Over the years an elite group of law firms, known as the Sweet Sixteen, has come to dominate transatlantic work.
These firms have pursued one of two business models – expansive or traditional.
Firms following the expansive model grew by hiring laterally or merging, extending services to include transactional roles akin to those of bankers, and adopted compensation models based on production.
Firms following the traditional model restrained growth and network expansion and kept compensation largely determined by seniority. Often the choice between models depended on where the firm started rather than where its partners wanted it to go.
Firms following both models delivered excellent service to clients and produced excellent profits for partners. But the models have had vastly different consequences for employees.
In recent months the more expansive firms have laid off employees to bring workforces into line with the decreased demand for transactions. The traditional firms have not.
2008 should be one of the most profitable years ever for the Sweet Sixteen. The current year, which started with layoffs, performance reviews, and deferred start dates is likely to be worse.
Clients who fuelled past success are under pressure. Important financial services organisations have disappeared or dramatically cut back activities. Other clients are seeking rate concessions and changed working practices.
Post the financial crisis, the firms that will be most successful will adapt their business models to consistently provide three features:
- A distinctive value proposition for clients. Clients will know when to use them, how much it will cost and what level of service to expect during the engagement. Not all firms want the same value proposition – success comes from being valuably different. Winning firms will deploy talent and deliver and price their services consistent with this value proposition.
- Clear ‘contracts’ with talent. The career paths of professionals will directly support how value is delivered to clients and will develop legal and business skills and reward talent – the contract will trade off between security and earnings.
- An integrated network designed to satisfy both client needs and talent aspirations. Globalisation will continue, but with expansion plans more focused and precise. Winners will have ‘genuine’ networks and offices will be mutually reinforcing.
In light of this, the core questions are more pressing than ever:
- What is the Sweet Sixteen offering clients – excellence with little regard to cost or a specific way of working aligned to our strengths and our clients’ expectations of quality and cost?
- What is it offering talent – traditional training and job security or an opportunity for broad skill growth and advancement to high earnings according to merit, but without security?
- And where will the firms be located? How well are they integrated? What advantages flow from their networks? And what are their earning expectations?
- It is unclear which model will better ensure success for the Sweet Sixteen. But it is distinctly possible that, in the future, some of them will be judged to have failed, particularly by former staff.
David Barnard, Blaqwell