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24 Things to Know About The "New Normal" of The Legal Economy

Ken Lopez
By: Ken Lopez

Economics, Litigation Management, Management, Leadership, Alternative Fee Arrangements


the new normal big law economy commitizationby Ken Lopez
Founder/CEO
A2L Consulting

The term the "new normal" is a term that is frequently used today to describe the changing state of the legal market.

In its present connotation, the term was apparently coined by Mohamed A. El-Erian, the head of PIMCO, a major global financial firm, to describe the new post-recession world of slower economic growth. It was quickly applied to the legal market by other theorists. The concept was recently mentioned in connection with the current Weil Gotshal layoffs and other efforts by law firms to reduce staff to meet reduced demand. We have written about the topic recently and plan to release an e-book about the new normal in a couple of weeks (*subscribe for free and be notified of its release).

The reason we are writing about the new normal is because we believe there has been a permanent shift that mirrors what is happening in the economy as a whole. With the rise of the Internet, buyers of almost anything can now quickly find information about various products or services and compare price. This used to be quite difficult not all that long ago, especially in the legal market. 

In business, this process is called commoditization. When a product becomes commoditized, buyers learn what the product or service actually consists of, and they learn to compare similar providers. Once that occurs, RFPs appear in the marketplace, and price eventually becomes the biggest factor in purchasing decisions.

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In our industry, it was printed trial boards that were commoditized first. Then it was courtroom trial technician support and increasingly it is graphics and jury work. Price is not the only consideration, but it is a big one, especially for in-house counsel, and it should be. The speed with which e-discovery services were commoditized surprised even experts.

Being much smaller than a large law firm, we adapted to the new normal back in 2008 when we first announced fixed-fee pricing and other discounting methods to create predictable pricing. We continue to offer a variety of innovative alternative fee arrangements and we routinely participate in preferred litigation support vendor discounting programs.

Not only have we adopted new pricing methods, thus embracing commoditization in one part of our business, but we continue to innovate and add new service offerings like mock hearings and sophisticated jury consulting services. For a firm to thrive for decades as ours has, that is the only way to address commoditization unless you intend to become the Wal-Mart of your industry. Law firms must do the same – strive to deliver many services much more efficiently, while at the same time introducing novel elements to their businesses.

Below are 24 great resources that discuss the new normal, divided into 11 topic areas.

1. The ABA has 30 pages of article titles devoted to the new normal with the first mention of the term back in October 2010.

2. The New Republic article last week, The Last Days of Big Law, has been widely discussed as an example of the “new normal.” I think it was a bit of a hatchet job on Mayer Brown, which is a great firm. This ABA article discusses the New Republic article and includes Mayer Brown's statement on the article. So many have written about the New Republic article in the last ten days that the author has already penned a rebuttal to critics.

3. The Weil Gotshal layoffs last month generated a lot of discussion about the new normal. This New York Law Journal article discusses the reaction of other law firm leaders. What was especially noteworthy was that Weil Gotshal's executive partner attributed the layoffs to the "new normal."

4. I love this article discussing business basics as it applies to the new normal. The author does a great job creating a financial primer for law firm management.

5. The reports of Citi and Hildebrandt on law firm management always generate good discussion, and increasingly that is focused overtly on the new normal. Here is a good Above the Law article commenting on the specifics of a recent Citi/Hildebrandt report.

6. Many industry observers have discussed alternative fee arrangements (AFAs). Broadly defined, that means anything that isn't simple billable hours times an hourly rate. We have written about AFAs, DuPont is a thought leader on the topic and there are many good articles such as this ABA piece.

7. Pricing specialists. The new normal has given rise to a new position at law firms, strategic pricing specialists. If you are a large corporation, you would want to work with law firms that have a pricing specialist on staff. Firms like Akin Gump, Crowell & Moring, and others have great programs in place. Good articles have been written about this topic such as this article in the Legal Intelligencer. Here is a great blog article on who holds these positions at large law firms.

8. Discussion of the death of the billable hour. A discussion of the new normal essentially goes hand in hand with a discussion of the passing of the billable hour.

9. I like this 2013 report [PDF] from Georgetown Law describing the state of the legal market. It is a good rational discussion backed up by a lot of data. Altman Weil's 2013 Law Firms in Transition Survey [PDF] is also illuminating.

10. Perhaps the whole industry should get a copy of Who Moved My Cheese? because the apparent shock expressed by some to the industry changes is surprising.  This article talks about Motivation and Morale in the New Normal.

11. There are many good blogs discussing the new normal, the business of law and law firm economics. Here are a few I think are worth a look: Adam Smith, Esq., Leadership for Lawyers, Corcoran's Business of Law, Legal Bill Reviewer

What is the silver lining in all of this? First, everything is going to be okay. We adapted our pricing models very quickly five years ago, and I have come to prefer fixed-price engagements for our jury consulting, litigation graphics and courtroom technology assignments. Such an alternative fee arrangement removes a lot of anxiety and allows us and the trial team to focus more deeply on winning.

Furthermore, just as it is a bad sign when people say it's a new economy when the market is soaring, it is probably a good sign that people are talking about a fundamental shift having taken place now. It suggests we are at or past the bottom, and that likely means good times are just around the corner. Here's an encouraging pair of articles that remind us that despite all we hear, law firm hiring is up 27% and revenue per lawyer at large law firms rose by 8.5% in 2012.

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