5/1/09

Future Leverage: Cylinder-Pyramid

Recent posts and discussions on the de-leveraging of law firms got me thinking. The thrust of the discussion is that BigLaw (and law firms in general) will not have the same leverage on the other side of the recession. I offer my evolving thoughts on this subject. No leverage = no profit. The only ‘firms’ I have seen that are profitable selling partner time are called solos. I struggle to see how a law firm can be profitable without some sort of leverage. Partners (a.k.a. Owners) will succeed financially by having a pyramid-shaped organization (be it tall or short). This turns the discussion to “what will this leverage look like?” I foresee firms adding to the bottom of the pyramid with non-partner track people (NPTPs). I’ve never understood why every lawyer hired has to be partner-track material. If (make that when) these people don’t make partner, they leave and take business and intellectual capital with them. Going forward firms would be wise not to build this destructive mechanism into their leverage. Additionally – NPTPs don’t have to be lawyers. What would make sense for the future shape of BigLaw leverage is a cylinder in a pyramid. The cylinder would contain the partner track hires, allowing for NPTPs to fill in a pyramid around that. This is not necessarily a new idea. The BigFour accounting firms already employ a similar approach, with some modifications. So it can work. It's more an issue of whether BigLaw will figure this out --- in time. Cross your fingers.

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1 comments:

Jason Mark Anderman said...

It will be interesting to see if law firms start using legal services outsourcing companies as well to compete more effectively on cost. A few do now, including Kelly Drye, but for the most part, leading outsourcers like Pangea3 and United Lex are not growing their business as fast as they would like in the law firm marketplace.

 

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