So the Golden Age of legal services is over? I had lunch with Tony Williams this week, formerly managing partner of Clifford Chance and worldwide managing partner of Andersen legal, now principal of Jomati Consulting, the leading international management consultancy specialising in the legal profession. Well, we all knew 2012 was going to be another challenging year, but it's sobering to hear Tony's thoughts on how the profession is unlikely ever to return to the levels enjoyed in the 'Golden Age', even come the recovery.
Tony talked to me about a report Jomati is due to publish later this month. After the Golden Age : The New Legal Era. Here he defines the Golden Age as the period from the mid-1980s up to the crisis of 2008, when partner profits were typically rising by more than 10% year on year, lawyer fee rates were going up regularly without being questioned by clients and firms were rarely challenged about what they billed and how. Of course this all changed with the crunch in 2008 and Tony's view is that there has since been a fundamental shift from "compliant client to active and questioning client" that has changed the marketplace forever.
"Anyone not convinced we really are entering a new era, who still assumes we will soon roll back to where we were in 2007, needs to look at the facts. To my mind it's clear on the evidence there's no turning back."
He cites a number of factors: first, that in-house lawyers are more sophisticated buyers of legal services, far more aware of inefficient working in their law firm suppliers and ready to challenge; second, an increasing insistence on foxed fees - the death throes of the hourly rate has of course been widely reported elsewhere - and an attitude that law firms should share more of the risk; and in addition to this pressure on fees, associates and non-legal staff continuing to demand pay rises and bonuses which firms need to fund somehow if they want to avoid losing talent to rivals; then there's the threat of competition in the guise of new forms of production, ranging from the Legal Process Outsourcers to the online document producers, also undermining fee levels at the commoditised end of the market, with a knock-on effect on mid-level work. The list goes on...
But it's not all bad news. Tony believes that firms prepared to grasp how the game has changed and innovate will find new, perhaps even better, ways to prosper. In particular he believes that for many, embracing globalisation will be key to growing revenues and profits.
"Those that adapt may then consider that moving out of the Golden age was not a negative step, just the beginning of something new."