Welcome to January 21, 2021, the first full day of the Joe Biden administration. It’s also an interesting time for law firms…
Most law firms announce compensation plans this week. The first week of the year is generally spent winding down last year’s financials. The following week is spent distributing bonuses.
This third week, though, may be the most important. It’s when the new year’s salaries are announced. Associates and partners alike sharpen their advocacy skills, to explain away last year’s billables and to demonstrate how this coming year will be the biggest one yet. And, of course, that they deserve a big raise.
If you’re a lawyer in a “discretionary” system (i.e. you advocate to a “compensation committee” for a higher salary), you have limited arguments available. In fact, the presentations generally focus on two metrics: (1) I promise to bill more hours; and/or (2) I am raising my billable rate.
Neither of these are particularly good outcomes for clients.
Unless there was some external factor that limited hours (illness, leave of absence, COVID), where can a lawyer find 100-200 more billable hours in 2021? Is the lawyer simply going to work harder? Maybe. In other cases, the lawyer will just pad their time and that letter that took a “0.3” in 2020 now becomes a “0.5” letter.
And, sure, inflation or more experience can justify an increase in an hourly rate, but is the increase really based on that, or has the lawyer just figured out that a $15 increase multiplied by 1,800 hours equals $27,000 more in profit?
When a rate increase is based only on a new calendar year, it can lead to unjustified results.
Law firm leadership has no incentive to push back on these issues. More hours and higher rates mean more money to them too. In short, the fox is in charge of making sure the barn door is locked.
All I’m saying is, clients, watch your bills next month.
Despite the pandemic and overall concerns about the economy, legal rates are going up. In March, we all talked about how commercial real estate, transactions, and law firm profits were dead. But, locally, that hasn’t been the case.
In general, law firm hourly rates are rising. The pessimist would say that law firms are increasing hourly rates to offset the reduction in actual hours billed. The optimist would say that the commercial economy is as strong as it ever was and that rising rates reflect the market.
Get your insolvency news from McLemore Auctions. I love getting the weekly emails from McLemore Auctions that show all the cool stuff being auctioned, usually via a going-out-business liquidation. In fact, one of the biggest mistakes I made during the pandemic was to show my children the website, which has resulted in a few really strange family purchases.
A few weeks ago, I noted the concept of “funeral by auction” after seeing how frequently the fixtures and assets of many Nashville restaurants end up being sold on the McLemore site. In fact, based on my review of today’s Nashville Post, it seems like the McLemore website may be the earliest public notice that some local businesses have closed.
And, yes, it really stinks to be shopping for deals on gaming chairs, and you see the cafe where you proposed to your wife being sold off, piece by piece.
Remember to shop local. I cringe when I see a local restaurant on the McLemore website. It’s often because I hate to see a small business owner give up, and I feel a little guilty thinking about the last time I spent my money at that local business.
This restaurant closure really hurt. Yesterday, the Nashville Post reported that Woolworths on Fifth was closing. Woolworths was a beautiful restoration of the historic lunch counter where many brave African American students and leaders took a stand to demand equality in our city.
I frequently took guests there for lunches over the years, and I was always proud to share that history. I also worry what’s next and whether the future operators will respect the history of the site.