Here the first in what I plan will be a series on Law Firm Business Models.
Today’s topic is Regional Firms, and the focus of essentially every one of the columns in this planned series will be a discussion of whether the business model under examination is viable in the long run:
- What are its strengths and weaknesses?
- Are there characteristics or benefits it had to offer in the past that look to be less compelling, available, or plausible in the future?
- Conversely, are there reasons to believe clients will find the particular business model more to their liking in the future?
- What, if anything, is its particular appeal for lawyers? (Remember Econ 101: For law firms, clients are the demand and lawyers are the supply.)
- Does it have structural strengths or weaknesses vis-a-vis other law firm business models and which (strengths or weaknesses) seems more likely to grow in future?
Those are just suggestive questions, of course, and I imagine the particular discussion of any particular business model focus more on the traits of that specific model than how it fits into a Master Paradigm. (I’m not big on Master Paradigms, in case you’re wondering, and no, the initial caps were not to dress things up but to signal skepticism.)
So, whither regional firms?
Readers with very long memories might recall that fully three years ago I surmised that the merger of Kirkpatrick & Lockhart Nicholson Graham with Preston Gates & Ellis might portend something about the future of regional powerhouse firms. Specifically, The New York Times asked me what I thought or rather why I thought it might have happened, and proceeded to quote me as saying:
“Firms like Preston Gates that look to be comfortable as regional powerhouses may not in fact think that that’s a very secure future, and they may want to ally with someone else and gain a bigger footprint.”
I thought it might be true then and if anything has changed over the past three years it’s only that I believe it more strongly today.
Why?
Fundamentally, we’re no longer a regional country.
Much more meaning used to attach to “New England,” “Dixie,” the “Pacific Northwest,” the “Rockies,” and so forth. Now we’re not so much a nation of scrapple in Pennsylvania, biscuits and grits in the South, baked beans in New England, guacamole in California, and bagels and lox in New York, as we are a nation of McDonald’s and Starbucks and Denny’s at one end and the Thomas Kellers, Bobby Flays, Wolfgang Pucks, and Gordon Ramsays at the other, all with their continent-spanning empires.
Even Times Square, for lord’s sake, has become Gap-, Disney-, Toys-R-Us-, and Bubba Gump Shrimp-ified. It has turned into New York’s great tourist-occupied outdoor mall mecca, with nary a local business left in sight.
Of course the well-chronicled, perhaps exaggerated, and surely overly romanticized assault of Big National Business on Small Local Merchants has been going on, as noted, for decades.
As Exhibit A, I give you the department store industry, where Federated Department Stores, founded in 1929 in Columbus, Ohio, has been a consolidator extraordinaire. Consider that it originally was a holding company for Abraham & Strauss, F&R Lazarus, Macy’s, and William Filene’s Sons of Boston, joined one year later by Bloomingdale Brothers of New York.
Here’s a perhaps-incomplete list of the stores Federated has since acquired, merged with, or otherwise rolled up, all of which (with the sole outlier exception of Bloomingdale’s) are now doing business under the unitary “Macy’s” brand name:
- John Shillito of Cincinnati
- Rike Kumler of Dayton
- Burdines of Miami
- Rich’s of Atlanta
- Foley’s of Houston
- Sanger Brothers and A. Harris of Dallas
- Boston Store of Milwaukee
- MainStreet of Chicago
- Bullocks of LA
- I. Magnin of San Francisco
- Richway of Ohio;
- Twin Fair and Gold Circle (of various locales, merged)
- Lord & Taylor (subsequently divested as an independent entity)
- Famous-Barr of St. Louis
- Hecht’s
- The Jones Store
- Jordan Marsh
- L S Ayres
- Meier & Frank
- Robinson May
- Strawbride’s
- Kaufmann’s of Pittsburgh
- And perhaps most famously and controversially of all, Marshall Field’s of Chicago.
In a word, so long, regionalism.
So it has been with industry. If the South was textiles, Detroit cars, the Great Plains agriculture, and so on, now any company of scale that has survived has gone national and most international. You can say that this has been a trend since, say, World War II, and I would hasten to agree, but the internet has vastly accelerated it during the past decade.
Physical location is increasingly irrelevant. “Headquarters” has become almost a metaphysical term, and many law firms themselves (Jones Day, K&L/Gates, Latham) would tell you they have no such thing. Sourcing (shall we drop the term “outsourcing” once and for all?) has gone global, as have clients. Talent, capital, and most importantly of all for us, ideas, know few borders and no timezones.
What, then, is the precise marketplace niche of a regional firm?
If you suggest that it’s knowledge of local:
- business conditions;
- law schools;
- recruiting environments and lateral candidate prospects; and
- cultural, philanthropic, pro bono, and other “soft” aspects of the local socioeconomic infrastructure;
then I would suggest to you that role is equally well served–perhaps better served–by the office managing partner of a national or international firm.
What are the remaining advantages of a regional firm?
Without (as I posit), a matching client base or an advantage in ability to track local conditions, I would turn the question around: Please (and I mean this) do tell me what you think the remaining advantages of a regional firm are?
We’re all ears.
