Will Law Firms Adapt—or Go the Way of the Dodo?
The fossil records, interesting on their own terms, offer some reason for optimism.
Correction, 10/11/13 1 p.m. EDT: The original version of this article incorrectly identified the home of the dodo. Prior to its extinction, the dodo only ever lived on the island of Mauritius. The first paragraph of the story has been revised to reflect that fact. We regret the error.
We all vaguely remember the humble dodo. A large bird, the dodo went about its business on the island of Mauritius until the Dutch arrived. The Europeans named it derisively—a pun on "fat-ass" is the etymologists' best guess—and proceeded, with the aid of their shipboard rats, to hunt it into extinction. The dodo lives on as a character in Alice in Wonderland, and as a cultural reference for creatures facing impending doom.
The dodo is, to use the current jargon, the perfect symbol for an entity ripe for "disruption." It didn't see what was coming (men with weapons), it lacked a necessary skill (the ability to fly), and there wasn't enough time for evolution to work its adaptive magic. So now the question: Are law firms, particularly big law firms, the dodos of the professional services sector?
The short answer is no. And the reason is pretty simple. Big clients need them. And unless and until a substitute provider of legal services at the high level appears, big law firms will have a future. Here are the caveats: The future of any particular firm is not guaranteed—it never was—nor will this future be free of change.
Can Big Law adapt to the times? One way to assess that likelihood is to examine the fossil record. For me that meant reading a dusty but fascinating book called The Wall Street Lawyer, which was finished 50 years ago. It was written by New York University professor Erwin Smigel, who was part of a small group of academic sociologists and financial journalists who in the late fifties and early sixties poked around in the then cloistered world of big law firms. They were consumed with determining whether lawyers, members of the last "free profession," had become highly educated "organization men," who spent their days protecting "the power elite" for extraordinary payments—up to $100 an hour. (Every age has its obsessions.) What Smigel left behind was a remarkable snapshot of a profession that had little idea about what was coming yet managed, despite its comfortable, sedentary role, to evolve.
Writing in 1963, Smigel described a small, status-conscious world. There were only 20 firms in New York that had 50 or more lawyers. The largest was Shearman & Sterling, with 125. Most of their lawyers came from three law schools: Harvard, Yale, and Columbia. A remarkable 28 percent of their partners were listed in the Social Register.
Some things haven't changed. The firms existed to represent and defend "big blocks of power and money." Firms were seen as postgraduate vocational schools. About a third of the associates would leave within three years. And, it may be a relief to hear, it was taken for granted that the current generation of lawyers didn't "work as hard" as earlier ones.
That sounds like a formula for complacency and failure, especially as the nation was entering a period of social and economic upheaval. These were houses of privilege and unapologetic bias: Few Jews, fewer women, and virtually no blacks were admitted. Firms were insular, homogenous, and hierarchical. And then they changed with the rest of the wider world.
After five years Smigel updated his book. By then the firms were hiring—and promoting—Jews and Catholics. They were allowing, some even encouraging, their associates to take on pro bono work for the poor. They were growing rapidly: New York had 11 firms with 100 or more lawyers; there were at least nine others dotted around the nation. And those firms witnessed a 60 percent growth in in-house lawyers, a development the firms welcomed, for it meant clients were turning to them now for the "more interesting" work. What happened? The practice had changed, especially in finance and mergers and acquisitions, and recruits wanted a somewhat different experience. The firms needed more talent than their previous discriminatory practices could support. Change was a rational response to a big opportunity.
Will firms adapt again? We'll find out together. But there are two points worth noting as we watch. First, of the 20 firms Smigel studied, seven have died or merged out of existence. Second, the firms that adapted faced competition only from themselves and a few ambitious new start-ups. This time there is the prospect of new entities, trying to use different business models and supposedly transformational technology to wrest away market share. The firms who thrive will be the ones who didn't sit on their dodos.
Press, ALM's editor in chief, can be reached at firstname.lastname@example.org.