Angie Hickey Featured in The American Lawyer
December 18, 2018
Law firms are in a fine position, according to legal industry analysts who point to surging demand in 2018 and predict similar outcomes in 2019. (www.law.com/americanlawyer/2018/12/11/best-year-in-a-decade-for-law-firms-maybe-but-not-for-everyone) But those who take a wider perspective on economic trends are expressing growing concerns. Half of the economists polled in recent days by the Wall Street Journal predict a recession will start in 2020, and 10 percent see one beginning next year. CFOs in the United States have a more dire outlook, according to a recent report from Duke University. More than half believe that the nation’s economy will be in recession by the end of 2019, and 82 percent believe that a recession will have begun by the end of 2020.
“The end is near for the near-decade-long burst of global economic growth,” said John Graham, a finance professor at Duke’s Fuqua School of Business and director of the survey. “The U.S. outlook has declined, and moreover the outlook is even worse in many other parts of the world, which will lead to softer demand for U.S. goods.”
So what gives? Are law firms immune to the pressures facing the wider economy? Have they properly absorbed lessons from the past? Or do the rosy reports paper over some fundamental troubles on the horizon? James Jones, a senior fellow at the Center for the Study of the Legal Profession at Georgetown University Law Center, is in the middle of preparing his own report. He’s not ready to pop the champagne.
“Demand is up. That’s good news, but it’s not up dramatically. Productivity is up. That’s very good news. This may be the first time since 2011 that we’ve seen an increase in productivity. Many firms have been able to raise their rates,” he said. “I think the troubling information, however, is that that does not represent broad performance across the market.” Jones suggests that a superficial look at the aggregated law firm financial data overlooks a growing segmentation in the marketplace between the top-performing firms and all the rest. “I think the firms at the top have plainly benefited from the past couple of years, from increased merger opportunities and financings,” he said. “They’ve benefited in a way from the Trump bump.”
Consultants Bruce MacEwen and Janet Stanton of Adam Smith Esq. share Jones’ perspective on the emerging chasm between the law firm “haves” and “have nots.” And while they say that most law firms operate on a very short-term perspective, obviating the prospect of recession planning, the 5 to 10 percent that are pulling away from the rest are better run as businesses. “They will make whatever hard choices need to be made,” MacEwen said. Even still, and in spite of the established fact that economic expansions can’t go on forever, they’ve only heard about two firms that are actively discussing preparations for a recession. Both firms have COOs with a business and finance background, not a J,D. Just as important, they are “treated like adults and listened to,” according to MacEwen.
The number that are seriously considering the issues is surely greater than two. But MacEwen and Stanton’s theory is bolstered by the example of Angela Hickey, the CEO at 60-attorney Chicago firm Levenfeld Pearlstein. Hickey holds an MBA, not a J.D., and she pointed to the adage “a crisis is a terrible opportunity to waste” in explaining how the firm has been applying lessons from the 2008 recession to lay the groundwork for the next one. That’s meant reorienting client service by targeting efficiency and value, but ruling out competing on cost alone. It’s also included a focus on transparency: keeping personnel at all levels informed and bringing in financial advisers to work with attorneys, including younger ones who were not a part of the last recession. “We do a lot to educate our people,” Hickey said.