The legal industry is in crisis. But its archaic partnership models are built for inertia.
The legal world is paying its final respects this week to Dewey & LeBoeuf, which on Monday became the largest American law firm to ever file for bankruptcy. Dewey was by all accounts spectacularly mismanaged -- up to its partners' collar-stays in debt and weighed down by bloated, guaranteed contracts it couldn't afford to pay, it quickly collapsed as its top talent bolted for the door after signs of financial trouble. But while its failures were specific, they are representative of a broader truth that many in the industry are only now beginning to acknowledge.
Most big corporate law firms aren't built to run like modern businesses.*
Over the last few decades, being a big flush law firm was easier than selling umbrellas during a rainstorm. Before the financial crash, U.S. demand for highly-skilled legal work
grew unabated for decades, which allowed firms to increase their billing
rates (and their profits) year after year without clients asking
questions. Top corporate lawyers raked in millions of dollars a year. A few firms began earning more than $1 billion in revenue.
Today, the business climate couldn't be more different. Cost-conscious corporations are cutting back on their legal budgets. Upstart tech companies are automating tasks like document review that firms used farm out to young associates, generating huge profits along the way. It's a lean new world, and they're simply not equipped to adjust.