No surprise to this big firm refugee, but a new study by a legal recruiter confirms that the recession has helped drive Fortune 500 clients tosmall, midsize and boutique law firms. “Because of their lower overhead and operating costs, small firms can offer the same legal services for significantly less than large firms. This makes both new and established small firms attractive to cost-conscious clients,” according to the report from Robert Half Legal, “Future Law Office: Delivering Maximum Value in a Cost-Conscious Legal Era.”

Providing large-firm expertise at small-firm rateshas become even easier because many small and midsize firms have picked up talent that was unavailable to them before the recession. This has helped arm boutique firms with the capability to serve middle-market companies that can’t afford big-firm rates.  Technology, of course, has also leveled the playing field, allowing small firms to compete with their bigger brethren.

Small is the new big.  Only more efficient and more responsive.

By the way, Minnesota CLE’s Solo and Small Firm conference will be August 1-3 in Duluth.  See you there.

Hat Tip: Larry Bodine

Here is a great little story about a car mechanic going the extra mile (pun intended).  Treat your clients well, because what goes around comes around.

It seems British lawyers are jumping on the “virtual law firm” bandwagon.  They seek to develop “a fresh way of working,” using technology ”to give a streamlined service without the traditional law firm infrastructure” and offering ” greater value for money and certainty on fees.”

Sounds familiar!

I just stumbled across an interesting article called “Building a Virtual Law Firm” by Joseph Kashi, an attorney in Alaska.  His article was written six years ago, but it highlights some trends that have only gained speed since then.

Kashi first points out that there is nothing new about “virtual” law relationships; most attorneys regularly associate with, and work closely with, local counsel in other states as the need arises. They collaborate with other attorneys who have expertise in specialized areas.  We use the services of professional and paraprofessional staff who either telecommute or otherwise work off-premises. Attorneys are generally comfortable working with investigators, court reporters, and expert witnesses whom we may not physically meet very often, if at all.

Once we have recognized that these “virtual” arrangements are not a radical departure from our previous ways of practice, we can begin to understand how internet technologies will accelerate this process and create new opportunities.  As Kashi puts it:

Mainstream use of Internet-based legal practice systems will force law firms to change into radically different, flexible practice associations that respond more quickly to market and technological changes. Future law firms will likely adopt a more flexible and democratic horizontal structure that facilitates the quick and efficient flow of critical information, something that’s critical to the quick parry and thrust of almost any law practice. Further, almost every other industry has found that flexible business structures also lend themselves to better profit margins.

Technology has leveled the playing field.  Before computers, law firms depended on large numbers of associates and paralegals to manually collect and process the vast amount of information required by any significant litigation or transaction. This required the addition of intermediate layers to supervise employees and to control the quality of the paperwork as it gradually flowed to the ultimate users.  These additional layers, however, only slows the flow of information to the lawyers who ultimately use it. Too many intermediate lawyers not only reduce the firm’s productivity and responsiveness but also increase overhead and costs, which are usually passed on to the client in one form or another.

By contrast, a virtual law firm will not need to carry the salaries of regular employees, or the costs of fancy downtown offices in which to house them.  Instead, it will rely upon trusted contract professionals and paraprofessionals specially chosen for particular projects.  Clients will no longer be expected to bear the cost of training associates or bring paralegals up to speed on industry specifics.  This flatter structure will lead to greater speed and flexibility in meeting client needs.  Nor will clients be paying for office space filled with filing cabinets and “war rooms”; today, data can be stored digitally for almost nothing, and layers can collaborate virtually via the internet.  These new technologies greatly reduce overhead costs, and therefore, fees billed to the client.

Professionals as diverse as radiologists and university educators are developing new “virtual” models; law firms need to move in that direction as well.

Apparently, its all about trust.

For my in-house counsel friends, here is a great article from Law360 on ways to demonstrate and quantify your value to the company and resist the drive to outsource legal services. 

Four key elements:  there are some tasks that you can do more cost effectively; you know and understand the business better; you are more accessible; and you are able to manage outside legal costs.

There is also a good discussion on the merits of charging-back legal fees to individual departments within the company.

here.  Money quote: 

“All the momentum in the legal services marketplace today favours small, adaptable, innovative, client-focused, value-oriented, business-savvy providers. Most large law firms answer to immobile, traditional, self-centered, profit-oriented, and business-challenged. It’s not hard to pick the winner here.”

“Clients are unwilling to pay the high fees unless it’s extremely specialized work.” 

“Firms have been run like a business in terms of pursuing profitability.  They have been able to increase their rates every year, and that can’t happen anymore.”

Those thoughts certainly ring true for me.  Why would a client pay a big firm (with all its overhead) for employment law counseling and litigation when a small firm or sole practitioner can provide the same quality at a lower rate?  Same expertise, greater efficiency.  Just asking!