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When Does Size Matter?

I practiced with a medium sized firm in Mississauga, Ontario, which many of you may be surprised to know is the sixth largest city in Canada, just after Edmonton and ahead of Winnipeg and Vancouver. Back in the late 1980’s and early 1990’s several Toronto firms opened offices there. At that time, the buzz in the legal profession was that there was no future for medium sized law firms, and they would all be wiped out by the larger firms with their greater expertise. In fact, almost all the Toronto firms closed their offices in Mississauga after a short time, and the local firms have been doing just fine ever since. 

However you define an “expert”, the large Toronto firms have more “experts” than the smaller firms, and the smaller firms have more “generalists” than the large Toronto firms. So how is it that the smaller firms continue to thrive, and in the realm of entrepreneurial companies, compete quite effectively?

It is useful to start by defining the difference between an “expert” and a “generalist”. My favourite definition of the term “expert” is “someone who knows more and more about less and less until they know absolutely everything about almost nothing”, to be contrasted with the definition of a “generalist”, being “someone who knows less and less about more and more until they know almost nothing about everything.”

I am aware of two theories which seek to explain why many sophisticated clients choose to do business with smaller firms, which typically have fewer “experts” than larger firms. 

The first theory, propagated primarily by the larger firms, is that bigger is better, you get what you pay for, and if you can afford a larger firm you should use one. If you cannot afford a larger firm, you should settle for second best and deal with a smaller firm. The corollary, of course, is that the most successful lawyers are those who work for the larger firms. The larger firms start pushing this theory at the law schools. For example, students at University of Toronto Law School who strive to win the Blake Cassels & Graydon LLP prize in Business Organizations or the Gowlings WLG Prize in Corporate Finance can be forgiven if they graduate with the impression that to be a successful lawyer, one must be an expert at a large firm.

I prefer the theory that smaller firms offer something that the larger firms often cannot provide, which is the benefit of dealing with generalists. In this theory, generalists are not simply second-rate lawyers who were not smart enough to be hired by the larger firms, and their clients are not all companies who cannot afford a larger firm and/or do not know any better.

So, how can a generalist possibly be a better legal resource than an expert? Let me start by saying that there are many times when you need to hire an expert at a major law firm. There are transactions which are simply too large for a smaller firm to handle because they require more lawyers than a smaller firm can provide, and there are specialized areas of law that a smaller firm often cannot handle. I would be the last person to argue that the client is always better served by a generalist in a smaller firm.

I would also never suggest that a client is well served by a generalist who does not know his or her limits or who hesitates for any reason to call in the big guns when they are required, or who covers too wide a practice area. (For example, it is one thing to be a general business lawyer for private companies, but quite another to be a lawyer who covers all of business law, litigation, wells, estates, trusts, and real estate.)

However, the problem with experts is that they often do not have the general background to spot issues outside of their immediate area of expertise or to borrow solutions from another discipline, and as a result one or more of the following occurs: an issue or a creative manner of solving a problem is missed, or the issues are identified and solved, but only with the participation of many lawyers and at great and unnecessary expense. Many large clients of the big Toronto firms will have in-house counsel who play the role of the generalist, so the absence of the generalist at the larger firms may not be an insurmountable problem for them. However, the entrepreneurial clients of the large Toronto firms, who often do not have in-house counsel, may suffer.

Back when the law was less complicated, legal practices were more profitable, less time was required to be devoted to practice development, and billable hour requirements were lower, there were some old timers at good sized firms who could specialize in one area of law and have a general understanding of many other areas of law. Arguably, these lawyers were the perfect mix of being experts and generalists. However, those very lawyers who “could do it all” trained many generations of lawyers who were more specialised than they were, and I believe that in larger firms, and with some exceptions, the value that the generalist brings to the equation has been lost. 

The bottom line: The large firms are better for some things and not as good at other things. They are an expensive resource for the things that they are not that good at. Although their marketing would suggest that they are always better for those who can afford them, I just don’t think that is the case.

As an aside, there is another definition of an “expert” that I like, which is as follows: “An expert is someone from out of town with Power Point”.  (I was once asked to travel to Vancouver to speak about business succession, which made me an expert in the field. I thought it amusing because I am certain that there must have been at least a few lawyers in Vancouver who knew at least as much about the subject as I did, and the sponsor of my presentation could have saved the cost of the airfare and hotel.)

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