Trained as a lawyer in his native Canada, Jordan Furlong has spent most of his career as a legal journalist and a strategic consultant to Canadian law firms. He writes well and convincingly about fundamental economic issues in the contemporary practice of law. His blog, Law21: Dispatches from a Legal Profession on the Brink, is one of the best sources we’ve read for good writing and deep thought on the subject. He does not mince words.
Jordan’s post earlier this week, How to Compete on Price, is superb. He begins with the often-heard truisms that law firms can’t compete on price–that it provides a fast path to commoditization and that it is ill-suited for the specialized, knowledge-based nature of legal services.
But then Jordan shifts gears, saying in effect that the more he considers the subject, the more that he realizes that lawyers will have to compete on price. ”Whether we like it or not, price will become a significant competitive factor, and it will be dangerous to run our businesses pretending otherwise.”
Fortunately, Jordan also offers a solution: law firms can compete on price by competing on cost. By lowering costs, they can price more competitely (or flexibly) while maintaining or even growing margins. While this may seem obvious, it isn’t. Law firms (epsecially larger ones) have famously been cost-oblivious. They compete to pay higher and higher salaries to incoming associate classes. And they traditionally occupy the most expensive real-estate in their respective cities (Side note: I was at a meeting in Boston last week with several GC’s and large-firm partners when one of the GC’s blurted out, “Why are you guys all in the Back Bay or the Financial District? When is a firm going to locate its offices in Woburn? Because THAT’S the firm I want to hire!) .
Fortunately, Jordan offers several basic tenets of cost-competiton that firms should follow:
- Initiate project management
- Automate anything repetitive
- Focus your high-value people on high-value work. Offload everything else.
- Use technology wherever possible
- Think seriously about outsourcing
- Adopt non-hourly billing and compensation
We often hear one or two of these tenets in our client meetings. But it’s especially interesting to see someone list them all in once place in such a well-written posting.
Nice work, Jordan.