The Great Recession's tentacles reach everywhere. The Washington Post reports that the law firm business model is changing as well. The article details how Northern Virginia attorney Geoff Willard left the big law firm life and began a "virtual" law practice. More below the fold.
Geoff Willard, a Northern Virginia lawyer who largely represents newly launched companies, illustrates how the Wal-Mart effect of discounting is playing out in the Washington region's legal community.
Willard left his job as partner at DLA Piper, a huge global blue-chip law firm, because, he said, he was fed up with the traditional business model that required it to annually increase rates and billable hours to finance ballooning profits and overhead.
Last fall, he joined a start-up "virtual" law firm that he said is much better suited to the current economic conditions: It does business mainly over the phone and Internet and through video conferencing. Because the firm lacks two of the biggest cost drivers -- a prestigious brick-and-mortar office and associates -- he said he is offering his clients substantial savings compared with what they paid before.
New associate salaries continued to increase every year for whatever reason. The Washington, DC firm of Williams and Connolly reportedly in late 2007 raised the starting pay for new attorneys to 180,000 dollars per year. Any good capitalist knows you pass those costs on to the consumer.
Under the current model, large firms hire hundreds of associates out of school -- at salaries of around $150,000. Whether the associates earn bonuses and ultimately become partners is based on their ability to generate huge billable hours for a firm.
But this annual salary increase could not last forever.
Last week, Latham & Watkins, which announced plans in late February to cut 440 lawyers and staff, said it was offering newly hired lawyers $75,000 -- nearly half of what would be their annual salaries -- to put off their start dates from October 2009 to October 2010.
"Right now as an industry, everyone is worried," said David Nersessian, executive director of the Harvard Law School Program on the Legal Profession. "No one knows what will happen next."
And you thought that only manufacturing jobs were sent overseas or that only customer service call center jobs were outsourced to India?
Law firms spend as much as $40 billion a year on document review, experts said.
Over the past six months, the work more and more has been outsourced to lawyers in such faraway places as India. Since 2006, the number of lawyers working at offshore firms doubled to 2,000, said Ron Friedmann, senior vice president for marketing at Arlington-based outsourcing company Integreon.
"We have 300 people in India. We've added 50 people" in recent months, said Michael J. Dolan, chief executive of the Tusker Group in Austin. Dolan said his lawyers charge $25 an hour, compared with $150 to $300 an hour billed by paralegals and associates doing the same work at law firms. "We're in the process of adding another 30 people."
Lexadigm is another such company that outsources legal review work. The company can be found by easily doing a google search.
I've never worked at a big law firm. Actually, after college all of my jobs were with non-profits or with the government. If I was a big law associate making $150,000/year I would gladly take a pay cut down to $100,000 if it meant keeping my job. Maybe even a cut down to $75,000. Any of the kossack attorneys currently work at a big law firm? Is your firm cutting pay, laying off workers or both? I'm sure there are plenty of people on this blog who won't weep for attorneys having to take a pay cut down to 100k or even 75k. :-) This is not going to be a good year. Maybe 2010 will be better?