The Demise of BigLaw: Does Startup Culture Provide a Solution?

dinosaur

There’s been a lot of discussion about BigLaw in the wake of announcements regarding recent mergers and the outright dissolution of a few firms. I would suggest that the answer lies in changing the ways in which lawyers perceive their primary job function–and that of law firms–and that startup culture can provide incredible guidance in this regard.

But before I expand on that idea, let’s take a look at some of the underlying reasons suggested for the BigLaw crisis. Many who have offered their opinions argue that a major cause is greed, plain and simple, as explained in this recent article from the New Republic:

Part of the reason the law-firm ecosystem has changed so dramatically in a single generation is greed: The most profitable partners steadily discarded their underachieving colleagues, because they didn’t want to share the spoils…Within the next decade or so, according to one common hypothesis, there will be at most 20 to 25 firms that can operate this way—the firms whose clients have so many billions of dollars riding on their legal work that they can truly spend without limit. The other 200 firms will have to reinvent themselves or disappear.

So far, the transition has not been smooth. In fact, the more you talk to partners and associates at major law firms these days, the more it feels like some grand psychological experiment involving rats in a cage with too few crumbs.

Jordan Furlong reaches the same conclusion in his recent post about the rash of legal secretary layoffs, contending that a mean-spirited selfishness is at the core of the problem. He posits that instead of facing the actual issues head on, managing partners are simply taking short-sighted steps to maintain their positions and wealth, with little thought of the future or the underlying issues causing the previously unheard of fiscal crises many large firms are now encountering:

Something has gone seriously wrong at the core of a number of law firms. I don’t how else to describe it except as a mean streak – a level of selfishness and ruthlessness among decision-makers that we’ve not seen before. The triggering event was probably the massive change in client behaviour and the deeply unnerving drop in business that followed, combined with lawyers’ utter inability to adjust their own practices in response.

Similarly, Ron Friedmann reflects on the predicted decline of BigLaw in a recent post and contends that one cause of managing partners’ apparent selfishness may be the result of their looming retirement and thus unwillingness to plan for anything more than maintaining profit levels in the short term:

Too many (law firm partners) seem focused on cost cutting and re-allocating profits rather than fundamentally changing how they deliver legal services and advice. It may be that partners 50 and older do not need to worry; after all, change, to the extent it happens, moves slowly in legal. If, however, I were a newly minted partner or just in my 40s, I might be paying close attention to these alternatives – and taking action.

At its core, the less than exemplary behavior described above is encouraged by the structure of most law firms–one that emphasizes the interests of the individual over those of the group. Lawyers in large and mid-sized firms are rewarded for bringing in a personal book of business and as a result, jealously guard their clients and cases.

For these lawyers, the law firm is often viewed as the entity within which the lawyers operate–rather than the entity for which they operate. The service delivered by each lawyer to his or her client is viewed as one that is personally provided rather than a commoditized service delivered by the firm as a whole. Internally, favorable case outcomes are perceived as a victory for the individual lawyer rather than that of the firm. In other words, mid-sized and large firm lawyers generally operate for the good of themselves, not the good of the firm.

Is it at all surprising that this mindset breeds jealousy, selfishness and greed? Law firms–rather than being perceived as entities that are bigger and more important than the sum of their parts–are viewed as disposable shells; mere life support systems upon which lawyers leech until retirement. The success of the individual lawyer often matters more than that of the firm as a whole.

Startups, however, are a different story–and lawyers can learn a lot from startups. In the startup culture, the team works together to achieve success for the company. Each team member contributes different pieces of the puzzle, all of which are important, with the end goal being happy customers. In order for startups to thrive, they must meet the needs of their customers. Doing so is of paramount importance and thus shifting consumer expectations must be quickly met with a corresponding shift on the startup’s behalf. Also important, long term success is the end goal of most startups. Of course the definition of “success” can change over time, but generally speaking, the team operates with the long term success of the business in mind.

In other words, startup culture provides law firms with a wonderful example of what it means to pivot and be responsive to customers’ needs. And, as I’ve argued in the past, in order to survive in this rapidly changing legal landscape, mid-sized and large law firms must indeed learn to pivot. Otherwise, the short-sightedness and selfishness of the current law firm culture will quickly and inevitably lead to its demise.

So, pivot or pay the price. Which path are you going to take?

–Nicole Black

  • Adam Ziegler

    Great post Nicole. As a lawyer (with big firms and small) turned startup founder (of Mootus), I experience this every day. It’s amazing how much progress you can make when your team is rowing in the same direction toward a single, shared goal, and it would be awesome if more law firms took that approach.

  • Joshua Kubicki

    While thinking and acting like a “startup” might be beneficial to a firm there are two challenges. First, startup founders have a shared vision and goal.
    Consolidating partners inside a firm to “share” anything is always challenging, as they are more personally motivated than organizationally motivated. That is not a pessimistic view but one that the current business model encourages (and has a long history of success until recent times.) Second and contrasting with the first challenge, the firm model discourages “pet projects” or individual projects making it truly difficult for a firm to wade into the startup environment – it is often seen as an all or nothing endeavor. Thus the easy answer is always “no.”

    A cure for this is a program that requires little investment upfront (money out of the pocket of partners) but creates opportunities for creation and innovation within the firm. Exposure to startup tool-kits and methods is a first step. Using these
    tools, lawyers and firm professionals may be able to develop ideas and at least
    present them for consideration in a more meaningful and impactful manner. For instance, would any lawyer who has an idea present it to the firm in a manner similar to how startups pitch to investors? Most likely not. Why is this key . . . because any law firm looking to act like a startup needs to look at its partners as individual investors.

  • Last Honest Lawyer

    While greed is certainly a huge factor in BigLaw’s meteoric rise and recent troubles, I think the bigger problem BigLaw faces is its organization structure. Large partnerships are notoriously bad at making significant change, especially when the needed change may result in massive short-term losses. Law firms also are infamous for having very little cash reserves – the partners take almost all profit out each year for those big PPPs. The new world of startups is totally different. They tend to have small leadership who can make the tough calls and are small enough to adapt very quickly. Let’s also not forget that the vast majority of startups also fail.

    Specialized boutiques may be the “startup” analogy for the newer law firm. A small team of experienced attorneys in a practice area(s) who use various outside providers for much of the grunt work. They will have small in house support teams and use technology wisely to keep overhead at the bare minimum. They will offer modern fixed fee pricing (in stages, if necessary) that will outcompete traditional law, yet allow them to make big profits if they deliver results. Clients will be rewarded with value and predictability. Better yet, these firms already exist and new one’s are emerging every day.

    As a client, I really could care less what happens to BigLaw – whether it survives or not – because I only need to care about myself or my company getting the most bang for the buck. If I need Ted Olson, I’ll be able to afford him with all the money I saved from common sense legal spend management.

  • nikiblackesq

    Wow! Thanks for all the great comments! And I agree 100% that it’s not a perfect leap from BigLaw to startup and that organizational restructuring on that scale would be difficult. But the emphasis on the whole over its parts is an important differentiating factor that would help to revise attitudes within BigLaw and perhaps curb some of the overarching greed. In any event, thanks again for all of the wonderful discussion!

  • Dustin Cole

    The Brits are now allowing non-lawyers to own law firms. We will see a lot of cleanup taking place there. Unfortunately, here in the U.S. the biggest investments are going to non-law firm startups like LegalZoom. As BigLaw experiences the long-term shockwave of change, it will be the smarter, more nimble and creative smaller boutiques and mid-America firms who will come to the fore. Unfortunately, most of those are also deeply embedded in the old model and will resist change until it is too late. Older lawyers just want their firm to hold together long enough for them to squeeze the most out of it and step away. The smartest younger lawyers will abandon those sinking ships and innovate. Others will go down with the ship and find themselves out on the street with no plan.