Having suffered through a huge economic downturn and facing pressure to lower costs and increase productivity in the recovery, Big Law is experiencing its share of gear grinding. As a result, we’ve seen a crescendo of media attention directed toward the dislocation in what had been a stable and thriving profession.
Our compensation practices, business development strategies, recruitment policies, and professional standards are all under scrutiny. Some observers are sounding the death knell of Big Law itself; others are saying it’s premature to bury Big Law. As the editor in chief of The American Lawyer recently pointed out, after taking a hit in revenues in 2009, The Am Law 200 regained all losses within 12 months. In 2012, revenues among The Am Law 100 reached a new high. Profits per partner were up, and the number of partners and margins had stabilized.
So why is there so much confusion about the fate of Big Law? For a start, "Big Law" shouldn’t be defined solely by numbers. When stories appear about law firm management chasing business models to pump up a firm’s numbers, taking shortcuts to expand client bases and fighting among themselves over money, a lot people recognize their own experiences or those of people they know. The fact is that layoffs, outsourcing, and lengthier partner tracks are real trends in many corners of Big Law.
While a certain level of size and scale is necessary to function in today's world, it is the quality, culture, and value that firms deliver that make firms, indeed Big Law itself, sustainable. That fact is not so easily shown on a chart. So, yes, it would be premature to bury firms just because they are big. But it may be high time we bury the Big Law business models that are still driving the industry, that have ill-served clients, and that have ruined the cultures of many fine law firms.
Of course, profits per partner and many other metrics are extremely useful in measuring performance. However, when PPP or any other measurement—from attorney head count to number of offices—become goals themselves, Big Law plants the seeds of its destruction. Many Big Law firms in the major financial centers, whether global behemoths delivering mediocrity worldwide or regional players fighting on price, have entered a losing game. And whether it is bank debt or partner debt, too many have used excessive capital to fund and follow expansion-at-all-cost models. All of this expansion is undertaken on the theory that someday they will win the race to be in the most locations or have the most lawyers. How such an environment doesn't ultimately end in margin-killing competition for clients and talent among largely indistinguishable firms is hard to imagine. It’s a spiral in the wrong direction. The recent economic downturn exposed it for what it is.
In fact, the best law firms are different from other businesses, and Big Law can’t survive without acknowledging and operating on that principle.
So how does Big Law come back from the precipice? Many have already rushed down the road to become something they are not, and the "deal with the devil" they struck is not easily unwound. While getting financially "rich" in this business may have been a relatively brief "golden age" in the history of law, many of the qualities that drew us to law in the first place can return to firms that take their fate into their own independent hands.
The answer won't be the same for every firm. Generally, it starts with having courage, being realistic, and taking full advantage of what you have and who you are. There can be another kind of firm, whose nimble approach, focus and flexibility make it easier to deliver value to clients and hard for competitors to pin down. That kind of firm will attract business and talent from all sorts of clients who have previously been sending it elsewhere. If more firms identify what is distinctly unique about themselves and build to their strengths, a new era will dawn, replacing the morass of giant, one-size-fits-all firms fighting over a shrinking market share.
That means not doing everything, everywhere. It means establishing top-tier practices and affordable prices. It means staying local and approachable and offering global resources and access. And it means putting culture and values first, overcoming any of the interference that crept into so many firms when culture was put "on hold" during the downturn. (Those who built organically and never did a merger or verein have an advantage here.) Ultimately every firm must look into its own soul and at its own assets and determine what its future will be.
One thing is sure. A debate over whether Big Law is dying or thriving misses the point. Instead we should be rethinking the meaning of the metrics we use. If we are Big Law, it ought to be because our clients need us to be big, and never because we believe big is better than best.
The author is the CEO of Greenberg Traurig.