“This is unprecedented,” says Bruce MacEwen, President of Adam Smith, Esq. “For a firm of this size to go down so fast in a non-recessionary environment, it’s truly amazing.”

Over the past several months, Weil Gotshal got caught in a negative spiral after the departure of a few key rainmakers, merger discussions failed to produce a deal, and another top executive — Ramona Nee, the firm’s co‑managing partner — told the firm she would not take over as executive partner from longtime leader Barry Wolf. “People within the firm saw all this and that left everyone spooked,” MacEwen says. “And from there, it just took on a life of its own.”

In his 2020 paper Why Law Firms Collapse, Prof. John Morley, of Yale Law School, argues that law firms can fail not because of financial problems, but because their partnership ownership structure creates incentives that accelerate their collapse. “Law firms, it turns out, are made of unusually thin glass,” he writes.

A firm’s reputation is no longer enough

One broader lesson here is that a law firm can have a distinguished history and substantial revenue without possessing a sustainable business model. In a market in which leading partners can move their practices to competitors without much warning, institutional reputation may not be enough to retain either talent or clients.

“Unfortunately, culture only takes you so far,” says Bryson Malcolm, founder & CEO of law firm recruiter Mosaic Search Partners, adding that sometimes lawyers have more loyalty to the practice group culture in which they operate rather than the larger culture of the firm.

Although Weil Gotshal had more than 1,200 lawyers across the world, it was heavily dependent on a few key rainmakers who contributed a disproportionate amount of revenue and profit. Once those lawyers began leaving, the financial damage began to cascade. Partner retention, therefore, must be a strategic priority for law firms, not simply an HR concern.

"Firms want to ensure key clients will stick with them, but rainmaker lawyers are looking at protecting their personal brand and their income. So, often they won’t let go of that relationship."

And once a firm experiences a critical departure, leadership must act quickly, says Dr. Larry Richard, founder of LawyerBrain and an expert on the psychology of lawyer behavior. “My research has shown that lawyers, by their nature, are low resilience and highly skeptical personalities, so any negative event or even a threat of a negative event will have them looking at the worst-case scenario.”

Leadership’s response, Richard says, should be to acknowledge the rupture to the firm and engage with everyone in collective problem-solving around healing and moving forward. “By injecting hope and optimism into this situation, leadership can keep their lawyers from gravitating toward what they see as disaster.”

As a practical matter, firms need to prepare for the departure of key rainmakers. That means firm leadership needs to regularly review partnership agreements, withdrawal provisions, capital obligations, compensation commitments, and client-transition procedures.

Another way several industry specialists suggested that law firms could mitigate this type of damage is to align individual lawyer compensation with the firm’s own long-term health. Compensation should reward collaboration, mentoring, cross-selling, and institutional contributions. Responding to every competing compensation offer with a larger guarantee can undermine a law firm’s overall business, especially if the firm’s underlying economics do not support it.

“Leadership succession is one of the most consequential decisions a law firm makes. Partners, clients, and recruits often read it as a signal about the firm’s future.”

In his paper, Prof. Morley argues that law firms should address issues such as ownership structure, governance, and partner loyalty to avoid disastrous situations. For example, he advocates for placing restrictions on partner withdrawals, which would give firms more ability to retain partners and thus reduce the risk of a cascading exodus.

Unfortunately, clients can sometimes play into this dynamic, often viewing the individual lawyer leading a matter as more important than the name on the firm’s letterhead.

This points to a clear misstep that many law firms make today by failing to institutionalize the client relationship. “There is a real tension on that issue,” says Tony Williams, a former managing partner of Clifford Chance and now a strategic advisor to the legal sector. “Firms want to ensure key clients will stick with them, but rainmaker lawyers are looking at protecting their personal brand and their income. So, often they won’t let go of that relationship.”

This leaves law firms walking a delicate balance between making sure their top rainmakers are happy — which often comes in the form of decent renumeration and allowing them some influence within the firm — and ensuring that the rest of the partnership doesn’t feel slighted,” Williams explains. “Often firms are in the unenviable position of trying to keep everyone contented.”

Indeed, several industry sources agreed that too many firms allow individual partners to control client relationships without sufficient institutional oversight — as long as the billings kept rolling in. As Weil Gotshal illustrates, that approach carries significant risks.

The solution to this, as many law firms are discovering, is creating key client programs that would expand the law firm's touch beyond a single lawyer and involve a larger team approach to serving the client's needs.

Succession issues cannot be ignored

Kent M. Zimmermann, a partner at the Zeughauser Group, a law firm management consulting firm, says that questions of retention and succession raised by the Weil Gotshal situation are critical for law firms, perhaps even more than they are willing to admit.

“Leadership succession is one of the most consequential decisions a law firm makes,” Zimmermann says. “Partners, clients, and recruits often read it as a signal about the firm’s future.”

A successful leadership transition requires consultation and alignment with the partnership and the firm's formal and informal leaders. When that groundwork is skipped and the decision is made by the outgoing leader or a smaller group without sufficient consultations, the successor may be anointed, but that’s not the same as being accepted by partners, Zimmermann explains.

To avoid this, law firm leadership should develop multiple leadership candidates, establish clear transition milestones, and communicate strategic priorities well before an incumbent departs. They also need contingency plans if a designated successor withdraws or loses the partnership's confidence.

Clearly, top competing law firms are watching these situations with interest, Zimmermann says, but they aren’t the only ones. “Partners with portable practices are watching closely, and recruiters are too,” he adds. “If partners don’t have confidence in where the firm is headed and who will lead it there, some of them will leave. Without credible leadership that inspires confidence, a trickle of departures can become a stream.”

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The future belongs to firms built to endure

Weil Gotshal’s collapse is a warning that prestige, past revenue, and legal excellence cannot compensate indefinitely for deteriorating leadership, competitive weakness, and a loss of confidence among partners.

Those firms best positioned to survive in today’s legal market will not necessarily be the largest or those paying the highest salaries. They will be the firms that understand why their best people stay, why clients remain loyal, and how to preserve institutional strength when individuals leave.

“What happened to Weil Gotshal is likely to spur more consolidation,” says Adam Smith’s MacEwen. “The demand for legal services hasn’t gone away, and the firm’s talent will find homes elsewhere, so I don’t think the industry as a whole will shrink.”

Individual law firms must show they are more than the sum of their rainmakers, because their long-term survival depends on the strength of their business, the credibility of their leadership, and the confidence of the people who make it work.

You can listen to our special Clarity podcast discussing the impact of the collapse of Weil Gotshal here