Law Firms

Expert Sees Possible Big-Firm Shift to More Temp Lawyers, Pay Cuts

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A legal consultant speaking to marketing partners last week bandied about the words “fundamental changes” and “fundamental shift” to describe how the law firm business model will likely change in response to the economic downturn.

The news isn’t good for partners and associates at large law firms concerned about their employment prospects—and their salaries. James Jones, managing director of Hildebrandt International, said the changes could include a shift to more contract and temp lawyers and fewer full-time partners and associates, according to an account of the speech posted on the The Law Marketing Portal.

“At the end of the day, law firms could stand to be a little smaller and don’t need all those partners and associates,” Jones said. Instead, firms should consider a new mix of lawyers that includes contract lawyers and staff attorneys.

2009 will be bleak because corporate clients are resisting fee increases, and litigation work is not picking up as much as expected, Jones said. He predicted more layoffs and cost-cutting—and that includes salary freezes and even pay reductions, according to the Marketing Portal report, written by legal marketer Larry Bodine.

Jones urged law firms to end the fixed “starting salary” mentality. “It’s an irrational system that a huge chunk of our biggest expense item is non-negotiable,” he said.

The story outlined more of Jones’ predictions for law firms. “This recession is significantly different than prior recessions and could lead to fundamental changes in the law firm business model,” Jones said. Possible changes include:

• Change in net income will range from flat growth to declines of 15 percent.

• Rate increases will be modest, with heavier discounting.

• Revenue growth will be in the 3 percent range, but expenses will rise more quickly than revenues.

• Indebtedness will increase.

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