Over the past decade and beyond, we’ve witnessed an incredible consolidation of “big commercial law firms” in the U.S. market. Law firms have combined in every corner of the country, from the large, headline-grabbing transatlantic mega mergers, to the gobbling up of regional or local firms by big law competitors opening new offices in new cities and states.
In some markets, this left some mid-sized firms struggling for their footing — do they compete with the Am Law 100 that moved into town and swept up all their competing partner talent, or do they move forward with their own narrative, a regional or local powerhouse that can handle the most sophisticated matters but at an often lower price point?
But things have changed, as they always do. The appeal of a smaller platform seems to be gaining more and more traction. We’ve noticed a definite rise in interest from AMLAW100 partners in smaller platforms since the pandemic began. Stated a different way, partners from major law firms are more willing to consider a smaller platform than in previous eras.
But why, and more importantly, why now?
Short answer: The pandemic.
Long answer: Still “The pandemic”, but more specifically, the overnight conversion of the entire legal services industry to a virtual format has exposed with stunning clarity what a partner and their clients actually 1. Needs and 2. Wants from a law firm platform.
This certainly isn’t to say that smaller is always better in law firms (or visa versa), but rather to discuss why we’ve seen an increase in interest in smaller platforms.
1. Low Overhead Firms that are not operating with dozens or even hundreds of offices scattered across the globe have a lower operating cost (obviously). This is often translated into higher margins, very generous partner compensation systems, lower hourly rate structures and the ability for partners to have control over their own rates, and alternative fee arrangements. Partners with modest to large portable practices can often increase their compensation on smaller platforms, assuming they have the type of practice that doesn’t rely on specific international locations or expertise.
2. Operational Efficiency Another obvious point but it bears mentioning: smaller organizations are often more agile. Smaller firms have less “bureaucracy” to wade through to make decisions, including hiring decisions. A law firm’s efficiency in their lateral partner hiring is a huge factor in whether they will successfully recruit partners. More often than not, partners will talk to several firms before making a lateral move. Having an offer in hand and an open line of communication with firm leadership are more compelling than waiting to muddle through a long hiring process, no matter how compelling the opportunity is.
Operational efficiency also comes into play as it is easier for smaller organizations to make rapid pivots in response to market conditions, i.e. a global pandemic. At the onset of the pandemic, many smaller firms were able to avoid austerity cuts to the entire partnership , or target them to very specific areas that were actually impacted.
3. Integration. Firms that have a relatively small partnership have an advantage when it comes to integration of partners. It’s organically “easier” to get to know your fellow partners when they number in the dozens or very low hundreds. Smaller platforms derive the most benefit when partners collaborate and work together to retain clients and keep all client matters “in-house.” This can have a profound impact on cohesion and collaboration in the firm’s culture.
These are just a few of the factors that drive interest from partners coming out of AMLAW100 firms into smaller platforms. I anticipate more of these types of moves in 2021 and beyond as well all move forward into what we hope is the “post-pandemic” era.