Ed. note: This is the latest installment in a series from Bruce MacEwen and Janet Stanton of Adam Smith Esq. and JDMatch. “Across the Desk” takes a thoughtful look at recruiting, career paths, professional development, human capital, and related issues. Some of these pieces have previously appeared, in slightly different form, on AdamSmithEsq.com.

We humans like to put things in categories.

And while we can get it plain wrong, or mix up two categories benignly or malignly, there’s no question our propensity for categorization — from friend or foe and food to poison, to Linnaeus, to the periodic table, to the Dewey decimal system — has gotten us a long way on the planet so far.

So today we launch our own taxonomy of law firms….

The ground rules:

  • We’re only categorizing Biglaw, or Sophisticated Law; but you knew that.
  • Do not make the flat-out wrong assumption that any of these models requires or entails a one-size-fits-all approach to quality, pricing, profitability, or anything else. Many firms following the same model can have extremely different approaches to where they fit on the prestige scale, where their clientele primarily comes from, the caliber of talent they attract and require, and so forth. In short, you can serve the top, the middle, or the value portion of the market under any of these models (you just can’t serve more than one such segment)…
  • We’re not going to identify firms by name who fit into any specific category; you can play that game at home.
  • Membership in a particular category for a particular firm is not static; firms can move, have moved, and will continue to move between categories. In fact, we live for and celebrate dynamism.

So without further ado:

Model
Prognosis
Truly global players spanning three or more continents Top of the food chain predators (but, like predators, limited in number)
Capital-markets-centric specialty firms headquartered in a global financial center—often historically tethered to a major I-bank Intrinsically the most lucrative, high-margin practices, but also prone to parochialism and conceit. Vulnerable to global dislocations, complacency
Corporate-centric firms headquartered in non-global cities catering to sophisticated upper/-middle market, mostly non-financial services Fertile soil for tremendous growth in the 20th-C.: But these firms need to beware markets moving out from under them
“Category killer” specialists targeting one broad but not necessarily high-intrinsic-value practice Hungry and effective acquirers absorbing any encroachers; the best will persuade other firms to surrender the category entirely
Traditional boutiques Will always be with us; a durable and evergreen model
“The Hollow Middle:” One-size-fits-all, not a special destination, generic law firms Endangered; at risk of marginalization, irrelevance
Emerging “synergistic super-boutiques” A fascinating evolutionary innovation


Biological classification, or taxonomy, reads down thus, with humans as the example:

  • domain/eukarya
  • kingdom/animalia
  • phylum/chordata
  • class/mammalia
  • order/primates
  • family/hominidae
  • genus/homo
  • species/sapien

Starting at the top, this identifies us as:

  • having cells with a nucleus
  • unable to produce our own food
  • with a backbone
  • with hair, producing live young, which are fed with milk
  • with opposable thumbs
  • walking upright
  • the same, or alike
  • wise (I’m just reporting here, folks)

I deliberately chose the fuzzy classification “model” rather than anything quite as specific as one of these categories to leave room for introducing various sub-types, but if you had to pin me down I’d say there’s at least room for several species of firm within each model.

I stress the biological analogy because I find it helpful to understanding the ecosystem of law firms. There’s competition within species (between individual firms who are essentially alike) as well as competition across species (between, e.g., global firms and boutiques). There’s also, as we know well, the phenomena of birth, death and perhaps even extinction of certain categories.

Each of the next installments in this series will discuss the pros and cons, challenges and opportunities, facing each particular model, as well as what the management priorities for that type of firm ought to be.

But let’s tackle the first category, “Global Players,” forthwith.

Pros

  • Presence everywhere that matters
  • Have created their own barrier to entry
  • Comprehensive practice area offerings
  • Areas of very high intrinsic profitability

Cons

  • By and large, there are no economies of scale in law firms; there may even be a small contrary effect
  • Marginal offices, with continuing churn of openings and closings around the periphery
  • Specific practice areas and sectors can suffer cycles of flaccid demand
  • Risk of a pachyderm-like lack of responsiveness
  • Compensation across a very wide network with areas of high and low intrinsic profitability and high and low costs of living can be a big headache

Management priorities

  • Try to remain nimble in maintaining an economically compelling geographic footprint and practice area mix.
  • Stay on top of enormous managerial complexity and overhead.
  • Maintain and reinforce the core concept of a “one-firm firm” across time zones, cultures, languages, and more.

What else can we say about global players?

Some of the earliest — e.g., Coudert Bros. — are no longer with us, and others have failed to live up to their potential. This is a back-door way of saying this business model, which everybody and their brother seemingly used to aspire to, is no panacea.

Second, the burden of managerial complexity needs to be called out for special attention. I know managing partners of some of these firms who live on airplanes. That’s glamorous for about a month, and then it quickly becomes a long-run endurance test of one’s physical constitution, dedication to the position and the firm, and simple self-discipline. Don’t underestimate how hard it is to run a firm on which the sun never sets.

Third, if you think the creative ability of competitive Type A’s, working together in a single office, to spontaneously generate tensions where none need exist, to obsess over purely imaginary slights, and to perceive favoritism mysteriously visible only to themselves and themselves alone, can be challenging, try expanding the canvas to a few continents. Is the “home office” throwing its weight around? Or are the outposts making irrational demands?

Are the practitioners in the most profitable practice areas appropriating more than their “fair share”? Are the practitioners in the least profitable practice areas trying to hold up the firm for ransom? Does the geographic footprint of the firm’s offices, always and inevitably a creature more of history and experience than reason and logic, make sense? If not, how far out of kilter is it? Bad enough that it needs to be addressed, or just tolerably bad, where tinkering would cause more sturm und drang than it would be worth?

Finally, these firms by their nature find their primary clientele among multinationals with similar global presence. In case you hadn’t noticed, you might want to know that that’s become a particularly volatile and perilous sector of the corporate landscape to occupy. Not even the most innovative firms, at the crossroads of technology and business, have an assured future. (If you doubt me, I have just a few words for you: Apple, Dell, Facebook, Microsoft, RIM.)

Yet the ranks of the Global Players are well populated with firms of (by and large) tremendously impressive capability. Regular readers know that I am not a doom-sayer about Biglaw in general, and one reason among many that I’m not is simply this: The ability of these firms to marshal, on a dime, a vast, powerful, and targeted array of impeccable talent, backed up by deep resources, across virtually 24 time zones, is awesome to behold.

A complex, globalized economy will always need such services. So perhaps I should half take back what I said: Being a Global Player is no guarantee of success, or even indefinite viability, but if you can play in these leagues you may have some serious fun doing so.


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