Let’s Start with Farm Teams
Long-time baseball fans—those who predate the designated hitter, multiple teams making the playoffs, and a “split” Cy Young Award—will recall when players routinely played for one team all or the bulk of their careers. When their skills waned or upon retirement, their team would routinely look to bench players or minor leaguers (who played on “farm teams”) to replace aging regulars. Trades were rare, especially among established players. And so it once was with law; firms had an orderly progression of talent within the organization. Like baseball, lawyers rarely switched firms and aging partners were typically replaced by home-grown talent, not laterals. Just as major league clubs had farm teams who groomed and fed them talent, so too did BigLaw have its own farm system comprised of graduates from a handful of top law schools. When “rookies” came to the firm, they were tutored by vets and honed their skills until they were elevated to the “starting lineup” (their crowd being the firm’s clients).
Along Came Free Agency
Baseball’s move to free agency was pioneered by Curt Flood, a fleet-footed, spray-hitting center fielder, 45 years ago. Flood became one of the pivotal figures in baseball’s labor history when he refused to accept a trade following the 1969 season. His case ultimately wound up in the U.S. Supreme Court. Although his legal challenge was unsuccessful, it brought about additional solidarity among players as they fought against baseball’s reserve clause and sought free agency. The first wave of free agents, among whom were Jim “Catfish” Hunter and Andy Messersmith, two mainstay pitchers, came five years later. Free agency changed the game, allowing players to perform for the highest bidder, enabling wealthy franchises like the Yankees to stockpile talent and disrupting the long-established notion of what it meant to build a team.
Not coincidentally, it was at about this time that the upstart Finley Kumble law firm burst upon the scene (note: I was the youngest partner at the firm and resigned upon being asked to join the Firm’s Management Committee while, at the same time, being denied access to its books). Finley Kumble applied a free-wheeling, free agent approach to the law, cherry-picking big name partners from white shoe firms (a hitherto unheard of practice) and quickly becoming one of the most powerful, if not loathed, law firms in America. It flouted traditional law firm discretion about partner salaries, touting the immense sums paid to its prize free agents. All this made White Shoe firms gasp. Though Finley Kumble is better know for its cataclysmic fall than its mercurial rise, it ushered in a new BigLaw model, one where partners became free agents and moved their practices—in some instances their entire firms—to the Finley juggernaut. Compensation was based upon an “eat what you kill” approach, and the notion of organic growth was tossed aside like an extra bat in the on deck circle. And to those who think Finley was an historic aberration, look again at the spate of recent firm bankruptcies, most notably Howrey. The parallels to Finley are eerie; or as Yogi Berra would say, “It’s déjà vu all over again.”
Competition from New Quarters
For years, baseball was “our national pastime” and maintained its undisputed status as “the greatest game, the only game for the youth of America.” (to quote Babe Ruth). But starting in the 80’s, football—to be followed also by basketball and later soccer—began to compete with baseball for fan interest and revenue dollars, especially the mega-billion dollar long-term television/cable contracts. Baseball’s hegemony over the sports world was waning, and many athletes who once aspired to be major leaguers were opting for other sports. So too with BigLaw. Starting in the ‘90’s and accelerating during the next two decades, BigLaw saw its monopoly challenged by new competitors—staffing companies, LPO’s, legal technology providers of services and products, as well as others. Just as baseball was challenged from outside sources, so too was BigLaw feeling the pressure from new sources seeking a piece of its very large pie. More importantly, the urban myth that BigLaw was the only way to deliver legal services was being openly debunked in the marketplace.
MoneyBall and Law
Early in the 21st Century, “Moneyball” burst onto the scene. Its central premise is that the collected wisdom of baseball insiders (including players, managers, coaches, scouts, and the front office) over the past century is subjective and often flawed. Statistics such as stolen bases, runs batted in, and batting average, historically used to gauge players, are now deemed anachronistic. “Moneyball” posits that the Oakland A’s’ (a smaller market franchise with a relatively meager war chest) front office took advantage of more analytical gauges of player performance, thereby “doing much more with less”.
Once again, law followed baseball as the conventional wisdom that “BigLaw does it best” came under fire, especially its ever-escalating PPP, salaries, and opulent offices. General counsel began to play their own version of “Moneyball”, asserting that BigLaw lacked virtually any meaningful client metrics (though they maintained scrupulous track of their own profitability) and started to suggest—if not demand–there be more value delivered for the staggering cost of services (this took form in the ACC’s “Value Challenge”). And so corporate GC’s (and, increasingly, procurement officers) are now applying a form of “Moneyball” to the procurement of legal services, looking for new metrics and greater value in the delivery of legal services. Just as the Yankees did not routinely win World Series with the highest payroll, so too could legal matters be more effectively handled by resources other than by firms with the highest PPP’s and salaries.
The biggest baseball stars will continue to command huge salaries. They possess “bespoke” skills that typically show up in “bet the series” situations (witness Madison Bumgarner’s recent World Series feats). But for every Madison Bumgarner there are scores of overpaid and underperforming players who do not begin to live up to their bloated salaries and hype. It’s not surprising that the bulk of these high-priced underachievers play in the largest markets—New York, LA, Chicago, and Boston to name a few. If this appears similar to law, it is. Why should there be so many multi-millionaire law partners—especially in large markets—whose actual performance is hard to distinguish from peers in smaller markets (and/or smaller firms) making just a fraction of that? This is bound to change for all but the true superstars, and it will. LawBall is already being played by progressive GC’s and, in rarer instances, by newly-formed law firms and legal service providers whose DNA is comprised of a new set of client-centric, value driven metrics.
The national anthem is still played before every game, and the seventh-inning stretch persists. BigLaw is still going strong but merger-mania and parapatedic partners will not slow the move to a new model where compensation is closely tied to performance that affects outcome. Why should we not expect the same from lawyers? Some already do and many more will soon follow.
It’s a new ball game…..