Looking back on 2009, looking forward to 2010: change is in the air.

• Author: Zeughauser, Peter

The year 2009 will go down as the year in which the greatest upheaval in the world's financial markets since the Great Depression reverberated throughout Big Law. The legal industry began adjusting to the new long-term global economic reality of slower growth in the world's developed economies--the United States, Great Britain and Western Europe--and resilient and more promising growth in the emerging economies led by China, Brazil, India and Russia. For Big Law, the long-term consequences of this shift in the global economy are unclear, but change has been palpable among the world's leading law firms, including the AmLaw 100, 200 and Global 100.

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The Year in Review

Looking back on 2009, industry-leading firms lost market share to second-, third- and fourth-tier firms that long had suffered from weak pricing power. According to BTI Consulting Group, corporate spending on legal fees dropped 10.8 percent. Clients in economic distress moved work to firms with lower price points. After years of strong rate increases, top firms felt unprecedented rate pressure. Rate cuts for some work hovered at 25 percent, even among Wall Street firms. Discounts on accounts receivables soared to 40 percent led by Wall Street and City firms. Firms struggled to rightsize. Leverage, the darling of the golden era of law firms, became a dirty word, and deleveraging became the byword of the year. Declining profits at the top of the market resulted in eyebrow-raising lateral departures. Marketing and other staff departments were slashed; 30 percent reductions were common. Announced lawyer layoffs amounted to more than 3 percent of the AmLaw 200 firms, and silent reductions in the equity and non-equity partner ranks continue to run up the numbers.

The lockstep associate pay scale was cracked at several top firms. Many firms deferred and withdrew offers to first years; some announced they would skip a year of hiring; others extended offers to first years but didn't give them start dates. Some firms cut associate salaries; with the glut of talent on the market, zero attrition held fast. Afraid of leading the market, others held on to starting salaries that were out-of-whack with market conditions.

Firms scrambled throughout 2009 to improve their margins, hold on to desirable talent, shed underperformers and avoid a repeat of 2008 failures such as Heller and Thelen. Believing that rate increases would be tough to get, many firms made a noticeable...