August 30, 2006
Exaggerated Impression of Law Firm Firings
Rees Morrison with Hildebrandt International is one of the most prolific bloggers around. His blog, Law Department Management, is targeted at the general counsel world. For managing partners of law firms, it provides insight into the thinking of the law firm’s corporate customers. Thus, it is well worth monitoring.
Undoubtedly you have read about clients’ dissatisfaction with their law firms. The legal media seem to love reporting things like “50 percent of corporate law departments fired law firms in the prior year." Rees notes that the July 2006 InsideCounsel reported in bold print that 34 percent plan to fire law firms.
Rees examines theInsideCounsel story with a more objective eye and, in so many words, says, “Hogwash!” He points out that the reality is that less than one percent of law firms get terminated. In looking at the numbers used by the publication to mix apples and oranges for creating their apparently desired (but wrong) impression, Rees writes the following:
“Wait a numerically-challenged minute! The average department in this survey had 31 lawyers, so at a plausible benchmark of five lawyers per billion dollars of revenue, assume the average department was in a $6 billion company. Based on my consulting projects, a rough rule of thumb may be that companies of that size pay 25-40 US law firms per billion dollars of revenue, which means that average department perhaps paid around 200 law firms.”
The actual firing of law firms is far smaller than the legal media would have you believe; instead, law departments are more likely to simply reduce the type and amount of work given to a law firm. Major corporations will reduce work to firms who give only lip service to diversity. They will reduce business over pricing and efficiency issues. Across the board, most law firms that lose business lose it due to poor client communications or other service quality shortcomings. Unfortunately, you still find lawyers and partners who don’t understand “service quality” as viewed through the eyes of their clients.
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