Have We Learned Anything from the Demise of Law Firms? Mmm, Keep Your Legal Resume Updated.
The sudden collapse of megafirm Dewey through hundreds out of lawyers out of work. Think it couldn't happen again? Greenberg Traurig CEO Richard Rosenbaum says other top law firms were engaged in some of the same management practices that contributed to Dewey's destruction. "It was the entire business model that was the problem," he says in a December 4, 2015 interview with Bloomberg Law.
Particular problems with the common business model for law firms include:
Short-term greed of law firm partners, focused on their own annual profits
Growth for growth's sake, without concern to value added to the law firm's clients
Basing law firm mergers solely on money, rather than corporate culture
Multi-year compensation guarantees, irrespective of law firm and individual lawyer performance
Too much overall debt
Masking law firm debt by requiring individual equity partners to contribute more capital, thus transferring firm debt to individual partners
Chasing American Lawyer rankings without regard to sustainability or economic health of the law firm
If you're an equity partner, or considering becoming an equity partner, consider carefully whether your law firm has a sustainable business model. Even law firm associates--who are not privy to law firm financials--should keep an ear to the ground. And keep your legal resume ready.