Legal Business‘s retrospective on the 2010s (“The Vision Thing”) opens thus:
The last decade emerged with the shockwaves of the banking crisis still making themselves felt on the profession. Having just made a series of job cuts in major markets the like of which had never been seen in the legal industry, the mood was infused by uncertainty, the brutal realities of austerity and the sudden emergence of more demanding clients.
And turning their faces from the past towards the future, the editors continue:
Most of what happened, happened to the profession thanks to wider economic forces, not its own agency. Major law firms became enthusiastic marketers of ‘innovation’ at the very moment they lost the knack for leadership and strategic thinking that had served them so well in previous years.
As we enter 2020, there is more time for reflection – and a sense that the plates beneath the industry are shifting still, even if the commercial legal industry remains a hugely profitable trade.
Isn’t this about as succinct an encapsulation of where we stand at the dawn of the 2020’s as you could essay?
- We emerged deeply shaken from the Great FInancial Meltdown of 2008-’09 slashing lawyers and staff, postponing or revoking offers, freezing nonessential expenses, unsure how long or how bad the reputational fallout would be.
- Clients seemed, once and for all and at long last, to have gotten religion about cutting legal expenses.
- And yet as the decade unfolded BigLaw found itself under threatened or impending siege from the Four Horsemen of the Potential Apocalypse
- Clients tightening the screws for real on fees, with disaggregation here to stay and steadily declining realization on what’s left;
- The unknown long-term consequences of the Legal Services Act in the UK and serious and sober-minded movements emerging in California, Utah, and Washington to dismantle the profession’s guild-era moat and drawbridge keeping out “non-lawyer” heathen;
- The more immediate, and potentially existential, challenges being thrown down by NewLaw and (some day–don’t tell me it will never happen) the Big Four; and
- Our own self-reinforcing lateral partner bidding war.
As we reflect on these known and the almost certain unknown unknowns, what’s the diagnosis of how we’re doing lately in managing our own affairs under conditions of uncertainty? Not great:
The 2020s will mark the period that finally resolves whether the Magic Circle faces demotion to second-string international players or can galvanise to remain global elite contenders.
Key issues will be the ability of the group to reform governance structures that hand an effective veto to older partners to block necessary reforms.
Pass by the UK-centric lead about the Magic Circle (or enjoy it immensely, as I do) and what do they finger as the critical challenge? Reforming our governance to kill “an effective veto” being handed to unrepresentative minorities. There’s more:
the 2010s proved the decade in which City law fell out of love with leadership as grudging partnerships kept their leadership teams on increasingly tight leashes [and] it soon became clear that it was becoming increasingly difficult for large, London-bred law firms to get much of anything agreed of note,….
This inertia has proved increasingly out of step with the times
The bill of particulars includes reforms that are “too little too late” of the “outdated lockstep pay system,” dabbling in verein structures with the primary result of enabling law firms to fecklessly “kick the governance can down the road [and find themselves with] even less clear leadership.”
But wait; don’t we all know in our heart of hearts that decisive top-down leadership is a non-starter in law firms populated by autonomy-seeking partner/missiles? To the contrary, Latham and Kirkland have demonstrated the power of focused and centralized definition of strategic direction and disciplined, hands-on execution: “The 2010s was a lost decade for major City law firms in leadership terms.”
And we haven’t even mentioned Brexit, which is far far removed from taking on clarity, but which has crossed one irreversible line since last mentioned in this pages: It is absolutely positively going to happen, deal or no-deal or half-baked deal. As a responsible journal would, LegalBusiness does discuss its consequences for the legal sector in cursory fashion, including this data, new to me:
A survey last month by global consultancy Duff & Phelps of 245 senior financial services executives underlined London’s loss of status, with New York being rated as the world’s top finance centre by 56%, outpacing the City on 33%. Two years previously, London was top-cited by 53% of respondents, well ahead of New York in the same research.
Where then does this leave us?
You might think this would be an occasion for a spasm of triumphalism by this dyed-in-the-wool New Yorker, but the world is a large and marvelous place, and rooting for the home town team is amusing but fundamentally un-serious.
I would like to go in another direction altogether, and focus on what I think the LegalBusiness commentary tells us about models of law firm governance.
Regular readers know I’m fond of one of the leading models of permissible patterns of behavior by those who find themselves in organizations they’re in disagreement with. (The “organization” can be anything as remote and transactional as an online merchant or as intimate and involuntary as a family; for our purposes, think law firm partnership.) The model I refer to is that provided by Albert Hirschman’s timeless Exit, Voice & Loyalty.
Hirschman theorizes persuasively that individuals have three choices on how to behave vis-a-vis the organization:
- Exit: Ditch the online merchant (trivial), resign from the club (harder), abandon the family (shattering and all but unthinkable);
- Voice: Express your dissatisfaction and disagreement; air your grievances, seek a hearing or an audience (in general, far easier albeit potentially awkward to greater or lesser degree); and
- Loyalty: If you’re unwilling to exit and voice is unavailable (you’re in a street gang) or unavailing (classic mega-corp and nonprofit behavior), decide to stick with the place and (figuratively speaking) shut up and sit down.
This is the important part: Law firm partners who disagree, who prefer not to leave, and who’ve exhausted their voice, have a cultural, social, and professional duty to get in line and support the firm’s direction and decision without reservation and to the very best of their ability. Sitting in the back row and throwing spitballs at management is not a permissible option.
Which brings us back to the London/US dichotomy posited and elaborated by the LegalBusiness piece. The London City firm partners have, or so it appears, gotten their way and now should if they’re rational (or even just self-interested) rue their victory. Shades of King Pyrrhus.
By contrast, taking the commentary at face value, the more intentional, systematic executive management of US firms is producing quite different results. And might I note that in terms of financial self-interest the partners at Latham and Kirkland have been richly rewarded for a trivial and fundamentally meaningless incursion on their pure unmodulated “voice.”
This goes far beyond a transactional bargain: I believe that membership in (important, voluntary) organizations entails a bilateral social contract. By virtue of David or Mary (say) belonging to a church or being partners in a law firm, they have rights and responsibilities.
Being a partner in a law firm is both a rich privilege and one that comes with profound obligations, to the firm and to your colleagues. It is not a catering hall dedicated to serving your tastes and interests.
“Exit [or] voice [or] loyalty.” There is no fourth option.