The winds of changes are blowing on the legal market. The current financial and economic crisis of course, but also the underlying trends of globalisation, technology, and increased competition are some of the irresistible forces sweeping through the landscape. These forces will not fade, quite the opposite: even more substantial, structural changes are looming on the horizon. How law firms are coping with this fast-changing environment is a life and death question, and the game is reshuffling the cards among winners and losers.
The main challenge for law firms is to be able to change themselves, at best to anticipate and lead, at least to follow and adapt. Firms with a "political system" able to produce and implement firm-wide decisions to effect this change have a clear competitive advantage. Firms handicapped by a powerless political system are incapable of changing and, in this environment, may rapidly pale into irrelevance.
We have identified six political systems in law firms. We don't believe that all are equals. Some are receipts for disaster. Others give a powerful competitive advantage. Here is an overview of the existing systems, and an assessment of their strategic impact.
Absolute monarchy
Some firms look like France under Louis XIV. The managing partner is the ruler, and even the absolute ruler. There may be committees, partnership meetings, and other similar get-togethers but, ultimately, the managing partner is the one who calls the shots, and none dare challenging him.
Where does this authority come from? History, often. The managing partner is the founding father of the firm, and was already a highly regarded attorney when his current partners, by then baby lawyers, started as junior associates under his mentorship. Early perceptions die hard, and years or decades later, the partners feel the same respect as they did as first-year associates. Another source of authority can be outstanding turnover. Some firms appoint as managing partner the top rainmaker whom everyone will respect because he feeds the firm and looks like knowing how to successfully run a legal practice. When the founding father is also the top rainmaker, his grip on power is even stronger.
Are these firms able to adapt to change? In law firms as in government, some absolute rules are visionaries and innovators, other are status quo orthodox. So, we might thing that for these firms, success in a changing environment depends on the personality of the monarch, but actually we believe that in most cases, these firms are in a strategic disadvantage. Even when it works in the short-term, with the absolute ruler making right strategic decisions, these firms hardly flourish when Louis XIV goes into retirement. "Le Roi est mort. Vive le Roi" does not seem to work so well for law firms. Interestingly, we have often observed in absolute monarchy-type law firms that the main worry for leaders with a long-term vision is precisely to change the internal political system. They realise that absolute monarchy is not a viable option in the long-term, and want to delegate more powers to other partners or to practice groups and to involve them in strategy and management. The absolute-monarchy firms that have a chance to succeed in the future are those that will move to another political system.
Feudalism
A political system doomed to fail in the emerging legal market is feudalism, although it remains quite widespread among law firms. When the king is weak, the barons seize the opportunity to claim back or gain more autonomy. In these firms, being the managing partner is all about coalition building and reaching compromises and a modus vivendi with independent-minded individuals who jealously guard their territory. This power struggle (most of the time highly civilised, fortunately) has left more than one managing partner exhausted and cynical, and backing off into a de facto job of office manager. In these firms, making important strategic decision for the entire firm is of course very difficult, and ensuring implementation and compliance comes close to wishful thinking.
This is why we think that these firms, unless the change their political system, will inevitably slip down and eventually disappear from the rankings that matter. And yet, it can even get worse…
Anarchy
The political system in some firms is completely chaotic. Decisions of the managing partner are most of the time challenged, overruled or simply ignored. No matter what the managing partner has "decided", partners will make whatever they, and none else, have decided. Eventually the managing partner stops trying to make any decisions at all.
Each partner does what he wants, how, when, and where he feels like. Reporting lines and chains of command, if any, are systematically by-passed. The position of managing partner is the one that nobody wants. The question of long-term strategic success of these firms is not even relevant. The firm is already dead (but with leadership, perseverance and skills, it can sometimes be resuscitated).
