|
BACKGROUND.
In recent years, law firms, especially large firms, have been under
pressure to pay top dollar to associates and to maximize profits per
partner. Yet high operating overhead has placed extraordinary
demands on attorneys in order to achieve compensation and
profitability goals. Meanwhile, clients have been trying to control
legal expenses and are closely scrutinizing law firm rate
structures. The recent financial crisis has greatly exacerbated the
inherent tensions between attorney compensation, partner profitability, overhead costs and client demands. The outcome has been
unprecedented layoffs of salaried personnel, removal of equity
partners and across the board salary cuts. Some commentators have
even pronounced the end of Big Law. At the very least, the
economics of law practice generally, and the world of large law
firms in particular, has changed forever.
 TRENDS.
As financial strains continue to play out, law firms are reviewing
the profits and costs of practice areas and individual attorneys. At
the same time, attorneys are evaluating their financial and
professional needs and lifestyle choices. The outcome of this
process is hard to predict. Significant numbers of attorneys have
become unemployed, moved to other firms or in-house and started solo
and small firms, and the trend toward layoffs, lateral moves and
startup firms is likely to continue.
ISSUES. Yet most attorneys who leave
large firms or established practices are not prepared for the
onslaught of technological, operational and management issues associated with starting and operating a new
firm or practicing in a smaller lateral firm. Even something as basic as setting up
email and BlackBerry service can be a challenge in a new or small
firm. Attorneys who take in-house positions realize their
support systems are quite different or non-existent and are sometimes dismayed to learn that their employer
may not have a document management system. And existing smaller
firms struggle to keep up with technology, streamline operations and
update partnership agreements.
Equally important, most attorneys in
large or established firms have not dealt with the nuts and bolts of
operating accounts, trust accounts, processing payroll and client
payments, remitting tax withholdings, obtaining malpractice
insurance, setting up basic benefits or managing a P&L. In fact, many attorneys starting a new firm or moving
laterally to an existing firm do not have experience with organizing
a business entity, obtaining Bar certification for the entity, or
structuring attorney compensation arrangements and partnership
agreements. While hanging one’s shingle, a lateral move or
small firm practice may be the
best option for many attorneys and certain practices, the learning
curve can be very steep and may involve considerable trial and
error, which can be costly and a drain on productivity.
< Previous Page
|
