The future of law firm branding

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My semi-monthly column is up and running at Slaw. As always, I recommend you go read it there, because I guarantee you’ll find other very cool stuff at Canada’s best legal blog. If you haven’t visited lately, you might not know that Slaw has added great new bloggers like Dave Bilinsky, David Canton, David Fraser, Nick Holmes, Patricia Hughes and Omar Ha-Redeye to its roster. Go read my column there today.

And as always, I’ll post it here, too.

A couple of weeks ago, I wrote about the ascendance of individual lawyer brands. Today, I want to write about the corresponding decline of law firm brands. And there’s no better place to start that discussion than with the fate of Heller Ehrman.

Heller Ehrman, if you’re not familiar with it, is a century-old California law firm that dissolved last week. You can find detailed coverage here, here and here. The lasting impression you take away from these reports is that Heller was neither evil nor incompetent. Its rivals were sad to see it fall, and many of its employees were devastated and in tears, referring to the firm as a “family.” There’s no schadenfreude or sense of just desserts here.

Heller is not the first firm to go down in the relative blink of an eye. Here in Canada, the profession was shocked last year by the sudden collapse of respected Toronto firm Goodman and Carr. Other names like Brobeck and Coudert come to mind as well. In most of these cases, what really stands out is the astonishing speed and seeming lack of warning with which everything gave way. The only tremor emanating from Heller was a pair of failed merger talks, but as soon as that word began circulating, the breakdown was underway.

Sound familiar? It should, unless you’ve ignored newspapers and television for the last two weeks, and the collapsing house of cards on Wall Street that they’ve been chronicling. Because when you get right down to it, the same affliction really took out both Heller Ehrman and the likes of Lehman Brothers: the marketplace suddenly stopped believing in them.

The consistent theme of the analyses emerging from Wall Street’s rubble is that the industry’s level of trust in each of these entities fell away, first gradually and then suddenly. And when that happened, what became apparent — with frightening speed and clarity — was that trust was really the only thing keeping these institutions afloat. Here’s Derek DeCloet of the Globe & Mail:

Mistrust – or lack of confidence, if you prefer – is the most corrosive thing you can ever have coursing through the world’s banks and credit markets. Mistrust maims and destroys. In the end, a financial institution’s only asset is trust. Brand names, history, branches on the prime corner of small towns – they don’t mean a thing unless there’s confidence. Ask anyone who worked for Northern Rock, IndyMac, Washington Mutual, Wachovia, Bear Stearns, Lehman Brothers ….

And here’s James Surowiecki in the New Yorker:

[T]he entire edifice of Wall Street is built on confidence. Investment banks rely on short-term debt to run their businesses, and their businesses consist of activities — trading, deal-making, money management — that depend on people’s faith in their ability to honor their obligations. As soon as the customers and creditors of a company like Lehman start to wonder whether it might collapse, they become less willing to lend or to trade, and more likely to demand their money back. The perception of weakness exacerbates the reality of weakness. And although there are myriad measures of a company’s health, nothing looks scarier than a stock price that’s heading toward zero. …

The downward spiral can be stunningly fast and near-impossible to escape. Lehman’s assets were not significantly more toxic last Monday, when the company filed for bankruptcy protection, than they had been a week earlier. And, technically speaking, the bank may not even have run out of money, since it had access to an emergency liquidity line from the Federal Reserve. What Lehman did run out of was credibility. It couldn’t remain a going concern because creditors and customers no longer trusted it.

Try reading those entries again, substituting law firms for investment banks. What Heller Ehrman demonstrates, and what should seriously worry managing partners everywhere right now, is that law firms really are no different. Bruce MacEwen at Adam Smith Esq. is exactly right:

[T]he stark, glaring reality is that law firms are fragile institutions. … There doesn’t need to be anything wrong with Heller, or Morgan Stanley, Goldman Sachs, or Merrill Lynch, for people and the market at large to perceive there’s something wrong with any of those firms. It’s the run on the bank mentality. … The curtains come down and the lights go out when the abrupt exodus of partners, clients, and erosion of the revenue base, occasion breaches of bank lending covenants and a shut-off of credit.

A law firm’s most important asset is not its work in progress, and it’s not even the people who walk out the door every night. It’s the confidence that the market places in the firm — the extent to which the firm inspires the continuing untroubled assumption that this collection of talent and commitment is safe to believe in. Everything else is details. And that’s why law firm brand is so critical.

Very few law firms possess what marketers would strictly refer to as a “brand” — a differentiating reputation for or identification with some distinguishable trait that constitutes a competitive advantage. But every law firm of even minimal presence has a “brand” in the sense of a recognizable profile in the marketplace based on acceptable levels of competence and reliability.

If a firm is known to sufficient numbers of clients, carries out its tasks, and keeps its promises, it earns confidence. Its name — be it Skadden, Linklater, or McCarthy, or something less gilt-edged — is shorthand for a repository of client trust. Its brand is essentially its marketplace ID, its industry access pass, its credit line of credibility. Lose that, and it loses everything.

And here we come to the crux of the issue for law firms: a brand needs to be controlled. If you’re not in charge of your own brand, if you can’t make it be and do what you want, you’ve got a problem. Because that means someone or something else is in charge of your brand, and you’re at their mercy. Law firms are running out of ways and means by which to control their brands.

Look at it this way: a brand is a promise to the marketplace that your product or service will consistently feature the characteristics X, Y and Z. An individual lawyer can say, “I will provide these sorts of legal services, I will deliver them in this fashion, and I will deliver them to these types of clients.” That’s the heart and soul of a professional brand right there. The lawyer who chooses to makes those promises and carries through on them controls his brand.

A pair of lawyers can make and keep those promises about as well as one can. Five can manage it, though it gets harder to ensure everyone meets and maintains the same standards and criteria. It’s harder again with a dozen lawyers. And when you get past 20 — and especially when you get to 200, or 2,000 — it becomes well nigh impossible. Law firms of any substantial size really have little control over the clients they take on, the ways in which they deliver legal services to those clients, and who is delivering those services. Think about it.

Law firms don’t have much control over the clients individual lawyers take on. Conflicts of interest are the only obstacle that a firm can realistically place in the way of a partner who wants to being in a new client. Unless the new client would interfere unduly with an existing (and more profitable) client, a lawyer is generally free to take it on — regardless of how poorly or even contemptuously his or her partners might regard that client. The lifeblood of a law firm is billable business, and as long as the lawyer brings that business in, the firm won’t much mind who or what the business is attached to.

Law firms don’t control how lawyers deal with their clients. Lawyers are notorious for the unique and even idiosyncratic ways in which they deal with their clients. They call clients as often or as infrequently as they like, deliver written opinions in whatever format they prefer, offer as much or as little detail and explanation as suits them and their individual clients, and so forth. Consultants urge firms to institute differentiating practices like 24-hour client callback. But the reality is that enforcing practices like that is pragmatically difficult and culturally all but impossible. A client who switches lawyers within the same firm might reasonably think he has actually switched firms altogether, for all the consistency in service delivery between the two.

Law firms are losing control over who delivers their services. This is, in many ways, the most critical one, because clients hire the lawyer first, the firm second. Unprecedented lateral movement of partners, combined with firms’ proven inability to retain associates at will, means the people delivering a firm’s services change with mind-spinning frequency. Many clients associate a firm’s brand with that of the lawyers with whom they deal. But if the names and faces of those lawyers keep changing, that reputation becomes equally transient and unreliable. Are you a great M&A firm? Okay, your best two M&A lawyers have just joined your biggest competitor, and a third has gone in-house. What are you now? Your brand has changed, and you had no say in the matter. If that lack of control doesn’t scare you, it should.

What it comes down to is this: a firm’s marketplace currency — its lifeblood — is the degree with which its brand is regarded with confidence by the marketplace (and that includes its clients, its competitors, and its own talent). Managing that brand and maintaining that confidence is therefore of the utmost important. But the means by which a firm’s leadership can do that are slipping away.

The newest, most affordable and most intriguing branding tactics — blogging, Twittering, micro-marketing, pinpointing — trend towards the individual lawyer, not the collective firm. Firm branding tactics — advertising, sponsoring, partnering — are traditional, resource-intensive and mass-market-oriented: blunt instruments in an age of precision targeting. It’s easy for an individual lawyer to build a trusted brand through her character and accomplishments, and to amplify that brand by blogging or podcasting; it’s very difficult for a firm of 100 lawyers to build trust the same way.

If many law firms were to stop and take stock of their most important asset, they would likely realize that their brand owes far more to historical momentum than it does to consistent deliverables. Now, momentum is a powerful force, nowhere more so than in the law; but you simply don’t know when it’s going to run out and Coyote Gravity will kick in. Dig beneath the surface of many law firm brands, and you’ll strike hollow space a lot sooner than you might think. In a lot of cases, there’s not much there there.

What can law firms do about this? Honestly, I’m not really sure there’s much they can do. If your brand is your lifeblood and you don’t have control over it, then you need to take steps to gain that control, even if only a measure of it. You need much stronger oversight of client intake and service delivery methods. You need to outdo all your rivals in terms of your ability to keep partners on board and retain the associates you most want to retain. You need sufficient consensus to enforce at least a modicum of the standards you say you stand for. And frankly, you need to be of a sufficiently compact size that you can realistically manage to accomplish some of these goals.

But really, I’m not sure all of these put together would make enough of a difference. I still believe the long-term future of the legal profession belongs to client-driven alignments of solo and small practices. The world’s largest firms — the 10,000-lawyer behemoths on the distant horizon — are going to be those that specialize in commodity-type work, the kind of things that can be automated, templated, algorithmed and standardized — the kind of work for which ISO 2001 ratings will be meaningful measures of quality assurance. The bigger you are, the more your work needs to be susceptible to the consistency and predictability of the assembly line. That’s just about the only way you can develop and control a brand on a scale of that size, and the law will prove no exception.

If you don’t control the content of your brand, then your brand becomes little more than leftover reputation, general opinion, holdover name recognition. Active brands are powered by trust and confidence, and at the end of the day, these attributes are earned by individuals, not collectives. Gather and nurture these individuals and their brands, and you have a chance. Fail to do so, and you’ll be left sitting around wondering when the inertia will run out.

There will come a day, sooner than many people think, when vast numbers of law firms disappear almost overnight. The shock to the profession will be profound and lasting. But the reason will be simple: the glue that held these entities together — the confidence of the marketplace, the trust in the name, the power of the brand — dried up and wore off, little by little, until the bonds of collectivity simply fell away. That’s what happened to Heller Ehrman.

Who is your firm? Why should we believe you? Why should we believe in you?

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2 Responses to “The future of law firm branding”

  1. Vickie

    Great post. I’ll be publishing a piece about this in The Complete Lawyer soon. My husband was with Heller for 34 years (gasp!) He left in February when potential merger was just a concept to anyone but those inside management. Dominoes from bird’s eye view: (1) sending $$ to the top & squeezing them from the middle; (2) unhappy middle; (3) fear that merger will cause H to dump certain practice groups; (4) resumes hit the street; (5) head-hunters pick up scent of carrion; (6) people who never thought they’d leave, think of leaving; (7) suitor-law firms treat offerees with more respect than they’ve been treated for years; (8) when I say “middle” I mean WORKERS, not they who make the rain – so middle includes nationally known names; (9) potential merger partners (this is rank speculation) realize the firm is teetering and talks fail; (10) like the Bush administration, statements that firm will fail (economy will fail) if merger/bailout doesn’t come through, both cause and effect of second merger attempt dying; (11) the “big boys and girls” (Heller: the IP Group) leaves . . . . . start to finish? 6 months? one year? A truly great law firm dies.

    What to do?

    1. VALUE your human capital
    2. remember a law firm is supposed to be a collective “for better or worse” venture in which the firm sees its members through bad times so that it can benefit from good times
    3. don’t let David Lat anywhere NEAR your merger plans but
    don’t leave the partners in the dark
    4. remember the rainmakers cannot do all of the work that they generate – SOMEONE has to be WORKING (for the rainmaker, sure it’s the money, but at least one rainmaker Heller partner has been heard to say that if he knew it were that bad, he would have been willing to re-invest the extra money coming his way in the “middle”
    5. when the center can’t hold, it’s over; you can’t wait for a crisis
    6. how about hiring people who have been trained to manage to manage law firms of this size — I know, I know, they have business managers but the decisions are in the hands of lawyers who everyone knows cannot do the math.

  2. Jason

    The chain of bankruptcies this year has caused some banking panic and might cause a long economic recession. Many of the recessions in the United States were caused by banking panics. nomedals.blogspot.com

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