Published in Chambers Client Report, Spring 2008
How can law firms raise their standards and profits without sacrificing their partnership culture? Renowned for its friendliness but prone to financial underperformance, Lovells has battled to strike the balance.
One challenge is common to all ambitious law firms: to raise profits and stay competitive while retaining collegiality and their own distinct partnership culture. It is a high-stakes game. Take too much pride in a partnership approach, and a firm can struggle to deal with underperforming partners. High-billing star partners will soon head for the exit. But push too hard for increased performance, and you risk destroying the very working environment that retains talented people.
The recent troubles at Heller Ehrman, the medium-sized California firm, illustrate the risks. The firm was known and admired for its partnership spirit. But – determined to retain and attract big-billing rainmakers – the firm demoted several partners in non-core areas, and adjusted its compensation to a more eat-what-you- kill model. Rather than attracting big names, though, the firm has lost several well-regarded partners who felt the new model undermined the firm’s egalitarian culture. As one former partner said: “Now that they have made money [their] number-one [priority], I don’t know why they are surprised when people leave to make more money.” Only the tiny handful of firms which can offer more earnings than anyone else can afford to sacrifice culture for performance.
Equally, though, history is filled with once-stellar firms who have slipped into the mid-market as a result of a cosy culture. Stephenson Harwood, once a member of the UK’s elite group of nine, now languishes in the London mid-market. Of course, if a firm is happy to enjoy a relaxed culture at the expense of its position in the market, fair enough. But such a firm can hardly be surprised if it struggles to attract talented young lawyers. Stephenson Harwood has woken up to this, and has run a tighter ship in recent years.
For most large firms, the answer lies in finding the right balance between these two extremes. Perhaps no UK firm has faced this challenge more acutely than Lovells.