Over the last week, I read two interesting articles about the legal profession. A friend of mine sent me a link to an article in the April issue of the Philadelphia Magazine. The article: "The Last Days of the Philadelphia Lawyer" talked about changes going on in the legal profession. The second article dated April 30, 2008 was from The American Lawyer and was titled: "Lessons of the Am Law 100: Is the Golden Age Over?" These two articles focused on the not so subtle changes our profession is facing and will continue to face over the next several years. In fact, many pundits have predicted that the days of the 200-400 lawyer regional firm are numbered.
Consider these shifts in the size and composition of our profession over the last several years:
Merger mania. In 1997, in the heat of the bull market, just 11 law firm mergers were completed. In 2007, as the economy was deteriorating there were over 50 law firm mergers.
Increased revenues per firm. According to Altman Weil, in 2006, Average revenue per lawyer in the law firms surveyed was up 4.3% to $419,826 in 2005 seven firms produced more than $1 billion in gross revenue.
More lawyers. In 1951, there were approximately 200,000 lawyers in the United States, 1 for roughly every 700 people in the nation. Skip forward to 2007 and the profession had grown to about 1,143,358 licensed lawyers representing 1 lawyer for roughly every 200 persons. At this rate we are not far from the day that there will be a one-to-one relationship between licensed lawyers and American citizens.
Size of law firms. In 1960, there were only 38 law firms in the entire country with more than 50 lawyers. By 1985 there were more than 500 firms of that size or bigger. Today, a 50-lawyer firm is considered a small firm. In most cities a firm that size is a relatively recent start-up, a merger candidate or a highly specialized boutique. Today's largest law firms include thousands of lawyers. The average number of lawyers in the Am Law 100 is 781.
Increased Profit per Partner. Not too long ago, partners who claimed a $250,000-per-year share of profits, considered themselves well-off. But in today's high-end, highly competitive world of business law, this would be a dangerous level of performance for a firm of any substantial size. Consider the PPP of the nation's 100 largest law firms: In 2006, for the first time, a majority of America's 100 top-grossing firms had profits per equity partner of $1 million or more.
Litigation. Because large law firms are so focused on increasing profits per partner, they no longer want the kind of work that provided opportunities for young lawyers to go to court. I can remember when I started, a group of associates met at the courthouse frequently as each of us had small insurance subrogation cases, or court appointed criminal defense cases to litigate. Now, I know litigation associates who become partners in their firms without ever trying a case. Needless to say that can be disheartening for a young lawyer who aspires to try cases.
Law firms are becoming bigger and richer, and young lawyers are earning more than ever before, which seems more cause for cheer than concern. So why is our money-hungry profession in crisis, why are our clients dissatisfied with the quality of our legal services and why are so many young lawyers disillusioned with our profession?
Law firms are growing - and closing - at record rates in the new millennium, and our entire profession is being turned upside down. Many law firm leaders fail to recognize the need to change the main focus from profits and billable hours to clients and the development of the firm's young lawyers.
I am reminded of our 2004 Olympic basketball team - talented losers. Compare that team to the first U.S. "Dream Team" that included Michael Jordan and Larry Bird. Those players never let their exceptional skills substitute for adherence to the game's fundamentals. Jordan, who often seemed like a one-man, high-flying, point-making machine, never forgot his philosophy, "Talent wins games, but teamwork and intelligence wins championships." And Bird was a player so dedicated to fundamentals that he always showed up for a game hours before anyone else - so he could dribble the ball and detect any flaws on the court.
Both men - and their teammates - recognized the power of focusing on the basket, not the scoreboard. The 2004 U.S. Olympic basketball team included just as much talent, but took a third-place bronze medal because they were less focused than the Argentine and Italian teams on the basics of basketball.
Many law firm leaders who are focused on the scoreboard - The AM Law profits per partner - will ultimately lose in an economic downturn to those who understand the value of the fundamentals - training, motivating and retaining their best talent and providing exceptional service to their clients.
