Our third installment in the “Law Firm Taxonomy” series addresses corporate-centric firms. With malice towards none and candor towards all, I must confess that I find this species the most problematic of all seven in our taxonomy. I’ll explain why in a moment, but first let me, following Linneaus, simply describe these firms. By and large they:
- are headquartered in non-global cities
- cater to desirable upper/middle market clients, mostly non-financial corporations and very high net-worth individuals (the 1%)
- and are solidly embedded in their local markets
There are a host of such firms, and some of them are quite large indeed, ranking comfortably within the AmLaw 50, but in an odd way they are a residual category consisting of firms that don’t fit crediblly or plausibly anywhere else.
Where did these firms come from and where are they going?
First, where they came from is the easy question: As any thoughtful reader well knows, BigLaw had a golden age from ca. ~1980 until September 2008. That economic environment, sui generis in our lifetimes (and absorbing the entire career of some fortunate souls), will never return. In those palmy times, it’s no surprise that some favored firms found themselves rooted in fertile ground and grew accordingly. It came with the territory.
Understand what I’m not saying: I’m not saying firms couldn’t exploit their blessed circumstances more or less effectively, and I’m not saying that individuals don’t matter. Individual leaders matter, and the only reason we don’t think of firms that failed to take advantage of the incoming tide is because, well, they didn’t. So they’ve been passed by and dropped off the radar. Call it survivorship bias, call it tautological, or merely call it res ipsa loquitur, but firms that lagged in the tailwind-fueled race aren’t big players today.
Now, where are they going?
Well put Bruce.
This group of firms is found in all major jurisdictions. Our analysis parallels yours–they are typical of Michael Porter’s ‘stuck-in-the-middle’ enterprises.
In Australia most are still using mixed business models: high end advisory alongside volume, what David Maister famously called ‘brain surgeons’ and ‘factories’, respectively.
It’s a tough spot to be in. Most we know are choosing to keep their heads in the sand and hope the storm will pass.
I believe this group is self-selecting – without perhaps knowing they’re self selecting – to a long period of decline. During that period – they’re best lawyers will leave or retire. I believe we’ll see that talent either go into regional offices of AmLaw 200 firms – or end up in firms the likes of which we haven’t seen yet in America (a Riverview model, for example). It’s important to note here, however – that it’s not too late for these firms. The upper middle market is full of C-suites under-served by sophisticated professional services providers. They’re a market that can be tapped to re-energize these firms. But sadly for them – they see a dwindling pie and are fighting over the scraps – and see the means by which to compete for new business – a threat – instead of a friend. Hence, senior partners are holding out to retirement – junior partners disgruntled and looking for options which for them are dwindling. Younger lawyers will be actively looking for better managed firms with a more promising future. The future isn’t bright for these firms – but they’ve chosen their future. They failed to adapt to changes accelerated in 2008.
Astute observations; thanks.
I’d like to underscore two points:
Thanks again.
A loyal reader who wishes to remain un-named writes as follows — Bruce.
These thoughts strike me as coming from someone quite attuned to the market and not afraid to face reality as it is. As Churchill said, “Facts beat dreams.” — Bruce