There are glimmers of hope in the legal industry. And perhaps just a scintilla of wishful thinking.

The WSJ Law Blog story cites a new report from the Citi Private Bank Firm Group. It is their 4Q09 “Managing Partner Confidence Index,” and it shows an uptick in that metric, the strongest move in over 2 years.

The WSJ rightly expresses some skepticism as to whether things are really turning around, noting macroecomic factors, and concludes thusly:

One big looming unknown for managing partners, according to the report, is whether a step-up in demand will lead to a corresponding step-up in revenue. The reason why one might not perfectly track the other, reads the report: “The difference is probably due to continued discounting pressure from clients. For many law firms, the road to recovery looks to be a long one.”

Understanding this point requires a closer look at the report, specifically the Demand indicator (bottom of page 1) of the overall index. It is up, with the explanation that:

“Nearly two in three respondents (64%) expect demand to grow over the next 12 months; 23% think it will stay flat.”

While the managing partners, profit hawks that they are, understandably focus on (hope for?) an end to discounting, I think this view of demand is the key. Two-thirds of managing partners surveyed buy into the assumption that a rebound in the economy will result in a commensurate rebound in a demand for legal services.

I think that this assumption is partially true, but misses the work going on in aggressive legal departments to attack demand (i.e. the ongoing need for legal services), who satisfies that reduced demand, as well as the pricing thereof. This requires a deep dive, a real microeconomic view of corporate legal services.

Over the last 12-18 month the focus has been doing the same things cheaper. That’s called a good start.

The next frontier for legal pioneers involves long-term savings. It may be called doing some things less, others not at all.

I don’t know how you factor this into a “Managing Partner Confidence Index,” but something tells me it’s not an easy fit.

(Update: The Legal Intelligencer has a look at this report as well).

Another week, another large law firm enters dissolution. This time, Wolf Block.

When you see a headline like this, it’s easy to link the bad economy to the news, and just move on reading. But sometimes the truth is a bit more complex.

In the case of Wolf Block, we have some rare insight here, from writer Chris Mondics of the Philadelphia Inquirer.

Mr. Mondics has done the reporting and takes the time to trace leadership changes at Wolf Block over the years, how this affected firm culture, and what this all meant when the economy started to go south in a big way. Here’s an excerpt:

For the fact is that Wolf Block’s internal dissension was so great, and the damage to its reputation so pervasive, it never had a chance to recover.

Getting the right mix of people by recruitment and cultivating a reputation as a place where people can be proud to work and where partners refer clients to other lawyers rather than jealously hoard them, is a process that can take decades. It can fall apart with breathtaking speed.

And then the knockout punch, something I think has happened to many firms over the years. Fundamental problems are obscured by a good economy, with increasing work and rates:

The firm hobbled along in a weakened state and even grew, buoyed by the exceptionally robust legal market of the last few years.

But when the economy soured, and the firm’s banker sought to tighten the terms of its line of credit, an essential economic backstop for many law firms, there wasn’t enough bench strength to see it through.

It’s really a great job by Mr. Mondics, and it likely highlights something we will see play out over the next year or two. You can’t really look at firm size, or revenues, or (perhaps) even profits to determine a firm’s inner strength.

So the proximate cause of the Wolf Block dissolution is a unique one. Maybe Tolstoy said it best (stretching the metaphor that a firm can be like a family):

Happy families are all alike; every unhappy family is unhappy in its own way.

(About the firm Anna, Karenina & Associates?)