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Two metrics for identifying law firms over which you have leverage

A cause of law-firm vulnerability, where a client wields too much clout, is law-department power. Here is what a small item in Law Firm Inc., Vol. 6, May/June 2008 at 14 offers as a way to think about this dynamic, based on the comments of an Altman Weil principal. Ward Bower was giving two yardsticks for the survivability of a firm, but I think the points apply to client clout.

(1) If your law department accounts for more than four percent of a law firm’s revenues and (2) your fee arrangements result in below average profitability per partner in the practice areas you draw on, you have the heft to push that firm around (See my posts of July 31, 2005 and May 28, 2006: additional services law firms can provide.). The trouble is, no general counsel has any visibility into either of these indicators of leverage. It would not be hard to ask your primary firms for this information (See my posts of Jan. 10, 2008 and Jan. 13, 2008: how much is fair to ask of your law firms.).