Big Law firm O’Melveny and Myers plans to become a fixed-fee leader for top-end legal services, according to a paper leaked to a legal blog.
The legal blog Above the Law obtained a copy of the plan, released to the firm’s lawyers about a month ago, and published the proposals, which include making the firm “a leader in providing high-end services on a fixed fee basis, reducing costs to clients and achieving superior economic performance through practice management oriented toward cost-effective client service.”
The five-year plan begins with a statement of “The Vision.” It’s not exactly visionary: O’Melveny & Myers wants “the most desirable engagements,” and it wants to be “primary outside counsel… to a large and growing list of clients.” It intends to do this by — surprise surprise — providing “the highest quality legal service.”
Then the memo gets more interesting. It expresses management’s plan to “adopt a single rate card by FY2012, with volume and ‘investment’ discounts and appropriate alternative fee arrangements.” It announces OMM’s intention of “becoming the leader in providing high-end legal services on a fixed fee basis, reducing costs to clients and achieving superior economic performance through practice management oriented toward cost effective client service.”
The plan proceeds to take a critical look at O’Melveny’s market position. Management talks about the type of clients the firm has, the type of clients it wants, and the kind of relationship it would like to have with clients going forward. It expresses the view that moving in the direction of flat-fee work will be beneficial to the firm’s clients — and, ultimately, to the firm’s profitability. The firm acknowledges that, in order to attract the client base it desires, it will need to re-tool some of its practice groups (e.g., by developing a competitive restructuring practice as soon as possible; bankruptcy partners looking to lateral, send your résumés to OMM).
The memo is commendably candid; it’s not all cheerleading. One paragraph begins: “In the very recent past, our business model, as a whole, has yielded disappointing financial and practice growth results.” The plan notes that O’Melveny’s litigation model, “which depended heavily on high charge hours levels by associates, counsel and partners to offset the impact of discounted rates and increased write-offs of expenses and time, has been under pressure for at least three years” — i.e., well before the Great Recession began.
What’s behind this? Well, as we’ve been telling you for months, outsourcing is coming to — or has already arrived at — a firm or company near you. “Document review and production have been outsourced altogether or client-directed to contract attorneys,” the memo states, “thus eliminating much of the work formerly assigned to junior associates.” These difficulties won’t go away with the recession: “[O]ur litigation clients are looking for rate and fee reductions, and we expect that mindset will continue into the next good economy and beyond.”