Management: Staying at the Top of the Roller Coaster

Published September 22, 2015

Poor business management has killed many a large and small law firm alike during the economic roller coaster of the past years. If firms expect to climb to the top of the roller coaster and stay poised there, they must heed the following lessons:

Firms cannot indiscriminately add lawyers without regard for demand. The law school hiring lockstep that used to be a thing of the past should remain a thing of the past.
Firms cannot pay compensation out of scale with what clients will accept. New, lower associate payscales and partner compensation tied to performance should become the norm.
Firms cannot indiscriminately pursue mergers with each other. Combining law firms should be done only to enhance synergies and eliminate redundancies.
Firms cannot automatically raise rates. The billable hour may not be dead, but alternative billing is here to stay, and the casualty in the process is unilateral rate increases.
Firms cannot try to grow without a clear client-development strategy. The only practical focus should be on profitable clients with highly desirable work.
Firms cannot ignore budgeting. Budgets define successful business planning, and any business can and should operate according to a budget.
Firms cannot ignore technology. Rather, they must use it to reduce labor (and legal) costs to leverage lawyers’ per-unit fees.
Firms cannot put a premium on offices since remote work tools and the virtual practice of law increasingly make physical locations less important.
Firms cannot be banks for their clients as millions of dollars in unpaid receivables sit on their books. Enforcing the engagement agreement is essential.

Law is as much a business as it is a service, and lawyers who do not understand this basic principle will fail at the business end and thus be incapable of providing their services.

Categorized in: Management

Audience type: Administrators, Associates, Large Law Firms, Small Law Firms, Sole Practitioners