At Law Firms, Can Culture Create Value?

Editor’s Note: The author of this post is the chief marketing officer at Haynes and Boone. This is the first installment of a two-part series.

By Murray Coffey, Chief Marketing Officer, Haynes and Boone LLP

“Optimal culture means creating an environment that results in genuine enthusiasm in your work while also allowing individuals to obtain a sense of balance and fulfillment in their lives more generally, insofar as they want it.” Sounds like something you might hear from a tenderfoot Millennial opining on what he or she hopes to find as they enter their career. It might surprise you to hear this is the sentiment of 30-year (now retired) Kirkland & Ellis litigation partner Steven J. Harper.

The prolific Harper, an adjunct professor at Northwestern University, author of “ The Lawyer Bubble: A Profession In Crisis ,” and award-winning blogger of The Belly of the Beast , calls himself a “…voice crying in the wilderness…” about what he sees as the legal profession losing its way in pursuit of increasing profits and non-strategic growth.

Harper is the best kind of contrarian you can encounter…scrupulously well-researched, with an uncanny knack for synthesizing data, big and small, into arguments that both challenge and enlighten simultaneously. And, despite the grim story his research sometimes tells, he remains a dogged optimist.

Harper thinks your firm’s culture means more to your clients than you might know. “Smart clients know there is a real value in culture that encourages long term thinking. They have always seen where short-term thinking has led to disaster.” While it may not have generated as much coverage as the eye-popping salary guarantees and salacious allegations of criminal activity on the part of firm leadership, the dislocation generated by recent law firm collapses such as Howery, Dewey LeBoeuf and Bingham created a very real and tangible loss for the clients. Harper said the problems were likely substantial. “I can assure you it’s not smooth sailing. It’s not like we’re going to pack up and start somewhere else…. I think it’s a loss that happens. It’s a loss of continuity, a loss of institutional knowledge that a firm can acquire sometimes over several generations of a client, sometimes over many generations, and smart clients know that.”

The dislocation generated by recent law firm collapses such as Howery, Dewey LeBoeuf and Bingham created a very real and tangible loss for the clients.

To put it simply, the question is whether firm culture adds value for the clients? The loss of culture at a collapsing firm has apparent implications for both the lawyers and staff that lose the firm they once knew and for the clients who now see splintered teams find professional homes at new different firms. Now think of one-time Chicago powerhouse Sonneschein which morphed in five years through a series of major mergers into Dentons, the world’s largest law firm. Does the culture (or the loss thereof) at firms that have grown from strong regional and national firms to organizations with offices in time zones around the globe matter to clients? Harper thinks the answer is yes, and there seems to be a growing body of data that suggests this might be the case in terms of market share shifting from the largest firms to smaller firms.

But the culture needs to be typified by innovation and responsiveness. In this respect, bigger is not always better. According to Harper, the optimal size of a firm is no more than about 201 to 500 lawyers. He elaborates in an October 2013 blog post citing to a CounselLink survey results :

“Among the firms with 201-500 lawyers, referred to as ‘Large Enough’ firms in this report, the share of U.S. legal fees paid by clients has grown from 18 percent three years ago (July 1, 2009 – June 30, 2010) to 22 percent in the trailing 12 months that ended June 30, 2013.”

Whose lunch are the “Large Enough” firms eating? The megafirms':

“Simultaneously, the share of U.S. legal fees paid by clients with more than 750 lawyers, the ‘Largest 50,’ has gone in the opposite direction — from 26% to 20% over the same period.”

The shift is even more dramatic in higher fee legal work: “‘Large Enough’ firms have almost doubled the share of high fee litigation matters — those matters generating outside counsel fees totaling $1 million or more (High Fee Work). ‘Large Enough’ firms grew their portion of U.S. High Fee Work from 22% three years ago to 41% in the trailing 12 months.”

Is this work shifting to the smaller firms because they have better cultures? The line connecting more quality work as a result of better culture is not quite that direct. According to Harper it is really the firm’s ability to adapt and stay true to the core mission of a law firm which he said is “Client service. That’s the core mission. I think there are other things that lawyers should do in terms of society and the world at large but if you’re talking about the mission of a law firm it is client service. It should not be maximizing current partner profits.”

Tying it together Harper said “I’ve never seen an institution that was more sensitive (to client service) as it got bigger. Firms that are big enough to handle large matters but small enough to have a flexibility and responsiveness, they’re going to thrive.”

How are these firms going to thrive? The ability to offer the clients a deep bench of the best and brightest legal minds is one of the most important elements for providing clients with value. Will “Large Enough” firms be able to compete with the mega firms? See Part Two of my interview with Steven Harper to find out his thoughts on what it takes to attract the top professionals and a little on how firms might be better managed going forward (Hint: it’s a little bit back to the future.)