This fall we had the opportunity to spend a fair amount of time in the Pacific Northwest—multiple trips to Seattle and Portland—and became better acquainted with the dynamics of that particular local/regional legal market.
No mention of those two cities would be complete without citing their fascination with all things (a) artisanal; (b) coffee-related; and (c) preservationist, so we will consider our duties on that score discharged by confirming that, yes, it’s indeed all true. And on the understanding that they are two of our favorite US cities, it’s sadly apparent that our New York-based wardrobe falls dramatically short in the category of fleece.
Be that as it may, we wanted to share some of our observations about the region with a broader audience because we think they hold lessons of wide application.
The region has been discovered
No longer a somewhat insulated or remote market, the Pacific Northwest has been found out by firms with a national or larger footprint. They’re establishing or enlarging offices and to some extent, but not yet radically as we perceived it, upsetting an equilibrium in the local talent market.
Their impact on lateral mobility seems so far to be somewhat limited. We assume this is due to a combination of indigenous lawyers being perfectly happy (“thank you very much”) at their home firms, the intensely local flavor of much of the practice and all of the personal networks, and lawyers’ predictable skepticism about how newish ventures are ultimately going to turn out.
Note that all three of our suppositions behind the impact of outside firms being limited, however, are perishable assets, or self-eroding conditions. To wit, (a) the membrance between local and outside talent is highly porous and can be traversed almost at will; and (b) what’s new and unproven today will be part of the landscape and a solid member of the business community in shockingly short order.
If you’re thinking here that I begged the question and didn’t explain why the region has been discovered, I have a few words for you: Amazon, Microsoft, Nike, Starbucks, Canadian energy, and the Pacific Rim.
Does “regionality” matter?
In virtually every meeting we had, the topic arose in the form of a question, a declaration of belief, or simply musing, whether the notion of an identifiable, contiguous, somewhat self-contained, and describable “region” still mattered or would continue to matter.
On the one hand, one merely need acknowledge the profound phenomenon of globalization to hypothesize that regions will lose their meaning in the future. For that matter, the tale of the United States to date has been (among many other things) one of local differences being diluted away into invisibility. Concepts like “New England” or “the Deep South” are probably invoked today more in a tone of nostalgia than hard core reality. And if I understand the mentality of mass marketers correctly, the categories that seem to matter are less”Vermont Yankee” or “California dude” and more “soccer mom” or “urban homesteader.”
On the other hand.
Regional differences remain, and to some extent immigrants from outside learn (and if they’re gracious about it, prefer) to adapt to local customs. We were instructed more than once, in the most helpful and sympathetic of tones, that we should be attuned to the Pacific Northwest’s reluctance to disagree and understand that (in implicit contrast to the behavior expected of New Yorkers) people might not tell us exactly what they thought. Whether the reticence was viewed as polite and deferential or as passive/aggressive depended on who we were talking with.
Ultimately, I come down on the same side as #1, above: Differences remain, and are real, but the process of erosion has set in and they may not last forever.
Yes, but what about local rates vs. national rates?
Lots of conversation on this topic.
Having practiced in the Pacific Northwest for a while with firms spanning 1 to 200 lawyers, I see a subtlety in your description of “local” pricing, and your implication that what is “local” to the lawyer may be different from what is “local” to the client. In your first example, a national firm may bring work in from large clients in NYC or SF, and then have the work done by lawyers in secondary cities at costs and rates substantially lower than the costs and rates in NYC and SF. (I’m using “costs” to mean the firm’s costs and “rates” to mean the charge to the client.) Another model is the national firm that charges the local rate for whatever office the work comes in to, regardless of where the work is done. You allude to this in your practice caliber model: superstars in Seattle should command the same rates as superstars in New York. (I think that’s harder to pull off than it sounds.) Move down from superstars to workhorses: if the New York client is attuned to paying $700 for midlevel partners then the client may not care that it’s paying $700 for midlevel partners in Seattle and Portland, as long as the quality of work is the same as that of the midlevel partner in NYC. The hitch, I think, for the Seattle or Portland office is that $700 for a midlevel partner is well above the market rates here, so a lawyer in Seattle who charges $700/hour for national clients either must charge a lower rate for the local clients and risk running afoul of most-favored-nation fee agreements with the national clients, or must give up the lawyer’s local book of business to Seattle-based competitors who charge at Seattle rates. It’s a fascinating business problem: how to set a rate for a lawyer at a high-rate firm in a low-rate city.
Ahh, the evergreen Plan A vs. Plan B discussion for (midsize?) regional firms. As you say Plan A is very difficult. And there are some prerequisites to even be in a position to really execute on a long-term basis. In fact, I think it means behaving like a successful boutique would:
– Your partnership needs to be extremely cohesive. And not just economically, but from an interpersonal perspective as well. Cowboy camps of lone rangers who get along begrudingly using strong forms of eat what you kill aren’t going to make it. Those guys will be picked off one by one. Slightly stronger loose confederations of silos with similar compensation schemes run by/for the benefit of a powerful few will likely splinter as well.
– You better be in touch with what makes millenials tick. This is going to be a differentiating point in recruitment in the next ten years for all firms, but really a key point for firms choosing A. Not the talking points that get the headlines, but the reality of work environment, the day to day expectations, the compensation and the career tracks. These are not your father’s lawyers, and there are no “one size fits all” answers to these questions.
– Hand in hand with the second point, firms choosing A are going to need real, transparent and executable succession plans for key relationships and the leadership of the firm. The development of the bench at several levels needs to be taken very seriously. If the younger cohort feels disenfranchised and that there is no future for them, they’ll leave for the bigger money from national competitors in droves.
Needless to say, the managing partner of a firm choosing A is going to need to be pretty dynamic and at the same time completely self-honest about whether his or her partnership is truly capable of these things. Chances are, if the firm isn’t already doing these things, its chances of survival on its own in this type of environment (over the long haul, say 5-10 years) are probably slim.
Dear “Skeptic:”
First of all, thanks for your thoughtful comments.
I agree that
We and I suspect you have seen enough of the “Cowboy/Lone Ranger” firms as well as those challenged by succession planning (of senior firm leadership as well as key clients) to know that the handwriting is on the wall for a large percentage of these midsize regional firms. We may pine for the good old days but if you look into the background of any of the founders of these firms (I have), they were not risk-averse, steady-as-she-goes types in the remotest.