Numerous articles focusing on the imminent perils of BigLaw firms continue to pop up, turning the phenomenon into somewhat of a sport in recent months. But Noam Scheiber’s recent article in the New Republic provides perhaps the most alarming look yet at how the changing supply and demand equation for high-end corporate legal work is roiling the partnerships of major law firms, with Mayer Brown the most recent example.
There’s little debate that the good old days – where an abundance of high-end legal work existed and a steady stream of hiring was needed to handle that work — reside in our rear-view mirror. But to suggest that BigLaw is on its final leg seems far-fetched.
In a reaction post by Above the Law’s David Lat to the New Republic story, a former Mayer Brown partner downplays the drama at his former firm and the overall fate of BigLaw. The following excerpts sum it up well:
My reaction to these legal trend stories tends to be, “Yeah, no kidding. How is this different from any other industry?” Our business has become remarkably profitable over the last 15 years, resulting in far more compensation than what most people ever dream of. “Bracket creep,” as the story calls it, doesn’t do it justice. There’s an incredible amount of money to be made doing the most interesting top flight legal work. It should surprise nobody that it is competitive. What started in 1849 was a “Gold Rush,” not a “Say, old chaps, let’s take a tour of the West and collect some gold pieces for each of our satchels before we return home for polo.” Of course it isn’t genteel.
The idea that the industry is going through a major contraction because 12 firms out of several hundred go out of business over the course of a decade says a lot about our business. In other industries, that’s a below-average failure rate.
The stuff [about infighting at Mayer Brown] is way overblown. Yes, there was some bad, non-cooperative behavior, but I think it was rare.
Make no mistake about it, the legal industry faces dramatic change and it will certainly evolve into an industry that is much different than what exists today. Change is an inevitable factor within today’s 24/7 information society which brings a level of transparency and accountability that even the most prestigious of law firms aren’t immune to.
As the saying goes: “There is no education like adversity.” And with adversity, there is opportunity.
The opportunity stems from law firm leaders taking a disciplined and authentic approach to communicating openly with key stakeholders — both internal and external — about how they must modify and/or retool their strategies to navigate the current environment or the “new normal” as many refer to it.
The vast majority of law firms are focusing on two very important issues: 1.) cost control and reduction to ensure they operate as efficiently and profitably as possible, which increasingly involves the difficult process of letting non-performing attorneys go; and 2.) growing revenue and market share within practice areas that are strategic to the longer-term growth and profitability of the firm. While neither task is easy to accomplish, each can benefit greatly from an authentic approach to communications.
Communicating change in a challenging, rapidly changing business and economic environment is difficult enough at face value. When you factor the unique attributes of a law firm into the equation, the challenge becomes downright daunting. Law firms are traditionally led through collaboration driven by a partnership structure that does not naturally lend itself to nimble decision-making or bold vision. This places an even greater amount of pressure on the organization’s overall approach to communication, both internally and externally, particularly in challenging times.
Weil Gotshal’s news in June that it laid off 60 lawyers, plus staff, acts as a good example of effective communication surrounding a difficult management issue. As we addressed in an earlier post on the Weil situation, Executive Partner Barry Wolf did a nice job of explaining that his firm made this difficult decision to protect and preserve a strong financial position versus making it from a dire position like the one that triggered Dewey & LeBoeuf’s collapse. The firm also awarded generous severance packages to those affected, which from a reputational standpoint served the firm well. Weil’s approach meant the marketplace and key stakeholders could better understand the decision and, more importantly, the underlying financial strength of the firm.
In addition to firm leaders effectively communicating how they implement strategic alignment to maximize efficiency and productivity, they must be ever more diligent and creative in positioning their firms for strategic growth. As Citi Private Bank Law Firm Group and other recent analyst reports have shown, the legal industry continues to operate in a relatively flat-demand, flat-revenue environment. Taking market share away from others seems to be the best path to growth in the near term. Because of this, an aggressive business development strategy — an emerging and evolving discipline at many BigLaw outfits — will be all the more robust and measurable if firms can clearly and purposefully position their credentials, capabilities and perspectives within defined areas. Again, this is no easy feat in a crowded marketplace, but one that can be successfully achieved through strategy, creativity and sound execution.
So yes, the legal industry continues to operate outside of its comfort zone as it undergoes a renaissance of sorts. And there clearly will be winners and losers at the end of this transformation of the industry. But to conclude that BigLaw is over in as dramatic of a fashion as the New Republic and other recent industry trend articles suggest isn’t likely. What is likely is law firms will see the reputational goodwill and ensuing business development and recruitment rewards after they take an authentic and responsible approach to communicating change.