Boutique Law Firms, Small Law Firms

Beyond Biglaw: 3 Bridgewater Lessons For Small Law Firms

Point one: there is room for a founder-driven, idiosyncratic culture in a service business.

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Ray Dalio of Bridgewater Associates (at the New York Times DealBook conference)

Ray Dalio of Bridgewater Associates (at the New York Times DealBook conference)

As an owner of a boutique law firm, I am always interested in studying successful business owners in other fields — especially when that business is headed by a fellow born-and-bred New Yorker from the outer boroughs. While Bridgewater Associates, headed by Queens-born Ray Dalio, one of the world’s largest hedge funds, is not one of our clients, I am very respectful of the level of talent and commitment present at the hedge funds that we (more specifically, Markman Advisors) consult for. This makes finance an industry I respect, and one that I feel lawyers can draw lessons from. More importantly, Dalio himself has a lot to teach self-made entrepreneurs in a service business. Of course, he has been in the news lately, usually in articles talking about his long march toward retirement (his 10-year succession plan began in 2011 and he recently announced stepping back from his co-CEO duties), and Bridgewater’s unique culture.

By all appearances, Bridgewater is an interesting, albeit demanding, place to work (this article has a good summary of some of the firm’s unique cultural appurtenances, like the employee “baseball card”). The firm manages an ungodly sum of money for investors (give or take $100 billion), has a penchant for attracting the best and brightest without any fear of reaching out of the finance industry to do so (his co-CEO at the moment is an Apple veteran computer scientist), and has a turnover rate that would make even the most rapacious Biglaw-axing-associates-during-a-recession firm proud. In short, Bridgewater is different, and revels in that fact, despite the occasional spat with the media over its characterizations of the firm’s culture. At the same time, the firm operates in a cutthroat industry, with clients who may be even more willing than those of law firms to pull their business away when results are not favorable. What Bridgewater’s success shows, on a basic level, is that there is no one cultural approach that guarantees success for a service business. This maxim is as true among hedge funds as it is for law firms.

So what are three concrete things small law firms can take away from Bridgewater and Dalio’s example?

First, that there is room for a founder-driven, idiosyncratic culture in a service business. There is no Bridgewater without Ray Dalio, and any objective observer would agree that the firm’s culture is overwhelmingly shaped by Dalio’s vision of how the business should operate. This top-down cultural model works, provided a few things are true. For one, the person at the top of the pyramid truly has to have extraordinary ability and a record of achievement, in order to justify any cultural quirks that may appear weird to the outside world. In the world of hedge funds and law firms, the most powerful individual is the rainmaker, who has the charisma to both attract client funds (whether in the form of investments or legal fees, depending on which industry you are thinking of) and the talented employees that a top-tier service firm needs to flourish. There is no doubt that Dalio has long demonstrated inordinate ability, both as an investor and rainmaker, which gives him the ability to command his business as he sees fit, outside opinions be damned.

Law firms that operate on that same model can likewise be very successful, as long as everyone working at the firm is comfortable with their place in the orbit of the superstar owner. This approach will not work for other firms, such as ours, which was founded with a much more egalitarian and collective spirit amongst the partners. Of course a small firm’s culture is often a reflection of its founder’s values, and it is important to recognize that every firm’s culture will be unique. For some firms, a Bridgewater-type top down structure works best, while other firms thrive with a more distributed approach. What matters is that there is a close fit between the culture of the firm, its partners, and its employees, so that the firm’s culture can be a point of pride, rather than friction.

Second, it is important for small firms to recognize that just as you can’t force a cultural fit at a large firm, the same is even more true at a smaller firm. For example, one of the key tenets of Bridgewater’s culture is that complete transparency is a virtue, rather than a challenge best avoided. Employees are expected to develop a thick skin, and participate in constant critical evaluation of both their and their colleagues’ performance. It is not for everyone, and this demanding aspect of Bridgewater’s culture is a key reason for the firm’s turnover rate. But for those employees who thrive in such an environment, this aspect of Bridgewater’s culture can be a key driver of institutional loyalty. At the same time, the firm is unapologetic about the demands its culture places, and has no compunction about letting those who can’t perform in that culture that they would be better off elsewhere.

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Smaller law firms can tend to be more genteel, and may even attempt to foster a more inclusive, “family”-driven culture. That is fine, and the bedrock of any number of successful firms, but that may not be the best cultural fit for all lawyers. We would not expect, for example, a hard-charging recent Biglaw refugee used to demanding long hours from associates to automatically take to an environment where everyone leaves at 5 p.m. for various and sundry domestic obligations. Because loyalty is so important at small firms, Bridgewater’s example reminds us to consider not only the qualifications of employees, but also their ability to thrive in our own firm’s unique cultural environment.

Finally, Bridgewater reminds small law firms that no matter what size your enterprise is, there is always room for calculated risk, particularly when it comes to bringing in outside perspectives to your business. While hiring an ex-Apple employee to run your law firm like they did at Bridgewater may not be in the cards, or advisable, the example serves as a great reminder that one of the benefits of running either a very large or very small organization is the leeway to try interesting things. What is interesting to one firm may not be so to another, but having a curious spirit as a firm is a laudable achievement. Ultimately, no small law firm has to mimic Bridgewater’s culture in order to succeed — but it (and Dalio’s) example provides us with an interesting jumping off point for reflecting on what makes our own law firms unique, and what we can do to make them stronger.

Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique. The firm’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.

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