Midsize law firms are having a solid year, outpacing productivity and demand growth compared to the Am Law 200 through the first half of 2023 as many benefit from legal buyers’ quest for value amid shrinking budgets.
But as midsize firms look to the future, rising costs of compensation and technology are threatening law firms that feel obligated to keep up with larger firms. In Philadelphia, for instance, the dissolution of Schnader Harrison Segal & Lewis coincided with above-average cost hikes in the region that stuck around after the talent wars.
Yet, not all midsize firms have to square up against regional and national competitors to compete on compensation. Midsize firms that achieve the status of “lifestyle firms” — at least in the eyes of current employees and potential hires in the market— can insulate themselves from some cost pressures. “We are a shrinking population of firms,” said Munsch Hardt Kopf & Harr CEO Phil Appenzeller. “But for us and our competitors, we’re seeing very similar approaches to the practice.”
Those approaches amount to prioritizing the long-term culture and collegiality of the firm over short-term profits, which gives lawyers more reasons to stick around than money. “The way our approach has worked out and the intentional steps we’ve taken to be respectful of people’s lives outside of work has led to very high retention rates,” said Elizabeth Sbardellati, head of Greenberg Glusker’s trademark protection & enforcement group. “By being so intentional, we haven’t been as impacted by thoseoutside pressures.”
What Makes a Lifestyle Firm?
While most midsize firms market themselves as “lifestyle firms,” offering lower billable hours and more flexibility and collegiality than Big Law, being a lifestyle firm is about more than size alone.
“There’s a perception often that midsize firms are lifestyle firms, but that is not always the case,” said Lisa Smith, law firm management consultant at Fairfax Associates. “One of the complaints we hear from associates in some firms is, ‘It’s a big firm lifestyle at midsize firm pay.’”
Billable hour requirements are a major indicator of “lifestyle” firm status, however, and many midsize firms target 1,800 hours annually to maximize profits while protecting lawyers’ nights and weekends.
Nearly 20 years ago, Munsch went down from a minimum of 2,040 hours to 1,800 hours, a number the firm determined would cover its expenses and ensure reasonable profits. “Attorneys who hit 1,800 hours are probably going to be in the office 10 hours a day,” Appenzeller said.
Greenberg Glusker recently lowered its minimum billable requirement from 1,800hours to 1,750 to adjust for what most associates were actually billing, said Sbardellati. “You can come here and expect to work about that amount—that’s how we came to the number.”
Similarly, Denver business law firm Moye White based its 1,800 hour minimum on the “numbers needed to maintain profitability,” said managing partner Merc Pittinos, as well as ensuring attorneys get enough experience to succeed in their careers.
For many attorneys, total billable hours are less important than the need to take time off and their firm’s recognition and respect for that need. In The American Lawyer’s 2023 Survey of Mental Health in the Legal Profession, numerous midsize firm lawyers said they took minimal vacation days and missed out on important events with friends and family because they couldn’t afford to stop billing or weren’t able to find a replacement.
In addition to not requiring an excessive amount of total hours, Brooks Pierce managing partner Reid Phillips said firms can retain talent by making wiggle room when their attorneys would really appreciate it.
“We strongly believe in supporting the family commitments of our lawyers and being involved in the community,” Phillips said. “We support people being at a soccer game with their kids, a swim meet, a dance recital. At our size, we know each other, care about each other, and we’re paying attention to who needs help to do other things that are really important in people’s lives.”
Lifestyle firms also strive to offer more career advancement opportunities—such as earlier client exposure and a more hands-on role in major matters—and a more clear path to partnership. “They are hiring people who want to become partners and don’t necessarily want an up or out model,” said Smith.
Perks of Becoming a Lifestyle Firm
If lawyers valued their firms sheerly on financial metrics, midsize firms would merge or dissolve far more frequently during periodic Big Law hiring streaks or dips in profitability. The fact that they don’t speaks to firms’ ability to give lawyers more reasons to stick around than money alone.
“The pressure is only an issue when a firm lets that pressure get to them,” said Robert Kamins, law firm management consultant and founder of Vertex Advisors. “A lot of firms don’t care; they are strong in their identity or their practice areas or specialty areas.”
In Denver, Moye White has chosen to invest in its cultural infrastructure instead of trying to go toe-to-toe with salaries offered by an increasing number of Big Law satellite offices.
“What we want is for people to feel like they belong here,” Pittinos said. “When they get off the elevator into our office, we want it to feel like home for them. We want them working with clients whose work excites them, and working with people they know and love working with, doing the work they love and are really good at doing.”
In practice, that means developing client service teams that combine lawyers across practices to increase collaboration, as well as choosing clients whose work will be intellectually stimulating for attorneys.
At Greenberg Glusker, being picky about recruitment has aided retention. “We look for people when we’re hiring who are courteous, genuine, and going to continue to make this a pleasant and welcoming place to work,” Sbardellati said. “That’s very important to us—maintaining the culture of courtesy and authenticity and people being genuine and kind. We don’t tolerate bad behavior.”
Sharing in the spoils of a new client origination has also helped Greenberg Glusker retain associates in a market full of Big Law competitors.
“If you’re a second-year associate with a great opportunity to bring in business, that business is going to benefit you financially,” Sbardellati said. “That’s another way we prioritize the people at the firm and show them that they’re important and they matter from day one."
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