Every law firm goes through a series of decision points at various stages of its existence. Sometimes a firm makes a conscious choice, sometimes choices are forced upon it and sometimes firms simply wait and let the critical moment pass, hoping that a clear market trend will emerge. If they wait, however, things could go in one of two ways. Either firms might lose a clear first-mover advantage and surrender lucrative business opportunities or they might gain the benefit of entering a market that has stabilized, where the major risks have already been taken and quantified and which is inhabited by relatively mature players.

In this column, I examine four such critical decisions that a number of firms have grappled with. This is not to suggest that this is the sum total of difficult decisions that a firm must grapple with, as any managing partner will tell you. Nor is it necessarily true that these decisions are the most difficult ones for firms. But these questions are common, complex, involve multiple variables and have comparatively unpredictable consequences. Some firms have chosen answers that have  moved them to greater heights, others have stumbled.

Personalities or Institutions?

Legendary corporate lawyer Joe Flom, one of the founders of Skadden Arps Slate Meagher & Flom once said that his goal at Skadden was, “To build an institution where my passing might be noticed but not important.” Today, with 24 Skadden offices worldwide and about a thousand lawyers, this seems more than likely. David Boies left Cravath to start Boies, Schiller and Flexner and now he has 200 lawyers to keep him company as his firm emerges as one of the most profitable ones in the U.S.

The numbers, however, do not tell the whole story. Some firms, like Skadden, have succeeded in outgrowing their founders and emerging as institutions. Others have never quite managed to outgrow the powerful aura of the lawyers who started them. Some firms have fully understood and internalized the processes of identifying the next generation of leaders, training them and giving them a stake in the firm’s future.  These have generally managed to make the transition to institutional status.

Firms also have to consider the issue of whether institutional relationships are stronger than personal ones. At the very top end, the largest commercial institutions tend to have institutional relationships with the top law firms – Goldman Sachs with Sullivan & Cromwell, IBM with Cravath or Google with Wilson Sonsini. Not only does this make it harder for partners to depart with major clients, when they move from one firm to another, it also makes a law firm’s growth symbiotic with the growth of its major clients.

Specialize or Full Service?

A Greek philosopher once said “The fox knows many little things. The hedgehog knows one big thing.” Law firms often face a similar choice – stay an IP or litigation boutique or go full-service? Some firms tackle this decision head-on at an early stage and reap rich rewards. Again, Skadden is a good example – the firm’s decision to go full-service helped to insulate it from the downturn in the U.S. merger market between 1969 and 1972 and to ensure that firm income stayed steady.

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