Like many people who work on behalf of in-house legal departments, We at JustLaw
started our careers with major law firms. Over the past decade, James Stapleton was
responsible for the business development at four very large law firms and business was
very, very good. Each firm enjoyed record revenue, growth and profits.

Which, by the way, remains the case in the legal profession. Law firms are not hurting,
though that is the impression they convey. I don’t blame them, it is to their benefit that
they convince clients that they are stretched to the economic breaking point. Yet in
America, corporate law remains a $200 billion business.

Most profitable enterprises seek greater efficiency to maximize their profits. Law firms
benefit from inefficiency. Like any other business, law firms charge the absolute most
they can squeeze from their clients. In other words, they benefit from inefficiency by
doing as little work for as much fees as is possible. This results in some perverse
incentives. Most law firms would claim to pursue superior client service, but many
attributes of great client service interfere with a law firm’s ability to generate profits.
Many steps taken to build client relationships take time, and all law firms have to sell is
their time, so client service and profits can exist at cross-purposes.

From a law firm’s perspective, the more control that the law firm can exert over their
client relationship, the better. That control starts from the beginning of the relationship;
first, they want to control the potential buyer’s decision, and second, they want to
control the manner and extent and costs to which services are provided. The more that
a law firm can dictate the terms of the relationship, the greater the degree of control
that they can exert over your decision as to which firm to use and to what extent.
To put it bluntly, law firms don’t really want to compete with each other. They would far
prefer to be sole-sourced work rather than participate in a competitive process to
engage a new client. Therefore, they invest typically between 4% and 14% of their
revenue in business development programs in an effort to build relationships with in-
house counsel and ideally circumvent or limit a competitive process. In short, they want
in-house counsel to select them directly, rather than compete through proposals and
presentations. Some law firm partners derisively refer to the competitive process as a
“beauty contest.”

As a result of this investment, and due to the pressing need to retain current clients,
engage new clients, and cross-sell existing clients, https://donahue.com/wp-
content/uploads/2014/04/MacKay-Andrew-v2.pnglaw firms collectively practice and

understand law firm selection processes much better than in-house counsel do. Over
the course of a year, a large law firm will be party to hundreds if not thousands of client
purchasing decisions, far more than an in-house counsel would experience, so law firm
partners become very adept at influencing the process. They know how to use in-house
counsel to their benefit, they hire consultants to improve their sales, business
development and interpersonal capabilities, they employ an army of marketers to
promote the firm, they write thought leadership and speak at conferences, they invest
in directories, they eagerly pursue awards and list inclusion, they invest in sponsorships
and events and webinars and trade organizations and industry groups among many,
many other activities. In short, they do everything they can to present themselves to
you as the only law firm choice rather than one of an array of choices. When an in-
house counsel consciously limits law firm choices, they reduce the likelihood of
optimizing the relationship with their law firm.