In industry, where a competitive edge is crucial and often achieved through economies of scale, one business stands out as contrary to this basic principle: the law firm.
Generally speaking a law firm — the traditional provider of legal services — becomes increasingly less efficient, less productive and consequently provides less value to a client the larger it gets.
In such firms, high overhead costs and layers of service providers combine with a systemic drive to produce revenue based on leverage. This creates a breakdown of the service delivery model and the client loses. In spite of this fact, nearly 47 percent of the legal spend on outside law firms goes to the AmLaw 200 firms, according to ALM Intelligence.
There are some legitimate arguments for why a significant portion of legal work remains with BigLaw. Some complex international matters require coordination of lawyers across a wide number of jurisdictions. Other matters demand highly specialized knowledge, often in the regulatory context.
Certain litigation or enforcement actions may draw the attention of the public markets, which may find comfort in the familiar name of a large law firm (certainly the board of directors and the general counsel do).
In those instances it is often understandable for the client to pay a premium to be represented by such firms.
However, the majority of work performed by most large law firms does not fit within the categories mentioned above and can be performed by other legal service providers who may offer a more competitive value package than a large law firm.
What is it about BigLaw that can have a negative effect on the client experience and value proposition? Let’s start with Law Firm Economics, Business and Politics 101 (a course every law school should teach).
A law firm is a collection of people who work together, most often with the business goal of earning a profit. The law firm has what are known as “fee earners,” those who provide their services to the clients in exchange for a fee. The fee earners fall into a few traditional categories: paralegals, associates, of-counsel and partners (nonequity and equity).
Simple enough, but here is where it gets more complicated. Click to read the full article.