Lawyers, especially more established ones, enjoy referring to the vocation of law not as a mere business, but as a profession. Anyone can own a business, but having a profession requires something special. “Profession” carries connotations of grandeur, learning, following a higher duty to society as a whole. In contrast, “business” is just the gauche act of making money. Businesses are run by Gordon Gekko; Atticus Finch was a member of a profession.
It’s fun to pretend to be a Philosopher-King or -Queen, dispensing wisdom and authority from on high while ignoring the petty economics. Philosophers don’t need to get their hands dirty with math. They have people for that. So long as the Philosopher carefully listens and gives wise counsel, the kingdom will prosper, the peasants will rejoice, and the offices will remain wood-paneled, because that is the way of things.
Ask Ozymandias how that worked out for him.
The world is changing, and the grand profession of law is changing with it. We’re in the early stages of a war for our life, and it’s not the lofty sages that will shape the future of our industry. It’s the scrappy businesspeople who are willing to get their hands dirty, crunch numbers, and make bold choices.
A War On All Fronts
The battle for market share is being fought by more combatants than you might realize. Alternative legal service providers are stealing commoditized market share, and in some instances even traditional bespoke legal work. The Big Four accounting firms are expanding the scope of their consultation services, and boxing law firms out in the process. Legal-oriented startups run by non-lawyers are trying to disrupt the basic fabric of the industry. In-house legal departments in search of efficiency (or internal budget allocations) are keeping more work in house than ever before. The monopoly we enjoyed for decades is being consistently eroded, and when you start with a monopoly, you have nowhere to go but down.
The way this erosion has played out in the Biglaw market has been fascinating, but troubling. The market as a whole for law firm services has been sluggish, seemingly missing out on the past ten years of economic recovery. But it hasn’t been sluggish all over. The top 1 percent of firms are growing massively, and solos and boutiques are chugging along fine. It’s the middle market that’s feeling the squeeze. Midsized firms are struggling to keep their market share. As the overall pie continues to shrink, that segment of the market will be fighting harder amongst itself for fewer dollars. And if and when the next recession hits, a bloodbath will likely ensue.
The scariest part about all of this is how few lawyers even realize this battle is going on. It’s been such a slow boil for the past decade that it’s been easy to miss. We all felt the crunch when the Great Recession set in, shifted hard into a low-expectation mindset while we rode out the downturn, and never really shifted back out. Ten years of moderate growth has been greeted, year over year, as good news. But compared to the overall economy, the legal market has barely bounced back at all. Slow growth has been the norm for so long, many have started to think their firm’s performance has been acceptable, maybe even healthy, when in fact it’s tenuous at best.
Markets change, and industries die. Magazines used to be big business. They set the cultural conversation. When was the last time you bought a magazine outside of an airport? Thanks to some intrepid Wikipedia editors, you can pull up a list of magazines that have died as their industry contracted. You can also find virtual graveyards for the big box department stores and retailers that have crumbled under the weight of competing with the internet.
Mismanagement and bad fortune surely took down their share of the victims listed above, but if you look at the dates these companies folded, an overwhelming number have come in the last 20 years. A tsunami was incoming for the industry as a whole, and only a lucky few made it to high ground in time.
Law firms that don’t recognize the fundamental problems facing our industry run the same risk. Too many firms are coasting on inertia and are unprepared for a shock to their system. Even outwardly thriving firms like Sedgwick can turn out to be brittle and vulnerable when a bad turn comes. Any firm that isn’t actively planning for the downturn may be just a few years from closing its doors.
To survive this war, firms need to be disciplined and realistic. They need to embrace financial planning, educate themselves in complex analytics, push partners for creativity and efficiency, and work hard on accurately understanding, allocating, and cutting their costs. They need to emphasize diversity in hiring and promotion to maximize the skill sets and communities at their disposal. They need to get scrappy, clever, and clear-eyed. They need to run themselves like a business, not a Victorian intellectual salon.
Gordon Gekko Need Not Apply
To be clear, I’m not advocating for the return of Gordon Gekko, nor am I advocating we abandon the higher goals we traditionally aspire to. The legal industry is under siege, but we should not jettison our better selves entirely in the name of staying alive and making money. We can and should run ourselves smarter, while at the same time remaining humane, caring, and reflective. For all the unearned bluster we sometimes ascribe it, it still means something to have a profession. We owe ourselves, and the society that has given us so much, to remember that.
The notion that we are a profession and not a business will do us no favors in the next decade. Neither will the idea that we must cut throats, pillage, and plunder to survive. To make it through the coming reckoning, we need to balance the scales between the professional and the business sides of our industry. We need to find the productive middle ground between Atticus Finch and Saul Goodman. Above all we have to survive, both body and soul.
The first step to surviving a war is knowing that you’re in one. Now it’s time to decide what kind of soldiers we choose to be. Choose wisely.
James Goodnow
James Goodnow is an attorney, commentator, and Above the Law columnist. He is a graduate of Harvard Law School and is the managing partner of NLJ 250 firm Fennemore Craig. He is the co-author of Motivating Millennials, which hit number one on Amazon in the business management new release category. As a practitioner, he and his colleagues created a tech-based plaintiffs’ practice and business model. You can connect with James on Twitter (@JamesGoodnow) or by emailing him at James@JamesGoodnow.com.
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