Goal setting and planning for a law firm essentially consists of "building" the model which serves as a guide for the development of the firm, and determining how and over what period of time the firm will reach its goals of becoming an organization which is similar to the model.
Among the characteristics of the model are size, status, ownership, economic results, types of law practiced, types of clients, social environment, management and organizational structure, geographic scope, degree of community involvement, physical environment and personal comforts for the lawyers.
There are certain characteristics of law firms which usually are not compatible, and in setting its goals, a firm must be careful not to devise a model that is both "round" and "square" at the same time. Following are some examples. A very large law firm usually does not have the more intimate social environment that is found in a small organization. Larger firms with larger clients mean that the lawyers in a firm must specialize to a degree, which may not be attractive to a lawyer who wants to be more of a general practitioner. A law practice which is heavily socially oriented cannot hope to achieve the economic results which a "corporate practice" will generate.
This article sets forth some of the characteristics which should be considered, as well as pertinent comments based on the consultants' experience.
Many lawyers associate size with: status within the legal community, economic success, stability, prestigious clients, the ability to undertake more complex and interesting legal work. These advantages are usually coupled with other characteristics which may be unattractive to some lawyers. These include less opportunity to have a meaningful participation in management, a greater need to conform to established policies and procedures, a more impersonal atmosphere, less direct client contact, and working on small pieces of larger matters rather than getting a complete overview of a problem.
There is ample statistical evidence that lawyers in larger law firms generally have greater incomes than those in smaller firms. One reason is that it takes a certain size law firm to attract the large corporate clientele which is willing to pay the higher rates which the larger firms usually charge. Larger firms tend towards representing corporations and institutions, whereas smaller firms may frequently represent individuals or smaller organizations.
The incomes of senior lawyers generally continue to increase as firms become still larger. Also, it should be pointed out that the income per partner, as firms become larger, increases more rapidly than does income per lawyer (partners and associates combined). This conclusion is supported by several of the available law firm economic surveys.
For a firm to become substantially larger than, for example, 40 or 50 attorneys usually means either that it must have several large corporate clients, or that it must diversify geographically, or both. Also, it should be noted that firms which have achieved major growth in recent history have generally done so largely by expanding their litigation practice. The ability to properly serve larger corporate clients is also dependent on a firm's ability to handle larger scale litigation.
Hence, if you decide that your model objective should be a substantially larger firm than your present one, you must be prepared to build a top-notch litigation department.
One of the ways to increase the income of partners in a law firm is to make a conscious effort to maintain a "favorable ratio" of partners to associates, since associates typically make "profits" for the partners. In larger firms, the ratio of partners to associates will typically fall in a range of one-third to two- thirds of all lawyers. Factors affecting the ratio include length of time required to become a partner, turnover of associates, and overall firm growth.
If a firm does not have an unusually high turnover rate for associates and the average time requirement for associates to become partners is about six years, the growth rate to maintain a low ratio of partners to associates has to be phenomenal. For example, if a firm wants to maintain a ratio of one-third partners to two-thirds associates, it would have to double in size every seven years, assuming it takes six years to become a partner and only 50% of associates eventually are made partners. If a firm in similar circumstances were satisfied with a 50/50 ratio of partners and associates, it would only need to double every 16 years to maintain its desired ratio.
These factors are obviously related. Larger firms usually cater to corporate clients, professionals, and the more affluent citizens of our society. Each firm develops expertise in those legal areas which correspond to the needs of its clients. However, in addition to the more routine areas of law practice (general corporate, tax, real estate, litigation, estate planning, probate, etc.), some firms develop distinct specialties. Specialization can be by function (anti-trust or environmental law, for example) or by industry. Examples of the latter are health care, labor law, natural resources, and banking.
If a firm decides that it wants to grow, it also should consider whether it should develop specialization in a distinct area of law in which it is not heavily involved at the present time.
Typically, lawyers are less able to participate in management in larger firms than in small or medium-sized firms. Even the prerogatives of partners or shareholders tend to become fewer as firms increase in size.
An avenue of growth for some firms lies in geographic expansion of activities. Branch offices can be used to supplement the services of a firm's main office, or can be established to serve a different and new set of clients in a different location. Branching breeds its own set of problems. Profitable branches may break off.
These can have a significant impact on the expenses of a law firm, and sometimes there are real differences in the attitudes as to how lavish, spacious and costly the environment should be, as opposed to letting this money become income to the attorneys. The same is true when it comes to operating efficiencies. Lawyers in some firms demand more personal comforts like rewards sharing of secretaries, lavish expense allowances, and having some personal affairs handled by office personnel.
There is nothing wrong per se in wanting to practice in a very plush environment or wanting some of the personal comforts that a very profitable law practice can provide. However, problems do arise when different groups in a firm have vastly different views on this subject. Where such opposing views exist, it is bet to agree in advance what the firm's posture will be as related to these items, and then to incorporate this in the model that the firm forms for itself.
The degree to which the lawyers of a firm participate in community activities, bar work, political activities, or the advancement of social causes can have a significant impact on a firm's image in its community, as well as on its economics. For this reason, it is advisable to give some thought to the extent that a firm should devote its resources to such activities, as well as to the type of community involvement it should pursue.
Each of the factors outlined above must be considered by law firms in their planning. Planning should occur in light of the firm's present strengths and weaknesses as well as outside factors such as the local economy, competition in the legal marketplace, and internal developments in client organizations. Firms which establish a planning model are more likely to achieve success than those which do not.