In this pandemic year, geographic arbitrage for legal services is finally getting its due (Part 1)
A sea change is occurring in the world of legal services, driven by technological innovation and accelerated by the scourge of the COVID-19 pandemic. What’s happening is that deep legal expertise is reaching buyers more directly, swiftly and efficiently than ever before. More important, buyers no longer are concerned with where this expertise originates – they are basing their purchasing decisions on the quality, credibility and value of the service being delivered.
This mindset is relatively new to the legal services industry, at least when it comes to high-end engagements such as litigation, M&A and other major strategic matters. Many general counsel seek out law firms that have offices in large city centers, and thus shoulder the burden of higher costs tied to elevated attorney compensation and downtown real estate footprints. But, in 2020, as these higher-priced attorneys videoconference their clients from their suburban homes, far from their office towers, the clients are left asking themselves: Should we really be paying more for this lawyer’s ideas? Just because of the firm’s office location? Isn’t there a better value proposition?
Our firm has been answering that final question affirmatively for years, using just two words: geographic arbitrage. With this operating model, a law firm strategically locates its offices in cities with more affordable real estate and lower costs of doing business. Then, the firm recruits top lawyers (typically from big law firms) who are passionate about client service and flexible in how they deliver that service. Success of this model requires connecting with clients through great technology, ensuring seamless service, and driving efficiency across every part of the relationship.
With geographic arbitrage, two positive effects typically converge. First, the general counsel gains the insights of outside lawyers who are highly experienced, responsive and reasonably priced. Second, the outside lawyers experience a lifestyle that is less intense and stressful (e.g., commutes of 10 rather than 100 minutes), while enjoying a relatively affluent lifestyle due to lower real estate and consumer costs. The theoretical downside to geographic arbitrage was that outside lawyers were in close proximity to major corporate headquarters. But, as we have seen over the last seven months, the concepts of “proximity” and “availability” are being remade in 2020 as lawyers (and all senior service professionals) engage with clients and advance their success using today’s advanced digital tools.
Hilgers Graben pioneered the geographic arbitrage nearly 10 years ago, and we have refined it through a combination of strategic office placement, patient recruiting, technology investments and a keen emphasis on creating a client-first culture. In my next blog post I will share details about the Hilgers Graben journey, and what it might tell us about reframing the legal services value proposition to benefit the most discerning general counsel.