Despite Having So Many of Them, Lawyers Remain Expensive Because of Sticky Wages and Limited Discounting


Thu, Mar 15th, 2012 10:00 by capnasty NEWS

You would think that with a system of supply and demand, having more lawyers than needed would make them cheaper to employ. Yet, just looking at a lawyer costs more than a week's wages for most people. What gives?

As Antone Johnson, former eHarmony VP/global head of Legal, explains in this article on Forbes magazine, the reason is because of sticky wages (nobody, including lawyers, likes pay cuts), limited discounting (lawyers don't want to lose their perks and bonuses) and an obsession with prestige and rankings usually judged through money.

This may be about to change, however; Antone points to an article on LAW.COM on the rise of new legal providers who base their business model on not charging insanely expensive fees:

The legal industry is in the midst of a once-in-a-generation disruption. From the perspective of one who has served as a general counsel in recent years, paying $3 million a year in outside law firm bills, we (or "they" now that I've switched teams) are fed up with large firms' endlessly escalating billing rates and cost insensitivity. With many talented, experienced lawyers having left big firms (voluntarily or involuntarily), and technology making it easier than ever to set up shop as a new solo practice or small firm, Craig's point is compelling. I started my own firm, Bottom Line Law Group, with a similar philosophy of low overhead and an awareness of clients' cost sensitivity, in large part because I want to serve early stage startups and other clients who couldn't afford me if my billing rate were $650/hour. (See for a manifesto of sorts.) Firms like mine, and those founded by many of my colleagues in the last couple years, are the wave of the future. It's such an obvious win-win -- or slam dunk, as Craig said -- that I think it's inevitable. In much the same way that startups seize opportunities that large corporations aren't nimble enough to pursue, "startup" law firms will rush to meet the market need that's currently unmet. The only way I see that not happening is if the megafirms move to slash overhead (meaning compensation, not layoffs) and billing rates. With all of the incentives and institutional traits that I've described above, I think the probability of that happening in the near future is near zero.



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