Biglaw Tries “In-Sourcing,” Profits and Good Jobs Ensue

The New York Times ran an interesting piece on Biglaw firms opening lower-cost domestic “in-sourcing” operations, which has gotten coverage in other outlets (see, e.g., the WSJ Law BlogAbove the Law and Mendelson’s Musings).  The article focussed on Orrick, Herrington & Sutcliffe, which has opened an office in Wheeling, West Virginia where lawyers get paid around $60,000 (instead of $160,000 as a first year at many large firms) and are not on partnership track.  The Orrick Wheeling lawyers, though, get more dependable hours and work they apparently find interesting.  The Times puts a fairly negative spin on the Orrick Wheeling operation and its ilk (such as WilmerHale‘s Dayton, Ohio office), writing:

The nation’s biggest law firms are creating a second tier of workers, stripping pay and prestige from one of the most coveted jobs in the business world. …  But as has been the case in other industries, a two-tier system threatens to breed resentments among workers in both tiers, given disparities in pay and workload expectations. And as these programs expand to more and more firms, they will eliminate many of the lucrative partner-track positions for which law students suffer so much debt. … What’s good for clients, of course, isn’t quite as good for those low-cost lawyers.

The article’s unenthusiastic take on the Orrick Wheeling office surprising—we think getting clients similar quality work product at lower cost is a good story.  Orrick Wheeling is good for clients (who presumably pay lower fees for the Wheeling associates), good for Orrick (lower costs for the Wheeling operation should make for good profits despite lower billing rates; Orrick’s ability to offer lower overall bills should help win clients), good for the Wheeling associates (who have jobs that might not exist at a higher cost) and good for partner-track Orrick associates (who likely get to pass-off some less interesting work (as we discuss here) and who are at a firm with what should be a more profitable business model).  Sure, associates in Orrick’s regular offices might make more money.  And sure, partnership at a large law firm is a well paying job.  But Orrick’s addition of a lower cost operation creates good jobs, even if those jobs may not be as good as others within the firm.  The appropriate comparison for the jobs created by Orrick Wheeling isn’t Orrick New York, but rather other lower paying options. 

As proponents of more efficient high-end legal practice, we think Orrick’s Wheeling operation is great for a lot of reasons, not least because it provides an example of how firms can make more money by being more efficient.  “In-sourcing” is one of many ways to get greater profits per partner beyond raising billing rates.  And solving legal problems more cheaply is good for the overall economy.

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