I’ve previously mentioned the Business Leadership Summit being organized by The Lawyer, taking place in London September 22—23. (More information here; registration here.)
On the afternoon of Wednesday 23 September I will be moderating a panel (3:30 pm – 4:30 pm) on “The Law Firm of Tomorrow,” which will include Charles Martin, Senior Partner, Macfarlanes; Darryl Cooke, Managing Partner, Gunnar Cooke; and Sara Morgan, Head of Sales, Axiom.
We have been conferring and have come up with a few questions we plan to take on during our session. I won’t reveal all but in the spirit of hoping to inspire thinking in advance (whether or not you’ll be attending in person), here’s one of those questions:
Can a single law firm operate at different price points under one brand? Stated alternatively, can a single firm provide routine services at competitive prices while also taking on the most high-stakes, boardroom level attention, engagements?
To me, it’s self-evident why the answer to this question could be of pressing interest. All that’s required is that you believe there’s more than a bit of truth to the following about the high end engagements:
- Many firms declare that they aspire to do the high-stakes work, but there isn’t going to be enough to go around for all the aspirants. That work is in fact just a sliver of the overall global legal spend.
- Not only is there not enough ultra-high-end work to satisfy the hunger of all firms who say they’re pursuing it, in fact the list of firms in the consideration set of sophisticated clients for such works is getting shorter and shorter. And the hurdles for firms not already on those short lists to place themselves there some day are becoming insurmountable.
Turning to the value end of the demand spectrum – although I prefer to use the phrase “economical end” since I devoutly believe value can be delivered at any and all points of the food chain – how good are conventional law firms really at providing (a) routine services (b) at competitive prices (c) with consistent and superb quality (d) in a way that makes clients eager to come back for more? I fear the question answers itself.
Have I set too high a bar for firms to meet at this end? I can hear the responses already:
- “We don’t do routine.“
- “We have to cover our costs plus allow for a livable profit margin—and we don’t have real competition in any event.”
- “Of course we aspire to deliver superb quality; that’s essential to our firm’s nature. But can we help it if not every one of our colleagues is at the top of their game every day of the week?”
- “We’ve tried client relationship management, client teams, client business plans, and all of that; at the end of the day it comes down to personal relations and none of this top-down stuff.”
I’m not trying to be facetious, just realistic.
Now, we have seen a large variety of firms—famously starting over a decade ago when Orrick launched its “Global Operations Center” in Wheeling, WV—start operations in lower-cost centers, and the trend shows no signs of abating. Lest you doubt me, in no particular order: WilmerHale has done it in Dayton, Ohio; firms like K&L Gates and Bryan Cave have taken advantage of having a large presence in intrinsically low-cost metropolitan centers (Pittsburgh and St. Louis, respectively); and in the UK Allen & Overy has Belfast, Ashurst and Pinsents and others have Glasgow, and Freshfields has Manchester. More are surely in the works.
But are these investments changing the competitive playing field or simply sound management hygiene? My vote is with the latter. Please, I urge you, do take advantage of labor arbitrage: There’s no reason for back office functions to be conducted on Sixth Avenue in Manhattan or California Street in San Francisco. Do not kid yourself, however, that you have changed the game. Extremely similar, if not the very same people are doing almost exactly the same things in the same way but zero to two timezones and hundreds or a thousand miles removed.
A moment ago I mentioned Allen & Overy. Their ambitions in Belfast, and now Hong Kong and soon, surely, elsewhere, far exceed “labor market arbitrage.” They have launched Peerpoint, which they describe publicly as “global, flexible resourcing” but which is the first most conspicuous move into trying to house the high/low ends of the spectrum under one firm’s brand.
So staying within the boundaries of Law Land, the short answer to the question is “we don’t know yet.”
Fortunately, we are not without examples from the rest of the economy.
Bruce,
Closer to home, have any of the Big 4 accounting firms or bulge bracket investment banks tried things like this? Also, just looking at the success of the carmakers launching those subbrands, I don’t think it is coincidence that all of them were “upmarket” moves rather than downmarket. The firms you are talking about don’t really have that option.
For the reasons you cite, I don’t think large law firms themselves can do this. Not directly. But what they can and should do is look at deploying “passive” capital within the alternative provider universe. Private equity or venture capital type investments, or maybe a JV if the business case is strong enough. I know some firms are doing this already, a trend likely to continue. You can start on a much smaller scale, and see where it goes.
Hilton and Marriott do offer multiple price points under different brand names. And now, they sometimes build two brands in one building. That does not address, however, the meddling partner issue.
Thought provoking article. I’ve been mulling it over for the last couple of days.
I have to declare a particular interest in this topic, having founded the contract lawyer hub Vario within the brand of Pinsent Masons. My experience suggests that we should ask a different question: not ‘can different price points exist under one brand?’ but ‘can different service lines (which, most likely, will attract different price points), exist under one brand?’ By taking the service(s) offered as the starting point, rather than the price, I think we can arrive at a more optimistic view.
Sure, partner intransigence and cultural inflexibility will remain issues to overcome, but, in a way, it was ever thus. Crucially, however, in taking the service-first approach, we will be responding first to client demand for flexibility and choice from their trusted legal brands. From that solid foundation flows differential pricing, which is a natural consequence of the varying market forces associated with delivering services in a variety of ways.
So perhaps all of this would sit more comfortably with law firms if we started to think about differentiation in terms of a horizontal spectrum rather than the more pejorative ladder of services where some are ‘upmarket’ and some are ‘down’? Clients expect quality in all types of legal services they procure, be they LPO services, contract lawyers or partner-led strategic advice. The difference is not the quality but the nature of the output. The method by which the services are delivered is a consequence of the required output and the price point is a consequence of method.
Dear Katherine:
Many thanks for such an insightful comment. You have nicely articulated the difference, which far too many fail to appreciate, between “value” and “inexpensive.” I have long been a firm believer that product and service providers can deliver value at all price points along the pertinent market spectrum, from inexpensive to super-luxury pricing. And “value” itself embodies and essentially entails the concept of quality, as in quality fit for purpose or suitable for the client’s needs for that matter or that application.
Lawyers too often denigrate the prospect of less-expensive services by immediately and thoughtlessly assuming they will bring with them compromises in both quality and value. Not so in the least. (For a discussion of some of these issues in a different context, see my recent “Bergdorf Effect” column.)
I mostly agree with the conclusion, but wonder if the comparisons are apt. In the auto, airline and food examples, the upmarket or downmarket moves were aimed at targeted different segments of consumers. Law firms who are trying to successfully move up or down market are typically trying to get a broader swath of work types from their existing client base, not trying to establish a radically new and different set of clients.