For the last three months, much of the law-firm world has been watching the slow-motion train wreck that was the dissolution of Dewey & LeBeouf. The legal blogosphere has written a lot about what the collapse means, and offered numerous theories about why Dewey failed so spectacularly in only a few months. Most focus on the income guarantees for a number of partners. Some go so far as to worry about criminal conduct. And it seems clear that there was at least some level of mismanagement. (As usual, Adam Smith, Esq. has an outstanding discussion of the many factors that led to Dewey’s collapse. But I shouldn’t have to tell you that, because that is one website you should be checking constantly anyway.)
But we can draw a more general lesson from the Dewey collapse. [DISCLOSURE – I do not manage my law firm, or speak on behalf of it. My opinions are my own.] When it came to grand strategy–in the law firm context, the larger goals of the law firm and the overarching methods it will use to get there–Dewey simply didn’t have one. Grand strategy is a tricky thing at the best of times. It has become even more tricky in an environment where individual lawyers pay close attention to profits per partner (PPP) instead of the firm’s primary mission. (Indeed, many lawyers might argue that the firm has no mission other than maximizing its profits per partner.) But it’s still an essential element for long-term, sustainable success.
Looking at all of the accounts, it appears that at best, Dewey had no strategy, and at worst, it had a classic "bad strategy." In this case, Dewey’s management mistook its goals (growth and profit) for an actual plan. As the New York Times’s Dealbook reports, the reasoning behind the Dewey/LeBeouf merger:
was to become the next Skadden, Arps, Slate, Meagher & Flom or Latham & Watkins, two profitable large firms with strong international networks. Together, LeBoeuf and Dewey created a firm with offices in 26 countries and $1 billion in revenue that Mr. Davis thought had the global reach and diverse practice to withstand a recession.
So, in other words, Dewey’s goals was to become one of the biggest law firms. Its strategy to get there was to merge with another law firm. (And its strategy to keep the partners from the other firm was to guarantee their income.) That seems delightfully straightforward, but only because it wasn’t a real goal: it was the kind of goal one gives when one hasn’t thought through what a real strategic goal looks like. It did not diagnose any current challenge, and it did not offer any solution that took account of the current terrain. (Here, a competitive legal market, rapid technological change, and a looming recession.)
Moreover, the firm never seemed to consider another essential element of a good strategy–what to do if things did not go exactly as it planned. As bankruptcy lawyer Marty Bienenstock repeated several times in his interview with the Wall Street Journal:
I think that if [Dewey chair] Steve [Davis] is guilty of anything, it’s the crime of optimism.
(Emphasis added) Optimism is no crime (as Bienenstock’s use of dysphemism emphasizes), but excessive optimism is a hallmark of bad strategy. It’s particularly bad strategy if part of the plan is to withstand a recession. One has to assume that, during a recession, firm revenues might contract. So where was the money going to come from to pay income guarantees if that happened? To borrow one of Professor Richard Rumelt’s criteria for a good strategy, guaranteeing million-dollar incomes during a recession to protect against the effects of a recession indicates a lack of coherent action.
Lawyers–especially defense lawyers–tend to be reactive instead of strategic. Sure, we all like using the word strategy (I’m clearly no exception) but employing an actual strategy with a diagnosed challenge, a guiding policy, and a set of coherent actions to reach the end—-is much more difficult, either in a given piece of litigation, in one’s career, or on behalf of one’s firm. Take too many shortcuts, do too much that sounds like strategy without actually being strategy, and you run a very large risk of ending up like Dewey.