Earlier this year, Hildebrandt’s Susan Longo and Susan Lambreth set out the differences between BigLaw firms and the majority of midsized firms in an article appearing in Law Practice Today. The authors note that those midsized firms that have addressed these same issues have reaped positive benefits. What are the areas of difference? They identified five.
Culture
Partner Compensation and Authority
Bench Strength and Talent Pool
Professional Management
A Traditional View of the Business of Law
From the culture standpoint larger firms tend to have a branded or institutional culture—it is all about the firm not the individual. They have put structure and processes in place for effectively managing the firm and for projecting an image and style for the firm. If we look at most midsized firms, partner autonomy remains a core value. In such an environment, self interest obstructs the developing and institutional image or culture. The notion of “my” clients is superior to “our” and “we” and thus the continuity of the firm is always in jeopardy. In the end “my” type firms are less successful.
The exalted level given partner autonomy in the majority of midsized firms limits the authority of its managers. In addition, midsized firms tend to undervalue the management component of its managing partners and practice leaders. Limited authority coupled with misguided compensation plans produces the result you would expect. Inadequate management is the reason 75% of midsized firms have no strategic plan. It explains why they fail to set clear goals, measure performance and hold people accountable. Their performance is in stark contrast to the top performing 25% of midsized law firms whose partners earn two to seven times the partner income level of those law firms with a “my” culture and inadequate management.
When it comes to bench strength and talent pool, the large firm has an advantage that is beyond the reach of midsized law firms. However, as I noted in a prior post, even if one looks at the legal services needs of major corporations, a large talent pool is only important in about 10% of their cases. Rather than compete with Biglaw on Biglaw's terms, the more successful midsized firms look elsewhere for competitive advantage—price, industry knowledge, narrowly defined markets they can dominate. Less successful firms tend not to have defined the competitive advantage or value proposition for their firm. They pursue a “me too” strategy. The problem with “me too” is that rather than differentiating the firm, its message is “we are no different.” If you are no different then why should a client do business with you rather than some other firm?
Regarding professional or non-lawyer management, studies rather consistently show that firms who have invested in non-lawyer C level management produce higher levels of per-partner income. A minority of midsized law firms is beginning to add full time management but it is still the exception. The lack of non-lawyer managers (managers who do are not conflicted by two apposing responsibilities, the billable hour vs. their management duties) leads to wide differences among midsized firms when it comes to their financial performance. Because management is more consistent among Am Law 200 firms the variation in financial performance is less. All Am Law partners are doing well financially; the same can not be said for all midsized law firm partners. Midsized law firms can improve performance and consistency by adding non-lawyer professional managers or by at least increasing the value they place on the contribution of their part-time lawyer managers.
When you come down to it, the fifth point difference trumps all the others. BigLaw is in the Legal Services Business. Most midsized law firms have not made the transition from the practice of law to the business of legal services. In their article, Longo and Lambreth write “Years ago, most law firms were small and managed by partners who had full-time practices and spent only as much time as they had to on business strategy and operations. In fact, there were those who resisted a business-like approach to running their law firms for fear that it would have a negative impact on productivity (too much bureaucracy, administrivia), collegiality (fosters unhealthy competition) and entrepreneurial spirit (too much accountability). Today, that business philosophy translates into inefficiencies, compromised profitability, uneven client service and lack of direction, just to name a few drawbacks of operating under such a business model. For many mid-sized firms, recognition of the need for change in their management approach has evolved slowly because they haven’t fully embraced the benefits of a more centralized management structure and the hard decisions required to remain competitive.”
I couldn’t have said it better. At the same time I should point out that at least a quarter of midsized firms appear to have made it into the business camp and are doing well with partners earning two to seven times that of the rest of the pack.
Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
Related posts
Filed under Blog by Tom Collins
Women and Men Rainmakers in Law Firms
Leave a Comment