1. The force of ideas
The rule of law
David Galbenski
Webinar Presenter & Chairman of Lumen Legal
The worth of individuals
The value of diversity
Scott Sarasin
Webinar Host & Director of Client Development The power of human potential
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2. “Leaders establish the vision for the future and set the
strategy for getting there; they cause change.”
John Kotter
3. 2011: After the Fire. What’s Next?
Webinar Core Focus:
The legal landscape has been
permanently transformed. The actions
taken in 2011 will significantly impact the
success or failure of your organization in
the decade ahead.
4. 2011: After the Fire. What’s Next?
Discussion Overview
1. Yellowstone: Forest Fire & 2010 Polling
2. Unbound: Key Industry Trends
3. 2010: Industry Update (Traditional Lenses)
4. 2011: Macro Business Impact Concepts
5. 2011: What’s Next in Legal Services
6. 2011: Law 3.0 & (LSO)²
7. Q&A
5. 2011: What Stage is the Legal Services Industry?
Raging Fire Smoldering Fire Re-growth
9. 2011: The Trends -
Executive Summary Style
A. 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.
10. 2011: The Trends -
Executive Summary Style
C. 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.
11. 2011: The Trends -
Executive Summary Style
E. 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.
15. 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.)
16. 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)
17. 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)
18. 2011: Industry Demand: Future
▲ 80% of law firm leaders are somewhat or very optimistic
heading into 2011. (TAL Firm)
20. “The manager accepts the status quo, the leader challenges it.”
Warren G. Bennis
21. 2011: Industry Pricing: Hourly Rates
▲ Corporate counsel project that hourly rates will increase
1.52% in 2010 after increasing 1.48% in 2009.
22. 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)
23. 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)
24. 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
25. 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)
26. “There’s a way to do it better – find it.”
Thomas Edison
27. 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
28. 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)
29. 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)
30. “There is nothing wrong with change, if it is in the right direction.”
Winston Churchill
31. 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?
36. The “New BFC” for 2011
Buyer’s Market = Operating Model Change
Flexible Model = Increased Efficiency & Value
Change Management = Competitive Advantage
37. “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
42. 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.
43. 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.
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48. Questions and Contacts
David Galbenski
Chairman
877-933-1330, extension 190
dgalbenski@lumenlegal.com
Scott Sarasin
Director of Client Development
877-933-1330, extension 120
ssarasin@lumenlegal.com
49. The force of ideas
The rule of law
David Galbenski
Webinar Presenter & Chairman of Lumen Legal
The worth of individuals
The value of diversity
Scott Sarasin
Webinar Host & Director of Client Development The power of human potential
49
