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Cash flow is the most important financial variable of businesses of all types and sizes, including law firms. Delinquent accounts can take a large bite from your working capital and impede your ability to pay your own expenses on a timely basis. Law firms, therefore, must ensure that they are paid on a timely basis, or they will face financial problems. READ MORE >

Would anyone advise a commercial entity with multiple business lines to operate in an environment in which management does not know the relative profitability of the company`s business lines, product lines, and/or geographic regions? Given the competitiveness in today`s legal profession, managing partners and management committees should consider that same question as it applies to the management of their firms. READ MORE >

Seeking to differentiate their firms in a competitive legal marketplace by providing a broader range of services, an increasing number of law firm planners find themselves performing a cost-benefit analysis of proposed ancillary businesses -- non-legal ventures that offer services complementary to those provided by the law firm. Services provided by ancillary businesses include, among others: advertising, consulting, claims administration, document management, government relations, human resources, real estate appraisals, real estate development, title insurance services and tax counseling. READ MORE >

Day One
It’s Friday afternoon, and you are the new Managing Partner of an old-line law firm in a significant legal market. Your firm has suffered three years of stagnating revenues and partner incomes, and has shrunk modestly in size, despite what has been for most firms a very profitable few years. You look around, and you realize that at 5:00, there are a number of dark offices—far more than can be accounted for by the shrinkage you’ve experienced. Your gut tells you the firm has lost its direction, and you are concerned about bringing the revenues back up to historical levels. For some reason, you’ve had a series of strikeouts with the various lateral candidates you’ve pursued. Cash flow has not been good, and you just heard from the controller that it is clear the firm will be off budget this year . . . READ MORE >

One of the stark new realities facing law firm leaders and managers across the country is a dramatic increase in the risk of significant liabilities that can affect their firms. READ MORE >

Few would question the value of external financial auditing, even in legal partnerships where it is not a statutory requirement. It provides a valuable independent verification of the financial results achieved and of the accounting procedures used to calculate them. READ MORE >

The dissonance between what lawyers think they’re selling and what clients want to buy is often stunning. Nor is the problem limited to law firms dealing with relatively new clients. It’s the most highly institutionalized relationships between law firms and very large business companies that are often best characterized as ships passing in the night. READ MORE >

Now, more than ever. If your firm has ever considered conducting formal client feedback interviews, but has been unable to overcome the obstacles to implementing them, now is the most critical time in recent history to reconsider—there`s no time to waste. The effect of a unique confluence of events makes this process imperative to ensuring that the firm makes informed business decisions about its future. READ MORE >

Way back when, lawyers served as holistic counselors to their clients, offering sage advice in a host of areas, including those considered outside of the purview of "legal advice." Today, the picture is a bit different. Many lawyers are specialists in a particular practice area and advise their clients in a narrow and specific manner. However, in interviews with hundreds of law firm clients, it is apparent that clients are seeking an entirely different type of advice. One of the most frequently cited characteristics that clients desire in their lawyer is pragmatic, practical business advice—advice that keeps them on the straight and narrow path legally, but also takes into account the realities of their particular business, culture, situation, and/or industry. Lawyers who can reclaim the role of "business counselor" will have a distinct competitive advantage. READ MORE >

The issues surrounding retiring partners and compensation have created problems for many law firms. While not universally true, unfunded retirement plans, whether tied to some average of historical income or to receipts associated with continuing client fees from the partner’s responsible clients, are generally without economic justification and usually a serious economic problem. READ MORE >

Eliminate Lock-Step Model and Reward Performance, Not Time Served

Beginning at the end of 1999, law firms began accelerating the rate at which they increased associate compensation. This trend literally moved at “Internet speed:” within three months, associates nationwide were deemed to be worth substantially more than they had been when hired, sometimes only a few months earlier.
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This is an exciting time to be a new partner in a law firm. The legal market has experienced several years of record profits and growth while the global market as a whole continues to become smaller. The profession will undoubtedly continue with its metamorphosis as Generation X infiltrates the law firm partnership ranks. READ MORE >

Simply put, if the job of a manager is "to make the trains run on time," the job of a leader is to ask where we should lay the tracks - or, perhaps, to suggest that it`s time to close down the railroad and start an airline. Most law firms are reasonably well managed but seriously under led. At a time of dramatic change in the legal market, this deficiency can be fatal. Having an effective leader as managing partner, though certainly not a panacea, can go a long way to helping a firm weather the storm of change going on all around us. READ MORE >

As law firms review their capitalization, they need to consider the costs of operations and strategic initiatives as well as those events that cannot be anticipated. READ MORE >

Nothing can create more tension and controversy in a law firm than partner compensation. At their best, compensation systems leave some partners feeling short-changed. At their worst, they misallocate financial resources, cause severe infighting, and set the stage for destabilizing defections. Although consultants admonish firms to use their compensation systems to further their strategic ends, only a few firms have clearly managed to do so. But given the current degree of upheaval in the legal profession, no firm can afford not to link compensation closely with strategy. The challenge is determining how best to accomplish that goal. READ MORE >

A partner’s retirement can have an adverse financial impact on a law firm unless proper planning is done. This is particularly true of a firm’s big rainmakers. Loss of even a few large clients when a rainmaker departs can have a severe impact on the firm’s bottom line. Failure to successfully transition management can also have disastrous consequences, leaving a practice group or the entire firm directionless and stumbling. A firm’s partnership agreement should clearly address retirement issues to plan for a successful, orderly transition. READ MORE >

There are as many variations of partner compensation plans as there are law firms. Most are well intended and targeted at rewarding those efforts that the firm values, or thinks it should value, most. READ MORE >

One of the most striking changes in the evolution of the American legal market over the last 20 years or so has been the extraordinary growth of law firms. READ MORE >

Has your firm identified its business goals for this year (and beyond)? Have you developed long-term strategies for securing your position in the market? Have you thought about your competitors and how they might be planning to take your business? The mid-size firm can no longer rely on the fact that they are “full-service” firms. Global mega-firms, accounting firms and other professional firms will prove to be intense competitors for work that has traditionally been dominated by mid-size law firms. To survive, mid-size firms need a focused strategic plan that clearly identifies long-term goals, present and future market position, and business development objectives. Mid-size firms pursuing rapid growth would do well to consider merger as a means of achieving long-term strategic goals in a rapidly consolidating market. READ MORE >

At too many firms around the country, the primary roles of the first-year associate are pretty simple: Generate a significant number of billable hours and learn how to be a good lawyer. For this, associates are paid handsomely and expected to thrive. Unfortunately, these twin goals often are placed in direct conflict, and young lawyers tend to focus on the more tangible goal of billing hours. It would be far more beneficial to law firms to adopt an approach advocating a more balanced commitment to the billable hour dilemma, one that emphasizes both billable and nonbillable contributions. READ MORE >

Don't be deceived. Unfunded retirement plans are antiquated relics that can drain valuable resources and severely limit a firm’s ability to execute strategic initiatives. An argument against unfunded plans. READ MORE >

The rapidly accelerating rate of consolidation in the legal profession continues to capture the attention and interest of lawyers everywhere. In recent months we have even seen an increase in the announcements of mergers in New York City. The question that we hear time and again from firms considering merger is whether these and other mergers have been successful. Some firms want empirical evidence of this success, or lack thereof, and look at areas such as increased profits, while others look for “telltale” signs such as partner defections. While these may be interesting, they cannot tell the whole story and can often lead to an incorrect conclusion. This article will define those success measures, although perhaps not in the black and white terms that some would like to see. READ MORE >

A few years ago, many were predicting that the legal industry would see an overwhelming number of mergers between U.S. firms and U.K. firms. But the flood of mergers did not occur, and some came to believe that there are fundamental differences between firms in the two countries that are difficult to overcome in the context of a merger. The termination of some high-profile discussions between London’s Bird & Bird and Orrick, Herrington & Sutcliffe, as well as between Latham & Watkins and London’s Ashurst Morris Crisp, supported this theory. READ MORE >

As the economy changes pace, more firms than ever are shifting their focus from acquiring new associates to procuring partners and the client relationships that accompany it. As a result, the interest in law firm mergers is higher than ever, and there are a growing number of merger discussions occurring in California. READ MORE >

Long before most mergers are put to a vote, merger committees define and analyze the new firm's financial prospects, practice opportunities, governance structure, technology needs, marketing plan, and a host of related issues. Unfortunately, some firms thoroughly analyze the merger; agree to merge; but then stumble through the integration process. READ MORE >