Eastman Kodak’s recent bankruptcy filing has me thinking about what impact, if any, the non-economic health of a law firm has on its long-term success.
Often described as the Google or Apple of its day, Kodak was a true titan of industry that thrived on a relatively simple formula— investment in people, investment in technology and the ability to understand the needs of its customers (“You press the button and we do the rest.”).
To be sure, there were many factors that led to Kodak’s downward spiral. So far, however, little attention has been paid to its commitment to human capital.
Kodak’s early investment in people was revolutionary. The company was able to attract top talent from around the country and bring them to Rochester, New York, the company’s global headquarters.
While other companies battled the labor unions, Kodak took a decidedly different approach by incentivizing their employees to such a degree that they had no interest in unions. Kodak built a movie theater, basketball court and even a bowling alley exclusively for its employees.
As a native of Rochester, the “Yellow Box” was an integral part of our community. I attended birthday parties at the Kodak bowling alley. Kodak was one of my first jobs — I had a high school internship that paid me $5 per hour, a fortune during a time when the minimum wage was $3.03. And I grew up in a neighborhood full of Kodak dads, even though mine was one of the few in town that did not work there. For a long, long time, Kodak was a great source of pride the city.
Somewhere along the way, Kodak lost its rhythm. In 1975 it invented the first digital camera. Instead of paving the path for digital imaging, it refused to bring the camera to market in fear that it would cannibalize the film industry. By the 1980s foreign competition hit Kodak hard.
Around this time, Kodak’s investment in people also took a sharp turn. More than 16,000 employees were laid off. The bowling alley and movie theater closed. By the time I graduated from college in 1991, the only jobs available at Kodak were as independent contractors. No perks. No benefits.
That was more than 20 years ago, but Kodak was never fully able to recover and it’s more recent troubles have been heavily reported in recent weeks.
Shift gears back to the legal industry. In the 25 years leading up to the Great Recession, Big Law profits increased seemingly exponentially year in and year out.
When the economy crumbled, law firm managers acknowledged the need for fundamental change to its business model. The Wall Street Journal reported on the death of the billable hour. But instead of fundamental change as it related to the use of technology, legal project management and efficiency models, Big Law responded with layoffs and lots of them.
Three years later, at the first sign of clearing, are law firms looking at the long-term need for change? No. They have remained short sighted. The Big Law business model has survived and even thrived as law firms have started posting record setting profit per partner earnings.
In The American Lawyer’s recent Law Firm Managers survey, the number one challenge facing managers was failed lateral integration initiatives – and by a wide margin. Yet, according to author Steven J. Harper, (The American Lawyer, “Fed to Death,” December, 2011), “Tellingly, the non-economic well-being of their firms isn’t even on the responding managers’ screens, but it should be.”
Has Big Law proved that its business model can weather any economic storm or, like Kodak, is it merely at the beginning of long, protracted decline? I’d like to think positively, but — to borrow a line from Harper — “Unfortunately, the predicted phenomenon illustrates a persistent case of lessons not learned.”