Who Comes First? The Lawyer, or the Firm?

The legal industry, to evolve, will need to undergo some moving and shaking. In the articles below:

1. “Lawyers as Professionals and as Citizens: Key Roles and Responsibilities in the 21^st Century” by Ben W. Heineman, Jr., William F. Lee, David B. Wilkins (“Article 1”); and
2. “From Big Law to Lean Law” by William D. Henderson (“Article 2”)

the authors imply that culture at law firms is dwindling which will result in the collapse of many firms. To overcome this, I believe that law firms can instil a strong culture by implementing strong firm values and establishing the firm’s identity.

Article 1 notes that the current focus of law firms is absorbed in meeting short term profits. This includes focussing on profits per partner, and leverage (the number of partners relative to the number of associates). The smaller the number of partners, and the greater the number of associates, the more leverage the partners have. Greater leverage means more profits per partner derived from the salaried work of associates. As noted by the authors of Article 1, emphasis on short-term economic success “has adversely affected the relationships between large law firms and clients, judges, public sector lawyers, and as legal service providers” and also the reputation of the large firm.

The authors of both articles are emphasizing that too much emphasis is placed on individual lawyers and not on the law firm as an organization. Accordingly, successful lawyers (monetarily) are provided with more influence over the law firm’s decision-making and growth. This mentality leaves lawyers choosing to fend for themselves to realize personal success instead of the firm’s success. Additionally, it creates a mentality of billable hours and revenue first, instead of focussing on corporate social responsibility inside and outside of the firm. Article 2 mentions that Larry Ribstein discovered 5 factors which are leading to the death of the Big Law business model. Ribstein’s 5 factors are as follows:

1. Bad incentives – encouraging compensation structures which reward rainmaking and provide inadequate incentive to build the firm for the long-run.
2. Diluted selection criteria – choosing partners who add to short and medium term profits.
3. Inadequate monitoring and training – excessive leverage, which makes high quality training, mentoring, and monitoring for associates infeasible.
4. Lack of shared downside risk – as liability becomes more limited, lawyers have more incentive to gamble with a firm’s reputation by hiring more associates than a firm can effectively account for. This is unlike where a lawyer is personally liable for a firm’s debts and thus has an incentive to restore a declining firm, rather than being jointly and severally liable for the firm’s unpaid debts.
5. Proliferation of exit – greater emphasis is placed on lateral hires to grow a firm which undermines a strong culture of trust and cooperation.

So, how could we shift this change? What should the industry do to prevent this impending doom of the death of Big Law? I would propose, that law firms should rebrand themselves to run like a business organization, rather than a partnership of individual lawyers.

Disclaimer: I do not mean to speak to liability in saying this, but more so the mentality of running the firm’s operations.

I believe that a simple, yet effective, change would involve a law firm implementing a vision and mission statement. A typical vision statement focuses on long-term objectives and aspirations of the organization, and usually consists of one or two sentences. A typical mission statement is usually longer (approximately 5-6 sentences) and sets out what the organization seeks to accomplish, and is more oriented toward the short and medium term.

Effective statements should address how the law firm wishes to interact with its clients, its employees (lawyers and non-lawyers), as well as the community and legal industry. Care must be taken to write meaningful statements and not lofty or “warm-and-fuzzy” type messages as a publicity scheme. Meaningful statements will define the organization’s purpose, reason for existence, core values, what it’s striving to become, future aspirations, and what makes the organization unique.

As a result these statements create a standard within an organization which serve as a moral and decision-making guidepost for the entire organization. It allows an organization to state its core values and follow through with them. In a law firm, implementing these statements would create more collaboration, as lawyers would be united under common objectives. This would better serve the purpose of the law firm instead of lawyers pursuing their own self-interest (such as profits per partner). Essentially, I believe these statements help create synergistic alignment in focussing on the well-being and future of the firm in a sustainable manner. After all, it seems to have worked for many successful organizations (both profit and non-profit) such as PepsiCo, Right to Play, and Nike to name a few.

The current growth rate of big firms becoming bigger, as noted in Article 2, is through large mergers. However, this is another temporary fix, as law firms seek to become “too big to fail” so that revenue is large enough to buffer against negative consequences, such as the effects of lateral hires leaving the firm. As such, the focus of a merger is not client-focussed, but more focussed on the law firm managers providing a cushion against the possibility of the firm collapsing. This is not to say that some mergers are organic, and will create synergy, and be successful. But a non-organic merger has an increased likelihood of going under as it fails to consider the greater implications of the negative effects it creates inside and outside the firm.

As more firms continue to merge, it is interesting to note the boutique firms and regional firms which have managed to achieve consistent success without merging. I found that while not all of these firms set out vision and mission statements, most of them typically identify what their goals are and how to address them. This has appeared to provide success for these firms. They identify the particular legal area, or geographical area, that they wish to focus on, and then build their values on how they wish to serve all stakeholders. They find a model that works for the entire firm, and continue to build upon that. Clients go back to these firms because of their specialty, and lawyers at these firms are happy, as they have found a niche that they fit in with.

Sharing the vision and mission statement would also better serve the firm in hiring. By reading the statements, potential hires are able to understand the organization, and what the culture of that firm is. This will attract those who are most interested in the type of work, and the culture, a particular firm will have.

Stating a vision and mission statement provides direction, creates accountability, and provides information which makes an organization relatable to the public. It puts lawyers in that firm in a similar mindset of what they should work toward for the firm. While a firm providing for its values and goals through a mission and vision statement may not be the end answer to prevent the death of big law, it is a start in the right direction. The overall effect is to create firms which look toward sustainability and long-term planning, instead of focussing on just short-term profits. A vision and mission statement serves the firm like a compass, guiding the direction the firm wishes to strive toward.