Stable, transparent, not very complicated, reasonably profitable, and often quite collegial. It also has flaws.
As noted in Part I (330) of this “learning about law firms” series, it’s taken nearly two decades in the trenches, including many years doing applied work with law firms, for a very confusing and counterintuitive insight to come into focus: Most large firms are not “firms” in the sense of conventional business theory. Instead, they are a confederation of individual partners building and running leveraged practices in various complementary and adjacent legal specialties.
In today’s essay (Part II), I’ll add a second counterintuitive insight: For the most part, lawyers pay little or no financial price for organizing themselves as a confederation rather than a firm. Even in the event of spectacular collapse, as was the case with Dewey, Brobeck, Heller, Howrey, Thelen, and many other large firms, see ALM Staff, “30 Years of Law Firm Collapses: An Annotated Timeline,” Law.com, Oct 29, 2019, there’s always a large cadre of competitor firms looking to give the partners (and their fee-generating practices) a new home. In most cases, what provides financial security and certainty to an equity partner is seldom the quality of firm-level strategy, or the ability of firm leadership to execute, but instead the health and vitality of their own practice.
This is what distinguishes law firms from conventional businesses. Like Legos blocks, individual law practices can be removed from one law firm and snapped onto another.
Continue Reading Learning about law firms, Part II: Why confederation is our default model (332)