If You Think Being a Lawyer is Tough Today, Try Legal Consulting


Reprinted/posted with permission of Daily Journal Corp (2009)

IF You Think Being a Lawyer is Tough Today, Try Legal Consulting

The basic consultant strategy sold to BigLaw over the past decade focused on growing high-margin practices while abandoning the low-margin areas; easing out historically underproductive partners while focusing on lateral recruitment to bring in more profitable talent; moving from a location-based to a practice-based structure; increasing the firm’s presence in the New York market; expansion into new markets and practices; and so forth.

This strategy was replicated and resold countless times by many consultants. Not because the strategy was universally correct, but because they could sell it. Fancy power point presentations, lots of "market segmentation" graphs, and the inevitable "peer group" comparison lists supported the immediate urgency to implement this change, or be left behind to wither and die. The consultants would latch on for a lucrative ride-along for continuing fees in the implementation phase that invariably took more than one year after the plan was adopted. Such plans were aggressively sold well into 2006 and 2007.

How do the results shake out a few years later?

Firms wish they had retained, and now scramble for the lower margin practices, as many of them were and are practices that deliver unspectacular but steady returns in both good and bad economic times.

"Historically underproductive" mutated into a euphemism for partners that could not squeeze from their clients ever more astronomical hourly rates, but had nothing to do with their professional talent, commitment to work or loyalty to the firm. It was also applied to force out partners who politically opposed the new strategies, or questioned the potential negative impact to historical firm culture. Strategic plans were also co-opted by some partners to shift, consolidate and apply power within the organization for themselves.

High margin practices were trendy but volatile, and that was not adequately factored in the analyses. Many acquisitions or developments of such practices wound up costing the firms far more money than they delivered, resulting in net losses to the organization, sometimes in the millions of dollars per firm.

Lateral recruitment turned out to be expensive, problematic with respect to long term retention, and disruptive in the process of inclusion and cultural stresses.

Practice based organization became a massive organizational and operational nightmare, with few effective means of tracking true performance, or assigning accountability for results. "Silo" practice, work hoarding and breaking down the "one firm" goal became a virus, creating warring fiefdoms and a senior warlord class of partners, with an exploitation mentality towards associates, of counsel, income partners, and eventually junior equity level partners.

Increasing presence in New York for those without one was, and remains for most firms, as intelligent a move as flossing teeth with a Bowie knife. Reciprocally, there are very good reasons why New York based firm incursions into other markets have so often become abject failures, even in "good times." The reasons can be explored in another article, but just do the math on how depressingly few expansion offices reach firmwide “average” profits within five years; if ever.

Immense increases in administrative and third party costs associated with "global" practice were not appreciated, even though there was a track record with this challenge from a review of the recently collapsed former paragons of international practice (Coudert Brothers and Graham & James), and many UK firms (whose presence in Commonwealth countries created a licensing and tax advantages available only to themselves and not to U.S. competitors), as well as operational challenges that do not exist even with large multi office national firms.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Edwin Reeser, Edwin B. Reeser, A Professional Law Corporation | Attorney Advertising

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