Hiring Teams, Firms and Lawyers: Evidence of the Evolving Relationships in the Corporate Legal Market

70 Pages Posted: 6 May 2011  

John C. Coates, IV

Harvard Law School

Michele Beardslee DeStefano

University of Miami - School of Law

David B. Wilkins

Harvard University - Center on the Legal Profession

Ashish Nanda

Harvard Law School

Multiple version iconThere are 2 versions of this paper

Date Written: April 24, 2011

Abstract

How are relationships between clients and service providers in the corporate legal market evolving, and why? Based on interview and survey data from 166 chief legal officers (CLOs) of S&P 500 companies from 2006-2007, this and related papers investigate the purchase of corporate legal services.

Standard depictions of client-provider relationships in corporate legal services suggest that hiring decisions have become akin to spot contracting based on individual lawyers’ skills. Contrary to such depictions, we find (1) large companies typically have ten to twenty preferred providers; (2) relationships with preferred providers tend to be enduring; and (3) clients focus not only on law firms and individual lawyers, but also on the qualities of teams and departments within the preferred providers, allocating work to sub-units at rival firms over time, and following “star” lawyers from firm to firm more often if they move as part of a team. The combination of long-term relationships and sub-unit rivalry provides law firms in these relationships with steady aggregate work flows and allows companies to keep cost pressure on firms while preserving relationship-specific capital, quality assurance, and legal capacity insurance – that is, soft guarantees that law firms will stand ready to provide legal services when and as needed by their clients. These findings have important implications for how CLOs manage relationships with their preferred providers, and for how law firms can and should manage themselves to maximize these relationships. Although our data pre-date the financial crisis, during which large companies cut back on expenditures of all kinds and law firms engaged in unprecedented layoffs, we believe the trends we have identified will only be accentuated by these pressures.

The plan of the paper is as follows. First we review existing literatures to state our null hypotheses – the conventional views that relationships between corporations and law firms have been getting less durable over time and that corporate hiring is now focused on individual lawyers rather than firms – and alternative hypotheses to be tested against the data (Part I). We then describe our methods (Part II), and present findings (Part III). We conclude with implications.

JEL Classification: J44, K0, L22, L24, L84, M12

Suggested Citation

Coates, IV, John C. and DeStefano, Michele Beardslee and Wilkins, David B. and Nanda, Ashish, Hiring Teams, Firms and Lawyers: Evidence of the Evolving Relationships in the Corporate Legal Market (April 24, 2011). Law and Social Inquiry, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1831544

John C. Coates (Contact Author)

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

Michele DeStefano

University of Miami - School of Law ( email )

P.O. Box 248087
Coral Gables, FL 33146
United States

David B. Wilkins

Harvard University - Center on the Legal Profession ( email )

1585 Massachusetts Avenue
Wasserstein Hall, Suite 5018
Cambridge, MA 02138
United States

Ashish Nanda

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

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