RSS
In search of excellence in the practice of law?
Feb 13th, 2008 by admin
By: Kenneth D. Gartrell
Law firms optimally combining size and leverage appear to be the most profitable.
Are they also the most interesting places to work, with the most attractive career potential for entering associates who have high value added skills and degree combinations that can engender innovation, profit and growth? This exploratory analysis provides suggestive indications that law firms are pursuing strategies depending more on the dimensions of staff skills, organization and culture than on the brute force of size or the limitations of narrow specialization.
Among law firms, the firms that consistently top the list of the most profitable firms on a per partner basis are neither the largest firms nor the smallest firms. They are somewhere in the middle. This suggests that the benefits of size are not ever increasing, but that some size is needed to sustain profit-maximizing levels of staff leverage. Is this true or are the profits among the medium size firms merely a reflection of transient conditions such as the specific industries a firm serves at a certain time?
Law firms provide an interesting place for organization and strategy specialists to examine theories of organizational economics. The legal profession is a large and relatively homogeneous industry. Across the United States there are hundreds of law firms and sufficient information about these organizations and their business activities exists to allow a level economic inquiry that is not so readily possible in most other industries.
Law firms vary widely both in size and in the ratio of associates to partners working for the firm. The former relates to the scale and scope of operations. The latter called the leverage ratio relates to the use of junior staff at higher profit margins per hour than a partner. At first impression it appears some scale is required to achieve higher levels of utilization. But, it also appears that beyond a certain point, size and leverage cannot both be sustained.
Continue reading: In search of excellence in the practice of law?
Sphere It