When the rainmaker walks out
This week, a prominent law firm that advised Lehman Brothers on the edge of its collapse is on the edge of its collapse itself.
I have never worked with Weil, Gotshal and Manges before. But my sympathy goes out to the high caliber folks who had joined the firm in the recent weeks, particularly those who were re-opening the practice in Asia[1].
I can only imagine what it is like to show up at the office one day to find that your role is at risk of being redundant while the company weighs its options of a merger or liquidation.
Then again, how does an asset-light business that is billing more than $2 billion[2] a year go under?
In most companies, the collapse of the business is almost always attributed to cash flow, a bank run or when someone pulls the plug on capital. Both Lehman Brothers and Silicon Valley Bank were classic examples.
Still, I think this is a stark warning for all companies, even those that are publicly listed, well regarded and inundated with cash.
To put things in perspective, law firms operate somewhat differently from other large capital-intensive businesses such as commercial banking or manufacturing whereby the departures of a few good men do not sink the boat.
No one is irreplaceable.
But the legal advisory trade—much like consulting—relies even more acutely on people. And when a $20 million rainmaker walks out of the door, an entire business can be put into jeopardy.
Weil's top earner was known to be powerful and territorial, holding enough sway to block recruiting efforts by the firm including a potential hire of an M&A partner from a competitor, even when those who were part of the hiring process supported it. He was also said to have held back on new growth initiatives, discrediting a colleague's proposal to grow the practice in a new area, even calling it an act of disloyalty[3].
I can totally understand that it is a fine balance having to juggle strategy, topline and bottomline, all while trying to keep your best salesman in check.
But if a firm's corporate culture shuns ambition and personal growth, or perpetuates an environment that turns talent away, then the ambitious people will simply leave.
The ones who remain will end up as mediocre fools who come to work every day lying and hiding behind their flaws, never taking risks, never doing the things that makes them appear weak or end up in the firing list. The end result will be a vicious cycle of employee turnovers, each round worse than the one before.
Most companies worry about cash flow and staying afloat. But remember: While you may not run out of money, you can also die by running out of people.
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