Individual partners at local firms might explain how a national firm’s higher billing rates “just wouldn’t work” in their practice area, how their local clients had become accustomed to somewhat kinder and gentler fees, and how the national firms were fighting an uphill (and to them hopefully doomed) battle.

Conversely, national firms maintained that the work they did locally was national-quality work deserving of national-level rates; it just happened to be in Portland or Seattle and not Chicago or Minneapolis. Clients were smart enough to understand that.

I actually take a different view entirely.

One can play the rate-card game with at least three sets of rules. The first set of rules is the simple labor-market arbitrage model, where, indeed, work that could be performed in Chicago or Minneapolis can also be done in Portland or Seattle by lawyers every iota as qualified, but with lower overhead costs and compensation expectations. Simple management hygiene demands you use the most efficient resource allocation model you have handy. So: Local rates for “national” work.

The second set of rules starts from the assumption that Client X’s problem (a merger, say, or a class-action defense), although it happens to arise in the Pacific Northwest, is a sophisticated problem deserving the same impeccable caliber of service that same client would expect in New York or Washington.

So this is a land of “practice caliber drives rates, not geography.” I agree that certain practices—white collar executive defense, for example—really do demand top-drawer practitioners and timezones matter not. But I also suspect there are fewer of these practice areas, and fewer matters of moment arising within them, than national firms would like you to believe.

Finally, the third set of rules might be called the “import-export” market rules. Increasingly, client issues are not city, state, or region-centric: They’re driven by business dynamics and not the happenstance of where HQ is. We know several firms, and more may be on the way, whose network footprint of offices is driven by the perceived need of clients to have matters handled in many different places at once more or less simultaneously.

This it seems to me calls for intra-firm collaboration of the highest order, where (say on a complicated supply chain issue) the local specialist in land use in Seattle can interact with the offshore production experts in Hong Kong who can interact with the FCPA gurus in Washington who can interact with the labor union law experts in Chicago who can… This argues for an entire matrix of local rates—but now what’s “local” means Seattle, Washington, Hong Kong, Chicago, etc.

The existential question

Bringing us to what you may have all been waiting for wondering about.

Can, and should, historically local firms compete with the new arrivals (and how) or should they just assume the jig is up and prepare themselves to combine or be acquired?

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