Earlier this month, Business Week jumped on the “law firms must adapt or die” bandwagon. This follows a story concerning the so-called travails of Mayer Brown in the New Republic with the patently ridiculous title, “The Last Days of Big Law: The Money is Drying Up—and America’s Most Storied Firms are Terrified.”
As Mark Twain would say, the reports of the demise of BigLaw are greatly exaggerated. Let’s look at some facts:
- The overall profit performance of law firms since the recession has certainly not been bad. The American Lawyer has reported aggregate gains in both revenues and profits of the AmLaw 200 since 2010. Yes, firms have largely been able to show modest increases in profits due to staff layoffs and de-equitizing partners (or forcing them to leave), but doesn’t that mirror Corporate America? (In this way, law firms have already “adapted.”)
- Much is said about the implosion of law firms like Howrey and Dewey & LeBoeuf, but this is not exactly a new phenomenon. Does anyone remember Finley Kumble, or Mudge Rose? After the fall of Dewey, many commentators predicted a rash of dissolutions, but none happened in 2013. Others certainly will bite the dust in years to come, but there’s no evidence that the number of firm failures will increase.
- Law firms are already adapting to the “new normal.” The rapid increase in the hiring of Pricing Directors, Legal Project Management Directors, and Client Value Officers attest to the fact that firms have gotten the message that clients are looking for more accountability from their legal providers. Moreover, many firms are making these changes “beneath the radar,” so as to get a competitive advantage to their peers.
- While consultants have been predicting that consolidation will result in only a handful of global law firms, such a shakeout hasn’t happened. Right now there are at least 20 firms that form a tier that is roughly equivalent to the Big Four in accounting, and globalization has actually added new competitors at this level. Indeed, if there has been any sector of the legal field that has been affected by global change, it’s the boutique law firm. Today, mostly because of in-house consolidation of legal service providers and the increasing inability of boutiques to attract top talent, many have thrown in the towel and merged with larger firms.
This is not to say that there won’t be significant changes coming to BigLaw and the rest of the legal profession. The growth of alternative legal service providers, the inevitable breakdown of the traditional state bar regulatory system, and further developments in technology will continue to impact the industry in a largely positive way. And large firms will have to find a way to retain the best talent, much of which has become disaffected with the overriding focus on hourly billing and dog-eat-dog business development practices. But let’s stop with the gloom and doom.
TMG’s Take is a regular e-mail advisory produced by The McCormick Group. The company’s Legal, Government Affairs, and Law Firm Management groups combine the expertise of more than 15 Consultants to help law firms fulfill all of their lawyer and administrative recruiting needs. TMG’s Take covers topics across the spectrum of law firm management, including associate and partner compensation, growth strategies, marketing and business development, operations and facilities management, finance and accounting, professional development, and technology. Please direct all inquiries to Steve Nelson, Managing Principal at (703) 841-1700 or snelson@tmg-dc.com.
