Editorial September/ October 2009
Discussions during Iberian Lawyer’s recent forums for General Counsel and Managing Partners returned again and again to the tricky issue of the billable hour.
While the counter-cyclical nature of legal services has softened the initial impact of the economic crisis on law firms, in-house lawyers have suffered a huge change in a very short time. Businesses have been refinanced, restructured, colleagues lost and careers threatened in a matter of months. Many in-house lawyers are viewing their relations with external lawyers in a new way and law firms, like other external providers, will need to adapt.
If the billable hour has become the symbol of disquiet, the underlying issues may however be more profound. Clients and external lawyers alike are now more comfortable admitting that at the top of the market, fees for lower value advice may currently be high, while that for the highest value work does not currently reflect its true worth. Initial advice on how to approach and structure a deal can literally save a business millions, while later processes like due diligence, being more administrative, generate less value.
The challenge for general counsel and firms alike is to break down and review the stages of legal processes and understand better where value accrues, selecting the optimum mix of personnel, know-how and technology to provide each.
The one-stop-shop may now be eclipsed by the new mantra of unbundling – decoupling higher and lower value services even within the same transaction. Some Iberian firms are already ahead of the curve, packaging both higher and lower value services – at widely differentiated prices – through their regional offices or external ‘associates’.
And the crisis has already shifted clients’ demands towards more senior lawyer involvement and a much closer approach. This may prompt some Iberian law firms to lower their leverage and ‘drop’ (or should we say “more carefully select”?) clients in a way that some UK firms have been doing, while putting their lawyers much closer to their clients.
Whatever the scenario, law firms will undoubtedly require fewer but higher quality associates. More attention must therefore be paid to recruiting and acquiring high level skills through longer training periods and on minimal pay rates.
Change has become inevitable, but the speed at which it is evolving is surprising many. The crisis it seems has opened a Pandora’s Box of issues and raised the spectre that some Iberian law firms may have to embrace what could have been a decade of change almost overnight!