A number of recent posts and articles are talking about the de-leveraging of BigLaw. Many of these predict that the other side of the recession will see BigLaw with less associates per partner.
There’s all this talk of alternative billing, leveraging technology and changing the way firms do business and somehow they are going to do this by shrinking the bottom-level of the inverted pyramid they live in … again??? Karl Marx perhaps said it best when he noted that Capitalists (a.k.a. business owners) make money off the sweat of another’s brow and not their own.
Just like the de-leveraging cycle in the 80’s, when hours go soft – Partners hoard. And they do this to their own detriment as the least profitable billable hours of the business are their own. They lose the best billable hours (a.k.a. leverage). Of course this behavior is highly motivated by the compensation systems. And we shouldn’t really be surprised by the fact that history is repeating itself, since these compensation systems have not changed much since the 80’s.
Still I am dumb-founded. After seeing so much encouraging dialogue about alternative fees and the subsequent changing of the law firm business model, firms fall right back into their old habits. Although leverage is not the be-all and end-all of profitability, its still a core metric to use. It’s a basic business practice to push labor tasks to their lowest cost source.
It is past time for lawyers and firms to turn and look over the bow of the boat. They need to understand that the radical changes in the market will need to be reflected by corresponding changes in the law firm business model.
Change …? I see a theme developing