Some years ago, I had the rather thankless task of directing a program on strategy for law firms. It was thankless in part because about half the participants didn't think law firms needed a strategy. They figured if you were smart, served your clients well and worked hard that things would be fine, as they historically often have. Just keep billing those hours! The other half might have been open to the idea that law firms needed a strategy, but completely opposed to having anything other than a consensus-built, senior partner-friendly mechanism for making strategic choices, which almost by definition is doomed to fail. Tough decisions such as which clients to serve and which not; which partners are creating value and which are not; and where to focus in terms of practice expertise and geography are nearly impossible to make by committee.
You could forgive them for a reasonable degree of complacency. After all, as the program organizer said in some exasperation, these guys were "working with a business model that hasn't changed since the time of Charles Dickens!"
Well, we did warn them. In the ten years or so since running that course, the assumptions underpinning a lot of the business models at law firms have come unraveled. Just as we argued, a lot of the lower-end, but profitable, work is now being done by cheaper providers or has been automated so that legally trained people are not necessary to get the basic results required (things like searching for documents in the discovery process). Clients have decided that there are other ways of getting the guidance and trusted advisory attention they need than being billed by the hour for it. Legal budgets have come under intense scrutiny as the Great Recession's aftermath grinds on. And — gasp — lawyers are now realizing that if nobody is looking after the business end of things — ahem — in other words, being strategic, the entire operation can come to a crashing halt. Witness the spectacular bankruptcy of once high-flying Dewey & LeBoeuf.
The problems started to become urgent when young lawyers, armed with freshly minted degrees, either couldn't get legal jobs or, worse yet, couldn't get jobs at all. The New York Times, in an article entitled "An Existential Crisis for Law Schools" reported that "only 55 percent of 43,735 graduates in 2011 had a law-related job nine months after graduation." The institutions we have are simply producing more lawyers than there is demand for. I've even seen job listings for paralegal help which explicitly say "No one with a JD degree need apply!" And that is at the entry level.
But things are fine for established lawyers, right? Not so fast. One outcome that I bet nobody in my class way back then thought would become a significant trend is that law firms are today culling their partner ranks, actions that would have seemed unthinkable years ago. Becoming a partner at a major firm used to be a guaranteed job for life, something like being a tenured professor. Yet, just as the Wall Street Journal reported on January 6, 2013, partners who aren't bringing in business are themselves being let go.
Back to that issue of strategy being, well, important, as it is going to help determine how well you perform. Firms can't simply muddle along any more.