"Law firms are being forced to run themselves along more ‘corporate’
lines than ever before," reports the FT,
summarizing a PwC report on the top 50 UK firms during 2004. This
new "strategic approach" may represent a departure from how things
were done, but if nothing else it also constitutes resounding confirmation
of the fact that capitalism, and the competition it entails, have
come to the elite end of the legal market. Consider:
- Of the firms whose partnership agreements permit partners to
be "de-equitised" or even dismissed, 80% invoked those powers. - Of the top 25 firms, 56% reported cutting "junior lawyers" as
well. - And 61% cut support staff.
Promiscuous expansion abroad is also being dialled back. More
than half the firms reported earning less than 10% of their profits
abroad, and the consensus seemed to be that global expansion has
not lived up to expectations.
Lastly, the UK’s common "lockstep" model is becoming increasingly
precarious, "as high-performing partners resent large payouts to
their less effective colleagues," as the report puts it.
When I say capitalism has invaded the elite end, let me be precise
about exactly which market I’m talking about: It is not, as
one would instinctively have it, the marketplace for FTSE 100 firms
buying high-end legal services; although that marketplace is surely
evolving, with "beauty contests" and "panels" becoming more common,
those trends are not driving the changes PwC reports. Rather,
the market that matters here is the marketplace where partners (and
associates) choose law firms. Take away that market—that
is to say, take away lateral mobility—and none of this would
be occurring.
So, draconian and inhumane as some of these developments may seem,
consider the alternative: Do you really want a world where
choosing a firm out of law school amounts to indentured servitude
with a lifelong term? Because if lawyers can move between firms,
firms have to compete to recruit and retain them. That is precisely
what PwC reports is happening.
I work in a firm that, like many, started off fairly small, when through mergers in the 1980s, saw big growth in the 1990s and is now quite large.
We still have quite a number of partners from way back when, 30 years ago. They are highly respected and I know many of them have been approached by other firms and companies offering more money. However,none have gone due to loyalty with what they still regard as ‘their’ firm, even though there are hundreds of other partners now (I dont mean that in terms of controlling the firm, only in terms of loyalty).
The younger partners are completely different – lateral hires and departures are common, almost always just for more money (since the work and client base is usually just the same). Very few people being made partners now days have worked for the firm since they started (if any).
Obviously this loss of life long loyalty thing is not just with law firms. But the business side of the law firms has ended up creating a rod for their own backs. Successful partners are unhappy at not making enough money, unsuccessful ones are stressed and know there they can be kicked out, junior lawyers arent being made partner and know that moving increases their chances (you always move ‘up’). I guess that is the way of capitalism and I can’t really complain. Until I become a partner, whether successful or not.