One reason total legal spending per dollar of revenue drops as companies grow in revenue is that law firms may put the A team on their larger, more prestigious clients. This hypothesis finds some support in data from Kirkpatrick & Lockhart’s late 2002 survey of 106 Fortune 1000 law departments. (See my post of May 4, 2005 on TLS as a percentage of revenue declining as revenue increases.)
Rating the value of outside counsel, of the Fortune 500 respondents an excellent rating came from 42 percent. Of the Fortune 1000 respondents, whose companies are smaller and probably less well known, the excellent rating came from 30 percent, which is a drop of 25 percent.
Quite plausible, is it not, that more powerful partners represented the F500 than the F1000, partners who can command better associates and themselves have more capabilities. The A teams earn higher value ratings, and may also reduce the overall cost of legal services.
Readers can attack the logic of this speculation, but what else accounts for the yawning gap in satisfaction between blue chips and smaller fry? If anything, one might expect the bigger companies to be more critical of counsel, since they have the clout to demand quality.