As Nevada’s economy sees improvements in a variety of industries, law firms continue to evolve in order to prepare for the future and better serve their clients. Recently, a group of Nevada attorneys met at the Las Vegas offices of City National Bank to discuss the trends and challenges facing their industry.
Connie Brennan, publisher and CEO of Nevada Business Magazine, served as moderator for the event. These monthly roundtables are designed to bring together leaders to discuss issues relevant to their industries. Following is a condensed version of the roundtable discussion.
What is the greatest challenge facing Law Firms?
Mark Ricciardi: The biggest challenge for the industry is trying to grow and train talent. Young lawyers have always been the backbone of our firms. The partners supervise the work the associates grind out and associates learn as they go. However, clients now are becoming much more careful about who works on their cases. We’ve had a couple of clients who have said they will not pay for an associate with less than five years of experience to work on their cases. So how do we get these people trained?
Gerald Gordon: We’ve seen a downturn in legal work nationwide, it doesn’t make a difference what size firm you are. The challenge we have is trying to predict workloads and how much work is going to be coming in in the future.
Nile Leatham: The issues that are going to be the greatest challenges are the number of lawyers that we have and where they’re practicing. We’ve seen the applications in law schools diminish dramatically as a result of an overabundance of lawyers throughout the country.
How has technology affected the legal practice?
Patrick Byrne: Keeping up with technology, incorporating technology and the impact of technology is a challenge. Consumers now have access to information at their fingertips they’d have to go see a lawyer for before. You can read a Nevada statute by searching that statute on the Internet. It’s a whole new world out there and we’re dealing with a whole new lawyer, too.
Christopher Kaempfer: The client expectations have changed so incredibly. It used to be, we’d send a letter and they would get it two or three days later. When the fax came out, that was a big deal. Now, a client sends you an email at nine o’clock in the morning, if you haven’t gotten back to them by 11 o’clock at the latest you’ll get another email or phone call saying they haven’t heard from you. It doesn’t matter where you are or how many clients you have, the expectation of an immediate response is there.
Gordon: It’s the inability to think. You don’t have enough time to sit back and just think about something and work it through your mind because they expect an immediate response. The biggest problem I have with young associates is simply saying to them stop, sit in your office and think about it. Don’t send that email immediately.
Alan Freer: Clients don’t want you to think, they want you to react. Just because the client expects you to get back to them doesn’t mean you’re best serving the client by immediately responding without thinking.
Has the improving economy helped the legal industry?
Leatham: We’re in a buyer’s market as far as legal services are concerned. We’re all in the same market, we have different niches, but we’re competing with each other and firms in other cities. The supply and demand issue is going to continue for the foreseeable future, even with the reduction in number of law students being admitted. It’s going to continue to put pressure on the cost of legal services.
Ellen Schulhofer: There is increased competition in the market. We’re feeling pressure from smaller firms because they have more flexibility and can take work away from us. There’s also pressure from companies that are sending out commodity work overseas or to other organizations across the country.
Ricciardi: The most uncomfortable thing that happens is when you have a long-term good client who puts out a request for proposals (RFP), which you have to participate in to keep the client you so well served for 20 or 30 years. Everyone who wants to work will come in and bid ridiculously low rates. You have to hope that your client has some sense that you have institutional knowledge because you’ve been working with them for such a long time and there’s some middle ground.
John Frankovich: Client loyalty doesn’t exist. This is a result and product of the recession. When these businesses got hit, they took a long look at where the costs were and it’s easy for them to cut back on legal fees. They’ve gotten used to not paying legal fees and a lot of companies now have in-house counsel. Companies that have gone through the recession have found out they can do without some of these things and not just legal fees, but also personnel.
Schulhofer: We see 30 or 40-year clients with billing guidelines that are designed to nitpick things in their policies. If you say you’re transmitting something they’ll say that’s a secretarial task and they won’t pay for it. Things like that are now built into the systems. You have rate pressures, and they want certainty, which is why they’re asking for caps or estimates and budgets. They don’t want to pay for young lawyers who are being trained on their dime. There’s a confluence of pressures. I thought it was only that way because of the recession but now as we’re coming out of the recession, we’re seeing more of it.
Bruce Ford: The problems that are mentioned here are in other industries, too. Every industry has similar complaints, which is interesting.
Samuel Schwartz: Consumer clients look at it, in the lowest level, as a fixed fee. They call the first people they can find on the Internet, ask what they charge and the person who quotes them the lowest number is who they go with.
Freer: Another unintended consequence of the recession and the retraction of the legal market is the ability to have qualified attorneys handle specialized issues. Before the recession, a lot of firms were referring cases out for specialized law practice and now everyone is trying to hang on to what comes in the door. That affects the client and the quality of legal work goes down.
J. Bruce Alverson: What makes a difference, too, is the ability to maintain personal relationships with your clients. You must maintain that relationship and go beyond that particular person and build relationships. When that person is going to retire, that relationship is gone. Don’t underestimate the personal relationships, because those can cure a lot of the issues we’ve discussed here.
How have the standards for making partner in a firm changed?
Ricciardi: It depends on the culture and the model. We want our lawyers who are going to become partners to have aptitude and results in business development. In most institutional firms over the years, if you just billed a lot of hours, worked really hard and did high quality work, you could get named partner. That just doesn’t work anymore. There has to be a business development aspect and it’s much harder to become a partner now.
Is there a gender gap in management within the legal industry?
Gordon: The essence of law firms is still originations, so in the end you have to have partners who originate business because that’s what you survive on and without it, you’re done.
Schulhofer: On the flip side, it used to be that’s all we were striving to be and there are a lot of younger lawyers coming up in the system who do not want to be partners. They don’t want that pressure. They want to be service partners or they want nine-to-five jobs.
Byrne: There are a lot of people who don’t want the partnership track. As a result, you’re seeing people out there who are willing to take less for more flexibility. You have to get creative and see if there are staff positions where they’re not on the partnership track. When you bring somebody in at the $100,000 or more salary, the expectation is it’s coming with the partnership track. Well, that’s the most expensive labor you can hire. Maybe you can hire a staff lawyer who is happy to work and get paid on an hourly basis. You don’t run the risk as much of losing money on them because you pay them as they bill it out.
Alverson: As a managing partner, one of the major challenges is to evaluate people, whether it’s your partners or associates, and don’t try to put a round peg in a square hole. If someone is very good at writing briefs, don’t make them go on a plane for a meeting if they’re tongue-tied. If someone gets up in court and stumbles all over themselves, there are plenty of other things they can do. Some people are not great researchers or brief writers, but you turn them loose in court and they’re fabulous.
Schwartz: There are some lawyer training and expectations that aren’t great. I try to have that conversation with the young lawyers in my office to discuss what they’re really good at and tailor their expectations to make them effective for the office. Some lawyers are never going to bring in new business but they would make great managing partners and administrators. Others just want to bring in business and don’t want to do administration.
Frankovich: When we’re going through the recruiting and hiring process, over the last 10 years, we have found the women almost without exception to be more qualified, more motivated and more interested and with a better educational background than the men.
Kaempfer: I find that I get a lot of calls from in-house counsel of major companies from women and they prefer, I believe, to speak to a woman. I want them to know that women in our firm play a very important role and are just as important, if not more important, than any male partner.
Byrne: Corporations have worked a lot faster in instituting the changes necessary to promote and encourage women, and law firms have not. It’s been 50 percent women and 50 percent men in law schools for 15 years or so. If you look at the last 15 years worth of data, women are not progressing at the same level as men within private law firms. Real change hasn’t happened and it needs to happen. It’s a real challenge and that’s why a lot of women end up in corporations.
Freer: A lot of the women I deal with are managing partners, but they’re managing partners of boutique law firms. They left big law to build their own practice. You may not see many women managing partners at this table, but they are out there running their own firms and they’re doing a great job.
Frankovich: Three of the top five producers in our law firm are women and none of them have an interest in being involved with management. They want to do what they do well, which is practice law in their particular area. They recognize if they get into management it’s going to impact their ability to do that.
Will there be more consolidations of law firms moving forward?
Gordon: There may be picking up of boutique firms, but not consolidations. Most of the national firms that came into the state are gone. Las Vegas is not perceived as being a good market by most national firms. They see us as over-saturated with significant regional firms. There are no corporations here to pick up. The corporations here are all gaming and they all have in-house. It’s all transactional work here except for maybe some very specific areas.
What is the outlook of the legal industry?
Schwartz: Nevada was number six for growth in 2014 so people are coming back. Even though transactions are down, as people come back transactions go up. Boutiques will get a little bigger and you’ll see more of what’s an anomaly in this town – a 10 to 15 lawyer firm.
Frankovich: In Northern Nevada, the growth is going to be very different. It’s going to be very technologically based. Tesla is just the tip of the iceberg, and now it’s exploded as far as people looking. Northern Nevada is predicted to have 50,000 new jobs in the next five years, and all of them are high tech. That is going to be an interesting evolution on whether or not the big law firms want to have a presence.