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The Evolving Business Model of “Big Law”

In the years following the 2008 global recession, the legal industry’s largest firms faced financial difficulties resulting in mass layoffs, mergers, and bankruptcies1 In this blog post, I will discuss some of the changes that have occurred in the “biglaw” industry since the recession along with the reasons for these changes.

Most notably, many large firms have been downsizing in their offices around the globe.2 Consultants and professionals in the legal industry have argued that continuing these layoffs may be a necessity in order for some firms to meet client demands while charging less.3 One consultant estimates that 30-40% of all legal work could be performed by alternative legal service providers that “employ business models closer to those of the clients themselves.”4

Another way the industry has dealt with the new legal market is through outsourcing. Numerous firms have utilized outsourcing, attorney contractor businesses, and off-site service centers to cut down on costs.5 Research has shown that 11 major firms based in the United States and the United Kingdom had opened off-site service centers between 2014 and 2015.6 Firms have benefited from outsourcing and contracting as a response to clients’ demands for a more flexible service model, as it has allowed them to stay competitive while maintaining profit margins.

Interestingly, despite these cost-cutting measures, large law firms in New York have almost unilaterally raised salaries for associate attorneys, with first-year associates enjoying a pay jump from $160,000 to $180,000 per year.7 This increase was initialized by prominent New York firm Cravath, Swaine & Moore, with many other firms matching within 24 hours.8

Considering the fact that firms have been steadily cutting costs to remain competitive with the rest of the industry, it seems quite curious that many of these same firms have increased associate salaries. David Lat, founder and managing editor of the legal news site Above the Law, wrote that the salary increase is meant to attract high-level talent from top law schools.9 It has also been noted that the salary increase will make it difficult for less profitable firms to keep up with the likes of Cravath and similarly profitable firms.10 Thus, there seems to be a tacit consensus that firms will remain ultra-competitive in legal hiring, while being more diligent about cutting costs in other areas.

  1. See Noam Scheiber, The Last Days of Big Law, NEW REPUBLIC (July 21, 2013), 

  2. See Layoffs, ABA JOURNAL, 

  3. Carmen Germaine, Why Law Firms Should Be Eyeing Attorney Layoffs, LAW360 (July 8, 2016), 

  4. Id. 

  5. Andrew Strickler, More BigLaw Firms Jump On Outsourcing Bandwagon, LAW360 (Feb. 5 2016), 

  6. Id. 

  7. Martha Neil, First-year associate pay will be $180K at multiple BigLaw firms following Cravath’s lead, ABA JOURNAL (June 8, 2016), 

  8. See id. 

  9. Casey Sullivan, $180K for a First-Year Associate? That’s What Cravath is Paying, BLOOMBERG LAW (June 6, 2016), 

  10. Id. 

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