My latest “Commendable Comments” award goes to a non-lawyer, the Washington Post’s Pulitzer prize-winning columnist Steven Pearlstein.
Since I started my blog a year ago, two of my most popular articles have been “Howrey’s Lessons” and “Howrey’s Lessons — Part II.” Versions recently ran on Am Law Daily, where they also attracted widespread attention.
I don’t know if Pearlstein was among the thousands who saw my analysis of Howrey’s end and its relationship to ubiquitous big law trends, but his March 20 column reinforces my themes. If I hadn’t been attending the Virginia Festival of the Book in Charlottesville to discuss The Partnership, I might have missed it. I’m glad I didn’t.
Both of my Howrey articles focused on a central point: What matters most are not the things that make the once venerable institution different from other large firms. Rather, the true significance of its death lies in what makes the firm similar to many, many others. Intelligent lawyers who specialize in distinguishing adverse precedent prefer to think otherwise; they do so at their peril.
Noting as I had that, as recently as 2008, the DC-oriented Legal Times hailed Howrey’s final chairman, Robert Ruyak, as one of 30 “visionaries,” Pearlstein describes how quickly the world turned. In the end, I found Ruyak’s litany of claimed contributors to the firm’s demise — clients demanding contingency fee arrangements; conflict problems that made European growth problematic; and the rise of competitive electronic discovery vendors — unpersuasive; I explained why in “Howrey’s Lessons — Part II.” Pearlstein is more charitable in accepting such excuses at face value. That’s understandable because he’s never worked in a large firm.
But on the big picture, his assessment echoes my earlier observations:
1. Howrey’s global expansion through lateral hiring created a firm of free agents who lacked the deep loyalties that once characterized the firm. That phenomenon wasn’t unique to Howrey.
2. Pearlstein notes that profits per partner has become “not only the key determinant of how much partners take home, but it is the metric by which the very competitive and ambitious people in the legal business keep score.” My regular readers know that the business school mentality of misguided metrics — billings, billable hours, and leverage ratios aimed at increasing partners’ short-term profits — has transformed a once noble profession in unfortunate ways.
3. Pearlstein observes that when Howrey’s average partner profits took a downward turn, the partnership — which wasn’t really a partnership in the way most people understand that concept — found that its “bonds of loyalty [were] not strong enough to hold Howrey together.” In “Howrey’s Lessons,” I put it this way: “[W]hen cash becomes king, partnership bonds remain only as tight as the glue that next year’s predicted equity partner profits provide….”
Likewise, Pearlstein’s overall conclusion is identical to mine: The most troubling aspect of Howrey’s death is that “the industry seems to have learned nothing from such episodes.” He closes with an acknowledgement of the widespread problem of partner and associate dissatisfaction that the prevailing big law culture has exacerbated.
On only one point would I offer this limited qualification to Pearlstein’s survey of the legal blogosphere concerning Howrey. He suggests that the media (press and blogs) offer “the same uncritical acceptance of…a world in which firms are held together by nothing more than a collective determination to increase profit per partner.” Respectfully, I offer my ongoing commentary over the past year as a consistent voice in challenging the prevailing big law model.
When an intelligent, sophisticated observer such as Steven Pearlstein takes a seemingly isolated issue involving lawyers — that is, Howrey’s disintegration — and uses his national platform to shine a welcome light on a deeper professional problem, it becomes that much more difficult for big law leaders to ignore. They’ll continue to turn a blind eye to the incubating crisis, but perhaps they’ll rest just a little bit less easily in doing so.
Pearlstein’s prize is a copy of The Partnership, which I will send him this week. I’m confident that, as an interested outsider, he’ll find it fascinating.
It is of little surprise to me that your Howrey posts have attracted such wide readership. The analyses were perfect and you tread on waters that many in the profession were too timid to approach.
Mr. Pealstein’s analysis of the demise of Howrey is concise, precise and well documented (although I personally preferred your thoughts on the subject as being more direct and critical). However, I believe he errs significantly in concluding that partners of the firm faced no personal peril if the firm collapsed. Some thirty-nine major law firms have collapsed since 1988 (barely two weeks after the collapse of Howrey, a fortieth, Yost, LLP of Florida, recently home to more than 200 lawyers announced its dissolution). Most of these law firms were LLP’s or LLC’s. In virtually every instance, the individual partners of these firms – whether LLP’s or LLC’s – were subject to severe adverse personal financial consequences, as described in http://kowalskiandassociatesblog.com/2011/02/03/the-financial-and-legal-consequences-of-a-law-firm-dissolution-on-the-partners-of-the-defunct-firm/
I am delighted that The Partnership is selling so well. It is a compelling and riveting book, which, as I told you, once I picked it up to start reading it, I literally couldn’t stop and I eagerly read it through the night until the morning sun arrived just as I read the last page. It is a must read for every lawyer, every spouse of every lawyer and every aspiring lawyer. I’ve purchased a number of copies and have given them as gifts to clients, who have each shared the same enthusiasm about your novel.
I (and I suspect a lot of current and former large firm partners) also find the litany of claimed contributors to the firm’s demise to be a little thin. I don’t believe that the “cash is king, laterals are fickle” argument washes. A smart lateral is looking down the road just like everyone else, and no one undergoes the ordeal of a firm change unless they really need to.
The rest of the list – clients demanding contingency fee arrangements; conflict problems that made European growth problematic; and the rise of competitive electronic discovery vendors – were all predictable. (The conflict point is one I have made dozens if not hundreds of times in discussing growth over the decades.)
So why weren’t they predicted? My surmise is that a lot of it had to do with the opacity of management at Howrey. When a small group is making the decisions, they can get in a bubble. They don’t get important feedback. Even their outside consultants (don’t get me started) often tell the people signing their checks only what they want to hear. After all, many people don’t like to be questionned. But feedback is important to quality strategic decisions. Howrey trusted it all to a cadre, and the cadre made a bunch of bad bets. All of Howrey pays. But the only way I could envision it being more likely that those decisions would not have been made is if more of the firm had been involved in the decision-making.
Hello Jerry. Ed Williams here,