Global200-middle-tier-shoes-three-choices_shutterstock_614406593 Credit: AmySachar/Shutterstock

It is the mantra management consultants love to espouse: Go big, go niche or go home.

So widespread is this logic – that success equals being either the biggest or the best – that it is repeated at almost every conference by almost every business leader in the country. You can easily imagine it preached by the likes of McKinsey & Company. 

In some industries, it makes total sense to aspire to one strategy or the other. Retailers with high overheads either need to achieve sufficient scale in order sell cheaply in volume, or be niche enough to demand high-end fees.

But law firms around the world have accepted this reasoning to such an extent that those with neither international scale nor a specific area of practice expertise are often derided as institutions that will one day fall by the wayside.

Look at Slaughter and May, they say, and Wachtell, Lipton, Rosen & Katz. They don't need to expand in order to succeed. And look at Latham & Watkins and Clifford Chance. They are hugely successful after expanding across the world.

The problem with this, of course, is that it is a self-selecting sample of the most successful firms operating the two extreme models. There is also a survivorship bias. For every success story of a targeted strategy like Slaughter and May, there is a less glamorous story of a firm being acquired or collapsing, like Ince & Co. And for every example of global growth like Clifford Chance, there are forgotten cases of failures like Coudert Brothers.

If scale was the single defining factor of a successful law firm business model, then surely Baker McKenzie, Dentons and CMS would be classed as the best institutions around. After all, they have the most lawyers and the most offices.

And if simply remaining small or with a narrow specialist focus effectively guaranteed riches, then the likes of BLM and Hill Dickinson would be among the most profitable, when in actual fact they have some of the lowest average profits per equity partner in the U.K. top 50.

In the legal world, the reality undermines the consultant's market logic. There are some firms that do not really benefit from scale and others where it makes little sense for them to limit their growth. And perhaps most importantly, there are plenty of successful medium-sized law firms that have neither a universal presence nor a niche strategy.

Ashurst, Simmons & Simmons and Stephenson Harwood are examples of these. All three are fairly big, but nothing like the size of the largest U.K.-based legal institutions. They are all pretty good in a variety of practice areas but may not excel at everything.

Conventional business logic would suggest that these firms are on their way out. And it is true that Ashurst has a storied history that once placed it as a competitor to the Magic Circle, something it would struggle to claim now.

However, all three firms rank above many larger competitors by revenue per lawyer and profit per lawyer, as they have done for many years.

If we divide up the top 200 law firms in the world into large, niche and mid-tier, the message becomes even clearer.

Let's say large firms are those with more than 2,000 lawyers operating across more than 10 countries, and niche firms are those in just one country with fewer than 500 lawyers. The firms in between – those with between 500 and 2,000 lawyers, operating across between two and 10 countries – have the highest average equity partner profits of all three groups, according to bespoke research by ALM Intelligence database Legal Compass.

Global200-PEP-by-Tier Source: Legal Compass

And in growth terms, firms in that middle tier are expanding at a similar pace to those in both the global and niche tiers.

Global200-Revenue-by-Tier Source: Legal Compass

The truth is that commercial law is so profitable that you can do fairly well out of it even with very few differentiators. You need not be the biggest or the best and you can still enjoy a comfortable existence.

This may not fit with a management consultant message, because it would be strange to pay high fees only to be told to carry on regardless. Where would be the so-called added value in that?

In the late 1990s, Norton Rose brought in Bain & Co for some costly advice, a process that culminated in the firm attempting to be one of the handful of top global law firms in less than 10 years. Subsequent efforts to build up an international network proved more painful than most could have ever predicted. 

Perhaps having a grand strategy just feels better, even when the merits of such a plan are highly debatable. 

The head of one large international firm says: "Clients don't care if you have a large international network. What they care about is whether you are good and the offices are integrated."

He may well be right. But he'd never make it as a management consultant.