Hi there,
"I don't have an issue with $3,000 an hour for a senior partner, it's the $1,000 first-year associate that really gets me.”
I could see heads in the crowd nodding as Alan Tse, Global CLO at JLL dropped this provocative gem a couple weeks back during our CLOC panel: “Rock-star law firms, soaring rates, and how legal executives are pushing for change.”
As Alan pointed out, there’s a reason we’ve crossed the $1,000 per hour associate line. “The problem is us, right?” he asked the crowd, “Our teams and colleagues keep paying them.”
“Lawyers only get fired for giving bad advice, not for charging too much money. So why should they stop?”
Because the balance of power between firms and clients is shifting.
As Jasmine Sims, VP of Legal Operations at IBM, put it during the panel, “Firms for so long have had this power that they don’t really have anymore.”
One hundred percent.
Firms that can’t read the room and continue down the well-trodden path of ratcheting up rates year in and year out could soon be left behind.
As our panel discussed, there are many ways for clients to push back right now.
1. Arm yourself with data
Jasmine said she takes on rate negotiations with a data-first approach and does her due diligence.
She collects objective data on spend information about her firms. She knows how much is going to partners vs. associates, and if partners are billing more than they agreed to.
But Jasmine also collects subjective data, surveying her team on firm performance. Turns out on a recent review that IBM’s No. 1 and No. 3 firms in terms of spend were in the lowest quartile in terms of feedback. (Try raising your rates when you’re at the bottom.) I love that story.
2. Flip the negotiation script
Jasmine views rate negotiations as a business conversation. They should go beyond the lawyers and include more than rates.
She wants a firm’s CFO at the table. And if a firm is using AI, their head of AI should be there, explaining how the technology is being implemented, and how will clients be better off.
This isn’t just smart. For IBM, it sets the tone and is a signal that an incumbent firm can’t just take it easy.
3. Put it in reverse
Alan and I enjoyed a nice laugh about how JLL signed with PERSUIT back in 2019 because of our reverse auction functionality (though he really did put the squeeze on me with that deal!).
Alan made a great point – reverse auctions are used all the time in business, they are just new to legal (at least they were back in 2019).
But reverse auctions don’t just help you get a fair price; they are also a way to take your attorneys out of the process and let the market do its thing.
4. Go beyond your go-to
Part of the reason clients keep paying high rates is because they don’t bother looking beyond their familiar firms. They stick with the ones they’ve used for fifteen years or went to law school with, because it’s easier.
Obviously, there are times and matters where you are willing to pay a premium. But not every matter requires a white shoe firm. For smaller or regional issues, you don’t need to pay NYC rates.
Does that take more work to find those firms? Yes! But as Alan said, “That’s our job.”
And to help with that part of the in-house team’s job, PERSUIT has announced a new partnership with Firm Prospects that makes expanding your panel and discovering new outside counsel easier than ever.
Will these tactics end the rock star firm rate increases? Probably not.
But as our panel pointed out, the days of rate negotiations feeling like a ransom exercise are coming to a close.
Cheers,
-Jim
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