Prior to the collapse of law firm Dewey & LeBoeuf, the firm used pay guarantees to attract and keep star lawyers while also expanding using mergers and lateral hires. A result of this method by the firm caused a strain between the superstar lawyers and the partners who were stuck working in the mud. Observers of the firm’s operations claim that the methods employed by the firm “destroyed the fabric of a law firm partnership, where a shared sense of purpose once created willingness to weather difficult times.”
Those same observers claim that the methods used by Dewey are not uncommon to the rest of the world as other firms set the goal of large growth by offering massive payment packages to possible employees. “Many large firms have discarded the traditional notions of partnership—loyalty, collegiality, a sense of equality,” DealBook, The New York Times blog, says. On the other hand, the firms have “transformed themselves into bottom-line, profit-maximizing businesses.”
Martin Bienenstock, a bankruptcy lawyer who left Dewey for Proskauer Rose earlier in May, said the following about the problems at Dewey: “I think there’s an overall lesson for law firms that leverage is dangerous. I think you just can’t take leverage lightly in a business where your most valuable assets go home every night.”
Law firms that grow for the sake of growing (like partners who want their salaries to grow for the sake of it) are doomed to fail. The legal market is too fragmented and there is too much competition to hold onto clients who are being gouged.