Welcome to The Edge, our new newsletter for the leaders, partners, and marketing and business development teams at midsize law firms.
First, an introduction: I’m David Brown, and in May, I celebrated my 25th anniversary covering legal business issues. Every week, I’ll be researching, reporting, and writing on the midsize market and delivering insights, news, tips, and strategies to help midsize firms navigate the ever-shifting legal business landscape. (If you haven’t done so already, sign up for the newsletter here.)
I thought we might begin our journey by considering a fundamental question: What do we actually mean when we say “midsize” law firm? It’s a trickier definition to pin down than you might anticipate, and how you answer the question depends a lot on where you sit. I have an opinion, which I’ll share later, but you might enjoy considering your own definition of “midsize” and how it compares with some of the others we’ll explore in this post.
PICK A NUMBER, ANY NUMBER
Search the web for a definition of midsize law firms, and Google returns a wide range of numbers: 20-100 lawyers, 16-350, 40-200, and on and on. Some believe firms with a lawyer headcount of 100-500 qualify, which may make sense if you’re working at a Big Law giant with more than 1,000 lawyers. From that vantage point, you might see a 300, 400, or even 500-lawyer firm as midsize.
A similar argument suggests that the Am Law Second Hundred should be considered the realm of midsize firms. (The Second Hundred includes firms ranked from no. 101 to no. 200 on The American Lawyer's annual list of the highest-grossing U.S. law firms.) Proponents of this view say firms at the very top of the Am Law 200 have a global footprint, can offer far more services to clients, and therefore, possess a different operational DNA than their lower-ranked counterparts.
The case begins to fall apart when you look closely at the makeup of the Am Law 200. Firm number 101, Dorsey & Whitney, has revenues of $467 million and profits per partner just under the million-dollar mark. If the definition includes firms with fewer offices or practice areas, then the firm that has routinely had the highest profits per equity partner during the last two decades— Wachtell, Lipton, Rosen & Katz—might qualify as midsize. After all, Wachtell has fewer than 300 lawyers, one office (in New York), and a laser focus on corporate and transactional work. But is it midsize because it operates differently than, say, Latham & Watkins or Baker & McKenzie? At a $1.1 billion in revenue and $8.5 million in per partner profits, hardly.
For the record, The American Lawyer (full disclosure: my former employer) has settled on a midsize definition of “more than 40 but fewer than 200 lawyers firmwide.”
MIDSIZE FIRM TRAITS
Of course, headcount is not the only defining factor. Midsize law firms often share a unique blend of characteristics—positive and negative—that set them apart from their larger and smaller peers.
On the plus side, they can offer more personalized service and deeper client relationships, a more cohesive and collaborative work culture, a shorter equity partnership track, a nimbleness in adapting to client needs and changes in the marketplace, and a diverse client base that includes mid-market and smaller business and entrepreneurs that may not land on Big Law’s radar.
In the debit column, they might lack the financial and technological capabilities of larger firms. One recent survey found that 92 percent of midsize firm professionals have felt squeezed by understaffing, and staffing shortages can harm a firm's ability to take on new clients or expand services. Many midsize firms lag behind in adopting new technology, making it harder for them to improve efficiency. And midsize players can face significant competitive pressure from more agile small firms and big, resource-rich firms.
WHERE IS THE TIPPING POINT?
Culture is also critical. Several years ago, I moderated a panel discussion for smaller and midsize firm leaders, and we pondered the question of when a firm transitions from midsize to large. Firm leaders on the panel proposed that once a law firm reaches 150 attorneys, a firm begins to evolve. Among the factors they cited were:
- Expansion Issues: At the 150-lawyer mark, most firms will have opened offices beyond their initial location, and often outside the specific region where the firm was founded. With larger associate and staff ranks, the firm's capacity also increases significantly.
- Less Intimacy: As the firm grows, relationships among partners become less personal. The collegial interactions they enjoyed may become more formalized, and daily contact among lawyers across the firm may decrease. With 150 or more lawyers, it can become a challenge to remember who each person is and what they do.
- Management Changes: A bigger firm necessitates a larger management team to effectively oversee operations. Additionally, at this stage, managing partners or firm chairs may need to step away from their practices to devote themselves full-time to the business.
The case made by the firm leaders sounded plausible, and as a bonus, it had a scientific basis. They were essentially restating a theory known as “Dunbar’s number.” In 1991, a U.K. anthropologist, Robin Dunbar, released a study correlating primate brain sizes and social group sizes. Extrapolating the primate data to humans, Dunbar proposed that our neocortex constrains the number of individuals with whom we can maintain stable or meaningful social relationships. The limit Dunbar posited was around 150 relationships.
“When groups get larger than 150, it becomes difficult for everyone to know one another well enough to work together efficiently. To achieve true intimacy and trust among members, the group has to be smaller," wrote Malcolm Gladwell, one of the most prominent exponents of the Dunbar’s number theory, in his best-seller The Tipping Point.
Unfortunately, Dunbar's number may no longer be a valid scientific theory. In 2021, Stockholm University reanalyzed the data and found the number of stable relationships possible for humans varied widely, which suggests that no precise cognitive limit exists.
THE ARGUMENT FOR 150
So were the law firm leaders at the panel discussion wrong? With apologies to the scientists in Sweden, I still find the firm leaders’ case compelling—anecdotal as their arguments may be. You might quibble about whether the number is really a little higher or a little lower, but somewhere between 100 and 200 lawyers, the business and culture of most law firms seem to change.
Even in an age when a few firms have attorney headcounts topping 4,000, the evidence suggests that 150 lawyers is still a pretty big law firm. Of the more than 1.3 million lawyers in the United States, only about 5 percent work for firms of 150 attorneys or larger. And outside a few major metro areas (like New York or Chicago), a firm of this size would be one of the biggest in its region.
At the outset of this post, I said I would offer an opinion, and for the purposes of our newsletter, we’ll be focusing on the vast cohort of firms in the 20-150-lawyer range that do not appear on the Am Law 200. Once revenues are high enough for the Am Law 200 (in 2024, that’s $126.4 million or more), firms enter the large firm realm, meaning they typically have broader geographic footprints, more formal leadership structures, and more extensive hiring and leadership processes than their midsize counterparts.
Other legal industry players define midsize law firms similarly. For instance, Thomson Reuters, in its market studies, has characterized midsize law firms as those with 35 or more lawyers that fall outside the Am Law 200. Similarly, Diversity Lab, known for its Mansfield Certifications, has defined midsize firms as those with 25-150 lawyers.
WHY A DEFINITION MATTERS
Why worry about defining the midsize market? Aside from setting the parameters of our discussion going forward, I think it’s important to acknowledge that the nuances and operational dynamics of midsize firms are distinct and significant. Understanding these distinctions helps law firm leaders and their teams navigate their specific challenges and leverage their unique strengths. Midsize firms operate in a unique space that requires tailored strategies for growth and success, and that is what we will be focusing on moving forward.
Do you disagree with these conclusions? Do you have input about topics we should cover in the future? Contact me at david@good2bsocial.com. Next week, I plan to examine the state of the midsize market at mid-year. If you have insights you would like to share about current market trends, please reach out.