Law firms forced to shrink

Another Sunday New York Times read and another ton of stuff to think about. This week's issue included a story about the impact the current economic malaise (I refuse to call it a crisis anymore, because someone needs to start heading toward the up and positive side of it) is having on big Wall Street law firms.

It focused on the challenges of making the tough decisions to lay off team members, and in some cases decades-long attorneys with big cases under their belts, second mortgages to pay on vacation properties and kids in ivy league schools.

After a couple rounds of lay offs at White & Case (one big firm) the article talks about "big" as a business model being bound for obsolescence. I think this has been coming for years, and it is perhaps only the current economic situation that has made it more real.

What is interesting is watching how companies deal with it. At White & Case they had three choices (probably the same holds true for any big business now): 1. Do nothing, risking the firm's survival; 2. Couch layoffs as decisions based on poor performance; or 3. Own up to the crisis and bid large numbers of lawyers good bye. They chose the third.

So very very hard, for the leaders and those who lost their jobs. Hugh Verrier, the company Chairman made what might seem a simple point, but for me it cuts right to the heart of company culture: "There were tough judgment calls," he said, adding that he tried as best he could to preserve the firm's culture and that the 'how' of the dismissals was at least as important as the 'why'."

While it was hard to read about the paradigm shift in such a venerable profession, and the loss of jobs for so many, there is a big part of me that thinks the changing the this natural order is a healthy thing. It's not sustainable long-term to have pyramid billings where clients pay for groups of associates to do they job, when some can be said to be training or watching, or back-filling in the event something happens. It's not sustainable to have the padded estimates by type of job, rather than the actual hours spent. This is true in many industries, not just law. Take advertising agencies for example. So the billing structures and client relations probably need to change.

I am down with that.

But what worries me in the midst of this paradigm shift is that as the "bottom line" takes on a greater focus, the kind of guidance, thought consulting and strategic advice given by professionals like these lawyers becomes commoditized. That runs the risk of shifting too far the other way, where the only "accountability" becomes an accounting metric. Equally as dangerous as the outmoded hierarchical big-bonus-jobs-for-life we see evaporating.

You'd think by now, after many of these cycles we would have figured it out - take pride in what you do, deliver great results, work hard, and look for new ways to innovate and add value to your customers, whomever they are. I have to believe that if we could do that, the natural order would win out and it would actually be the right answer.

And, high five to those leaders like Verrier who actually understand and value the importance of culture even in the midst of tough choices.

Read the full article here:

http://dealbook.blogs.nytimes.com/2009/06/08/on-wall-street-the-incredible-shrinking-law-firm/?scp=3&sq=alan%20feuer&st=cse