Room at the Waterhole: Midsize Firms Making the Most of the Middle

Midsize law firmsMany pundits would have us believe that sweeping changes in the legal profession will crunch medium size firms between the “we-can-do-everything-for-everybody” Goliaths and the new generation of super-lean virtual firms and narrow-niche boutiques.  However, a number of midsize firms I’ve spoken with claim, to paraphrase Mark Twain, that reports of their imminent demise are greatly exaggerated.

Quite the contrary, they say.  Midsize firms are perfectly situated to offer clients several compelling differentiators.  Edge International partner Ed Wesemann confirms that cost-conscious clients are feeding the migration of more legal work to smaller regional firms. “It’s a notable trend that is escalating as satisfied clients compare notes,” he says.

Bang for the Buck

According to Jeff Lutsky, Managing Partner of Stradley Ronon, “the last few years have finally laid to rest the outdated notion that bigger is better, and that size and geographical reach are necessary to achieve competitive profits.  Clients want excellent legal services at a fair price and are finding those qualities more and more in sophisticated midsize law firms.”

The idea that midsize firms can rival larger competitors in sophistication and service quality is echoed by David Antzis, Managing Partner of Saul Ewing: “Midsize firms are uniquely positioned to compete both for clients and talent.  Because of our regional footprint, we bear comparatively lower overhead than national or global firms, enabling us to offer greater value.”  Ametek’s General Counsel, Robert Feit, affirmed Saul Ewing’s value proposition when explaining his company’s decision to throw more work to the midsize firm.

Like Ametek, Georgia Pacific Corp. has sent significant new business to a midsize firm. Houston-based 100-lawyer Chamberlain, Hrdlicka, White, Williams & Martin now handles commercial litigation for Georgia Pacific that formerly would have gone to big firms.

Attracting and Energizing Top Talent

 Many midsize firms are gleefully welcoming high-profile, highly-skilled defectors from big firms whose global strategic plans mandated hourly rates that priced many practitioners out of their local markets.

Says Antzis, “[Our regional footprint] is also a draw for lateral candidates who want to continue doing interesting, sophisticated work but are feeling the constant fee pressure from clients.” 

For example, IP litigator Angela Agrusa left Baker Hostetler after 16 years and joined 50-lawyer Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor.  She saw the opportunity to pursue mid-market regional clients who would not pay BigLaw rates. “I did not have the flexibility to do contingency fee work,” she says, but at Liner Grode “if you make a business justification for interesting and complex work, you can do it.”

Midsize firms also engage lawyers’ interest and inspire a sense of ingenuity and adventure. These firms can be ideal platforms for forays into new or marginal industries that large firms won’t touch but that may evolve into healthy clients or profitable niche practice areas.  Amanda Robert recently reported in The Chicago Lawyer that midsize firms can enable development of unique practices in such diverse areas as luxury goods, sports, and even fire and explosions – practices far too esoteric for larger mainstream firms.

Firm Be Nimble, Firm Be Quick

Midsize firms also can tout the benefits of lean decision-making structures and greater responsiveness. “Our flexible, entrepreneurial approach to the delivery of legal services allows us to respond quickly to the demands of the marketplace,” says David Moran, Managing Partner of Jackson Walker’s Dallas office.  “For example, a pricing issue or AFA can be decided internally by a phone call to one partner, and that often allows a decision in literally minutes, rather than the cumbersome or top-down inflexible approach imposed by ‘management’ in some larger firms.”

The Punchline

The current competitive posture of midsize firms is that they can match the service quality of large firms, or close enough, and far more cost effectively. To be sure, big firms are not going to roll over and play dead, at least in their attempts to reclaim major clients from smaller firms.  However, while larger firms are actively taking their own steps to address clients’ budgetary concerns, midsize firms can still boast of the collaborative, more responsive relationships that benefit from a less cumbersome and costly infrastructure.

[For readers interested in this topic, I commend the article by my Edge Partner, Ed Wesemann, What is the optimum size for a law firm?]

© 2011, Edge International US, LLC.  All rights reserved.  No part of this post may be copied or reproduced without the express permission from Edge International US, LLC.

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2 Responses to Room at the Waterhole: Midsize Firms Making the Most of the Middle

  1. Pam,

    Excellent post. I agree on all counts. I well recall when jumped to the firm where I would be a partner for almost 25 years. At first we were only 7 in the Boston office of the larger firm. We didn’t get past 50 for several years–it was heaven. The words you use in your post–ingenuity, adventure, flexibility, entrepreneurial–all fit that experience perfectly (to the point of prompting a burst of intense nostalgia). And the clients felt it as well and responded.

    A few questions:

    You note, accurately, the “responsive” and “collaborative” client relationships that are fostered in a mid-size firm. Do you also feel that the partners and associates in these smaller firms are better team players there than they were, perhaps, at their original homes in BigLaw? In their new homes, can they transcend the less appealing aspects of large firm culture and build culture and institutional loyalty?

    Also–do you think that those “high profile, highly skilled defectors” will be able to resist the prime directive… expansion and growth? Will the desire to remain competititve on price be enough to keep these firms smaller?

    As the mid-size firm gains traction, will the team player be more highly valued than at BigLaw? I’d like to believe that collaboration withIN the firm is an idea whose time has come–and that the new generations of law firm associate will be asked to apply the collaborative skills for which they are known.

    Betsy

    • pwoldow says:

      Betsy,

      I appreciate your thoughtful response. I must be careful not to overgeneralize about the attitudes of lawyers who work in or move to midsize firms; certainly there are uncollaborative pushers, loners and fiefdom princes in every size firm, and competitive pressures can run high in all of them. My experience, however, is that most of those – even former BigLaw Big Dogs — who engineer a move into a more collaborative culture are there because they want to be there and will work hard to assimilate themselves into the firm’s culture and to adopt the firm’s level of responsiveness when relating to clients. I have witnessed some quite startling “personality transplants” among large firm immigrants breathing a different breeze. Conversely, “defectors” who move because they feel they’ve been forced into it and see it as a move “down market,” may exhibit patronizing attitudes toward new colleagues and overbearing demeanor toward smaller clients, and the transition doesn’t work out. Sometimes the magic works, sometimes it doesn’t.

      Good question on the “expansion imperative.” I think the expansion and growth “directive” depends on how well firm leadership is directing and how clearly the midsize firm has a solid strategic view of itself. “Critical mass” can be defined in terms of firm size & footprint, revenues, PPEP and/or preservation of cultural norms – so all the players must clearly weigh in on what they want.

      Jackson Walker, a Texas-only based firm, has made certain strategic decisions about its size, geographic location, and culture. It views those decisions as key differentiators. As Dave Moran points out: “First, by maintaining its physical or office footprint in only Texas, it affords JW a significant cost advantage over national firms whose overhead and cost structures are much larger. Second, although our “Texas” cost structure provides a considerable advantage, we have been able to compete successfully for clients that extend well beyond our Texas border. Third, Texas continues to supply growth opportunities, as more and more companies choose to leave the east and west coasts (and the north) for a more hospitable economic environment. That provides more opportunities to a Texas based law firm that has been here for 125 years.”

      The firms cited in my post are mindful of opportunities, but none is growing for growth’s sake or simply to be seen as large or growing; they stay mindful of their size as a positive competitive differentiator. The wisest firms know they have a good thing going, work hard to understand to why it’s going, and take pains to preserve what’s going.

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