Monday, September 06, 2010

Are Partners Any Good at Running Law Firms?


I was interviewed today by a legal journalist on the future of law firms once alternative business structures (ABS) enter the market in October 2011. The focus was on how partners and business managers/investors would work together.

This pre-supposed an image of integration and colleagueship within a new order. I am not optimistic. As my interlocutor remarked law firms have virtually shed whatever thin layer of management they had to maintain profits per partner (PEP). PEP is that mythical measure that signals to lawyers (and to suspicious corporate counsel) that I'm doing better than you. In the last year we have seen how the maintenance of PEP has stripped any sense of collegiality out of many firms as they have laid off associates, professional support staff, salaried partners, and even equity partners.

Yes, we've seen the final demise of another myth: that there is a tournament to partnership. I doubt there is even an "elastic" one anymore, or it's stretched beyond its limits.

There's a great film that's been re-visioned many times. Punishment Park was a typical 70s Nixon-era film, done in cinéma-vérité style, that follows a group of "convicted" hippies across a desert as they attempt to out run National Guardsmen. If they reach the flag location they will be freed. Of course when they reach the flag, there are the guardsmen and police waiting for them. I leave the rest to your imagination. This is a closer representation of the tournament today.

Once ABS arrive many partners are going to find themselves in the same situation as the hippies in Punishment Park. Investors and managers of the new law enterprises--law firm won't be a relevant term--will have definite ideas about what they want their human resources to do, what targets to achieve, and how decisions will be taken. Partnership, being notoriously inefficient in their eyes, will die out and self-governance will wither.

Why would this happen? Lawyers under the new regimes will find the managerial burden lifted and taken on by others. This will allow them to focus on--the law, what they like. But that is not where the power will lie. Lawyers will let this happen because they dislike management, but having ceded control, well they won't be able to get it back.

So the answer to my question is not very good. And it won't matter how many managing partners are sent to Harvard Business School, we are going to see a dramatic change in the business of law. The profession of law will still be there but much smaller than it once was.

And, finally, if you haven't seen Punishment Park, it's very worth catching if only to ponder its relevance now.


PS. Stephen Harper over at The Belly of the Beast has an interesting post on Biglaw and the Black Swan which picks up on analogous themes to the above post. It's worth reading.
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2 comments:

JohnSteele said...

John,

I like the post -- even if your choice of films is a scary thought. To play the movie-firm game one more step, perhaps what the firms need is a Henry Fonda (playing Wyatt Earp) in John Ford's "My Darling Clementine."

(Rent the pre-release version that restores most of Ford's scenes that were cut from the release version.)

John Flood said...

John--I haven't seen this so I will. Did you know that Earp's biographer and amanuensis was named John Flood?

By the way, I nearly used another of Peter Watkins' films, "War Game", about the event of the UK being bombed by nuclear explosives. Although commissioned by the BBC, they chickened out and refused to show it because it was considered "just too real".