Large purchasers of legal services—which are almost always large corporations—are demanding more control over the legal services they purchase. This article says that BP (British Petroleum) “is demanding access to key billing and financial information held by its external lawyers as part of a review of the energy giant’s global technology requirements.” BP will appoint a Functional Strategy Director to interface with its law firms. That’s the kind of input control you’d expect any large industrial company would demand from any of its industrial suppliers. But it’s something new for law firms.
For example, BP says that it use the information to “ensure that its external lawyers are getting the right level of supervision without too much partner involvement.” Traditionally, those decisions have largely been the prerogative of the law firms. That is changing. Of course, law firms will continue to have input on those issues, but as the market continues to transform the guild, law firms will need to develop new ways to protect and assert their traditional values.
Almost a generation ago, when the time and motion economists were in their prime, the ABA did some solid research and discovered that at about 40 billable hours a week (about 60 hours in the office), actual legal output flattened out and then declined. Which means if an attorney is billing out over 2000 hours a year, he or she is probably doing less work, though spending more time getting that work done.
One of the companies my brother worked for discovered that the attorneys they hired were less efficient when they had associates with them at EEOC hearings, and informed the firms representing them that they wanted a discount on the partner's time and would not pay for the associates' time when the typical three or foursome appeared for hearings.
Which strikes me as a return to reality. Right now, many large law firms are run as pyramid schemes from the associate's viewpoint (10-20 come in for every one that makes partner -- consider the Walls Street Journal's comparisons of the Harvard classes only ten years apart. The first class at their ten year reunion had 95% making partner, the second class had less than 10% making partner within the first ten years).
But from a client's viewpoint, many of them charge five to ten times in legal fees what the work would cost if done by a smaller a.v. rated firm. Institutional responses only make sense and have been developing over the past forty years, disrupted by management fads (look at the way companies deal with in-house counsel positions which wax and wane like the moon without regard for proper economic analysis).
It is a fascinating development, in a complex context.
But one has to ask what the actual traditional values of large law firms really are.
Posted by: Steve Marsh (Ethesis) | February 19, 2005 at 08:48 AM
Steve:
Thanks for that post. Do you recall about when the WSJ did that comparison of Harvard Law graduates, or do you recall where I might find it?
John Steele
Posted by: John Steele | February 20, 2005 at 10:15 AM