Declining partner numbers to maintain revenues . . and much more
New Zealand’s major firms have shed partners to maintain their partnership drawings and some firm partners are earning less than their secretaries, according to the NBR ‘Briefcase’ column today.
“Briefcase” author John Bowie writes that the law business, at over $2 billion in annual revenues annually, actually conceals some underlying issues that show some firms are struggling in the face of a sharp downturn in transaction work and other factors relating to their management.
The column indicates that among the top five law firms there has been a decline of fifteen percent in partner numbers, attributable to their need to maintain partner earnings in the face of increasing costs and declining profitability.
The column quotes legal consultant Ashley Balls, who says that law firms are not good at looking at issues such as their cost of sales. “Lawyers love lawyering,” says Ashley Balls “and they’re usually very good at it. They just don’t like management.” He says that even large firms measure their profit in percentage and margin terms, but they often cannot say what the actual profit or cost may be for a specific transaction. “For instance, they can’t tell what the cost difference may be between a piece of High Court litigation and conveyancing. They’re aggregating costs over all product lines.”
His view is that the commoditization of legal services will continue apace and that the firms that don’t use modern document management systems will suffer from declining productivity and revenues.
The recent failure of large UK law firm Halliwells and the failure of several large American law firms indicates that even large, professionally managed law firms are by no means exempt from the rigours of the market.
Although the column does not indicate that any large kiwi firm is in danger of failing, there is the distinct likelihood of a merger among some of the larger practices. “For the first time, in-house lawyers now exceed 20 per cent of those with practicing certificates, while barrister numbers are way up also,” says John Bowie. “Many firms are struggling with productivity and financial performance, as well as a clear strategy and leadership to get through the economic mire.”
He says that while there may be high hourly ‘rack rates’ for firms, many are not in fact charging them as the growing ranks of inhouse lawyers demand better fee deals from their outside counsel. “The inhouse lawyers deal with memos from their CFOs to cut the legal bill. The ‘less is more’ dictum is taking hold and outside firms are being made more accountable.”
Oops, That's My Coke. It's Paris Again.
Ditzy Paris is in trouble all over again as her coke fell out of her handbag when she was only reaching for her lippy. What does a girl have to do to...
Tiger's Divorce - How Did This Firm Get To Do it?
So how did a button-down commercial firm like McGuireWoods get to act on the TW divorce? Yesterday AboveTheLaw covered the divorce of golf sensation ...
Power Off, For Now
Simon Power’s planned speech to outline his ongoing quest to rebuild a broken justice system was delayed by the funeral of the young soldier killed ...
