Behold the legal bombshell: 500-lawyer national firm Heenan Blaikie may be folding, or at the very least re-structuring as early as next week, according to The National Post and The Globe and Mail. It’s like the opening line of Adele’s booming Skyfall theme: “This is the end….”
At Heenan Blaikie, Initial Public Offering (IPO) work, although lucrative, was down 80 per cent in 2013 from 2012, according to The National Post. The theory was faulty and the assumptions were flawed: firms can grow bigger and take marketshare away from other firms. In marketing, any category (law services, iPhones, Netflix, Labatt’s Blue or Big Macs) is finite. The true essence of marketing is to come up with new categories.
Overhead on Bay Street is ballpark $300,000 per lawyer—and that’s just to keep the heat, lights, and photocopiers on. There are too many big Bay Street firms already chasing the same work. Then, there is the conflict search. Any marketer worth his salt will tell you that to take business away from an existing firm requires a Herculean effort. Heenan Blaikie failed to read the tea leaves.
Last week, there was another sad story in The New York Times. It was about a New York M&A lawyer, Gregory M. Owens, 55, who was making $375,000, but who was broke. The article was titled A Lawyer and Partner, and Also Bankrupt. He got into this predicament for two reasons. He got divorced and pays about $10,000 a month in spousal and child support. And, the way lawyers get paid in big firms is changing. Mr. Owens didn’t read the tea leaves either.
There are lessons in these two stories for young Canadian lawyers that I can pass on, based on my experience doing marketing and public relations at giant law firm McCarthy Tetrault as well as having mid-size firms.
First, lawyers are not taught about business at law school. I hear this lament from clients all the time. They are not taught how big business works, nor how to run a small business. Mr. Owens had been following the trail of one of the New York great rainmakers in M&A, but M&A work is changing.
So, the lesson is: think carefully about the type of law you want to practice, how you’ll get clients of your own, and the viability of that practice 25 years from now. Turns out that Mr. Owens’ specialization in a sub-set of M&A was just too, well, specialized. Also, learn how the firm you join is managed: Who are the leaders? Are they savvy enough to adjust the sails if the wind blows from another direction? Most large law firms are not nimble decision-makers; inertia has a heavy price tag.
Second, the career paths of lawyers are changing. Mr. Owens is no longer an equity partner, but rather a non-equity or “service” partner. In other words, an employee. He no longer enjoys his share of profits brought in by masses of keen, young associates working flat out 1,800 or 2,000 hours per year.
In smaller Canadian firms, there are many other business models other than the traditional, equity-holding partnership. Those include the “professional corporation” where lawyers work on salary, plus income-splitting. Or, the “in association” model where both work and income can be shared among lawyers. For a lawyer winding up (or winding down) a practice, these can be a great environment, away from the pressure cooker (internal client poaching and other dysfunctional behaviours) of Bay Street.
Or, do you want to start your own firm? Because running a law firm is really: running a business!
Third, at no point in law school are law students taught how to run a business. That is a big mistake. Law students don’t know much about finance, operations, human resources (including managing other lawyers), marketing, and public relations. This makes it doubly hard to run a successful practice if you want to strike out on your own.
When you’re running your own practice, you “eat what you kill,” meaning you have to do your own marketing and public relations. The most common face of PR is media relations where we pitch CBC, CTV, The Globe and Mail and The National Post and other news outlets on interviewing our client.
Public relations is arguably harder than marketing: when you get an article published or you’re interviewed on television, you win big-time. When our pitch misses the mark, there is no appeal process. I’ve spent a lot of time teaching public relations to lawyers before we get to implementation.
Our most successful law firm client comes from a family of accountants. He knows how the numbers work—at all times. He checks intake, WIP, and his bank balance daily. I keep telling him that he is less “lawyer” and more “businessman.” He just smiles. And markets and does public relations like crazy.
One of the great things with social media is that you can easily re-package and re-purpose everything you do in marketing and public relations. Deliver a speech? Send it to clients. Do a presentation? Post it to SlideShare. Write a blog? Post it to LinkedIn.
Increasingly, clients are sensitive to the reputation of one specific lawyer (which is built by public relations), rather than the reputation of the law firm as a whole. So, you want to build your own reputation because, eventually, every Rainmaker retires. At the end of the day, law is always about who will give the work to you, as opposed to another lawyer. And, don’t forget to read your tea leaves.