Why Law Firm Structure Should Matter to Prospective Clients (Part 1)

Posted on Dec 1, 2015

This blog is the first in a two part series. The second part will deal with how Radiant Law is structured and why it matters. First we look at how traditional law firms are structured and what it means for prospective buyers of their services.

Although it is an entirely reasonable for customers to have little to no interest in the internal workings of their supplier, there are some inherent issues in law firm structures that should matter to clients. These issues are important because they engender many of the behaviours that are observed time and time again. If you want different outcomes, then you may need to ask some hard questions to understand whether change is possible from your suppliers.

The first issue is the partnership model and how it affects bold decision making.  It has been observed when looking at partnerships in action, that the management of partnerships is fundamentally an exercise in cat herding. The number one goal of management is often to ensure that the most valuable partners (as measured by book of business) are happy.

This means that actions that need approval, especially new ways of delivering services and new products, will always be weighed by management against potential upset to rain makers and the potential discord that the proposal will trigger. The challenge is that the most influential voices are by definition those that have been most successful under the existing system, meaning that it is hard to get fundamental innovation to be agreed to in a partnership.

Question for the buyer: if I want a new outcome, how likely will that change be supported by the most influential partners? Does the change threaten how they have always done business?

The second issue is future investment. Partnerships are not the ideal model for investing and it has been noted by commentators that partnerships don’t tend to have significant retained earnings lines in their accounts.

Question for the buyer: if you are looking for new service lines that will involve significant investments to set up, have your suppliers retained earnings to invest?

The third issue is the billable hour.  Most law firms treat the billable hour as the core metric for the work performed by their lawyers and charge on a billable hour basis. If an innovation requires initial investment of time  but will then reduce the number of billable hours needed to deliver the work then the incentive to do so is significantly reduced.

Question for the buyer: How likely is it that the relevant lawyers are going to take advantage of the potential efficiencies that  innovation could bring?

These issues aren't insurmountable but I suggest they go a long way in explaining why law firms haven't evolved as fast as their clients might like. If you are looking for a new solution, it matters what drives the firm that you are looking to partner with.