In the series on law firm profitability, the clients weren’t directly addressed. As law firms struggle to adapt to a profit margin business model, what will the impact be on how much clients pay and on the quality of services they receive?
- This is just a benchmark and will differ based on different firms and practices.
- The metrics are derived with an hourly billing model.
Even though this is benchmark data, I am guessing the same sort of split between law firm gains and client gains would apply to other fee arrangements and other cost reduction efforts. The difference between the law firm gain and the client gain is a reflection of the ‘Rule of Three’ aspect of law firm economics.
- Major reductions in overhead only bring modest reductions in cost per hour.
- By reducing the amount of resources available to the lawyers, their productivity goes down.
I haven’t seen any metrics that describe this yet, however, the likely outcome is an increase in the number of hours required to perform the same tasks. One obviously example is lawyers having to perform work they used to give to secretaries. So reductions in overhead for firms probably don’t benefit clients and may well drive their costs up.
- Understand the impact of each of these efforts and change your behavior to drive their adoption within the firms you use.
- Pay attention to which ones your law firms employ.