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A Fifth Reason BigLaw is Bad for Business

October 24, 2012

I recently discussed four reasons why smart clients should be looking for legal solutions outside of traditional BigLaw (see “Four Reasons BigLaw is a Bad Bet“).  Those 4 reasons are:

  1. The average AmLaw 100 partner makes $1.4 million a year.
  2. The average billable hour quota at a BigLaw firm now ranges from between 1900 and 2400 hours per year.
  3. The average BigLaw attorney bills out at $540 per hour (and many bill out at more than a $1,000 per hour).
  4. The average overhead for a BigLaw associate is between $200,000 and $300,000 per year (and that preposterous figure doesn’t even include salary).

Because of these staggering numbers, I suggested smart clients might want to distance themselves from the money-swallowing monster that BigLaw has become.  Well, thanks to another installment of Bruce MacEwen’s “Growth is Dead” series (Part 7), we have another (as if we needed one) reason to abandon ship.  In discussing the “new landscape” of “lower-cost providers” that now abound, Bruce notes:

The founder and head of one of these firms, which is in the business of applying Six Sigma processes to document review, and which has demonstrated consistently and convincingly that their quality is immensely superior to that produced by BigLaw associates working on the same document sets, remarked fairly casually to me not long ago that “for every dollar of revenue we gain, BigLaw loses three.”  (my emphasis.)

Essentially, we have the Guru to BigLaw admitting that a lower-cost provider (at 1/3 of the price!) can provide “immensely superior quality” to that provided by Big Law associates.  Clients. Decisionmakers.  General Counsel.  I can’t help you if you won’t help yourself.  Paddle away from that torpedoed, dead-in-the-water Destroyer and get yourself to saner waters…

For another view of the potentially huge cost of BigLaw document review, see “(Another) Top Trick to Reach Your Daily Quota as an Overworked Attorney: Document Review“.

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3 Comments leave one →
  1. November 1, 2012 11:14 am

    The virtual law firm is one answer to big law expense.

  2. January 31, 2013 8:38 am

    Well written!

    [Originally posted in LinkedIn group “Legal Innovations”]

  3. January 31, 2013 8:44 am

    very interesting. Traditional law firms (whether BigLaw or Medium-sized firms) have two main problems: inability to provide competitively priced services compared to new market entrants like LPO’s and others. Secondly, an unwillingness to adopt sales practices sufficient to maintain their business model on a long term basis. The result of this will be the eventual demise of the traditional law firm model, in favor of business models where lawyers will be employees, not partners, the business models price and sell their services effectively. It will be a win-win all-around. And this change in the market appears well under way.

    [Originally posted on LinkedIn group “Legal Innovations”]

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