At Walker Clark, we remain amazed by how many law firm partners -- and even some law firm management consultants -- really believe that the legal profession will eventually be dominated by the global giants. Under this overblown scenario, all the other firms will simply have to be content with the scraps that fall from the big firms' dining tables.
Do not minimize the threat that "Big Law" poses to most smaller firms. Changes are happening in the delivery of legal services everywhere. Large firms do have resources -- such as money, people, and reputation -- that can give them substantial competitive advantages.
Our firm's experience and observations advising small and mid-size firms on business strategy, profitability, and internal operations, persuasively demonstrate that smaller firms can compete very effectively even against some of the best-known and most powerful law firms in the world.
In fact, there are some clearly positive indicators that small firms cannot only survive, but can thrive in the future.
the special, but not unique, advantages of small and midsize firms
Over the past 20 years, we have noticed three strategic advantages that many small and midsize law firms possess, but which are often undervalued and underused by their own partners:
- As a group, the small and midsize law firms in a legal market seem to do a better job overall in meeting their clients' most important service expectations. Our firm's client survey results over the past 15 years suggest that clients perceive small and midsize firms as having distinct service advantages over larger competitors that the clients have used, especially with respect to key quality indicators such as responsiveness, commitment to the client's success, and understanding the client's business.
- Smaller firms usually are able to make and manage significant strategic changes more efficiently, and often more successfully, than large firms. Part of this is because it is easier to turn a rowboat than an oil tanker. Part of it, we believe, is also due to a heightened awareness among partners in small and midsize firms of the need to remain competitive.
- Although smaller firms frequently are undercapitalized and more vulnerable to cash flow crises, their partners also frequently have a better practical understanding of, and pay closer attention to, the firm's profitability and financial management. This might reflect the reality that smaller firms often have to work within closer financial tolerances.
Of course, these are generalizations derived from group observations, and there always are exceptions in each group. Moreover, we also see all of these characteristics, to some extent, in some larger law firms. But, as the managing partner of one midsize law firm told me:
"This is no big deal. We do this stuff better because we have no choice. We have to be better or we'll be run out of business by the big guys."
None of this means that a smaller law firm is necessarily a better management model simply because of its size. A pebble can sink to the bottom of the ocean just as well as a boulder. It does suggest, however, that some small law firms have hidden strengths that their own partners sometimes overlook.
Can your law firm do this?
This is why my colleagues at Walker Clark LLC and I remain optimistic about the future of the smaller law firm. There is an especially strong strategic case for a small or midsize law firm if:
- The firm's partners understand, appreciate, and consistently demonstrate some of the strengths noted above.
- The firm articulates those strengths to the market, in clear terms of client benefits that make the firm stand out from the competition.
- They can resist the temptation to face a rapidly changing legal market with denials and attempts to convince themselves that "none of this stuff really applies to us."
- They are not afraid to challenge the assumptions that might have been responsible for their firm's success in the past.
- They make well-informed decisions, rather than just hopeful guesses at a weekend partners' retreat.
- Most importantly, they know how to manage change.
These characteristics are not the keys to a successful future. The challenges facing a small or midsize law firm in a fast-changing market environment are formidable, even for a firm that demonstrates all six of them. However, these six points mark a strategic path forward that has led small and midsize law firms to sustainable profitability and market success, even in the presence of larger, better resourced, and more famous national and international competitors.