Consolidating work too much, in too few law firms, reduces quality

Fascinating data from 170 respondents to a survey this year by a research group, GCR, suggests that it is possible, and harmful, to over-consolidate law firms. The chart has five columns, which are in a bell curve formation. The columns represent increments of 10 percent of the law departments’ work assigned to outside counsel. The height of the column shows the “average degree of quality of work performed on a scale from one, the lowest quality, to 10, the highest quality.” That is, survey participants assessed the quality of their law firms’ work and the participants were divided into the ten-percent ranges described above.

When legal departments gave approximately 20 to 30 percent of their work to each law firm, the law departments accorded those firms the highest quality rating (8.56 average). When firms shared 31 to 40 percent of the departments’ work, quality assessments dropped to 8.07 — 7 percent. When more than 40 percent of the departments’ work went to a single firm, the average quality assessment plummeted to 7.56 percent, a 12 percent drop.

It is not clear whether this data pertains to percentages of work within substantive practice areas, such as labor and employment, or to the department’s total spending on outside counsel (See my post of March 30, 2006 for my article with arguments against convergence of law firms.). The point made later in the report is that over time the benefits of a large-scale relationship with a law firm begin to erode. The benefits of “partnering” lose their luster as discounts decrease, spending increases, and quality of work slides.

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