Is Bigger Always Better?
A new study by the Acritas market research firm surveyed hundreds of corporate counsel across the U.S. The survey asked what firms come to mind first when corporate counsel look for outside counsel; what firms they favor most; and what firms they use for high value work. The answers define which firms have the strongest brand presence, and - surprise! - those firms are the biggest ones: Skadden Arps, Jones Day, Baker & McKenzie and Latham & Watkins lead the list. Corporate counsel are, of course, notorious for going with the front-runners. But what was really intriguing about the survey was conclusion that Acritas reached: even as the big get bigger in a saturated U.S. legal market, they are fighting over smaller shares of brand awareness because the legal services market is so crowded. [1]
That conclusion, I believe, focuses on "BigLaw" - the large corporate firms with many hundreds or even thousands of lawyers. These firms grew aggressively along with their corporate clients, but in so doing they made themselves more vulnerable to economic downturns. All those lawyers and salaried employees need to be paid every month, whether or not new business is coming in the door. The result, as I shared in a recent LawBiz Tips post, is that more Wall Street and middle market firms are quoting "suicidal prices" for legal fees simply to get enough work to keep lawyers occupied and cover their fixed costs.
While some proclaim that the legal profession's problem is too many lawyers, the imbalance is a unique variation of supply (jobs at Biglaw) and demand (still very large among the Main Street folks who can't pay $1,000 an hour legal fees). BigLaw is not all law. The bulk of the legal profession, perhaps as much as 80%, consists of sole practitioners and small firms that provide most of the legal services. Yes, there is Corporate America, a small but disproportionately powerful group serviced by BigLaw. The rest of the profession, however, provides the bulk of the legal work for the "other "99%" of the population. This large, underserved customer group includes individuals, families and smaller companies that don't fit the BigLaw skill set. These customers offer a lot of work to firms with costs flexible enough to be affordable.
The mega law firms with many hundreds or even thousands of lawyers may serve the 1% of the corporate world that is relentlessly pushing them for fee and overhead reductions. But, there will be a large group of customers who are underserved except for sole practitioners and small firms who are flexible in their cost structures and nimble in their legal analysis.
[1] Once Again, Skadden Tops List of Best-Known U.S. Law Firm Brands (2/25/13)
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