Should Law Firms Operate as Businesses?

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By Basha Rubin
| Legal Industry

The news out of Weil Gotshal, a 1200-lawyer New York-based firm with a preeminent bankruptcy practice, last week was grim: 60 associates and 110 staffers laid off and a 10% pay cut for partners. After the bankruptcy and dissolution of Dewey LeBouef last year and "Bloody Thursday" in February 2009 when big law firms laid off a total of 748 lawyers and staff members, the legal profession has been trying to adapt to a new normal.

The Problem

In a New York Times Op-Ed last Monday, Steven J. Harper, a former Kirkland & Ellis partner and current adjunct professor at Northwestern University, argued that Weil’s layoffs are evidence of a “troubling trajectory” that “big-firm practice has become just another business.” Unlike the “carnage of 2009” or dissolution of Dewey, Weil’s layoffs—in its Executive Partner, Barry M. Wolf’s, own words—“[was] not about cost-cutting but about the future of the firm and strategically positioning us for the next five years.”

Harper’s fears are not misplaced. When lawyers become slaves to the bottom line in lieu of a higher code of ethics, their professional integrity can be easily compromised. Nationwide, the legal community’s longstanding aversion to non-lawyer ownership of firms reflects and reifies that value. When third-parties with no master other than profit enter the equation, lawyers, unable to adhere to their professional oath, may be incentivized to recommend courses of action that cost more because they take longer. In other words, when law becomes a business rather than a profession, lawyers will be unable to do their jobs as well.

But the counterpoint—as succinctly and pointedly articulated by Richard Susskind in his 2008 book The End of Lawyers?—is that lawyers will suffer the fates of other professional guilds at the hands of commoditization and technology if they don’t start acting more like businesses. Traditionally, lawyers were gatekeepers of information—legal jargon, documents and the formality and rules of the court system, but the Internet has democratized data so laypeople have access to information in spades. Now we’re manning a gate that guards little.

I agree with Susskind that the lawyers must adapt, now and fast, but also with Harper that when lawyers lose sight of their profession and values, we all lose. Excesses from the booming 1990s will have to go to accommodate financial realities and client intolerance—lock-step compensation regardless of performance, extravagant summer-long courtship of summer associates, and overbilling hours to “churn that bill, baby!”

Becoming more business savvy is not inherently at loggerheads with professional integrity. We can’t be a cosseted profession in the modern world, and that shouldn’t be perceived as an indignity. Lawyers can and should think about how technology can assist them do their work more efficiently and effectively, import task and staff management techniques from profitable businesses in other industries, and think about how their time is being spent from a client billing perspective.

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A Way Forward?

We cannot consider the challenges plaguing big law firms in a vacuum. In my view, the way forward requires all the stakeholders—law firms, law schools, the American Bar Association and state bar associations—to come together. Law school graduates are having an increasingly difficult time finding legal jobs, law firms complain that the new associates aren’t trained for the jobs at hand and clients (sensibly) now refuse to pay high rates to train attorneys. All these institutions are facing problems with a common root, but there is a communication disjuncture between them.

My law school professors were brilliant, but most have not practiced law for more than a couple years. Historically, American law schools were founded to standardize, centralize and supplement the ad hoc apprenticeships in law firms. Now, many law schools—and notoriously, my alma mater, Yale Law School—steep novitiates in theory not practice.

When these newly minted lawyers graduate, law firms pay them somewhere to the tune of $160,000 per year to learn how to do their jobs. This does not make sense when law firms are struggling to stay afloat. Something needs to change—be it new ways of teaching in law schools, changing the pay structure at firms, permitting non-lawyer investors in firms, or implementing an interim training course or residency-like system. I won’t advocate for any one particular solution, but I do know that all these institutions need to be in conversation with one another.

Ultimately, part of the answer might be that we need fewer lawyers than we have now, and that downsizing will be painful. In the long-run, though, it will enable lawyers to rethink their role to spend more time as trusted, thoughtful counselors and less as glorified paper-pushers. The profession should take this occasion, this shift in the tectonic plates, to envision what role lawyers should have in the new order and take the necessary steps to make that happen.

 

Photo Credit: Joergelman via Pixabay

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