The collapse of Dewey & LeBoeuf
Those of you who know me personally or have read this blog know how important firm culture is to me. Still, most days I don’t worry too much about Plante Moran’s culture; it’s always on my mind, but I feel confident that, as a firm, we’re doing a great job protecting and perpetuating the great culture we’ve built. Then a sad story like Dewey & LeBoeuf comes along, and it makes you do a double take.
Dewey & LeBoeuf filed bankruptcy just days ago, punctuating the largest law firm collapse in U.S. history. They were the 11th largest law firm in the country, with 190 equity partners, 1,700 total staff, and 26 offices. Their roots go back nearly 100 years. How hauntingly similar does this sound to Plante Moran?
Then you look at the root causes: $300 million of debt, little capital, a sputtering economy, a questionable partner participation system, and a lack of transparency and trust. In 2011, the firm had net income of $250 million. More than half of that amount was being paid to retired partners or for guarantees made to other partners. One article speculated, “What appears to have brought Dewey to its knees is a failure of governance that allowed these challenges to spiral out of control.” The firm was not run like a traditional partnership but rather more like a corporation.
Our profession would be wise to take note and avoid these mistakes. CPA firms trying to build national/international footprints need to make sure they have the culture to support these strategies. They should likewise be careful about modeling themselves as corporations and using the term “CEO” rather than as partnerships and using the term “managing partner.” Money isn’t everything, and partners and staff are more than just variable costs: they’re valuable talent who will pull together to overcome any obstacle.
How else can professional service firms protect themselves from the fate of Dewey & LeBoeuf? By placing their clients’ interests first and serving those clients to the best of their ability. By deciding that maximizing profits can lead to dangerous decisions and that optimizing profits is a better route. By behaving as a “one-firm” firm that operates for the good of the whole group and not in the interests of a select few. And by always committing to do the right thing.
I feel fortunate that Plante Moran follows these operating principles, and I’m confident that as long as we stay true to our core values and principles, we will endure.
What about you? What are your thoughts on Dewey & LeBoeuf? Do you worry about the sustainability of your corporate culture?