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Q: Joe, I have read your recent articles in Interbusiness Issues and also heard you speak to the Peoria Kiwanis Club about the future of law firms and how their business model is now “broken.” What is broken with this model, and how are law firms like yours changing their business plans? [name withheld for confidentiality]
A: Not only have you submitted the third question, but you have also raised a passionate topic for our firm! To briefly summarize for our readers who were not present at the Kiwanis Club presentation, the traditional time-honored business model for commercial law firms has been known as the “Cravath Model” named after the high-profile New York law firm of Cravath, Swain, & Moore. It involves a pyramid structure, with a few top-heavy high salaried attorneys sitting comfortably at the top of the corporate structure, supported by a wide base of young lawyers and recent law graduates who perform the majority of the services for clients. Barring unforeseen incidents or mismanagement, a firm structured in this manner traditionally assumed at least ten percent revenue growth annually, and projected its future business and hiring decisions accordingly.
Critics argue that the primary weaknesses of this model include the inefficiencies resulting from young lawyer’s learning curves as they are paid large hourly rates by clients to finance their acquisition of knowledge and experience, while at the same time underutilizing those already experienced attorneys who should serve as the most productive members of the workforce.
Subscribers to the Cravath model historically have responded to their critics by noting that they hire only the best available law graduates nationwide, thereby reducing the learning curve and utilizing their young lawyers as an “investment in the firm’s future” and “partnership with clients.” They also claim that their most experienced attorneys are better suited for supervisory roles and perform only the most vital services, while younger lawyers with lower billing rates should perform basic services. Unfortunately, far too often this model results in multiple attorneys billing for the performance of the same services.
The new commercial law firm model gaining popularity in this economic environment is becoming known as the “Bartlit Model,” named after noted Chicago attorney Fred Bartlit, who abandoned the powerful firm of Kirkland & Ellis to form his own organization and pursue his own business model. This model, as described by Bartlit, is “diamond-shaped” as opposed to the traditional pyramid. The rationale behind this mode recognizes that although it may be reasonable for a law firm to have some experienced talent at the top that may be less productive from a workflow perspective, and also some new talent at the bottom in the process of becoming more experienced and productive, the bulk of the work force should be experienced practitioners who provide significant value for the fees charged to the client.
A firm subscribing to this plan would prefer to staff one or two seasoned practitioners on a file, as opposed to several attorneys with varying levels of knowledge and experience. This results in greater efficiency and value for the fees charged as the legal matter proceeds, and the client is not paying for a young lawyer’s learning curve. Very few, if any, young lawyers are hired straight out of law school under this model. Rather, great care is taken to recruit lawyers with experience who are committed long-term and provide a good fit for the firm’s culture and work ethic.
Our firm subscribes to a modified form of the Bartlit model. As the most experienced attorney on staff, I do play a supervisory role at times but we never bill multiple attorneys for performing the same task. Most of the time, we staff one or two attorneys on a file and the same lawyers will handle the matter from start to finish. Because we are a relatively small firm and we typically face much larger firms as adversaries, we ensure that the latest technology is utilized to provide us with sufficient resources to level the playing field, if not provide us with a clear advantage. We also seek to further increase the value received for our fees by offering our clients alternative billing methods that are different from our customary hourly rates, such as contingencies, flat fees, and merit-based bonuses. Moreover, our investment in technology enhances our productivity and better enables us to interact with our clients quickly and efficiently. Please see our web site for more details, and if you have any other questions feel free to contact our office. Thank you for your excellent question!
Welcome to our new website & to our legal blawg Poetic Justis! Formerly known as Peoria Legal Blawg, we have re-launched our website to better focus on our new blawg and the artwork of Mr. VanFleet’s children, which will be featured and periodically rotated as the background theme of our entire website. Please join us each month to follow our legal based blawg posts and a special poem written by Mr. VanFleet himself!