The force of ideas The rule of law David Galbenski Webinar Presenter & Chairman of Lumen Legal The worth of individuals The value of diversityScott SarasinWebinar Host & Director of Client Development The power of human potential 1
“Leaders establish the vision for the future and set the strategy for getting there; they cause change.” John Kotter
2011: After the Fire. What’s Next? Webinar Core Focus: The legal landscape has been permanently transformed. The actionstaken in 2011 will significantly impact the success or failure of your organization in the decade ahead.
2011: After the Fire. What’s Next? Discussion Overview1. Yellowstone: Forest Fire & 2010 Polling2. Unbound: Key Industry Trends3. 2010: Industry Update (Traditional Lenses)4. 2011: Macro Business Impact Concepts5. 2011: What’s Next in Legal Services6. 2011: Law 3.0 & (LSO)²7. Q&A
2011: What Stage is the Legal Services Industry? Raging Fire Smoldering Fire Re-growth
2011: The Trends - Executive Summary StyleA. Better, Faster & Cheaper (Trend 1). BFC is the focal point as unbundled tasks have become the norm to achieve cost containment.B. Unbundling (Trend 3). Unbundling is moving from commodity tasks to higher-value tasks as purchasers get more comfortable with changing the status quo.
2011: The Trends - Executive Summary StyleC. Consolidation (Trend 4). As consolidation increases and competition intensifies, the infusion of outside equity into legal service providers will further accelerate the transition from a profession to a business.D. Self Help Trend (Trend 5). Data analytics will take center stage as corporate purchasers utilize spend data to increase transparency and provide comparative benchmarking to further contain costs.
2011: The Trends - Executive Summary StyleE. Legal Education Trend (Trend 7). Not only must law graduates become well versed in project management and process efficiency to succeed in the decade ahead, existing lawyers must embrace Lean Six Sigma principles to maximize productivity and increase the perceived value of services provided.
“Never confuse motion with action.” Benjamin Franklin
2011: After the Fire. What’s Next? Source Data1. Eversheds: Law firm of the 21st Century, the Clients’ Revolution (“Eversheds”) Date: 03/18/20102. BTI Consulting – Premium Practices Forecast 2011 (“BTI”) Date: 10/01/20103. Fulbright’s 7th Annual Litigation Trends Survey Report (“Fulbright”) Date: 10/14/20104. 2010 Hildebrandt Baker Robbins Law Department Survey (“HBR Law Dept.”) Date: 10/19/20105. 2010 Altman Weil Chief Legal Officer Survey (“Altman CLO”) Date: 10/20/20106. 2010 ACC/Serengeti Managing Outside Counsel Survey (“ACC/Serengeti”) Date: 10/25/20107. Q3 2010 Hildebrandt Baker Robbins Peer Monitor Economic Index (“HBR PMI”) Date: 10/30/20108. 2010 The American Lawyer’s Law Firm Leaders Survey (“TAL Firm”) Date: 12/01/20109. 2010 ACC /TAL Alternative Billing Survey (“ACC/TAL Billing”) Date: 12/01/201010. Inside Counsel’s 3rd Annual Law Department Ops Survey (“Inside Counsel”) Date: 12/01/201011. 2010 NLJ Billing Survey (“NLJ Billing”) Date: 12/06/2010
2011: Legal Services Industry Lenses1. Demand2. Pricing3. Operating Model
2011: Industry Demand: Surveys► Overall law department spending remained flat with 0% median increase last year. (ACC/Serengeti)▼ Total legal spending declined in the USA by 1% for the first time in the 10 years of the survey. In the past 9 years, total legal spending had increased an average of 7% with a range of 5 to 9%. (HBR Law Dept.)▼ 60+% of respondents indicated a decrease in the amount of spending on outside counsel with outside counsel spending decreasing in the USA by 5%. (HBR Law Dept.)
2011: Industry Demand: Jobs► In 2010, the legal job market stabilized.▼ There are 100 less jobs in the USA than at this point in 2009.▼ In November of 2010, 1,100 legal jobs were lost. The last gain in jobs was in September of 2010.▼ For perspective, 46,400 jobs from December of 2008 to December of 2009 were lost. (BLS)
2011: Industry Demand: Research► Wells Fargo Wealth Management and Citi Private Bank research indicates that law firm revenue is flat in 2010.▼ Overall demand fell almost 1% in Q3 of 2010. (Hildebrandt PMI)
2011: Industry Demand: Future▲ 80% of law firm leaders are somewhat or very optimistic heading into 2011. (TAL Firm)
“The manager accepts the status quo, the leader challenges it.” Warren G. Bennis
2011: Industry Pricing: Hourly Rates▲ Corporate counsel project that hourly rates will increase 1.52% in 2010 after increasing 1.48% in 2009.
2011: Industry Pricing: Hourly Rates▲ Hourly rates up 2.7%. The second straight year of <3%. Prior to Great Recession, hourly rate increases were between 6 – 8% annually. (NLJ Billing)▲ 90% of respondents indicate that bill rates will increase 5% or less in coming year. In 2009, 77% of respondents indicated an increase of 5% or less. (TAL Firm)
2011: Industry Pricing: AFAs Survey says, the verdict on AFAs is in: Lot’s of talk, and mixed signals on the action or traction reported.► Almost 50%.of corporate counsel with > $1 billion in revenue said 95% of legal spend will still be based upon billable hour. (ACC/TAL Billing)► 67% of corporate counsel surveyed indicated that they have 0% of their matters handled on an AFA basis. (ACC/TAL Billing)▲ 91% of law firms reported using a flat fee for an entire matter, up from 82% in 2009. (TAL Firm)▲ AFAs account for, on average, 16% of firm revenue. (NLJ Billing)
2011: Industry Pricing: AFAs▲ In 2009, corporate counsel indicated that, on average, 14.5% of total fees were paid on a non-hourly basis. (Altman CLO) Altman CLO Survey
The Great Divide:Perceptions Vary Greatly on AFAs▲ Law firm response: 15% say AFAs are client driven 80% say AFAs are driven by some of both the law firm and corporation▼ Corporate counsel response: 56% say AFAs are client driven 25% say AFAs are driven by some of both the law firm and corporation 2% say AFAs are law firm driven (ACC/TAL Billing)
“There’s a way to do it better – find it.” Thomas Edison
2011: Industry Operating Model Q3 2010: (Hildebrandt PMI)▼ 7.5% decrease in direct expenses as attorney headcount stabilized after declining for 4 consecutive quarters▼ 1.5% decrease in overhead expenses
2011: From Pyramid to Diamond ▼ 70% of law firms plan to ask partners to leave in 2011 ▼ 31% of law firms plan to deequitize partners in 2011 (TAL Firm)▲ 55% of law firms have used contract lawyers, up from 44% last year (TAL Firm)
Permanent Change to Industry & Model?▲ 50% believe that the legal services industry has been permanently changed due to the Great Recession (Fulbright)▲ 60% believe that the Great Recession has created a fundamental shift in the legal marketplace (TAL Firm)▼ 32% indicated that it caused the firm to adjust the business model (TAL Firm)
“There is nothing wrong with change, if it is in the right direction.” Winston Churchill
2011: Macro Business Impact Concepts► The consequences of living inside the jar.► Disruptive innovations and how it is impacting the legal services industry.► Lessons from iTunes will shape the future for the industry.► End of the world (and industry) as we know it in 2012?
The “New BFC” for 2011Buyer’s Market = Operating Model ChangeFlexible Model = Increased Efficiency & ValueChange Management = Competitive Advantage
“For us not to embrace change and innovation over the next eighteen months, over the next eighteen years, we are all going to fail.” Rich Baer, Qwest GC
Switch: How to Change Things When Change is Hard
Switch Framework: Direct the Rider http://heathbrothers.com/resources/
Switch Framework: Motivate the Elephant http://heathbrothers.com/resources/
Switch Framework: Shape the Path http://heathbrothers.com/resources/
2011: My Thoughts For The Road Ahead► Unbundling will kick into high gear as corporations get comfortable with wielding their economic power.► Data analytic tools will increase transparency into legal spend and provide comparative benchmarking opportunities at the law firm and timekeeper level.► Application of Lean Six Sigma principles and project management will increase efficiency and further close perceived price-value gap.
2011: My Thoughts For The Road Ahead► Case studies and best practices from early movers in the transforming industry will be replicated and will become industry norms.► The organization that masters change management process will achieve a significant, on-going competitive advantage.
Questions and ContactsDavid GalbenskiChairman877-933-1330, extension firstname.lastname@example.orgScott SarasinDirector of Client Development877-933-1330, extension email@example.com
The force of ideas The rule of law David Galbenski Webinar Presenter & Chairman of Lumen Legal The worth of individuals The value of diversityScott SarasinWebinar Host & Director of Client Development The power of human potential 49