The financial crisis has prompted differing responses by law firms, but if this means a return to a more “professional” approach it may be no bad thing, says Luis Riesgo of Jones Day in Madrid
In the last two years we have seen much speculation regarding the future of Big Law – the way large, multi-national law firms operate. This speculation has come about as Big Law developed over the past decade into a very different creature from what it was. Many firms had become managed according to profits per partner, origination and service credits, paying associates with a compensation structure that did not create the adequate incentives to work for the best interest of the client. Many firms borrowed large sums to fund what they thought was critical expansion, either by opening new offices or by hiring lateral partners (and frequently “guaranteeing” their compensation at non-sustainable levels). The reaction of those law firms to tough times in some respects marks the final transformation from a legal profession to law business.
We have a more traditional approach to law firm organisation. From our long-term outlook flow almost all our other core values: an insistence on co-operation and collegiality; our view that all clients are clients of the firm and not of any single lawyer; and a refusal to accept actions by any lawyer or client that are inconsistent with the firm’s longterm best interests.
We believe that we have collective obligations – not only to clients, but to all of those who depend on our continued success as an institution – that outweigh any individual or group desires. And our management philosophy is simple: focus on providing the support needed by our lawyers, removing obstacles to them doing what almost all lawyers would do in the absence of counterincentives: serve the client’s interests. This is still a client service profession, even though that concept seems to get lost too often. Jones Day faced the same demand curve in 2009 that other law firms faced, but we responded differently.
Many firms decided that protecting partner profits was more important than meeting their commitments to their staff and associates, and so they fired staff and lawyers, taking the notion of law as a business to its logical and extreme conclusion. We approached the reduction in demand the same way we approach everything else: reducing expenses where we could without impairing our obligations to clients, staff, and associates, and leaving any additional burden to be borne by our partners in the form of lower compensation. After all, the partners own the firm; we enjoy many of the benefits of good years, and we should carry the principal burden of weaker years.
The global legal market has been valued in the $200 billion range; 2009 was not the best year ever, but it would still be well over $150 billion. No need to have a big market share or be a very successful firm if your foundation values are sound. On our side, we are going to keep doing the same things we have been doing for many years; we are convinced that old core values are still the best chance for law firms to succeed in the future.
Now, we see that many firms are moving to a more conservative approach, evaluating associates “on the merits”, increasing capital and reducing borrowing. However, it is hardly the change of model that some people believed would come. This is not the first time that demand has seen a blip, and it’s hardly the first time that clients have pressed for lower rates or bigger discounts. The notion that companies will not continue to need high-quality lawyers in an increasingly complex and regulated world, where mistakes have even faster and bigger consequences than in the past, is nonsense. Sure, firms may need to adjust where to place their resources; maybe we will not grow in some practices but will grow more in others.
Yes, there will be some adjustments, and for some the adjustments will be really difficult, but frankly, it is always going to be very hard to put lawyers or law firms at the top of the “feel sorry for” list.