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Forged in Pain: The Chaos of a Slow Economy is the Ladder you Asked for

September 23, 2019

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Slow Economy — Image Source: https://adobe.ly/2kxV5uA

This article is written by Ramanuj Mukherjee, CEO, LawSikho.

How do you know the economy is not doing well? The perfect answer is this: when the government announces measures to counter a slowdown. With tax cuts in both direct and indirect tax and various stimulus packages, the government has finally signaled that the economy is in trouble and we need to recover from here.

Well, lawyers have already noticed the problem a while back. A lot of law firms have put hiring freeze. Assessment internships are not leading to jobs. 2019 graduates are still searching for jobs several months after graduation and are shocked to find out that there are few takers even at subsistence salaries. Fee recovery is at a low point, as many clients are in economic distress.

John F Kennedy, who was a president of the USA, used to say that a rising tide lifts all boats. This means that when an economy is booming, everyone tends to do well.

Even if you are not that good at your job, rising demand means that you will still find opportunities and be comfortable.

However, a recession has the exact opposite effect. When the swimming pool in drained, you will find out who was swimming naked, goes another saying.

The pool is getting drained. Those lawyers who never bothered to develop requisite skills are now getting caught off guard. They are finding themselves in trouble.

What is happening in the legal industry?

Inefficient lawyers and law firms that do not adapt to technology, did not care much about providing value to clients, those prone to shortcuts rather than building value over the long term are now at a lot of risk.

Those who charged premium prices without having the skills to really back those prices, and fooled client after client and got away with it, will be in trouble now. This is because a slow down or a recession makes the customers still spending money in the market more cautious than ever. They remember the problems of the past, and in a buyers market, they have pricing power and do not hesitate to experiment more with new service providers.

On the other hand, relatively new good law firms and lawyers who genuinely work for clients and provide great solutions at an efficient price point will be in more demand than ever. It will also force a lot of lawyers to innovate and improvise to survive. They will come up with new business models, and adapt new technology and practices that they resisted before, simply to survive. As clients will be more price-sensitive during the recession, they will find ways to do the same work more efficiently.

A recession is not all gloom and doom – there are some benefits for the fit

A recession ends the arrogance of incumbent big players and levels the playing field for newcomers. Even the incumbents that survive, have to learn to be humble and may have to relearn how to take care of the clients. Isn’t that beautiful?

Google, Amazon, Microsoft, GE, Revlon, FedEx and hundreds of greatest companies in the world were all started during a recession. Is that just a coincidence?

If you aspire for big success, a recession may be just the right opportunity for you to grow even faster. It may present opportunities that you do not come across every day.

The best in an industry do not have to worry about recession

The best does not only survive a recession, but they also flourish during a recession! Don’t take my word for it, McKinsey, Bain and Harvard Business Review all agree. Let me quote an article from a May 2019 issue of Harvard Business Review (HBR):

“In their 2010 HBR article “Roaring Out of Recession,” Ranjay Gulati, Nitin Nohria, and Franz Wohlgezogen found that during the recessions of 1980, 1990, and 2000, 17% of the 4,700 public companies they studied fared particularly badly: they went bankrupt, went private, or were acquired. But just as striking, 9% of the companies didn’t simply recover in the three years after a recession—they flourished, outperforming competitors by at least 10% in sales and profits growth. A more recent analysis by Bain using data from the Great Recession reinforced that finding. The top 10% of companies in Bain’s analysis saw their earnings climb steadily throughout the period and continue to rise afterward. A third study, by McKinsey, found similar results.”

So almost 1 in 10 companies during the worst recessions was still flourishing while others were going out of business! Who are these people? What do they do? What made this difference? Will, you not want to know?

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What happens when a recession hits?

Most people act reactively. They cut down investments, fire people, try to survive. This happens when you were not prepared for a recession at all.

Btw, in India, we are still growing. Growth has slowed down, but we are not in an actual recession yet. In a recession, the economy contracts instead of expanding. According to Karvyy, a financial institute, we may hit an actual recession, as economic crisis deepens, in 2020. This is almost inevitable if the government’s economic stimulus fails to attract private investments to the economy.

So things could get worse.

What are you going to do about it?

The answer is to prepare.

The studies described above found that companies that had contingency plans in place, which had thought through alternative scenarios, and prepared for a recession, did really well during the recession. According to the same HBR article, the major areas to prepare for, as far as a company is concerned, are debt, decision making, workforce management, and digital transformation.

So if preparation is the key, how can lawyers prepare for a slow down or a recession?

It is not so different for lawyers either.

Rule number 1 is to not run out of money. You need to be cautious during a recession. Revenue, the number of matters and recovery of fees may go down during a slow down unless you are a very famous lawyer.

It is a fact that absolutely top litigators in a court may not get affected much. But the rest are vulnerable. You need to manage your money very carefully during the recession. It is not the time to make big investments in upgrading your chamber or buying fancy gadgets.

On the other hand, it may be a great time to invest in software that increases comfort and value for your clients or reduce the hours you need to spend on something, i.e. increases your efficiency. It may also be a great time to learn new skills that help you to get a new type of client. For example, it is a great time to learn IBC or arbitration given the number of disputes over payment delays and failure to pay debts is steadily going up, requiring more qualified lawyers in these areas.

Watch out for government actions and reactions

You need to watch out for government actions also. Certain areas of the legal industry are heating up due to government policies and investments. A good example will be technology startups and intellectual property. The government has taken a slew of measures to create more indigenous technology, including a new rule that CSR money can be spent on research and development by accredited labs! This means that work for patent lawyers and technology lawyers may be going up despite a slow down!

It is the same for IBC. Since the government made it a priority for banks to recover NPAs there has been a tremendous activity for lawyers working at NCLT.

As the government is committed to transforming India into a hub for arbitration, we are most likely to see changes in this department.

Also, a slew of economic reforms can be expected, including possibly allowing foreign law firms to practice in India. Reforms will be dime a dozen. Disinvestments are also likely to be in the offing, leading to more work for corporate lawyers and capital market lawyers.

Are you preparing for the upcoming opportunities?

There are jobs, but the threshold to getting hired in more. There would be clients looking for a good lawyer, but threshold of performance that they will accept with be high.

Recession is the time for tightening your belts, upping your game and trying to be as efficient as you possibly can. That is how you get to roar your way out of a recession.

How long will this slow down last?

If we go by the opinion of Manmohan Sing, former Prime Minister, and a visionary economist, India will need 3 years to get back on its feet provided the government introduces favorable economic policies and engages in important reforms. We must take his words seriously because he took India out of its biggest financial crisis in 1991, through reforms.

It looks like we will have to tighten our belts for a while. It’s time to make tough decisions. Take hire cuts. Spend on what really matters and not on luxuries. Time to become more efficient.

Do not miss the opportunities out of fear and analysis paralysis

However, this does not mean we should miss opportunities. As the economy is in distress, prices of assets may come down. I have been for example buying a lot of shares that are available at a great discount currently due to terrible economic outlook. I expect the equity market to crash even deeper, and when it does I will invest more.

It is also a great time to invest in software, and you may find excellent resources to hire at a relatively lower salary, as the upward pressure on salary levels has eased off.

It is also a great time to invest in education because learning new skills for a new world should be your priority. It should be your priority to up your game to the next level, and education is the whetstone that sharpens the mind! Real skills that are very valuable will help you to take yourself to the next level of success.

What is your plan for what is going down? How will you prepare?

How will you be more effective, efficient and powerful during the slow down, and possibly a recession? Do you have a blueprint? Want to discuss your plans with me? Reply to this mail and ask to schedule a call with me.

The Master Access program is still available and we are taking in a few people. We haven’t so far increased the prices given the difficult economic situation, but it will not last for very long. So hurry up and enroll if you were interested!

Here are some recession-proof courses you should enroll into right now and start preparing:

Diploma

Diploma in Companies Act, Corporate Governance and SEBI Regulations

Diploma in Entrepreneurship Administration and Business Laws

Executive Certificate Courses

Certificate Course in Real Estate Laws

Certificate Course in Arbitration: Strategy, Procedure and Drafting

Certificate Course in Securities Laws, Insider Trading and SEBI Litigation

Certificate Course in Media and Entertainment Law: Contracts, Licensing and Regulations

Certificate Course in Legal Practice Development and Management

Certificate Course in Advanced Civil Litigation: Practice, Procedure and Drafting

Certificate Course in Advanced Corporate Taxation