We’re close to a peak of the business cycle. Client businesses are performing strongly; they can afford aggressively-increased partner billing rates. But the logic for raising rates strongly now is more than just opportunism; it’s about Big Law’s long-term viability. For firms to remain prosperous two things must happen: partners must delegate more and firms must re-balance where they generate margin (i.e. profit) from more junior to more senior lawyers. Raising partner rates aggressively now will help on both these fronts.
On delegation, let’s start with two observations. First, clients have been taking work away from Big Law and doing it in-house (or through lower-cost providers) because so doing saves money. This shifting will intensify as the new breed of more-capable in-house lawyer (see Figure 1) takes not just more work, but more high-end work, away from outside counsel. Second, more than half the hours partners bill (in many cases, well more than half) are for work that could be done by a lawyer with a lower billing rate. These observations connect: getting partners to delegate more will lower total client charges which is vital to Big Law stemming the contraction of market demand. As an aside I use ‘delegate’ not ‘leverage’ here deliberately: when partners hear ‘leverage’ they think they have to add more associates to their matters; by using ‘delegate’ I hope for partners to hear that instead of their doing an hour’s work, they have an associate do it.