When is Smaller Better?

Written by: Bryan Friedman

Recently, I’ve been fielding quite a few questions from people considering moving all or part of their legal work away from larger law firms and into smaller ones.

Some of the impetus is COVID-19 related, but a lot of it seems to be driven by a longer-term desire to bring down legal costs, while ensuring high quality work. Finding that balance can be tricky.

If you’re working through a similar analysis, here are some suggestions – only some of which are self-serving…

Big firms can be great

First, let’s define “big”. Think 50 plus lawyers, sometimes spread across multiple cities. They’ll have a sharp looking website, a gazillion practice areas, plus lots of very impressive (and valuable!) public overviews, memos and webinars. They’re also likely to have offices on high floors of tall buildings, with expansive views, nice art, and, in my experience, excellent cookies.

I have many friends who still work at these firms. They are typically exceptionally smart, hard-working people who want to do the best for their clients.

Pros: Deep expertise, incredible work ethic, strong professional networks, and sophisticated support infrastructure.

Cons: They cost an arm and a leg. And if you’re not careful, they’ll take the torso too. They also operate a heavily leveraged model, meaning that the folks on the top push a lot of the work down to junior lawyers who aren’t as experienced but still bill out at substantially higher rates than they would at smaller shops. In addition, there is a lot of churn at the junior ranks so you may find yourself constantly educating new lawyers on your priorities and business.

When to use:

• Hyper specialized and extraordinarily complex issues
• Bet-the-company litigation or transactions where price is no obstacle
• Where you need incredibly fast turnaround, and are willing to pay for that level of service

Small firms can be better

I define small firms as those with more than 10 but fewer than 50 lawyers.

They’ll have more modest offices and websites. They are also less likely to have major marketing initiatives, and their snacks probably come from Costco.

A lot of lawyers at small firms were trained in the big firm environment, but have chosen a different path. Large firm folks might say that’s because they couldn’t hack it with the “big guns”. And that may be true. But it also may be complete bunk. It sort of depends on the lawyer, the firm and how you define “success” for yourself. But I digress.

Pros: You can find terrific lawyers at 75% or even 50% the cost of the big firm alternatives. Why? Because those fancy offices are expensive. As I mentioned to a client the other day, my current hourly rate is not even close to what it was when I was a junior lawyer at a large firm. I may not be the world’s greatest lawyer, but I’m pretty sure that I’ve gotten significantly better, not significantly worse, over the last decade. Also, whereas some big firms won’t even pick up the phone unless you’re planning to spend $20K on a file, small firms are different. They take on and care about all manner of files, from the pretty small to the very big. In other words, you're less likely to feel like a number.

Cons: Though less costly than the big firms, they’re still not free, which often irks clients. There also may be limits to their areas of expertise, in which case they may not be your one-stop shop for every legal concern (though at firms like Friedmans, we’re pretty darn close). Also, because there’s no huge team of juniors and support staff you may not get the “white glove” treatment. But question whether you want to be paying for good, reliable legal work or the equivalent of a legal spit-shine.

When to use:

• When you need quality legal work but not the frills
• When you don’t want to spend $1M a year just to get your lawyer’s full attention
• When you’re fed up with constantly being shifted from one junior lawyer to the next

Other alternatives

Don’t want a big firm or a small firm? Here are some other options:

Boutiques - these are highly-specialized firms, generally with fewer than 10 lawyers. They are focused on one area of law and are great options if you need to go very deep into a field. But hyper-expertise comes at a cost. And there’s a risk that they can only provide a sliver of what you ultimately need.

Hire in-house counsel - If you have ongoing legal needs that you know will recur year over year, you may want to hire a full-time lawyer. There are terrific lawyers who prefer to work in companies as opposed to firms. Keep in mind, you’re taking on a fixed cost, which comes with various obligations (severance risk, benefits, etc.). In-house counsel also doesn’t typically replace external legal spend. Often having a person in-house exposes more issues that can counterintuitively increase your need to spend on legal. It’s great for some companies, but not for all.

Alternative Legal Service Providers - The Axioms of the world can be a superb resource for supplementing your current in-house team to match the ebb and flow of your supply and demand curve. But these solutions are best suited for larger organizations with established in-house legal groups.

If you've made it this far and want to learn more about my perspective on these or other questions related to law firms, legal spend management, or office snacking, please reach out. Always happy to chat. In the meantime, stay safe and healthy.