When the music stops in musical chairs, someone has no chair and is out.  Are large US law firms playing the game?

Many debate the future of large law firms: see the George Beaton blog post and comments at The rise and rise of the NewLaw business model.  I’ve never seen a  post generate so many thoughtful comments.

Of course, many dismiss talk of NewLaw.   I Tweeted yesterday: “I do worry that a few 10s or 100s of us live in a NewLaw echo chamber.”

Many large law firms have healthy and vibrant futures, though perhaps at lower profit levels.  A bright future for BigLaw is no guarantee for any single large law firm. Those without clearly defined market positions may struggle.

Suggesting that some firms are at risk is not a debate about the business model. Rather, the risk simply reflects  public reports about average excess capacity and low realization rates.  Averages almost always conceal outliers, so some firms likely are hurting.

Moreover, the market – whether BigLaw or NewLaw – constantly evolves.  Firms that do not keep up with their peers may be even more at risk.  And evidence of change keeps piling on, as two articles this week illustrate….

Smaller Law Firms Grab Big Slice of Corporate Legal Work – Midsize Firms Nearly Double Share of Big-Ticket Litigation, New Analysis Says in the Wall Street Journal today (subscription required) reports that general counsels are increasingly willing to move to work to smaller, regional firms that cost less than the very large firms centered in high-cost metro areas.  If this trend continues, some current AmLaw 100 firms will necessarily rotate out of the top 100 (if not worse).

Calling All Unemployed Law Grads: Greenberg is Hiring (American Lawyer Daily) explains that Greenberg Traurig has created a new lawyer trainee program.  These new lawyers are paid less but receive substantial training and are charged out at lower rates.  As for after the first year:

“Greenberg is simultaneously creating a new non-shareholder track position, practice group attorney, that is akin to similar jobs created by Kilpatrick Townsend & Stockton; Orrick, Herrington & Sutcliffe; and others that have moved beyond the up-or-out structure typically employed by large law firms.”

This shows that BigLaw is responding to change.  Whether it is starting a program like this, hiring contract lawyers, or partnering with a legal process outsourcing provider (LPO), many firms now find ways to reduce cost.  What will happen to those large firms that neither have a clear competitive differentiation nor change with the times? Will they have a chair when the music stops?

In sum, the bad news is that BigLaw faces profit pressure and some large firms may be at risk.  The good news is that some (many?) firms are responding to market pressure.