When Record Profits Mask Fault Lines: Gina Rubel’s Law.com Article Draws Responses From Heather Morse and Catherine Alman MacDonagh

In July, Gina Rubel published Warning Signs Mid-Market Firms Ignore at Their Peril Before a Forced ‘Combination’ or Collapse in Law.com Pro Mid Market. The article (which is behind a paywall) examined the strategic, financial, cultural and governance weaknesses that build inside midsize firms long before a failure becomes public.

Her point: 2025 delivered stronger profits, higher demand and better rates, and firms that layered on cost structure without addressing underlying vulnerabilities put themselves at risk. Rainmaker departures, compensation that rewards origination over stewardship, aging receivables and infrastructure that lags growth all belong on a leader’s watch list.

Law firm failures reach well past the partnership, disrupting staff, clients, vendors, referral sources, landlords and the surrounding community, she said. “Firms that endure are the ones whose leaders spot risk early and act on it.”

Read the full recap of Rubel’s article here.

Heather Morse Adds the Variable That Isn’t on the List Yet

On July 31, Heather Morse, founder of Heather Morse Advisory, responded in Law.com Pro Mid Market with “The Warning Sign That Isn’t on the List … Yet,” which was also published on her blog, The Legal Watercooler.

Morse writes as someone who watched these fault lines converge from inside a midsize firm, where she served as chief marketing and business development officer until it wound down operations earlier this year.

She recognized the pattern. Midsize firms chase many of the same clients as the Am Law 100 and 200, and those clients expect to pay substantially less per hour for comparable work. Competing at that level pushed investment in technology and talent past what the firm’s margins could carry. The fight for lateral partners and associates intensified at the same time. And profits per equity partner carried more weight in planning than it should have. As Morse puts it, “The numbers work for a long time, right up until they don’t.”

Her addition to the list is AI, both generative and agentic. It is already compressing the drafting and first-pass review work that used to fund the hiring and infrastructure firms needed to compete, while simultaneously raising what clients expect in terms of price and turnaround. Clients are not interested in paying for the AI investment or the efficiency it produces, and most firms are still built on the billable hour with no real readiness to move to value-based or project billing. Morse also names a cultural obstacle: “Lawyers are trained to reason from precedent, and no precedent exists for this. The instinct that makes someone an excellent advocate becomes a liability in strategy.”

Her timing warning deserves attention from any leadership team feeling comfortable.

Thomson Reuters’ 2026 Report on the State of the US Legal Market shows mid-market firms outgrowing the Am Law 100 this year. Good current numbers reduce internal pressure to change anything, which is exactly the wrong instinct. She recommends shorter-cycle scenario planning over the five-year vision-and-mission variety, and treating AI exposure as something leadership checks continuously rather than revisits at the annual retreat.

To know whether an AI plan needs revisiting, Morse offers three questions:

1. Does the plan address how AI is already reshaping the practice of law, beyond the business of it?
2. Does the plan commit real dollars and real training, or does it check a box with a pilot that was mentioned once and shelved?
3. Is leadership genuinely willing to act on what the plan reveals, even if that means changing course?

A plan missing any one of those, she writes, is no longer strategic. It is a document that was once true. Most firms are not short on intelligence about what is coming. They are short on willingness to give something up, whether that is headcount, short-term income or a piece of their identity.

Catherine Alman MacDonagh on Why AI Won’t Fix Your Law Firm

Catherine Alman MacDonagh, JD, CEO and founder of FIRM Guidance and the Legal Lean Sigma® Institute, took both articles as validation of her shift from classic SWOT analysis to the TOWS Matrix for business, strategic and scenario planning. Her response, AI Won’t Fix Your Law Firm. It Will Expose It, published on JD Supra, agrees that AI is a force accelerating vulnerabilities firms already had, then adds a warning sign of her own: “operational readiness.”

For decades, firms have succeeded despite operational inconsistencies, she said. Talented people compensate for inefficient processes, experienced partners know where information lives without any of it being documented, and institutional knowledge stays in individual heads rather than embedded in systems.

MacDonagh points to Rubel’s description of the result, “a firm that functions less like an institution and more like a hotel for lawyers, as the heart of the operational maturity problem.” She said, “A firm can grow its roster, revenue and reputation without building the governance and infrastructure required to operate as an integrated business. That model held until the pace of change accelerated.”

MacDonagh’s practical objection is straightforward. “A firm cannot automate a process it cannot define. It cannot govern AI without knowing who owns the process, the data or the decisions. It cannot improve the client experience without mapping the client journey. And it cannot measure AI’s impact without baseline performance data.”

The useful questions are not about which tools to buy, MacDonagh argues. “They are about how work actually moves through the firm, where decisions get made, which processes create friction and whether people are prepared to change how they work.”

MacDonagh’s answer is a sequence she applies to almost any transformation: People, then Process, then Platform.

Start with the humans, their incentives, skills, concerns and capacity for change, because a technically elegant solution nobody adopts is still a failure. Then examine the work itself, since adding AI to inefficient intake, inconsistent matter management or unclear workflows will accelerate the inefficiency rather than resolve it. Technology comes last, chosen to support the operating model the firm designed on purpose. Reversing that order produces the familiar failures: buying a platform and then hunting for a use case, or redesigning a workflow and leaving adoption as an afterthought.

She frames the assessment work through her P+ Ecosystem™, which evaluates a firm’s current state across Process Improvement, Project Management, Pricing and Profitability, People, Performance Management, Performance Metrics, and Practice Management and Innovation, scored on a weighted decision matrix. A meaningful AI readiness assessment, she argues, should measure operational maturity, governance capability, technology and data maturity, and organizational readiness to change, and it should produce an actionable roadmap rather than a list of problems. Her advice to clients is to build the decision-making model before making the decisions.

Her closing point echoes both articles. The warning sign is not that a firm lacks an AI strategy. It is that the firm does not know whether it has the operational foundation to implement one.

Read the full articles:

• Gina Rubel, Warning Signs Mid-Market Firms Ignore at Their Peril Before a Forced ‘Combination’ or Collapse, Law.com Pro Mid Market (subscription required)
• Heather Morse, The Warning Sign That Isn’t on the List … Yet, The Legal Watercooler
• Catherine Alman MacDonagh, AI Won’t Fix Your Law Firm. It Will Expose It, JD Supra

This media mention was drafted with the assistance of Claude.ai, using the source articles linked above. It was reviewed, edited and fact-checked by the Furia Rubel team prior to publication.