Caution: Law Firm Built On Quicksand Ahead

(A Cautionary Tale For Lawyers of All Ages)(A Cautionary Tale For Lawyers of All Ages)

ack quite a while ago somewhere in Ontario, a fellow who I will call Sam started a law firm, which he quickly grew to be a decent firm of about 20 lawyers.

Sam was a fairly progressive guy for his time, in a number of ways.?

One of Sam’s philosophies was that it takes all types of personalities to build a successful law firm.?When other partners would complain that some partners brought in more clients or produced more billable hours than other partners, Sam would say “we need to have diverse personalities and skills to build a strong firm.?We can adjust for differences in productivity in compensation.”

Another of Sam’s philosophies was that he always hired the most knowledgeable and technically capable lawyers who he could find, often without regard to their ability to generate business.

While Sam had no hesitation about adjusting for differences in productivity in compensation, the practical problem that he ran into was that if the firm paid the big producers as much as they thought that they were entitled to, there would be nothing left for anyone else.??

Sam did not believe in an ‘eat what you kill’ approach.?Instead, he thought that all of the partners had to earn a ‘living wage.’?Accordingly, the ‘people at the top’, as Sam was fond of describing them, had to earn less than they otherwise would, for the good of the firm.?In Sam’s view, the people at the top would never earn the really big bucks during the firm’s building stage, but that was a sacrifice necessary to construct a great firm.?Sam believed that the day would come when the firm would be so profitable that the people at the top would finally realize the return on their investment.

Another of Sam’s philosophies was that he wanted his firm to be externally competitive, but not to be internally competitive.?For example, Sam would never make associates aware of the billable hour numbers of other associates, since he did not want associates to hesitate to work on matters which might not generate good billings (called ‘dog files’) but which were otherwise important to firm clients.

Over time, Sam’s philosophies resulted in a law firm which had more legal expertise than many and was more friendly than most to lawyers with families.?I am told that it was a very pleasant place to work, and that it had developed a reputation as being a firm at which lawyers could achieve the elusive ‘work/life balance’.?It was for this very reason that the firm was able to attract some excellent lawyers who would have otherwise gone to Bay Street or stayed at Bay Street.?Perhaps as a result, at one point the firm was 50% female, both through the associate and partner levels.?

While the firm was profitable and well respected, it sometimes had trouble attracting enough business, and never did generate the types of incomes for partners that some of the people at the top wanted to earn, nor did the associates earn as much as they could have earned on Bay Street.??Not surprisingly, some of the firm’s partners and more promising young lawyers would be headhunted by the Bay Street firms and would leave for the bright lights.?Many of the lawyers who had been attracted by the promise of working at a firm which did excellent work while allowing a degree of work/life balance chose to stay.

After about 20 years, Sam left the firm and the private practice of law.?I heard that one of the reasons that he left was that he could not find a way to generate the incomes that the people at the top (including Sam) wanted to earn.

Since then, partners and managing partners have come and gone, and over time the firm culture has changed.?At one point it had changed so much that the then managing partner, who I will call Rich (short for Richard, although some of his partners called him Dick), promoted a philosophy that was completely different than Sam’s philosophy.?

In Rich’s view, the problem with Sam’s philosophy was that it resulted in having too many lawyers with low billable hours because they were wasting their time on things like childcare, fitness, recreation and maintaining their relationships with their domestic partners.?If, Rich said, you could replace as many of those lawyers as possible with lawyers billing many more hours, the per partner income would increase dramatically.

Of course, Rich’s approach was completely correct from a purely mathematical perspective.?If the firm could ditch all of the lawyers who were billing 1,200 hours a year and replace them with lawyers billing 1,800 or 2,000 hours a year, the partners would make a lot more money.?When told that this was approach would be particularly difficult for women with families, Rich would point to a few female lawyers with families who would consistently produce at that level and argue that this was certainly not a gender issue.?It was just a matter of finding more lawyers who wanted to work hard and getting rid of the firm’s reputation as being a place which attracted lawyers who did not want to work hard.

Rich also believed that the ability to generate clients was the holy grail, and he went so far as to say that he was willing to hire second rate lawyers if they could generate enough business.?Presumably, Rich had some sort of plan to be sure that hiring such lawyers did not negatively impact the firm’s reputation for its expertise, but he was never particularly clear on how he was going to do that.

Rich would also argue, and again with some merit, that unless the compensation levels for lawyers could be improved, the firm would always be at risk for losing ambitious lawyers who could earn more money elsewhere.

Rich has come and gone from the firm.?I note that by the time that the Rich era had ended, the firm had close to 40 lawyers, of which about 2/3 of the partners were male and 1/3 of the partners were female. I hear that the firm is more profitable than it used to be.

Over the years, there were partners at this firm who loved working there.?There was an excellent group of lawyers. They did great quality work.?Clients loved and trusted them. When people had young children or were going through a personal crisis, they were able to ease off on their hours. Lawyers would help and support each other in their professional work.??And through all of that, they were able to earn levels of compensation which would make most of the population of Canada jealous, but which was nonetheless significantly less than the compensation which lawyers on Bay Street or in other harder driving firms might earn.

This is a true story, although it has been simplified a bit, and of course the names have been changed.?

To me, this story is about the inherent contradictions in law firms.

One could, in theory, imagine a law firm where all of the lawyers agreed that the goal was to earn as much money as possible and that they were willing to work extremely long hours to achieve that and to make any necessary sacrifices of their mental and physical health and their personal relationships that got in the way.?Whatever one might think of that way of life, we would have to agree that at least everyone would be pulling in the same direction and there would be an understanding that when a lawyer could no longer do that, it would be time to get out.

One could also imagine a firm where all of the lawyers agreed that the goal was to earn a reasonable living while making time to protect everyone’s mental and physical health and to nourish their personal relationships.?Presumably, those lawyers would also be pulling in the same direction and would be free from the stress of being treated as ‘not good enough’ by more financially ambitious peers.

The problem, of course, is that for all sorts of reasons, firms rarely adopt a consistent approach reflecting either of these extremes, and young lawyers often have no idea of what they are getting into, or how life events such as marriage, domestic partnerships, children, or health challenges, will change their priorities.?

Firms jump on the ‘work/life balance’ or ‘mental health’ bandwagons and talk a good game to attract lawyers, with no real commitment to deliver.?Young lawyers take jobs based on salaries which will allow them to repay student loans and obtain a standard of living that they desire with no real understanding of the time commitments required to earn that salary.?Also, as was the case with the firm first managed by Sam and later managed by Rich, partners driven by different goals change the foundational philosophies of firms over time, and lawyers can find that the ground has shifted beneath them and a firm that they genuinely loved no longer loves them.

There are lessons in this story for both older and younger lawyers.

In order to avoid sinking into the figurative quicksand of competing values that lies in wait for them in some firms, young lawyers joining firms need to think about who they are and who they will become over time.?Armed with this deep understanding of themselves, they have to look to join firms which have a stable and cohesive operating philosophy and partners with consistent values and a commitment to stay the course. Good luck.?It is not easy to find.

Older lawyers need to be vigilant to protect the culture of a law firm which they love being a part of.?Things change, as they must in life.?While many changes are necessary and unavoidable, changes in the basic culture of a law firm are sometimes driven by new partners who do not share the same values as the partners who came before them.?I am told that one of the partners in the firm that Sam started left the firm soon after Sam was no longer a part of it, saying that it was just not the same place anymore.?Although this partner was a relatively young man, I imagine that he felt like a very old person might feel when most of their friends are gone and they find themselves surrounded by people who do not share the values that they lived their life by.