Articles Posted in How Lawyers Deliver Their Services to Business

The Point

Over the past four decades, the constant law department refrain, in response to rising costs, has been: “bring more work in-house” (see here, here, and here). Swap out on-demand law firm specialists who charge (high) fees, for full-time in-house generalists who receive (lower) salaries and benefits.

This “cost-saving” method hasn’t worked — a consistent 50 to 60% of law function spending has long consisted of payments to law firms (see here). And, excepting the 2008 to 2009 Great Recession, companies’ legal spending has consistently spiraled upward.

This Matters 

Most industries charge more per unit for purchases made in small numbers, or only occasionally, than they charge for purchases made in bulk, or on a regular basis. But the waste that the legal profession’s hourly billing business model builds into law firm charges multiplies any variable cost premium to grossly excessive extremes.

So, to an extent not true of most other industries, the legal industry offers corporate law functions no economically viable way to manage their variable costs — at least when it comes to sourcing help from lawyers. Continue reading

The Point

Earlier this month several top U.S. law firms announced that they’d be paying 2021 law graduates $200,000 per year (Wall Street Journal: “Entry-Level Lawyers Are Now Making $200,000 a Year”).

Whether the law firms account for this as overhead (very unlikely), or pay for it by charging clients for the time of such novices (much more likely), client companies will shoulder the bill for this largess.

This Matters

Any U.S. law graduate will attest to the reality that a freshly minted law graduate — without any experience in or training for actual practice — is unqualified to perform as an attorney.

As the founders of AmLaw 200 firm FisherBroyles have described it (before this month’s announcement of $200,000 a year salaries), assigning such unseasoned individuals to perform legal tasks for clients, and then charging clients hundreds of dollars per hour for their work, amounts to, “the $180,000 a year associate being trained on the client’s time“.

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This four-part post’s premise:

A company’s “legal” problems are likely to be — in functional terms — business problems that have a legal aspect.

The traditional impulse to call in a licensed attorney from a law firm or in-house counsel department doesn’t always lead client companies to the most practical choice for their needs.

Hence my introduction of “Alternative Legal Services Providers”, or “ALSPs” — and Georgetown Law Center’s recent, authoritative survey, “Alternative Legal Services Providers 2019” — in this four-part post.

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Here are four take-aways:

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OK.

Review of Part 1 and Part 2 of this four-part post:

1. In your company, many “legal” problems are more accurately viewed as business challenges that raise legal issues (as Mark Cohen put it).

2. Delivery of many of the legal services that respond to such business-challenges-that-raise-legal-issues now requires process management and technology skills that attorneys mostly lack (again, Mark Cohen).

3. “Legal services & providers of those [legal] services are ever more important — lawyers, however, are not.” (Jeffrey Carr’s tweet last Monday)

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For most of the past four or five decades, the phrase “legal services & providers” has meant one of two things:

1. Law firms, and

2. In-house counsel employed by companies as full-time employees.

Until — that is — a few years ago: With the advent of “alternative legal service providers” — or “ALSPs”.

“Alternative” to what? Alternative to law firms and in-house counsel.

Beyond that, the definition is pretty wide-ranging — except that all ALSPs embody the aphorism set forth in this post’s title: “Clients Need Legal Services But Not Necessarily Lawyers”.

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Part 1 of this four-part post introduced a February 19, 2019 Forbes article, “Clients Need Legal Services But Not Necessarily Lawyers” — by Mark Cohen, both an accomplished business attorney and former chief executive of his own (non-law firm) business.

Part 1 introduced Cohen’s observations about the process management and technological benefits of “disaggregating” what law firms and in-house departments traditionally have viewed as “legal” tasks. In this connection he wrote about “alternative legal service providers”:

“Law is not solely about lawyers anymore ….”

“Several new-model legal service providers … have replaced law’s brute force, labor intensive lawyer-does-all model with data-driven, customer-centric, automated, corporatized, scalable, collaborative, multi-disciplinary, and well capitalized service models.  These providers are often managed by business professionals and entrepreneurs, not licensed attorneys …”  

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Why this “disaggregation” of “legal tasks” now?

Because, says Cohen:

“‘Legal problems’ have become ‘business challenges that raise legal issues.’ The complexity, speed, and new risk factors impacting business—together with the impact of the global financial crisis, technological advances, and globalization—have changed the legal buy/sell dynamic.

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My client was an Amsterdam-based investor who wanted to build an aviation services business in the United States.

As a corporate and commercial lawyer whose practice largely emphasized the transportation sector, I needed to get this client the best advice possible on positioning its new business from a U.S. federal income tax perspective.

This meant choosing between tax attorneys who practiced in a law firm versus tax accountants who practiced in an accounting firm.

Minimizing tax and keeping the IRS off their back was not just a “legal” problem. It was more like a business problem that had a legal aspect.

For their business savvy, tax law expertise, familiarity with how the IRS treats such foreign investors — and a cost advantage — I recommended a regional accounting firm instead of tax attorneys in a law practice. 

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