Why the generational shift in leadership is impacting the legal industry

Last month came the news that another law firm is closing its doors. This time north of the 49th parallel.

One of Canada’s largest firms seemingly collapsed overnight. But, like most law firm failures, the collapse was a long time coming.

Canada’s online legal magazine, SLAW, sums it up well in this post, Requiem for Heenan Blakie:

Heenan Blaikie died from a combination of greed, poor management and failed leadership wrapped together in an antiquated business structure ill-suited to “more for less” client demands in a marketplace gradually filling with non-traditional competitors.

As I have said repeatedly, the Canadian legal profession is now entering the most disruptive period of time in its history. It has never faced such strong client demands for value and efficiency. It has never faced competition from non-traditional legal providers.

These are structural changes that never go away; they amplify.

And all of this in an environment of flat legal services demand, over capacity and legal tech entrepreneurs!

Layer in partners who are more loyal to themselves than to the firm and one can see that Heenan Blaikie (like every other law firm in Canada) was a house built on sand, not bedrock.

I fear that many of us can insert “name of American law firm” in place of Heenan Blaikie and tell the same story.

Yes, we’re chatting about this in my circles. What does this mean? Why? What will it take to change law firm culture and business models?

Some argue for the ability of non-lawyers to co-own law firms, thereby giving more control of the actual business function to the true professional business people.

Some argue we need true business development and sales people. Lawyers are not necessarily cut out for this.

Some argue that the services themselves need to be repackaged and sold (think AFAs).

Some argue that the growth through lateral hiring binge is unsustainable and a leading cause of law firm failure.

It’s the compensation plans. No, it’s the commoditization of legal services.

And then there are those lawyers who just want things to go back to the way things were. Institutional clients. None of this business development crap.

There are no single right answers. And there are no single wrong ones here either. These are all contributing factors, leading to a perfect storm that will continue to result in the roller coaster of growth through acquisition, and big law failures, along with a lot of mid-sized failures as well.

I’d like to add another layer to the conversation of change and disruption in the legal industry: There is a generational shift taking place and very few people are talking about it, nor the impact it is having on our sales culture, nor our business culture.

Yes, HR is talking about those pesky Millennials who are so entitled, and their helicopter parents who will swoop in and try to save them. But we need to move the conversation away from HR and into the main conference room.

As I continue to explore the issues surrounding generational marketing for my presentation at the LMA Annual Conference, I am seeing the shift in leadership from the Baby Boomers to GenX as having a major role to play in this turmoil and disruption.

The ol’ pyramid business model that was based on a specific lifestyle and cultural mentality does not exist with GenX and the Millennials.

They are not buying into this more money, more money, more money model based on 2400-billable hours a year. They might hang out long enough to pay off their student loans, but they are not willing to hang around hoping that they too will one day share in the deep pockets.

To top it off, GenX is all grown up now. We (Yup. I’m in this group) are turning 49 this year. We have established careers, and clients. We will no longer be held captive to a promise that we just don’t believe will ever materialize (like Social Security).

Xers live for today because they can’t depend on tomorrow. But it’s more. They live for today protecting themselves against tomorrow.

- Rocking the Ages: The Yankelovich Report on Generational Marketing

GenXers do not have faith that “it” (permanent financial success and security) will actually happen, and are therefore willing to take their clients to another firm to have their financial needs today met.

Today we have 2.5 generations active in the partner positions in law firms:

  1. The first wave of Baby Boomers, the Leading-Edge, should have started to retire, but they are not. They consider “old” to be 79, so they don’t have plans to retire anytime soon. To quote a friend of mine, their mindset is more of a: “You can pry that client out of my cold, dead hands.” Baby Boomers as a whole grew up in idealistic financial times that allowed them to focus on themselves, leading to the labeling of them as the “me” generation. If you follow the rise in the PPP of the AmLaw 100, it follows the rise in the power of the Leading-Edge Boomers. They were made for this business model. And it worked. For a long time.
  2. The second wave of Baby Boomers are known as the “Trailing-Edge Boomers.” They are now in their 50s, yet not as idealistic as their older siblings, and they too are not going anywhere. However, they are lacking the entrepreneurial spirit of their GenX counterparts, coupled with no longer being the recipients of the institutional client being handed to them upon the retirement of a senior partner, these are oftentimes the partners we marketing folks are not able to pry out of their offices to go off and meet with prospective clients. Great service partners. Great at cultivating existing relationships. Not so great at making brand new rain. They were raised with the same idealistic promises of the Leading-Edge Boomers, however, they were never prepared for hard times, and they are fearful of failure.
  3. And then there are the GenX partners, who, as I mentioned above, are turning 49 this year, and are no longer the young kids whining about the state of their lives, à la Reality Bites.  They are now the General Counsel and CLOs taking over at your clients’ companies. They are the CEOs, and the members of the Board of Directors. GenXers are no longer just influencers, but the actual decision makers both within the law firm, and in corporate America. Their generations markers have lead them to be more entrepreneurial as leaders, and risk takers. To top it off, GenX is well prepared for hard times. That is what motivates a GenX partner to take the risks to pack up their clients and head across the street, rather than hang around due to a sense of loyalty and partnership.

(Disclaimer: With any of these generational cohorts, they are grouped by birth years, however, it is the shared generational experiences (markers) that truly define them. So you will have GenX-leaning Boomers, and Boomer-leaning GenXers. The lines are not always clear.)

Inside the law firm, many Trailing-Edge Boomers are sitting around waiting for the senior partners to retire and hand off their clients. However, many of those clients are now GenXers and they’re not living and working in that same mindset. This is leading to challenges within our firms in regards to business development.

So while we are looking at the broken financial models, broken leveraging models, broken value propositions, and sales cycles that never work, let’s start taking a look at who is our customer today, and who are the legal service providers that are meeting their needs and selling them services. Let’s look at the disconnections, if any, and how to better meet the needs within the firm, and with the clients. Let’s work on changing the conversation.

And for those who think this is all gobbly goop, and marketing speak, go on thinking that way. The major brands out there have been cluing into this for decades, and are constantly repositioning their messaging, and products, to appeal to and reach their customers.

There’s a reason that the same ol’ isn’t working any longer. And it’s not just the recession. It is us. We are not the same. We do not think the same. We are not motivated the same. And we do not react the same.

Making assumptions based on how YOU would behave is shortsighted, and why, when a partner of many decades bolts out of a firm for a competitor shocks you, it makes perfect sense to me.

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  1. You passion for this topic is obvious and your observations merit the attention of many professionals, not just lawyers. If I understand this correctly, beyond defining the problem, you suggest the solution is four-fold:
    #1 Look at who the customer is.
    #2 Look at who are the legal service providers that are meeting their needs and selling them services. (Or in my words, define what is working best for clients as observed in the actions of those who are currently most successful.)
    #3 Look at the disconnections, if any, and [determine] how to better meet the needs within the firm [expectations], and with the clients.
    #4 Work on changing the conversation.

    These four steps seem pretty straightforward and actually, unlike the experience you relate here, at many levels in the legal profession I DO see more law firms having two-way conversations with their clients. I also see more law firms changing habits (business practices) and developing strategies that are both good for the client and the firm. I DO see them focus on understanding who the customer is and addressing their evolving expectations, just as their clients’ customers’ expectations are shifting and need to be addressed.

    I haven’t thought about this as much as some, like you and Timothy Corcoran, Ann Lee Gibson, Jonathan Fitzgerald, the gang at Slaw and more, so I’m not the best person to comment here. But in my experience, you can argue about the boom times, okay, there is a generation of arrogant, greedy lawyers, but that was just an anomaly in the big scheme of the profession. These “values” you address are not new. The GenX did not invent them. They may be reprising them, but they were always there.

    I know several lawyers who are now in their late 80s and 90s – the silent generation if you must define people by generations. These attorneys didn’t start out with billable hours, their clients trusted them, because they knew them/their business operations personally. They considered their lawyers to be genuinely partners in their business or personal legal affairs. These lawyers sent a bill at the end of the month, based upon the value they believed was delivered. If the client questioned or objected, there was always a civil conversation – not a lawsuit. Mutual respect between lawyer and client is not new. It may have been glossed over for a couple decades as the economy expanded and demand for services boomed, creating a premium on the most in demand practices. But, like the housing marketing, the legal boom peaked and busted. What’s happening now is that the legal market is settling down and things are moving to a more reasonable pace, where both law firms and clients have time to breathe, get to know one another, and resume being partners as it was….yes indeed…back in the old days.

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