Two old (1890 and 1924) San Francisco law firms folded in the past few months: Heller Ehrman & Thelen.
Both had payrolls with more than 600 lawyers, offices on both coasts
and over $100 million in billing. Many more law firms are going to fold
in the coming months.
Why?
I read the best insider explanation (not a public document) by Richard Gary a former chairman of Thelen and consultant to 40 other law firms.
Gary's explanation was symptomatic
of the problem. He was not a manager and doesn't truly understand
management. Other law firms listen to him, further proof of the problem.
Most law firms are
clusters of hard driving competitive lawyers, a modest proportion of
whom are the sources of the legal work that the firms do
('rainmakers'), the rest are just people who passed the Bar exam. The main law firm structure is a
partnership with a few stock owning 'participating in the spoils'
partners and the rest as lesser members. The common technical form of
organization is an LLC, a bastard stock holding form of partnership.
Management of most law firms evolved from a horizontal model with all newbies in a lower status. The model remains horizontal as the firm expands with teams that work on special client areas, with the creation of an elected CEO in some cases and an elected executive committee, with select sub-committees for personnel, administration and finance. Usually the committees are made up of active partnership lawyers. Occasionally their are hired non-lawyer administrators.
Many consulting and accounting firms have this same structure. And like Arthur Anderson, they fail for lack of management and impossible partnership bickering.
There is only one viable form of management for a large firm: a good manager at the top of a pyramid with power to hire and fire. Good managers only come from working under another good manager never from schools, law firms, personal experimentation or any other source.
The pyramid is the core form of management with authority and responsibility in the hands of one person at the top. There are countless variations on this structure from Office of the Chair to Boards of Directors that represent multiple divisions and multiple active outside interests. But the pyramid is the core structure.
Most large law firms don't have the pyramidal structure with a real managerial boss at the top and they are consequently doomed.