Once upon a time, red and white barber poles were used to identify barbers who also practiced medicine on the side, since there was little money to be made from practicing medicine. The red and white barber pole had its origins in the old notion: “healing whatever ails you”; the red color actually represented blood shed during bloodletting
But science and technology allowed medicine to evolve to the place doctors no longer had to cut hair to make a living. The manner in which medical services were delivered completely changed overnight by these advances and doctors now do precisely and only what they are trained to do. We may be seeing, finally, the same shift in the legal profession as two events recently demonstrate.
Law Firm Challenges
I have written about the risks the present and future legal market poses to law firms, particularly midsize firms in medium-sized markets. Among other things, these risks stem from problems these firms have in spreading the costs of technology and innovation across a limited number of partners, as mentioned before, a loss of work–particularly high rate work– to larger, national firms with greater expertise, the ability of lawyers to do legal work from anywhere allowing larger firms to make inroads in disparate locations, and to overall rate and cost pressures.
Combine this with a conservative attitude and a stubborn sense of identity and independence, and you have a recipe for significant future stress. Randall Kiser recently wrote about these threats, attitudes, and tensions in his excellent book, American Law Firms in Transition, which should be a primer for managing partners of midsize firms.
Two events last week suggest the legal services delivery market may be headed in directions that could reshape the legal community.
The first event was the announcement by Dentons, the world’s largest law firm, of the acquisition of two midsize, middle America law firms as part of its Project Golden Spike
The first event was the announcement by Dentons, the world’s largest law firm, of the acquisition of two midsize, middle America law firms as part of its Project Golden Spike: Bingham Greenbaum Doll, a 176-lawyer firm with offices in Indiana, Ohio, and Kentucky, and Cohen & Grigsby, a 140-lawyer firm with offices in Pennsylvania and Florida. The details of the combination can be found in Bill Henderson’s post, which is based in part on his multiple conversations with Joe Andrew, the chairman of Dentons. See also Dan Packel’s recent analysis in the October 7 American Lawyer.
I’m familiar with Bingham Greenbaum since its predecessor, Greenbaum Doll & McDonald, was based in Louisville. Greenbaum was a preeminent business firm in its market, was one of the biggest and most prestigious firms in Louisville and had a great client list. It also had a strong sense of identity and independence: its lawyers were among the hardest working, hardest charging lawyers in the area. It had a reputation for–and prided itself on– excellent work with a brutal work ethic and boot camp atmosphere.
Over the past several years, however, Greenbaum lost some of its luster as a handful of its leading lawyers defected to other firms. Its client base shrank as national banks gobbled up local ones and moved legal work out of town. It saw other local and regional business either being acquired or moving their work to national firms. In 2012, Greenbaum merged with a firm similar to it in Indianapolis, Bingham McHale. Bingham Greenbaum and Cohen faced many of the same trials and tribulations facing other midsize firms in like markets.
For Bingham and Cohen, the combination with Dentons gives them the ability to offer national services to their clients, become a one-stop place for all legal business, offer considerably more expertise, and to share costs among a greater number of partners.
For Bingham and Cohen, the combination with Dentons gives them the ability to offer national services to their clients, become one-stop places for all legal business, offer considerably more expertise, and to share costs among a greater number of partners.
The move gives Dentons a foothold where it had no presence and provides access to local and regional markets it might not have otherwise had. And it gives it a better chance to secure that business that might have otherwise either stayed where it was or gone to some other large firm. It also places Dentons in a better position to compete with not only other large national and global law firms but also with the Big 4 accounting firms.
And this is precisely what Dentons has in mind with its Project Golden Spike program (of which the Bingham and Cohen combinations are a part). This Program seeks to create a new national law firm that more closely resembles the Big 4 accounting footprint. (Henderson notes that, according to Dentons, there are Big 4 offices in 75 of the top 100 US legal markets; the largest U.S. law firms are present in only 31). Dentons ultimately plans to add more midsize firms to this program.
Greenbaum and Cohen in essence have agreed to swallow their independence and much of their identities in the hopes of better dealing with present day market realities.
The three firms paint this as a merger for some purposes and more of a strategic alliance for others. But make no mistake: all three firms have to know that their identity will inevitably be Dentons, not Dentons Greenbaum and Dentons Cohen. Even from the outset, according to Dan Packel, “client-facing functions, such as practice groups and business development, will be consolidated at the national and global levels to communicate a single organization that operates under a global brand.”
No matter how you spin it, Greenbaum and Cohen in essence have agreed to swallow their independence and much of their identities in the hopes of better dealing with present day market realities. That two firms like Greenbaum and Cohen would do so suggests that the threats to firms I and others have identified are real. As with the banking industry and accounting profession, consolidation will offer solutions to the challenges and problems of a new and changing marketplace brought on by technology and client demands.
Another offshoot of this: like any merger, efficiencies, and economies of scale will mean reductions in staff and lawyers to achieve greater efficiencies. The more sophisticated Dentons’ systems and improved technology and data analytics will also inevitably bring a greater emphasis on rooting out and dealing with unproductive partners.
Like doctors, lawyers will more and more do only that for which they are trained to do.
It will also ultimately mean more and different roles within the firm for lawyers and other legal professionals who contribute to the business More generally, consolidation may–just as we have seen with the medical profession– result in fewer tasks performed by lawyers but more and different tasks to being done by others. Like doctors, lawyers will more and more do only that for which they are trained to do.
Amazon’s Legal Market Entry
Which brings me to the other important development. Amazon recently announced a curated network of IP firms providing trademark registration services at predetermined rates. The service, called the Amazon IP Accelerator, provides “a network of trusted IP firms that provide high-quality trademark registration services to help brands secure a trademark.”
This program will allow a business to immediately start an online discussion with a law firm about trademark law. Amazon has vetted and selected 10 law firms to provide these services and is targeting small and medium-sized businesses (the type of companies, by the way, that used to take this kind of work to midsized firms). The business need not be a seller on Amazon to work with the firms and Amazon plans to offer access to those businesses to the Amazon brand protection features. Amazon also plans to include online customer reviews of the firms.
It would be easy to look at this as a limited foray by Amazon. But Amazon started its entry into the multi-billion dollar retail industry, which it now more or less controls, in a limited way: by selling books, of all things, online. It’s easy to imagine Amazon moving, as Bob Ambrogi muses, into family law, immigration, estate planning, and similar areas like tax and contract preparation. And, as I have speculated before, if Amazon is in the market, will Walmart be far behind?
The ultimate upshot of the Amazon move will be to siphon off some of the work smaller and midsize firms have traditionally done. And it’s doing so by providing a link to firms in other geographic places that can do the work cheaper and at a set price, reducing uncertainty.
Threats From Above, Threats From Below
The two announcements demonstrate the challenges facing law firms both from above and below, as described by Professor Ben Barton in his 2015 book, Glass Half Full: The Decline and Rebirth of the Legal Profession.
Dentons’ Project Golden Spike demonstrates the threat to midsize firms from above: big firms gobbling up more and more of the marketplace through increased efficiencies and mergers. And the Amazon program demonstrates the threat from below: players such as Amazon offering an cheaper alternative to the traditional local or regional law firms for the less lucrative but revenue producing commodity work.
What’s changing is how the end product of that thinking process will be delivered and by who.
Lawyers will always be needed to help solve the wealth of problems and conflicts of a civilized society. The development of solutions to those problems and conflicts is still a thinking process and not a technological one. Lawyers will always be needed for this.
But what’s changing is how the end product of that thinking process will be delivered and by who. Midsize firms may have little competitive choice but to latch on to a national law firm to continue to adequately and efficiently represent clients and do what lawyers do.
And all firms, not matter what size, have to face the competitive fact that new players may be able to do certain work that is not necessarily part of this thinking process better, cheaper and faster.
So just like the banking and accounting professions which have seen consolidation disrupt local relationships and the medical field which has seen work which doctors once did now being done by others, the legal profession and the way the profession delivers its services are changing. Those who will succeed must change with it.