"Most partners don't understand the firm's business." - Bruce MacEwen, Adam Smith, Esq. on BLOOMBERG LAW
For those looking for reasons to be optimistic about a recovery in the legal sector, sure, there are bits and pieces of positive developments.
Dallas-based Bickel & Brewer is paying 2013 first year associates $185,000. There haven't been widescale layoffs. And on the fictional "The Good Wife," the firm could emerge from bankruptcy, with Diane adding on a branch in Manhattan.
However, if those who viewed the Lee Pacchai interview of MacEwen on BLOOMBERG find the analysis credible, they will conclude that things are getting worse, not better in the legal sector.
The interview began with an allusion to the "suicide pricing." To get business, any business, some law firms, including brandname ones, are submitting RFPs with such low figures that the whole sector could be thrown into turmoil. As with department store discounting, clients will expect bargains. Obviously, with this as background, law firms will finally have to get it that they must lower their fixed costs. The biggest piece of that is manpower. Therefore, MacEwen does anticipate another round of large layoffs of associates.
In addition, partners are highly vulnerable because of their high salaries. However, they frequently don't sense the ax hanging over their necks because they never learned the business of law. Their focus has been on serving their clients. Most likely they will be pushed out by lowering their compensation to that of a first year associate.
Will there be more bankruptcies of firms? MacEwen sees that as possible. Unlike U.S. corporations, the legal sector never got its expenses under control. It was Jack Welch at GE and it was Lee Iacocca at Chrysler who introduced downsizing - with a vengeance. Middle management was knocked out of the box and the contract or just in time worker was brought in. That model dominates businesses of all sizes.
So far the numbers for the second half of 2012 for law firms are lousy. Therefore, the manpower purges MacEwen refers to could start in 2013.