Not Wanted on the Voyage - Building Gender Balanced Business

“Law firms hold few attractions to private equity investors because there is no obvious exit route and little profit.”— Law professor Richard Susskind

Susskind predicts that external investment will be made exclusively in new forms of legal business, which are the businesses that are growing and therefore attract investment.

Investors may feel that law firms are a bad investment because of the firms’ resistance to corporate management.

John Wallbillich at The Wired GC lists the five reasons why law firms couldn’t adopt the Goldman Sachs model:

1. They don’t hire the best and then invest in their development.
2. They don’t honestly evaluate talent at all levels.
3. They don’t make people leave who don’t perform.
4. They don’t directly link pay with performance.
5. They don’t accept downside risk for upside reward.

Most investors would avoid an operation that fails on any one of these points, and most law firms fail on all five.

Therefore, from an investor’s point-of-view, it makes more sense to finance a small greenfield firm where lawyers work efficiently, price by value, and are committed to the cause; or else to consider virtual or distributed firms.

The threat of irrelevance is not just a problem in the UK or the ABS world; it represents a marketplace shift away from traditional legal services providers and their bases.

The complex legal work that has earned the big law firms so much money over the years is moving outside the U.S. to places like Asia, Sao Paulo, and Moscow.

In 12 months, when the ABS dollars start circulating through the system worldwide, there will be major shifts in the marketplace environment that could mean the deposing of incumbents and the introduction of brand new players.

To survive this change, law firms should start by junking the model where the owners manage the business, manage it according to their individual short-term interests, and treat the firm as a means to an end rather than an end in itself.

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