Let’s open this third and final installment with the #1 question we’re most frequently asked about this model:

Can one firm excel at being both a Maroon and a Gray?

No.

Or in the very best of circumstances, it’s extremely hard to do and it’s usually done not well.

In our experience, all Maroons know they’re Maroons.  Many Grays deny they’re Grays.

While Maroons by and large accept the premises of the model without much objection, many Grays fight back strenuously and argue that that is not their lived experience—“we’re a ‘rainbow’ firm.”  They usually advance a combination of the following observations:

  • Some of our practice areas compete head-to-head with Maroons.
    • A slight variant on that: Some of our partners compete head-to-head with Maroons.
  • Some of our best clients come to us with Maroon-type work.
  • And, in general, “Why should we limit ourselves? If we can serve our clients more comprehensively, why wouldn’t we?”

Let’s stipulate that, indeed, each set of firms does some work the other set does; this is a model, remember,  not a rigorous geometric Schumpeterian dichotomy.  Human nature kicks in, personal relationships matter, and sometimes clients just find it more convenient to trust a firm with one more matter rather than meting out everything from scratch.

But when it comes to business models, that’s not the question: The question is not whether to seize or reject opportunities that fall in your lap; the question is where does your firm invest?

It’s quite a complex challenge to recruit a stable of beyond-superb legal practitioners—who also have business savvy—and keep them feeling challenged, core to the firm, and properly recognized and compensated, while at the same time investing in sophisticated process optimization, project management expertise, and pricing professionals, plus the “good enough” lawyers to service the cost-of-doing-business legal work.  And imagine setting the lawyers’ compensation: How do you explain the 10:1 or 20:1 ratio between the Maroon partners and the Gray partners, if you’re housing both under your one roof?

Fundamentally, Maroons need to invest in raw legal talent and Grays need to invest in efficiency, reliability, and predictability.  But of course these are not pure and absolute distinctions.  As we said earlier, unquestionable legal competence is a non-negotiable requirement for a Gray and superb “fit and finish” (process management) is equally demanded by clients of a Maroon.  The question is what the firm is built to do.

Of course you can drive a $200,000 supercar to the suburban train station and back for your daily commute, and Ferrari or Maserati would presumably take your money for the purchase even if you told the dealer that’s all you ever planned to use the lavish machine for.  But neither company would think, “Aha!  A new market for us to exploit!”

By analogy, observers who see clients going to Maroons for Gray services and vice versa are mistaken to think they’ve spotted a strategic rationale for the firms to make big investments in the “other” business; all they’ve identified are clients being human beings rather than perfect exemplars of rational homo economicus.

Summing this all up

As was true of our original seven-category Taxonomy of 2014, a few salient overall observations:

  • Both Maroons and Grays can succeed or fail; neither category is a panacea nor a sentence of doom.
  • Firms can migrate from one category to another:
    • A few former Maroons (we are not about to name names here!) probably are more aptly categorized as Grays today
      • Query whether this was entirely intentional
    • And, with herculean effort over a period not appreciably shorter than a couple of decades, Grays probably can transform themselves into Maroons
      • We would venture the view that this move has to be resolutely intentional, and will involve a large percentage change in the composition of the partnership. This means that it is simply not tenable in a period of time much shorter than that of someone’s full career.  For the vast majority of firms, partners would view it as an effort to blow the place up.
      • Even then, the most time-consuming aspect will most likely be the market’s perception lagging reality.
    • And for all firms, of either category, the critical priority is to recognize and respond effectively to their particular challenges.

Having come this far, you may have assumed we secretly, or not so secretly, think the Maroons are in some ineffable way “superior” to the Grays.

Absolutely wrong.

For starters, both can provide invaluable client service—it’s just “different” client service.

And we did allude earlier to the complexity of managing each type of firm.  Maroons are actually pretty simple to run; for one thing, lawyers have been doing it (it’s the Cravath Model, essentially) for over a century.  Hire great legal talent, love and compensate it generously, and turn away any work that doesn’t have boardroom visibility.

Grays, by contrast, are very challenging to manage effectively, and thus in our book far more intrinsically interesting from the perspective of strategy, finances, and leadership judgment.  Lawyers are one of management’s constituencies, but only one; the business professionals who are experts in process optimization, project management, big data analytics, pricing, and more provide an equally indispensable core competence.  Getting cognitively and intellectually diverse teams to work together and form a more powerful whole—including, critically, in client-facing roles—is far more challenging than identifying the finest lawyer/practitioners in XYZ field and letting them lawyer things.

Here’s a simplistic way of thinking about the two types of firms and the consequences for each of strong or of weak management.

  Maroons Grays
Superbly run Steady as she goes; don’t screw it up. We call this quadrant that of the “Splendid Grays.” A fascinating and powerful business model and quite sparsely populated territory at the moment.  This could provide tremendous value to clients and staff alike. Maybe our favorite quadrant in this table.
Poorly run How long do you plan on being a Maroon, again? You better have very forgiving, or very loyal, clients. Absent those (wasting) assets, a slow slide to irrelevance.

 


“All models are wrong; some models are useful.”

—George E.P. Box, British statistician (1919—2013)

 

 

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