Research Reports

A Fragile Balance: Business, Profession, and Culture in the Large Law Firm (GR 15-02)

This project explores the ways in which large law firm practice is changing in light of substantial structural changes that are producing increasingly intense competition in the legal services market since the economic downturn that began in late 2008. It examines how law firms are responding to this competition, and the extent to which they are attempting to fashion distinctive organizational cultures that reflect a given firm’s balance between business demands and professional values.

A common analytical framework for conceptualizing the large law firm since its emergence in the late nineteenth century relies on a dichotomy between law firm practice as a business and as a profession. For more than a century, there has been criticism in some quarters that the practice of law has declined from a profession to a business. Increased competitive pressures over the last three to four decades, however, have intensified this criticism, and changes in market conditions since the economic downturn have only reinforced it. The claim is that large law firms are now simply one form of business enterprise whose behavior is dictated solely by the demands of the market, with scant attention to professional values.

This report reflects preliminary analysis of interviews with 257 law firm partners in the United States, almost all of whom work in large firms. Our conclusion is that firms are indeed facing unprecedented competitive pressures, but that they are not necessarily behaving simply as market-driven entities that focus only on financial rewards. Firms see little choice but to respond to the market in ways that place more explicit emphasis on the financial performance of both the firm and its individual partners. They exhort their partners to be entrepreneurial, persistently seeking clients and opportunities to generate revenue. They are reinforcing this message by placing greater emphasis in their compensation systems on business generation, and by demonstrating a greater willingness to let go of partners and practice areas that the firm regards as insufficiently productive. Firms also are continuously engaged in attempting to recruit profitable partners from other firms, sometimes by offering compensation that exceeds the amount that most of their existing partners receive.

At the same time, to varying degrees, firms seek to create cultures that tie partners to one another and to the firm on the basis of non-financial professional values. The types of entrepreneurship they encourage, how they balance business generation and other considerations in compensation decisions, the measures they adopt to deal with underperforming partners and practice areas, and the ways in which they engage in lateral recruiting all afford at least some opportunities to temper business demands with professional concerns. Not all firms are equally committed to striking a balance, and those that are must navigate considerable tensions. That a firm makes an effort to do so, however, is important to most partners. We suggest that this process reflects the latest iteration of the large law firm’s effort to operate both as a business enterprise and as an organization composed of professionals. The balances that firms strike are fragile but meaningful in an era in which market forces are exerting a powerful influence on the large law firm.

The discussion of law firm culture in this report admittedly proceeds on a relatively general level. Further analysis based on our research will examine in more detail various mechanisms of cultural transmission, and the extent to which their effectiveness is mediated by factors such as practice area, office location, status as income or equity partner, informal personal networks, and other dimensions of law firm practice.

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