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Law Firm Rates Going Up – IV (Reality)

2006 December 15
by John Wallbillich

Today is the end of the road in the review of the causes of the annual law-firms-raise rates story. Some say the reasons are inflation or talent; I’d argue it isn’t either; profit-motive is a likely culprit.

Whatever; probably a combination of many things.

At the end of the day it’s America. Lawyers can charge what they want. It’s not like law is a guild, after all. (OK, but why do firms fall in line with starting salaries for new associates?)

Regardless of the cause, the GC has a role in this drama. Accepting increased costs will require the GC to defend that approach when time comes for the first budget review in 2007. So the GC will consider a number of options when informed of a rate increase. These will be covered on Monday.

At the outset, however, the reality of increased law firm rates is that it causes the GC to ask a simple question: “What am I getting for my money?”

Considering the way many firms communicate rate increases, the answer to this question would seem to be: “The same thing, costing more.”

That’s one answer. What it really means is that the client is getting less value (if the same services cost more). Giving less value in a competitive marketplace is one strategy. Not easy to see how it is sustainable.

But if a firm doesn’t want to have a client reading a rate increase letter to think “tastes horrible; more filling” then one idea is to send a case of this along…

Mmmm... beeeer...

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