Once again, it’s the client, stoopid

The principle is simple. Law firms are concerned with just two audiences: clients and potential clients on one hand, and staff and potential staff on the other. But while commercial firms can bore you to tears talking about 'client focus', the plain fact is that the interests and sensitivities of the latter constituency usually trump those of clients. After all, law firms are people businesses and the talent they sell is expensive, highly-mobile and well-informed – in short, a highly efficient and liquid market for labour. In comparison, the market for legal services is slow to adapt to events, often poorly informed and rife with cultural and structural barriers to exerting its influence.

As such, there’s little mystery why law firms, during a 15-year period of unusually steady growth, responded to a competitive labour market with high salaries, which were then passed on largely to clients. Sure, clients moaned on the conference circuit about high leverage, the cursed billable hour and clueless junior lawyers (all linked phenomena), but for years they did very little about it and law firms, quite logically, continued on their path.

Until now. There has been a clear sense in recent weeks that the dramatic slump in the global economy is finally turning this dynamic on its head as clients press advisers for a better deal on fees. Sensing a change in the wind, law firms are focusing again seriously on the demands of their end users - even at the expense of staff.

One of the most symbolic moves, perhaps missed by some on this side of the pond, was Cravath Swaine & Moore’s recent decision to slash bonuses, a move presiding partner Evan Chesler explicitly cited in terms of client expectation. The Wall Street firm swiftly followed up with a high-profile article in Forbes in which Chesler penned a well-pitched diatribe against the hourly rate.

It is mainly in this content that we now see Freshfields this week announcing it is to freeze salaries at 2008 levels – a move that will strike a chord with clients that have become weary of expensive but inexperienced assistants. Likewise, the related concept of high leverage looks as much out of fashion, and you can expect law firms to find more ways to put clients in touch more directly with their more seasoned lawyers, rather than inexperienced assistants with artificially high charge-out rates.

Yet reading the heated debate Freshfields’ move ignited, it remains striking the extent to which the firm’s stance has been judged either positively and negatively within the isolated context of private practice. What is largely missing is discussion of the impact or reaction of clients - as if the market for legal services exists within some kind of vacuum. Well, in the long-term, it doesn’t. Assistants who believe that the large fall in demand for legal advice - and by extension their services – should have no impact on them are deluding themselves and risk making career-limiting miscalculations. City firms still care what their junior ranks think. They are the future of the business and a long-term commitment, after all. But right now, they care more what clients have to say. That’s market forces for you.