The Barustors Report

Winning Strategies For The
LEGAL MARKET DOWNTURN

Legal Marketing Association (LMA) Bay Area Program

Held at the
PRACTISING LAW INSTITUTE
San Francisco, June 25, 2001

COPYRIGHT 2001 THE COSMIDES GROUP. ALL RIGHTS RESERVED.


According to a panel of experts, law firms should focus on three primary areas during the current market downturn:



These were the conclusions reached during a panel discussion moderated by Diane Hamlin, Chief Strategic Officer of Palo Alto's Fenwick & West LLP. Panel members were David Geyer, Director of Marketing of Brobeck, Phleger & Harrison LLP; Allen Olivo, Chief Marketing Officer of the investment banking firm of Robertson Stephens, Inc.; and Beth White, a consultant with Hildebrandt International.

Hamlin opened the talk with an astonishing statistic: 70% of all venture capital invested over the past 25 years was invested in the last 2 years. That tidal wave of cash created the strongest economy in decades. Now that the wave is receding, no one is sure how much of that growth will wash out with it.

WHAT LEGAL MARKETERS ARE THINKING
LMA Bay Area members appear to be as uncertain as the rest of the business community when it comes to projecting the general direction of the economy. Dave Bruns, LMA Bay Area Program Committee Co-Chair, conducted an informal opinion poll of 22 LMA respondents. It showed that:


Hamlin led the discussion with a series of questions.

Q: WHAT IS THE MOOD AT YOUR FIRM?
All agreed that their firms are cautiously optimistic. Olivo reported that new business deals are beginning to emerge, but with greater care than in recent years.

Geyer believes that the telecommunications sector will remain slow until new technologies arrive to fill the enormous capacity that was created during the past two years. He notes that only about 5% of the cable laid by telecoms is being used.

Q: WHAT ARE YOU DOING TO MAINTAIN OPTIMISM IN YOUR ORGANIZATION?
Keeping people informed is a key to maintaining morale at Robertson Stevens. Alivo's firm squelches rumors by maintaining a policy of open communication at all levels. His company also celebrates successes and offers brownbag Q&A sessions between employees and executives. "Those lunches have done more for morale, and for creating a trust of management, than anything else we've done," he said.

Hildebrandt consultants have been encouraged by fewer law firm dissolutions than had been expected this year. However, there has been some letting go of excess or non-performing professionals. White notes that some firms are shielding themselves from bad publicity regarding attorney lay-offs by reporting, with the attorney's consent, that the departure was voluntary. In addition, multi-tier partnership tracts are being revisited, giving talented attorneys the opportunity to stay aboard as partners, without sharing in the firm's profits.

Geyer applauds the many law firm partners who accepted reduced profits in lieu of cutting payrolls. However, if the market slow-down continues into 2002, he expects to see more law firm lay-offs.

Q: WHICH PRACTICE AREAS OR INDUSTRY SECTORS ARE YOU FOCUSING ON?
Securities litigation has doubled at Brobeck in the past year, and should grow stronger as investors pursue companies' and officers' assets. Bankruptcy work has not peaked, although precursor work -- such as commercial suits over broken contracts, and employment suits resulting from lay-offs -- is growing. Employment and labor work will increase if the upcoming 2002 corporate budgets call for more lay-offs. Real estate transactional work remains strong because many of the deals that are in the works now began under the strong economy. However, new transactions will probably come in at a slower pace.

Reporter's note: real estate boutiques are seeing increased demand on both sides of the commercial lease contract. Property owners are trying to minimize losses from defaults and reduced rental rates. Tenants are using the softening rental market, and the threat of bankruptcy, to renegotiate or sublease their spaces.

Olivo thinks we will see more consolidations in the media world, following the AOL/Time Warner deal. He notes that "internet advertising is dead", and believes that media giants will step up their acquisitions of hot online sites.

White believes that as MDPs continue to chip away at ABA and State Bars' prohibitions, law firms will need to consider new revenue streams, such as establishing ancillary businesses, to remain competitive.

Q: WHERE ARE YOU FOCUSING YOUR FIRM'S RESOURCES?
Geyer referred to the recently released BTI Consulting Group report , which reveals that less than 25% of Fortune 1000 companies are satisfied with their outside legal counsel. He reminded the audience that now is the time to reposition and promote the firm along its strengths, and to become students of their clients' businesses. "Build deeper relationships, offer just-in-time service, and build your knowledge base. The first ones to do this win," he reminded.

On a similar note, White encouraged law firms to focus on stabilizing their existing client relationships. She also recommended investing in knowledge management systems so that firms can "offer information that will bring more value to their clients' businesses."

Q: HOW ARE YOUR CLIENTS REACTING TO THE DOWNTURN?
White & Geyer warned that clients are using the market slowdown to demand lower fees, which they advise against giving. Instead, they recommend offering clients more value for their fees by employing cost-saving technologies and task-based billing, as well as giving clients additional services, such as setting up extranets for them. "Firms should see themselves as knowledge brokers who can help their clients broadly," advised White.

Q: HOW DO YOU CROSS-SELL?
Geyer acknowledged that Brobeck is one of some 200 U.S. law firms that have purchased Interaction as their CRM software. Most of these firms have yet to deploy it firmwide due to cultural versus technical issues. He reminded the audience that they must first build consensus before their firm can expect to see results from the investment.

White reminded that CRM software, like Interface, is only one leg in a three-legged stool. The other two legs include the processes that feed information into the system, and, an organization to develop and nurture the system, directives that must have leadership and commitment from the firm's managing partners

Q: IF YOU COULD SUCCESSFULLY EXECUTE ONE THING THIS YEAR, WHAT WOULD IT BE?
Olivo: "Get back to communicating the bigger message of 'Why us?' Stand for something. Find the truth of who you are."

White: "Take time with each client to get to know their business, and look for opportunities for your firm to provide other types of services. Don't give up on your contact relationship system."

Geyer: "Your job as chief scout is to be the voice to management as to where the business is, and how to get it. Put in place a contact management system that will make a material difference."

Prompted by the audience, Hamlin joined in on the final tail of the program by offering observations to some of her own questions. In the short-term, she believes that we will see more law firms go under. However, she is optimistic about the future. She believes that the telecommunications sector will come back, perhaps last, but that when it does it will be huge. She also believes that bioscience has a "big appetite" for legal services, and will become a strong sector once the flow of funding reaches necessary levels. She acknowledges that morale remains high at Fenwick & West LLP, in part because the firm never became singularly focused on high tech. She admits that cash/equity positions are still on the table, but for a more select group of companies.

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Bay Area legal marketing consultant, John Cosmides, is principal of The Cosmides Group and director of Barustors, a State Bar-certified referral service for business and corporate clients. John can be reached at john@barustors.com or at 415-957-1330.