Change is coming

And just before I get down to the day job, if you want to read an excellent review of Richard Susskind’s “The End of Lawyers” although I would urge you to read the book itself, you will do no better than Bruce MacEwen in Adam Smith, Esq. MacEwen has the telling quote from the book,

“I predict that lawyers who are unwilling to change their working prcatices and extend their range of services will, in the coming decade, struggle to survive. Meanwhile, those who embrace new technologies and novel ways of sourcing legal work are likely to trade successfully for many years yet, even if they are not occupied with the law jobs that most law schools currently anticipate for their graduates.”

Pulling up my socks

Blue socksI always look forward to Monday mornings as it means another piece by Lucy Kellaway in the FT. This morning’s Only the smart will survive, so pull up your socks is well up to the usual standard, but somewhat disheartening, as today finds me in a very fetching (or so I thought) pair of royal blue socks with pink and yellow lozenges.

Tomorrow will find me back in the usual black socks (but long ~ just below the knee! There is nothing worse than English short socks, except sock suspenders!)

Crystal ball gazing

There is just the slightest hint of smugness in Jonathan West’s letter, Commodity fetish in this week’s Law Society Gazette,

I note the recent sad administrations of Hammonds Support Services and Fox Hayes (see [2009] Gazette, 29 January, 1).

They were probably two of the biggest examples of firms who followed Professor Richard Susskind’s regular entreaties to the legal profession to ‘commoditise’ legal work. Will we now see Professor Susskind eat a large slice of humble pie, presumably at the creditors’ meetings of those defunct practices?

I don’t want to disillusion Mr West but commoditisation is here to stay. Law firms have not moved this way because of Richard Susskind, but because this is what our consumers want. Inevitably there are going to be casualties, especially among early adopters: but those casualties do not mean that Susskind is wrong.

As Rob Millard wrote in his latest post in Adventure of Strategy,

I’m reading it [“The End of Lawyers – Rethinking the nature of legal services“] at the moment and will review it for you when I’m done. At first glance, though : absolutely essential reading for anybody either leading a law firm or, in 90%+ of cases, practicing law in the 21st Century.

Simple mathematics

From a recent post by Bruce MacEwen’s in Adam Smith, Esq.

Finally, let us never underestimate the yin and the yang of the high degree of leverage on law firms’ P&L’s. That is to say, once you’ve covered your costs (which are, for the record, people @ ~60%, occupancy @ ~30%, and “everything else” @ ~10%), then essentially every additional dollar of revenue drops directly to the bottom line.

Also, if the average law firm’s gross margin is, say, 35%, then–if you do nothing to change your cost base–a 17.5% drop in revenue (highly plausible in this environment) implies a 50% drop in profits.

Add to that the highly liquid market for lateral partners and you have the ingredients for immediate and severe problems.

OK, it is not quite the same in the UK (clearly US firms work on a somewhat higher margin) but close enough.