Not that long ago, major companies – those on the FP100 and Fortune500 lists – turned reflexively to large law firms at King and Bay or on Wall St. when facing a complex legal issue. Yet this is changing rapidly as both anecdotal evidence and a new study reported in a recent issue of the Harvard Business Review  reveals that a growing number of major corporations are turning to smaller firms that offer a unique specialty or have earned a reputation for a specific kind of work.

The reason is simple: Top-flight legal talent isn’t the sole domain of big firms, the so-called the “Seven Sisters” or “white shoe” law factories. Moreover, as the HBR reports, general counsel are increasingly willing to move high stakes work to smaller firms if the value proposition is right.

According to Dina Wang and Firoz Dattu, who wrote the HBR piece, smaller firms “have been receiving impressive evaluations from GCs and in-house counsel on responsiveness, expertise, quality and efficiency. One reason for this is that top talent is increasingly dispersed, not residing solely at the most pedigreed of firms.”

Fully 75% of the companies surveyed say they are increasingly likely to use a good lawyer at a smaller firm over a good lawyer at a large firm. There are three specific reasons behind this shift, which appears to be well underway in both Canada and the US:

  • Nearly 60% of general counsel’s report that lawyers at smaller firms are more responsive than are their colleagues at larger firms;
  • Smaller firms often cost much less than large firms – anywhere from 30% to 60% less, according to the HBR – for comparable quality work on similar files; and
  • As “full service” firms come under increasing cost and profitability pressure, they are reducing or eliminating many niche practice areas, meaning they lack the depth of expertise needed by clients in specialized sectors such as franchising.

We see this happening here. For example, a few weeks ago, we were retained by a global manufacturer and distributor which was looking for our niche expertise and ready accessibility. They said we offered unique expertise and a creative solution that their primary lawyers never recommended or apparently even considered.

When we proposed working with the new client, it didn’t hurt that our standard fees are roughly 35% below what is charged by their national firm.

Fees alone would not create this seemingly new-found respect for smaller firms by the biggest companies in Canada and the US. After all, there is always a lawyer who will work for less than everyone else. But discovering that not only are firms such as ours home to some of the best legal minds in the country, and that the lawyers are more responsive, available and creative than their counterparts in Toronto’s tallest buildings, is a driving force behind the trend. When coupled with reducing their cost by perhaps one-third, general counsel are increasingly hard-pressed to pay premium rates for comparable work and service.

John Sotos may be reached by email at jsotos@sotosllp.com or by calling 416.977.0007.