What Weil's Decline Reveals About the Fragility of Law Firms
Professional services firms have long maintained that strong financial performance is the key to success. Everything is done to maximise the amount of time the firm is charging for and recovering. Firms which are profitable, which have enviable PEP and high salaries are the ones to emulate. Developing soft skills, such as collaboration, and focusing on culture are nice to haves against this harder truth. If the numbers are good, other problems cannot be that serious. However, the recent decline of law firm Weil, Gotshal & Manges (‘Weil’) is perhaps the wake-up call that is needed for firms to start to challenge that assumption.
Weil was not a struggling firm. It was large, respected and profitable. Yet, when enough partners lost faith in its future, the money in the bank counted for remarkably little. Instead, the people who were supposed to own and sustain the business became the catalyst for its failure. Behind this collapse are employees, who neither caused nor could have prevented the crisis, who now face uncertain futures. The role of what it means to be partner, as guardians of the future, is often forgotten.
Nobody saw it coming....However, we suspect that the warning signs were there all along. They were just ignored, or dismissed, as the balance sheet was healthy.
We see warning signs all too often when working with professional services firms. Psychological safety is often absent, which in turn drives a lack of affective commitment (emotional attachment) to the firm itself. We often identify key-person risk when carrying out client listening: where clients say they work with a firm because of individuals and not the firm itself. Then there is the desire to create rainmakers rather than to focus on collaboration.
All of these are ‘red flags’ - warnings - which are not always heeded. Why? There isn’t the time. There isn’t the desire for awareness. It is all needed now and putting in the work to develop something which isn’t chargeable is see as lacking in value. None of this is new. Most people working with the legal sector will tell you that for the most part, bad behaviour and toxic cultures are permitted so long as the firm is making money.
What happened to make a profitable firm collapse?
In this article, we want to explore the warning signs we see and think about how they potentially showed up in Weil’s demise. Before we do, let’s recap what happened. Weil, Gotshal & Manges was a leading US-based international law firm. Despite being profitable and well regarded, it became embroiled in a partner exodus that ultimately led to its collapse.
Reports all point to the fact that a number of senior rainmakers left for a competing firm. Michael Aiello is named as the ‘big star’ who walked. These partners took their clients. This shook the confidence of those who remained, so others left, fearful of their future (hence many speaking of a ‘partner run’ as analogous to the bank runs we have witnessed elsewhere). In the mix was also a failed merger and confidence was knocked further when Ramona Nee decided that she would not succeed longtime chair Barry Wolf.
That is the short publicly available version. I have no doubt that there were layers of internal politics, one-upmanship, ego, and selfishness at play here too. All of those relate to the warnings that Weil should likely have heeded.
Red flag number one: a lack of psychological safety
Amy Edmondson defines psychological safety as a belief that people can speak up without being punished. Employees can raise concerns, challenge decisions, or bring ideas to the table without fear of negative consequences. Where people are unable to do so, organisations fail to innovate – they also fail to see problems.
The author has measured psychological safety in law firms and has seen how it compares to other organisations (not well). I have experience working in law firms. The unspoken rule? You do not challenge the person bringing in the big bucks. Bad behaviour? It’s fine if the person is delivering income.
Psychological safety is on the face of it ‘soft’. However, the absence of it is anything but.
Studies have shown that where psychological safety is low, engagement declines. People may still turn up and do the job, but they are less emotionally invested in the success of the firm. (Kahn, 1990; Edmondson, 1999). Affective commitment also falls; employees become less attached to the organisation and when an opportunity arises elsewhere, there is little keeping them with the firm (Meyer & Allen, 1991; Frazier et al., 2017). This is a problem when those individuals are the ones holding the client relationships – as Weil found out to its detriment.
Outside of the risk of partners leaving, the cultural impact of not having psychological safety compounds the problems the firm faces. If people are afraid to ask questions, admit mistakes or acknowledge gaps in their knowledge, development is restricted and capability stagnates. This makes it more likely that clients will leave with the partners. We often hear when we speak to clients that whilst there is confidence in the top level at an organisation, there is less so in the depth of expertise sitting below them.
A lack of psychological safety also means that collaboration suffers. Individuals feel they need to prove themselves rather than support one another, and knowledge sharing and cooperation decline. This means that clients don’t experience a one-firm way of doing things. They instead rely on individual strengths.
Red flag number two: Key person risk
When we conduct client listening it is quickly apparent if the relationship is owned by an individual or the firm itself. We always ask some ‘quick fire’ questions about the firm, and it is not uncommon for clients to say, ‘well for me [x] firm is really [y] individual’. We report this back as being a key-person risk, particularly where the same individual is mentioned numerous times. When this gets flagged, firms try to resolve it by cross-selling, or trying to introduce new people into the relationship. This isn’t necessarily wrong. However, the client doesn’t always want to be introduced to other people. What the firm wants and what the client wants are often different!
There are a number of things to consider here too. If psychological safety is low, introducing colleagues creates personal risk that individuals may be reluctant to take part in. This is compounded by low affective commitment – where there is little incentive to build institutional relationships.
This all seeps through in the language seen in firms.
References to "my client", "my relationship" and "my account" rather than "our client" or "the firm's client" show where loyalties lie.
Yes, in the UK (at least for the moment) firms can protect against this with non-compete clauses. But, as with cross-selling, if the client doesn’t want to work with a firm once the individual has left, it cannot be forced to. If clients are loyal to individuals and individuals are not strongly committed to the firm, relationships can walk out of the door far more easily than leaders would like to believe.
The solution? To focus instead on client experience, the element which sits outside of individual relationships and with the firm itself. However, CX is hard, takes time, and usually involves things which aren’t chargeable, making it a tough internal sell.
Red flag number three: the Rainmaker
For years, firms have been obsessed with creating rainmakers. They invest heavily in rainmaker programmes, rainmaker coaching and rainmaker training. Success is often measured by an individual's ability to generate work, build relationships and grow a personal following. This is compounded in ‘eat-what-you-kill’ firms where it is very clear what is valued.
We have written before about how rainmakers are only one piece of the puzzle, and a piece which is given disproportionate credit. Yes, rainmakers are good at closing deals, however, a lot happens behind them to get to that stage in proceedings. Not only that, once the client has signed on the dotted line, it takes more than one individual to deliver the service to the client.
Labelling someone a rainmaker reinforces the idea that value resides within the individual rather than the institution, and it also sends a clear message: build your profile, build your network, build your client base. Firms shouldn’t then be surprised when those same individuals become indispensable.
The biggest loss to a firm, when it focuses on rainmakers, is that it does so to the detriment of collaboration. The incentives (financial or otherwise) encourage ownership rather than sharing. Collaboration becomes secondary to personal success. A culture of individual achievement undermines collective achievement.
Generating new work often receives more attention than strengthening cross-functional relationships, client experience or institutional trust. Clients experience individuals, not a firm and as a result, they often struggle to articulate what is distinctive about the firm itself.
Instead of asking, "How do we create more rainmakers?", firms might ask different questions:
How do we create greater psychological safety?
How do we encourage people to share relationships rather than protect them?
How do we build a culture where success is genuinely collective?
How do we create a client experience that clients associate with the firm, not just the individual?
How do we make collaboration more valuable than ownership?
The irony is that firms often pursue rainmaker programmes because they want growth. Yet many of the conditions that drive sustainable growth - trust, collaboration, psychological safety, knowledge sharing, belonging and a consistent client experience - are the very things that make relationships more resilient and less dependent on any one individual.
What would we recommend you do ?
Ask three questions:
Who can challenge your highest-billing partner without consequences?
If a partner walked out of the door tomorrow, what would their clients miss: the individual or the firm?
When was the last time you measured psychological safety, affective commitment and collaboration with the same rigour you apply to financial performance?
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