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Practice Management Q&A

How Is Practice Management Different for Mid-sized Firms?

by Susan Raridon Lambreth and Susan C. Longo

May 2006

In many ways, mid-sized law firms are very much like their larger counterparts. They have collections of attorneys who practice similar types of law, serve similar industries, share the same clients, and even market together. The firms also have, for the most part, similar (though sometimes less complex) governance structures, compensation models, and partnership tiers. There are, however, some important distinctions between mid-sized and large firms that can impact the smaller firms’ success operating under a practice group structure. For the mid-sized firms that have addressed these challenges effectively, the results have been very positive:

• Achievement of market positions in some practice areas equal to or better than even their largest competitors
• Significantly higher firm profitability
• A greater sense of “ownership” – at all professional levels in the firm
• Larger clients and matters
• A greater investment in associates – training and real professional development/career management
• Less pressure to be a generalist – with the challenges of marketing, risk management and intellectual stimulation
• Greater accountability among practice leaders

Distinctions Between Mid-sized and Large Firms

While the issues below are not necessarily exclusive to mid-sized firms, they typically are more pronounced and have a greater impact on the firm’s management and operations than large firms with hundreds-or thousands-of lawyers. Therefore, it is even more important for mid-sized firms to understand their significance in successfully implementing practice management.

• Culture

The culture in a smaller firm can be more relaxed and less rigid than, say, a 500-lawyer firm that has already had to put structure and processes in place to effectively manage and deploy a large number of resources. The prospect of more structure, rules, and accountability can be a hard sell in a firm that has long viewed itself as “collegial” and entrepreneurial and sees practice management as a threat to their smaller firm and stable environment. Partner autonomy is often almost a “core value” for many mid-sized firms and anything perceived as negatively affecting it can be fiercely fought. In fact, even though we hear “partner autonomy” is jealously guarded in larger firms too, it is often viewed as a primary benefit of partnership in a smaller firm versus how they view a large firm.

• Partner Compensation and Authority

Partners must be paid to lead and manage, as well as given the authority to make decisions that affect the direction and resources of their practice groups. Firm management has historically been driven by the billable hour in how they reward and evaluate a partner’s contributions to the success of the firm, with little real or perceived recognition for management contributions. Mid-sized firms in particular have struggled with recognizing the importance of this component in compensating firm and practice leaders in a meaningful and obvious way. Giving practice leaders the appropriate level of authority to do their jobs is also a critical element of practice management that firms must accept to achieve effective practice groups.

• Bench Strength and Talent Pool

Large firms typically have much more bench strength in their strategic practice areas than their mid-size counterparts, resulting in more depth in legal service delivery, expertise, and resources for meeting clients’ needs and managing the practice. There is also a more shallow talent pool in the smaller firms from which management can draw for identifying lawyers who have the skill set, experience, knowledge and/or potential to be effective practice leaders.

• Professional Management

Smaller firms typically have fewer people in professional management positions with the skill sets, education, background or experience to support a successful rollout and implementation of practice management. In the absence of in-house resources that can effectively manage the changes practice management brings, it may take the firm longer to achieve its benefits. This can make buy-in and support more difficult to attain and maintain.

• A Traditional View of the Business of Law

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.

Success Stories

Despite the challenges faced by mid-sized firms, we have seen many success stories. Here are some testimonials of mid-sized firms that have implemented practice management and how they say it has benefited their firm.

• A firm of 200 lawyers in four offices has been operating under practice management for three years. They wanted to have smaller, more cohesive practice groups, better and more frequent communication between practice leaders, and to improve work flow management. They now have
• regular monthly meetings with practice group leaders
• greater cohesion within and between practice groups
• business plans for all practice groups
• semi-annual meetings on budget, revenue, and retention

• A 130-lawyer, one-office firm implemented practice management more than three years ago with the goals of achieving a higher level of client service, more frequent and focused business development activity, and better integration of young lawyers into the firm’s practices. Not only did the firm achieve their stated goals, but their lawyers
• are thinking about business planning on a regular basis
• have greater accountability
• are able to attract clients they may not have been to otherwise without a focused group marketing and business development effort
• engage in group activities-business and social-that have created a sense of community and belonging
• participate in improved associate review, partner candidate evaluation and recruiting processes that has lead to better professional development and job satisfaction

• A firm with 110 lawyers and six offices began operating under the practice management model almost 10 years ago. At the time, the firm wanted to move toward practice and industry groups so they could focus on discrete areas. Their goals were to improve client service by knowing clients and their industries better, get better rates, and attract and retain quality clients. The firm now enjoys
• the ability to attract quality clients not normally expected from a firm of their size and in their geographic market
• a practice that is competitive on a regional and national level
• increased profitability
• the ability to command higher rates

• A 70-lawyer, four-office firm implemented practice management in 1997. Their objectives were to maximize the profitability of price-sensitive practice areas, re-focus expertise in new areas and diversify the firm’s practice, and to benefit from more team marketing. Through practice management, they were able to
• realize increased profitability through better management of price sensitive practice areas
• diversify their practice
• increase team marketing activities.

• A firm of 50 lawyers and one office adopted practice management in 2000 to fulfill its strategic plan, take advantage of best practices and to centralize practice specific institutional knowledge. Six years later,
• the practice groups achieved the goals they developed to support the firm’s strategic plan
• the firm’s culture has grown stronger by making people feel more connected to the firm through regular group social activities
• a training and mentoring program exists that provides a consistent approach to professional development
• hiring has been decentralized and is initiated by practice leaders based on needs identified in group business plans.

Conclusion

As those of us who work in the legal industry know, all law firms are different, regardless of their numbers. It is not a one-size-fits-all approach with practice management even if you look just like the firm down the street. However, there are important differences between mid-sized and large firms that should be addressed when mid-sized firms are considering adopting a practice group business model. Having said that, mid-sized law firms can also be the beneficiaries of the best practices-and lessons learned-of large firms, placing them in a good position to take advantage of a proven business model that can have a significant impact on the efficiency and profitability of their operations. The end result will be a competitive advantage for long-term success.

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