Legal Commentary

Price. Value. Commitment?

By Patrick J. Lamb

Above The Law recently revealed some internal documents from Simpson Thatcher.   If Simpson Thatcher reflects what is going on in large law firms, it is clear that the recession is hurting BigLaw big time:

In 2007, our realization was 110%; in 2008, our realization was 97%; for 2009, we originally budgeted 93%, and we are now running at a realization of around 89%.

The firm's reaction is equally interesting:

We want incremental business and we are realistic about what is needed to obtain attractive incremental business. We think we are value-added and should be paid as a top-tier firm with top-tier talent, but we need to be competitive with rates. We are giving discounts on some litigation; we are giving discounts on bank and investment bank house account matters; we give busted deal discounts; we are willing to fix fees. If a particular partner rate or particular class rate is a sticking point, we can discount those rates to be competitive. We can quote a blended rate. In brief, we are flexible on rates and want to do what we need to do in order to expand our share of the high-end business out there.

Apparently, desperate times call for desperate measures.  Well, not that desperate:

We considered lowering our rates, but rejected that idea since we are collecting 100% or close to 100% on a high percentage of our business and are able to provide a discount on most of the rest of our business. We think lowering our rates would have a substantial negative impact on our revenues.

Which translates to this: If a client wants to pay us at higher rates, we'll take it!  But if the client says it will pay us less, we'll take that too."

It doesn't sound like Simpson is committed to changing its business model to deliver greater value over the long run, does it?  I wonder how many other firms are engaged in this "treading water" approach to value?

Full post as published by In Search of Perfect Client Service on December 16, 2009 (boomark / email).