Technology

Don’t Let Your Law Firm Get Over-Lawyered To Death

How the classic law firm model fails, and how modern law firms succeed.

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Six months ago, most of us hadn’t even heard of generative AI. Today, legal industry leaders are all grappling with how much this new technology is going to change the way we do business, from basic research to contract drafting to potentially changing how much headcount a firm can or should maintain. These days, generational shifts in the practice of law seem to be coming around every two or three years. Law today is not for the faint of heart.

Back when change was more incremental, law firm leaders could afford to make decisions slowly and deliberately. This generally suited lawyers’ personalities. Ours is a precedent-based business. We make our living helping clients identify and avoid risk, piloting their grand business visions through established processes and safe harbors. Being careful and considered about change is in our nature.

Slow decision-making processes were also an artifact of the relatively unique ownership structure of most firms as compared to the larger business world. When considering the universe of companies making hundreds of millions or billions of dollars in revenue a year, most have either a highly concentrated or highly dispersed ownership structure. You have closely held mega-corporations, often governed by the owners themselves, and your publicly traded entities, governed by the C-suite and a selected board of experienced business professionals.

What you don’t find a lot of are companies in the middle, those with flat organizational structures and large numbers of stakeholders. No stakeholder commands huge voting power on their own, but all of them have a sizable voice and a non-negligible amount of influence. In the cutthroat survival-of-the-fittest business world, few organizations have evolved that sort of structure. Yet that is the model on which so many firms operate — largely, I’d argue, to their detriment.

The Odd Industry Out

Most of the prevalence of this model strikes me as a combination of an historical accident and an artifact of temperament. The modern law firm started on the classic partnership model, which is a model that makes sense when it’s a few people in a room trying to make decisions about their combined enterprise. But as the practice of law scaled up, the model of our business stayed largely the same.

That’s partly because, for better or worse, law firms are made up of lawyers. We’re smart, opinionated people who get paid well to weigh in on our clients’ major decisions. Is it any wonder that a group made up of the people who gravitate to that sort of job would also have a lot of strong voices that care about maintaining their seat at the table? More than that, we’re owner-operators who live and breathe our company in ways that passive investors and executives-for-hire just can’t. Stockholders can sell out, executives can move on, but a lawyer never really leaves their practice behind them.

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Whereas most trades and industries shifted responsibility for management and vision up to the C-suite over the past decades, much of the legal industry has kept its leadership structure flat and broadly distributed. Their legal structure may have changed, but in their heart of hearts most law firms remain partnerships.

All of these factors — temperamental, historical, and structural — reinforce a law firm culture of slow, measured change. We analyze, discuss, and debate ideas thoroughly. We campaign within our firms to build consensus, and we find compromises to get the votes we need. It’s the same careful, deliberate decision-making that our framers sought when they created our congressional system.

But if you’ve been paying attention to our government any time in the past 30 years, that comparison should not inspire confidence.

What Makes Sense Today?

I understand why the partnership decision-making model has dominated for as long as it has, but I don’t think it’s made sense from a business perspective for decades. As soon as law partnerships graduated from a few attorneys around a conference table to mature enterprises with hundreds of attorneys and thousands of staff, the old model stopped working. Most partners spend the majority of their time tending to their practices and keeping their cases moving along, and they simply don’t have the bandwidth to keep up with industry trends and changes — let alone have critical statistics committed to memory and know the inner-workings of the firm.

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Further, the sheer number of voices needing to be heard on every issue in a partnership management model is a recipe for death by committee. By both nature and training, we tend to be good at spotting problems and pitfalls in proposed solutions, while underdeveloped at spotting and seizing opportunities. Consensus tends to be easier to build around old, proven, safe ideas, while transformative, disruptive concepts struggle to get off the starting line. Although partnerships sit around and debate concepts to death, tabling bold action for further consideration, more nimble corporate entities can swoop in and eat the partnership’s lunch.

Perhaps when the economy was booming and industry-wide changes were rare, we could get away with suboptimal leadership methods. Inefficiencies and mistakes were masked by strong market conditions. But those days are gone.

Can We Stop Ourselves?

It’s no secret that lawyers have high opinions of themselves. We think we’re the smartest people in the room. We’re control freaks. We love to share our views with others. Why should we stop ourselves from inserting ourselves into every management decision — pointing out flaws and risk?

The answer: because you’ll kill your law firm if you don’t. Law firms that want to thrive in the coming years need to adopt governance models that empower their leadership to make rapid, bold, and sometimes controversial decisions. Firms need to embrace risk and change, and the discomfort that comes from trying something transformational. Partners need to shift from thinking of themselves as individual contributors and think more about the health of their firms as a whole. It’s a big ask, but the times demand it.

This isn’t a call for firm management teams to be given a blank check and no oversight. If anything, empowering firm managers to make tough decisions quickly will make consensus building more necessary than ever. A law firm’s executive team needs to communicate its thoughts, goals, and vision relentlessly. It needs to have an open door for partners, associates, and staff to be heard and potentially influence the decisions that get made. More than anything, leadership needs to cultivate trust and buy in within the firm, because increasing our tolerance of risk will lead to failures at some point. By building trust, we can survive the failures, learn from them, and fight back against the inevitable push to retreat to the old business model that doesn’t work anymore and never really did.

GoodnowJames Goodnow is the CEO and managing partner of NLJ 250 firm Fennemore Craig. At age 36, he became the youngest known chief executive of a large law firm in the U.S. He holds his JD from Harvard Law School and dual business management certificates from MIT. He’s currently attending the Cambridge University Judge Business School (U.K.), where he’s working toward a master’s degree in entrepreneurship. James 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 and run 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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