Kirkland & Ellis: Is It Leading Big Law Down Wrong Paths?

 A business model generating extreme success tends to become the sector's "best practice." That can harden into orthodoxy. 

Recall how the surge in all financial metrics at GE when Jack Welch was CEO motivated other corporate leaders to adopt the model. Unfortunately, later The Welch Way, including bulking up on acquisitions, has been vilified as what eventually almost destroyed GE. 

The same could play out for what's being called the "Kirklandisation" of large law firms worldwide. 

As influential Financial Times documents, that model is the most successful in the global legal sector. Those results motivated other law firms to adopt at least two of Kirkland & Ellis' approaches. They are the non-equity partner tier and the mandate for expansion. About the latter, recently Kirkland & Ellis added more than 300 lawyers. 

Currently 87 out of the 100 largest law firms have the NEP slot, although it is controversial. It has also been challenged in a lawsuit by former Duane Morris NEP Meagan Garland. During a merger A&O abandoned the NEP designation. 

The growth imperative has set other law firms scrambling to extend their footprints both in their own nation and outside their borders. In a 2021 interview with Bloomberg Law, Paul Weiss chair Brad Karp went on the record as declaring that law firms which lack the resources to grow - especially through recruiting star talent - might not survive. Since then Paul Weiss had conducted multiple raids on Kirkland & Ellis' London office to poach talent to build the presence of its own in England.

So, here we are. Kirkland & Ellis is king.

But longer term will law firms discover that this model soon reaches the point of diminishing returns, then becomes counterproductive? 

For example, there could be more challenges. legal and otherwise, to the NEP tier, with non-shareholder talent exiting to boutiques or starting their own firms. At Kirkland & Ellis NEPs earn $750,000 and equity partners $9.3 million. In general NEPs have to pony up their own contributions for Social Security and Medicare. Because they are employees not owners, they can be terminated whenever. 

As for growth, the manpower part is becoming a liability in this Generative AI era. Across sectors, reduced headcount is hailed as a marker of progress. With Gen AI you don't need all those humans. 

Also this is a time of specialization. With that kind of focus, will law firms be eliminating some practices, which also downsizes the number of lawyers? A trend is to phase out of litigation in Big Law, leaving that to the boutiques.

Replacing Kirklandisation could be proven-out unique models developed by individual law firms. As with founders they will think differently. In the bible for entrepreneurs - "Zero to One" - Peter Thiel says to create your own new whatever. Do not aim to improve on what's already out there. 

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