Abracadabra! What once was is no more. Why are mid-size firms disappearing?

Why are mid-size firms disappearing?

Major shifts in the legal market place, an individualistic (where siloes exist) firm culture where lawyers hoard clients and information, and fewer lawyers retiring are just some of the reasons.

A shift in the market cannot be ignored. Some consumer market segments are disappearing or are already gone. For example, simple legal documents are frequently provided by Internet legal rather than an actual attorney. A great deal of defense work is now done by young lawyers out of law school rather that senior partners. Clients are not willing to pay higher fees for work a new lawyer can and will do for less; business clients are savvier in the digital age. Some smaller companies have gone out of business, merged with a larger company or simply don’t have the cash to expend on legal fees. Firms that fail to offer alternative fees or even budgets will not be in practice for long as client demands grow and change.

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Shared basic assumptions are deeply embedded, taken-for-granted behaviors, which are usually unconscious, but constitute the essence of culture. These assumptions are typically so well-integrated in the office dynamic that they are hard to recognize from within. Simply put, culture is the way a law firm does things. A clearly-defined culture lets employees know what is expected of them. It also lets employees know what to expect from the organization. A clearly-defined culture provides valuable clues about how to navigate the culture — and how to achieve success. Most law firms today are hierarchical in their partnership set up: senior partners, junior partners, associates, paralegals, clerks, and other staff. The partnership culture that permeates the legal arena must change.

Strong management will make the tough but smart decisions. While some firms have executive committees comprised of partners with strong business backgrounds, most mid-size firms do not. The traditional “country club” law firm structure does not align with the current market-driven management (post-2008 financial crisis). A practice of law that fails to hire business people and if they do, fails to let them manage the firm but a business of law embraces business processes and client-centric behaviors and attitudes. These failures are reasons mid-size firms are disappearing. 

People who come from the corporate world are often jaw-dropped when they go to work at a law firm. They often find a lack of clear hierarchy, reporting lines and accountability, even among the partner/owners of the firm. This culture is highly disciplined and the structure is vertically integrated — and as such, very difficult to change. This lawyer-centric model tends to organize by functional departments, such as by practice areas like tax, litigation, transactions, labor and employment, rather than using a horizontal structure based on industry, with teams prepared to meet all the various needs of clients within the industry — evidence of a client-centric culture. Here is where one might find a practice leader who favors the interest of his practice area over that of the firm as a whole, and thereby limits their responsiveness to firm business development. Further, since the marketing, business development, and delivery of firm services must overlap, this practice culture cannot realistically compartmentalize these roles and functions into rigidly defined and sequential tasks.

This type of practice culture does not foster innovation, and if new problems arise for which it is ill-prepared, the whole firm suffers. Each firm has a personality of characteristics that can’t be ignored, but can be very difficult to articulate. Generally, however, there is a partnership set-up made of traits common to many law firms. In this arena, decision-making is extremely slow. Some partners are more equal than others, and in many firms almost anyone or any group can stand in the way of action, even if they do not have the power to force approval or move ahead. Lawyers are competitive but risk-averse, task-oriented and results-oriented in their work — but their governance may display serious paralysis when it comes to taking action for change or reining in difficult partners.

Part of the culture problem in most firms is generational — between the older partners, who have gotten along doing things fine the old way, and the younger partners and associates who, feeling they have so much at stake in the competitive marketplace, are not tied to old habits and attitudes. To survive and thrive, many lawyers who are not inherent marketers or salesmen feel they must conform to new standards of thought, behavior, and performance, just to maintain their status, never mind get ahead.

Lastly, partners not retiring as often, is perhaps another reason, as in the post-2008 economic climate, attorneys may not be in a position to retire. Instead they choose to continue working and they maintain their old-style behaviors and attitudes that were once prevalent in a practice of law but are irrelevant in a business of law. Often, they create limited value and profit, yet expect to maintain the same level of compensation.