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Law Practice Management

Are Midsize Firms Losing Their Cost Advantage? If So, Difficult Choices Await

Posted Nov 2, 2010 5:30 AM CDT
By Debra Cassens Weiss

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The historical cost advantage of midsize firms may be eroding, presenting some difficult choices, a legal consultant says.

Midsize firms made up of 100 to 300 lawyers have relied for too long on their pricing advantage, according to Joe Altonji, a leader of the Hildebrandt Baker Robbins Strategy practice. Now they are facing increased competition from many larger, non-Wall Street firms that are lowering their overhead and improving their processes and project management skills, he says.

These larger firms are focused on winning a larger share of what used to be considered “middle market work” in areas such as transactions and litigation, and increasingly are doing it with cost-effective service that is competitive with midsize pricing, Altonji writes at the Hildebrandt Baker Robbins blog. “Put differently, the historical cost advantage of the midsize firms is eroding,” he says.

If that happens, Altonji says, midsize firms will be forced to make some difficult choices. One choice is to merge with a larger firm, but that would involve a loss of independence.

Altonji explains another choice this way: Midsize firms “can accept a changed role in the world and focus less on trying to maintain the ‘higher value' position so many have tried to build and instead move toward providing specialty services and/or more routine commercial services at a lower cost. This approach, however, may be psychologically difficult for many partners and in any case will require real change in the staffing models for such firms.”

Prior coverage:

ABAJournal.com: “Complacency Puts Midsize Law Firms at ‘Serious Risk,’ Consultant Says”

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