Culture: An obstacle to success for law firms?
Reda Bennani : Consultant
The global financial crisis that truly impacted every economy, made a lot of radical changes in the way businesses operate and generate revenue. Those that anticipated ever-demanding customer needs thrived despite competing in very tough industries. Others however lagged far behind in terms of structuring a business model that understands the realities of the global economy and corporate clients’ behaviour.
There is a consensus that many big corporate law firms aren’t built to run like modern businesses. The tough reality is that modern corporations are allocating fewer resources to legal work, and establishing more strict measures to verify the efficiency and productivity of the law firm engaged. This changing environment has penalized law firms, which are already punished by their culture and structure. The Partnership structure aims to look after the partners as the ultimate financial goal. They have adopted complex corporate finance techniques to generate revenue in multiple ways to support the income stream.
In a law firm environment super stars’ pay checks are tied to profits, this creates a level of financial volatility within the decision makers and is in conflict with the desired longevity within the firm’s management. A fractured structure and culture can be deadly for a law firm once a group leaves and run with some cash…which we have witnessed in the last couple of years. Law firms then need, to think short term for rebuilding their financial structure, and anticipate long term trends by starting right now on internal changes. A danger is the practice of attending several peer conferences, where few of the subjects discussed are really translated to the law firm practice survival. The difficulty with chasing averages is that is the best that can be hoped for.
There is not a magic formula to fix the partnership model. The reality is compensation must be less generous than it previously was for associates and mid-level attorneys. The barrier to partnership must get harder. We are In an efficiency era, one where VC backed IT companies are thriving to automate pretty much EVERYTHING! Is your firm waiting for the inevitable or trying to get ahead of the curve?