, labor and employment.
  • Financial Services can include banking, IPOs and regulatory, among others.
  • Technology can include patents, regulatory and telecommunications.

Project management. LPM continues to be red hot because it produces efficiency, client value, fee transparency and profits. However, while it should be the number two concern of most law firms, many have not yet acknowledged it, or are having difficulty implementing it.

Alternative fee arrangements. AFAs continue to be more widely used. Some firms say they are easier to negotiate and budget, but many still feel that all clients want are “just lower fees.” This is true to some degree, but the major issue, whether hourly or alternative fees, is there is an overall reduction in the legal spend. Many firms still don’t get it.

Millennials. Hiring, training and retaining them, as staff as well as lawyers, will continue to be a challenge because many of them chafe against the traditional law firm culture. Yet they are the future of the legal profession.

Outside service providers. As noted above under “Litigation,” non-lawyer operations continue to grow in number and in the breadth of services they provide. In addition to serving law firms, however, legal departments are increasingly retaining them directly — bypassing law firms — because their fees are lower.

Recruiting. According to a mid-year report by Robert Half Legal, recruiting skilled lawyers is becoming even more difficult. Half stated that the greatest need is in civil litigation, particularly insurance defense, followed by what it refers to as “general business.”

Departures. Although lateral hiring continues to be a hot growth strategy for many firms, most is at the partner level because firms want the book of business laterals can bring with them. However, fueled to a great degree by the expansion of corporate legal departments, law firm associates and even partners without a large book of business are departing to join legal departments. Why? The workload and the compensation are generally more consistent, without the pressure to record high billable hours and originate business. Translation: The quality of life is better.

Start-up law firms. Because of the continuing tight market for new lawyers, as well as the focus on making legal services more affordable, law schools in California and several other states are funding start-up firms.

Business training. Skadden Arps continues to be among the firms that provide basic business training including finance, accounting and valuation to first-year associates. Harvard is among the first law schools to offer management courses.

Mindfulness movement. There are now reportedly at least two dozen law schools that offer for-credit courses in this Zen-inspired blend of meditation, breathing exercises and focus techniques, which are supported by companies such as Google and General Mills. At least one law firm and the legal department of a major corporation retain a mindfulness coach.

Debt. Historically law firms have not incurred debt to provide cash when needed but have used short-term lines-of-credit and capital contributions or buy-ins from equity partners. Now, alarmed by the collapse of Dewey & LeBoeuf almost four years ago, large U.S. firms have considerably reduced their bank debt even further and are leaning more heavily on their equity partners to provide capital. As a result, more partners are taking out bank loans to provide this capital, which effectively shifts debt from the firm to them.

The accountants are coming. In the past decade, accounting firms have been quietly but steadily building legal services divisions. According to The Economist, they have focused on “mid-tier, process-oriented work rather than the big deals and lawsuits that elite law firms chase.” Of course, they can’t practice law in the U.S. or in most European countries. However, as we reported two years ago, several countries — notably the U.K., Australia and also Mexico — have authorized multidisciplinary practices (MDPs), which allow attorneys to share profits, without restriction, with members of other professions. Since then, the Big Four — Deloitte, PwC, EY and KPMG — have been buying small law firms, hiring partners from other firms and recruiting on campuses. Rather than try to build full-services practices, they are concentrating on areas of law that complement their existing services, such as immigration, which fits with expatriate tax work, labor, which fits with human resources consulting and compliance, commercial contracts and due diligence.

Bar exam scores. The average score on the 2015 summer bar exams reached its lowest level since 1988. Some law school deans have said the test was unfair and that a software glitch made it harder to submit test results. The president of the National Conference of Bar Examiners, which created the multiple-choice section of the test, replied that law schools have been admitting students with lower qualifications who may encounter difficulty in taking the exam. And, of course, applications to law schools have been declining.

Legal operations. A growing, multi-disciplinary field that blends technology, business skills and legal expertise. General counsels in companies such as Cisco, Google and Oracle are giving experienced professionals the authority to improve legal department performance, including the hiring and managing of outside counsel. By utilizing data, process and technology, their mission is to make lawyers more productive

Practice Economic Group PEG. A group of attorneys at Bryan Cave that work outside the traditional partner-associate model. It developed from a cost-accounting system and IT platform to track the firm’s WIP, collections and profitability. It now enables the firm to develop alternative fee arrangements and make a reliable profit.

Foreign laws. U.S. Supreme Court Justice Stephen G. Breyer has written a new book in which he argues that there is a growing need for judges and lawyers in the U.S. to take foreign laws into account as they seek to resolve disputes both in the U.S. and abroad.

Mergers. They will continue although not quite at the rate of earlier this year.

Succession planning. More discussed and more needed than ever for the future of firms and the profession. However, there appears to be a dearth of interested candidates among the younger generations in the profession.

SO “WHAT’S IT ALL ABOUT, ALFIE?”

As we were in the midst of preparing this report, one of my collaborators said to me, “From where I sit, all I’m hearing is ‘change!’”

“We’ve gotta change.”

“We are experiencing a tsunami of change.”

“The profession is experiencing radical change.”

“And yet, as far as I’m concerned, we ain’t seen nuttin yet.”

Those words sum up what we have reported here while pointing out examples — by no means all — of the developments, trends and issues affecting the legal profession. But the question in my mind, and in the minds of many, is: “Will the legal profession survive?”

I believe it will — if members of the profession follow the advice my late father-in-law repeated, constantly, to his family: “Do what you have to do, when you have to do it, whether you want to do it or not.”

Bob Denney is President of Robert Denney Associates, Inc., providing strategic management and marketing counsel to law firms throughout the United States and parts of Canada. A respected speaker and author, his articles appear in many legal publications. His firm publishes the highly regarded reports on What’s Hot and What’s Not in the Legal Profession.

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