As a comment on the future of Big Law, the New Republic ran an expose of sorts last month using Mayer Brown as a whipping boy. Without citing sources, the article asserted that, given the significant pressures on the business model, only 20-25 big law firms like Mayer Brown (or 10% of the current 2oo+) will survive, implying that since these firms are increasingly nasty places to work, there’s not much loss to cry about.

Entitled “The Last Days of Big Law: You can’t imagine the terror when the money dries up,” the article was met with, as would be expected, grave doubts by the Big Law Establishment, including those articulated by the Editor in Chief of the American Lawyer. In “Don’t Bury Big Law Just Yet,” Robin Sparkman noted other commentators’ insistence that “the rumors of the demise of big law keep getting grossly exaggerated,” and contended that “a deeper look at how the largest firms are doing, short-term and long-term, shows resilience and growth.” Citing record revenue and profits per equity partner and flat profit margins at these firms, Sparkman’s position is that all this hand-wringing is in response to a cycle that will inevitably, and is already, turning up.

Sparkman nonetheless noted the fact that essentially no new partners are being made amid all this BigLaw wealth, a red flag in our opinion that trumps any other favorable statistic. If there is no partner growth, there is ultimately no growth. And the lack of growth can become a cancer in firms, escalating conflict among existing partners and driving away those waiting at the gates.

Another perspective comes from the 2013 Altman Weil Law Firms in Transition Survey, which reflects opinions from leaders of 238 law firms with 50+ lawyers, including 37% of the NLJ 250 firms and 34% of the AmLaw 200.

The report contends that law firm leaders are “acutely aware” of the following trends in the profession:

  • demand for legal work is flat or shrinking in many practices
  • clients are applying real pricing pressure
  • commoditizaton and lower-priced, non-traditional service providers are growing competitive threats
  • aggressive growth in lawyer headcount may no longer make sense
  • the pace of change is increasing.

As to the leaders’ greatest challenge in the next 24 months, increasing revenue, generating new business, growth, profitability and change management constituted over 50% of responses. As to growth, the report notes: “This year for the first time, we asked law firm leaders if they believe growth, in terms of lawyer headcount, is a requirement for their firms’ continued success. Only a little over half (56%) said ‘Yes;’ more than a third (36%) said ‘No;’ and the balance were not sure. If this question had been asked even five years ago, nearly all firm leaders would have replied with an emphatic ‘yes.'”

What may be most informative is what was NOT at the top of leaders’ greatest challenge list. “It is striking (and disturbing) that delivering value to clients appears only at number eight on the list, mentioned by just 5.6% of law firm leaders. Improving efficiency is eleventh on the list of twelve challenges, cited by only 2.8% of respondents.”

“Most firms appear to be reacting to external forces and making incremental changes within the framework of the existing business model, rather than pursuing opportunities to meaningfully differentiate their firms in the eyes of clients.”

The report concludes that in spite of “ongoing evolution of thinking on many of these issues including some dramatic shifts in opinion since 2009… there is less evidence of tangible changes in how law firms operate.” In other words, we know the water in this pot is heating up, we just can’t seem to do anything about getting out of it.

And the law firm leaders know it. Asked if they are reasonably confident that their firms are fully prepared to keep pace with these challenges, the percentage of firm leaders who were highly confident dropped by almost half from 23.9% in 2011 (the first time the question was asked) to 12.9% in 2013. Only 5.3% of leaders considered their partners to be highly aware of the changing marketplace and only 2.2% described them as highly receptive to change.

“These results highlight another significant challenge for law firm leaders. Along with many external market pressures, there is internal drag from partners who don’t fully understand the need for change, who don’t feel any sense of urgency to change, or who are simply resistant to doing things differently.”

More than half of firms have not significantly changed their strategy with respect to pricing, their service delivery model, or their partnership admission/retention standards.

In light of the New Republic teapot storm, two other data points with respect to the surveyed firms are of interest. Since 89% of firms are pursuing lateral hires at the partner level, any growth that is occurring among these firms seems to be occurring via laterals, and the broader no-net-partner-growth data implies that many partners are just moving around to fill the void left by those edged out.

Secondly, half of firms find partner morale to be the same or worse now than it was in the beginning of 2008. It would be interesting to know how morale then compared to earlier years. Even though many firms had a large inventory of work at that time to carry forward and ease their fall into 2009, many lawyers were already looking down a steep precipice. Only 21% of firms find morale much higher than in 2008, with the remaining 26% finding it a bit higher. So even our resistance to change isn’t making the change-averse troops happy.

From the other side of the pond comes a stronger resolve to effect change. In their article “When change is inevitable…,” The Lawyer wrote that “We face a once-in-a-generation change in the shape of the legal sector. The scale of change initiatives is growing and the speed of implementation is accelerating. To guarantee successful delivery requires a new level of change-management capability. If firms get it right, dramatic change can be turned into success.” The article noted that, as a direct result of the Legal Services Act, 25% of British firms are planning on changing their strategy.

The Lawyer surveyed the UK’s top 200 firms “to find out more about the major changes firms have been implementing, how they have been managed internally and how successful these projects have been. The questions focused on the operational aspects of running a firm but were aimed at the owners of the business – the partners.”

When asked to name the one area of business management in their firm they would most like to improve, ‘people management’ and ‘process efficiency’ tied for first place. Yet when asked if their firm used any formal change-management programs or strategies over the past 12 months, 60% said they did not.

One of the comments to the New Republic article ballyhooing the end of Big Law included this one: “Much of this results from the unwieldy nature of law. They are hard to manage, and most are run by people who are not really trained in business or well suited to managing.”

So far, from both sides of the pond, that seems to sum it up.