Business of Law

Warnings Toll for BigLaw Firms Resistant to Change

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“There’s as much chance of BigLaw dying as there is a return to normal,” says Ralph Baxter, chairman and CEO of Orrick, Herrington & Sutcliffe, summing the collective thoughts of academics, consultants, law firm leaders and service providers gathered at Georgetown University Law Center’s annual symposium on the future of large firms.

While Baxter on Monday predicted the imminent collapse of more firms in the wake of a recession marked by sweeping layoffs, cuts in equity partnership and discontented GCs’ demands to end the billable hour, he credits deep talent pools and long-standing client relationships for the survival of Am Law 100 firms.

“BigLaw is not dead,” he says. “This is just a time for opportunity.”

Whether firms will embrace those opportunities, if change will be incremental or across-the-board, and who owns the onus to lead change were all hotly debated topics at the at the two-day conference, Law Firm Evolution: Brave New World or Business as Usual? It was hosted by the Georgetown Center for the Study of the Legal Profession.

If Susan Hackett, Association of Corporate Counsel vice president and general counsel, is correct, outside firms have only another 18 months before client patience runs out. “The window is open for another year to year and a half for firms before clients start walking and looking at firms they’ve never looked at before,” Hackett says, citing legal service companies and nonlaw entities as viable alternatives to traditional firms.

“Whenever a firm says [it] can’t hold to a budget number because of unpredictability, the GC still has a busted budget,” Hackett says. “It’s not unpredictable. It’s unforgivable that they don’t know and unforgivable that we haven’t held them to that.”

And although clients may continue to stay in long-established relationship with a firm, that doesn’t guarantee they’ll return with new matters or refer colleagues, warns Jeffrey Carr, FMC Technologies vice president and general counsel, who added that GCs bear the burden of clarifying their needs to their outside counsel.

“The fault is ours if my team doesn’t tell outside counsel our objectives,” Carr says. “I might as well hand them my wallet.”

While there was agreement that multiple models of law firm organization, compensation and associate training structure will prevail, according to Robert Ruyak, managing partner and CEO of Howrey, the single-minded fixation on profits per partner must be abandoned, at least for now.

“Partners must be willing to sacrifice short-term profitability for greater success and profit in the long- term,” Ruyak says. “That’s something many partners don’t want to do, but we have to. There is no choice because some firms will, and they’re the ones that will be eating our lunches tomorrow.”

Not all firms share Ruyak’s views, as WilmerHale’s co-managing partner William Perlstein notes: “If you talk to most law firm leaders, they would dismiss these discussions and say it’s really going to be business as usual again.”

Taking particular heat at the session was Thomas Yannucci, Kirkland & Ellis chair emeritus, designated by audience members and fellow panelists as the defender of traditional models on the eve of the conference.

“The notion that we’re not [already] compelled by economic realities to change is just not accurate,” Yannucci says. “Partners, especially younger partners, are highly incentivized to figure out what clients want.”

Yannucci also countered arguments that many lawyers lack the business acumen to implement change. “There’s a very large infrastructure of management at law firms, but leadership is still the role of a partner. Just as you want a doctor to be the leader of a hospital, clients want a lawyer to lead the firm. Leadership trumps management; law firms just need to trump the quality of management.”

But old-line leadership—especially connected to traditional organization—took its lumps. Mark Harris, CEO and founder of Axiom, one of the new forms of law firm, says others are “looking too much for law firms to be leaders in change …. There is good intent and social responsibility at firms, but the real problem isn’t intent and character, it’s structure. Law firms are not structured in a way to change, drive and lead innovation.”

“It is a mistake to think of change in terms of silos,” adds Orrick partner Patricia Gillette, who called for organization-wide transformation and renewed trust between partners and associates. “Change must be sweeping. If you do not change, you will die.”

Join the ABA Journal from 12 p.m. to 1 p.m. ET, April 5 for a live chat between in-house counsel and law firm leaders, who’ll discuss “Alternative Billing: Who’s Actually Doing it?

Related Coverage:

The Posse List: “From Georgetown Law: ‘Law Firm Evolution-Brave New World or Business as Usual?’”

American Lawyer: “The Change Agenda: Are We There Yet?”

Am Law Daily: “The Change Agenda: Is Mega Law a Dead Man Walking?”

Blog of Legal Times: “Panelists Explore New Business Models for Big Law”

Blog of Legal Times: “Panelists Predict Changes to, Not Death of, Big Law”

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