LAW FIRM BUSINESS
Managing Partner
Not Quite Corporate:
TheNewLaw Firm Model
When necessity dictates rethinking the traditional partnership structure, how can—
and do—law firms make the adjustment? And what happens if they don’t?
BY REGINA M. PISA
IN BRIEF
Changing economic conditions and
a wave of consolidations have awakened law firms to the fact that the
practice-centered partnership model
to which they have long been accustomed may no longer be appropriate.
Indeed, it may be detrimental to their
health and welfare. Still, to many of
these firms, the alternative—a corporate, business-centered model—seems
anathema, which is why a hybrid has
emerged, allowing:
• Better client service
• A surer route to focused,
managed growth
• Streamlined decision making
• Brand differentiation
• Prosperity and survival in
an increasingly competitive
environment
here comes a point in
every maturing industry
when well-paced, incremental change meets the equivalent of a fast-moving avalanche.
On reflection, the telltale signs
were there before the storm—
the commoditization of certain
products and services, the
increasingly sophisticated customers and resultant increasing
expectations, relentless rate and
price pressures, an expansion of
predatory competitors encroaching on previously unsullied turf,
escalating talent wars, frontpage mergers, high-profile
defections, sudden implosions—
all leading inevitably to the swift
and spectacular industry consolidations well-documented by
those that have gone before.
There is no doubt that
the legal profession is in the
throes of this very phenomenon. For precedent, a look at
the accounting, consulting, and
public relations professions,
among others, clearly leads
to a figurative Exhibit A. In
other industries—transportation, financial services, and
health care, to name a few—
the continued consolidation
T
is even more pronounced.
While the most visible
tragedy du jour may be the
demise of Andersen, the bigger
story encompasses the metamorphosis from the Big Eight
to the Big Six to the Final Four.
In similar fashion, the rise and
fall of Brobeck, Phleger
& Harrison LLP
is a high-profile
microcosm of a
more significant and escalating consolidation trend
within today’s
law firm world.
Dozens of firms nationwide—
some of them centuries old—
have collapsed or disbanded
in just the past 18 months.
According to Hildebrandt
International’s Mergerwatch, a
total of 206 mergers and
acquisitions involving U.S. law
firms took place in the threeyear period from 2000
to 2002. As the remaining firms strive to
survive, it is clear that
the very governance
and structural models
that have served law
firms so well in a more
forgiving economy and
Regina Pisa
60 C H I E F L E G A L E X E C U T I V E
L AW E X E C . C O M
far less competitive environment
demand not only scrutiny but
also reevaluation.
A Mandate for Change
The question under debate in
law firm conference rooms
around the nation is whether, in
the face of these changing conditions, the traditional partnership model with which law firms
have been comfortable for generations can be maintained,
whether it needs to be scrapped
in favor of something closer to
the corporate mold, or whether
there’s a workable hybrid model
somewhere in between.
In anticipation of the storm,
many forward-minded law firms
have altered their planning in
recent years to weather the challenges we are now facing. They
have, for example, changed
their approach to practice-area
structures, operating office
autonomy, and firmwide strategic business planning as well as
examined the alignment of their
compensation models and support systems. While many have
realized major gains through
this change in strategy, others
remain in limbo, stuck between
the old world of traditional partnership models and the newer,
more progressive move toward
the integration of formalized
corporate structures.
One conundrum of the partnership/corporate model debate
is that proponents of both sides
believe the choice must be one
or the other. The challenge for a
firm that hopes to make it into
the future is not choosing one
approach over the other, but
realizing that the truly forwardfacing firm must create a new
model that blends the best of
both worlds.
SPRING 2003
Benefits of a “Hybrid”
Corporate Structure
For the Law Firm
• Enables the development of a longer-term strategic approach
• Provides a formal framework for managing growth
• Affords attorneys more time to focus on client service and delivery
• Eliminates inherent redundancies in a flat partnership model
• Moves the organization from individual and practice silos to a matrix
of industry specialization and legal expertise
• Creates a solid and consistent base upon which effective brand
differentiation and marketing strategy can be built
• Forms a tangible point of reference for aligning disparate processes
within the firm
• Allows for the more streamlined decision making needed to prosper
in a highly competitive environment
For the Law Firm’s Clients
• Enables client/attorney relationship to become more cost-effective
• Increases productivity of client/attorney relationship, allowing attorneys to focus on the strategic aspects of client service and delivery,
rather than the operational details
• Improves attorneys’ ability to marshal the resources of the firm to
benefit clients
• Enables attorneys to devote more time to developing creative solutions to problems
• Allows firm to respond faster to clients
• Eliminates surprises, enabling the law firm to provide more consistent processes and communications to clients
The challenge for
a firm that hopes to make
it into the future is not
choosing one approach over
the other, but realizing
that the truly forward-facing
firm must create a new
model that blends the best
of both worlds.
Looking for Balance—and
Client Service
At the heart of the debate
about structure—be it partnership versus corporate or
practice-centered versus business-centered—is the question
of balance. Structural success
in today’s law firm lies in the
understanding that there is no
“one size fits all.” Every situation, every law firm is different.
The successfully positioned firm
of tomorrow will blend the
unique components of the traditional partnership structure with
the appropriate elements of the
traditional business model. The
result? A somewhat unique operational model that preserves a
firm’s core values and culture;
allows an entrepreneurial spirit
to continue to thrive; and provides a formal framework for
strategic planning, decision
making, and governance on a
franchisewide basis.
This is particularly critical as
firms come to understand the
importance of client service to
their model, their success, and
even their survival. In a world
of growing legal complexity,
clients are calling on counsel to
deliver innovative and comprehensive solutions to their needs.
Progressive firms have made
considerable headway in melding into more client-centric
firms, concentrating energy on
deepening relationships and
presenting broad capabilities to
a new crop of potential clients.
Firms also need to be constantly
pursuing new client services and
products, including everything
from communications to knowledge management. Clients today
demand more, not less.
To be truly effective, continuous improvement in client service requires the combination of
top-down and bottom-up strategies and organizational ownership. This involves a number of
different components, including
a franchise-based approach to
service; a shift from partners
thinking of clients not as “mine”
but “ours”; more communication,
feedback, and external focus;
and a solid understanding of
needs and expectations. The
development of key accounts
and client-service teams, the use
of client satisfaction surveys and
measurement programs, and an
emphasis on seamless communication within the firm across
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LAW FIRM BUSINESS
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Managing Partner
geographies and rewarding team
behavior are critical.
How Can—and Does—This Work?
In a traditional partnership
model, the notion of organizational structure is simply anathema to the majority of entrepreneurial-spirited attorneys. Yet
without structure there can be
no process, and without process
there can be no leverage.
So how do you build effective
structure in the world of
freedom-loving individuals?
Carefully. Incrementally. Persuasively. You choose your positions and align formal processes
where they have the most
impact. I, for one, avoid dictating rules for rules’ sake.
Structure will ultimately be
accepted if it is personally relevant. It is often said that attorneys must agree to be managed,
but I think it is reciprocal. Management must prove the cost
benefits, time savings, and other
values of being managed, effectively rationalizing long-term
strategic capital investment at
the expense of short-term profitability for current partners.
How do you do this?
• By working from a platform
based on shared values
• By creating a sense of urgency
• By painting a vision for the
future so compelling that
others join you by choice
• By realigning your compensation structure to reward partners for franchise-building
activities as well as revenuegenerating activities
With this approach in place,
there are several core components of the traditional business
model that all firms, regardless
of their inherent distinctions,
62 C H I E F L E G A L E X E C U T I V E
TRADITIONAL PARTNERSHIP MODEL
In years past, Goodwin Procter was organized like a traditional law firm: a hierarchical pyramid without
designated practice areas and with associates and other support personnel serving the entire organization.
Immediate tactical needs, rather than long-term strategy, defined agendas.
Partnership
Executive Committee
Standing Committees
Management Committee
Departments
Administrative Functions
1
2
3
4
5
6
7
8
9
10
11
12
Offices
Dept. 1
Dept. 2
Office 1
Office 2
Dept. 3
Dept. 4
Office 3
Office 4
Clients
SOURCE: GOODWIN PROCTER LLP
In a world of growing
legal complexity, clients
are calling on counsel
to deliver innovative and
comprehensive solutions to
their needs. Clients today
must adapt in order to create a
framework that will allow them
to implement strategy and position themselves for the future.
Components of a successful
“hybrid” model include:
• Clearly defined vision and
strategy—from the top
• Organizational structure; formalized roles
• Client-centric, franchise-based
delivery of services
• Market-facing practice focus
and prioritization
• Seamless, world-class support
functions led by professionals
demand more, not less.
Putting This Model Into Practice
In my five years as chairman and
managing partner of Goodwin
Procter LLP, I have spent considerable time and effort developing
and implementing a long-term
strategy as well as ensuring
continued short-term revenue
growth and profitability. The
goal of moving the firm from
a regional powerhouse to a
national player and beyond has
at its core the issue of balance:
how far, how fast, in what order,
which practices, and in which
geographies. My overall goal is
to build a true franchise, not a
well-run hotel for successful
attorneys. It is a strategic shift
from a practice-centered business
to a business-centered practice.
To build this, one needs to create
economies of scale that can only
be achieved through process,
consistency, and alignment.
We see opportunity and
expansion in focus. A firm cannot be all things to all people.
We are leveraging our regional
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NEW MARKET-FACING HYBRID MODEL
Through its reorganization, Goodwin Procter, like many reengineered corporations, has flattened
the hierarchy. Practice and functional areas span departments; roles and responsibilities of partners,
associates, and support staff are all more formalized—and client-oriented.
Partnership
Executive Committee
Standing Committees
Management Committee
HR, Recruiting, Training
Finance
Operations
Knowledge Management
Marketing
Dept. 1
Dept. 2
Dept. 3
Dept. 4
Dept. 5
Dept. 6
Practice
Areas
Office
Industry
Teams
Office
Client
Teams
Office
Clients
SOURCE: GOODWIN PROCTER LLP
success and the national success
of specific practice areas—such
as products liability, white-collar
crime, private equity, intellectual
property, real estate capital markets, and financial services—to
grow our presence in a critical
market, New York City.
It makes undeniable sense to
concentrate efforts on areas in
high demand, and a number of
firms such as ours have seen
considerable return on that type
of investment. To maintain success in the corporate world,
companies are constantly
reevaluating the viability of their
businesses and departments.
Law firms are being forced to
look at practice groups and
office locations in the same way.
By concentrating their efforts
ideally in countercyclical indus-
SPRING 2003
tries, firms can streamline costs
and build a solid foundation to
help get through tough times
and prosper in brighter ones.
Setting a Strategic Course
Years ago, firms’ executive committees, composed of lawyers
with their own revenue
streams—and their own agendas—called the shots. Today,
more and more firms are adopting a more corporate-minded
operational philosophy, centered
around planning, innovation, and
efficient revenue growth.
This is not a new idea—firms
like Goodwin Procter have
employed nonlawyer administrators for years. Over time,
though, the roles of these
administrative executives have
grown dramatically. Once
THE MARKET
FOR MERGERS
While the total number of law firm
mergers and acquisitions dropped
in 2002, the size of the largest
mergers continued a growth spurt
first noticed two years earlier.
M&A in Q1 2003: 18
M&A in 2002: 53
M&A in 2001: 82
M&A in 2000: 71
Lawyers in average major firm
acquired in 2002: 171
Lawyers in average major firm
acquired in 2000: 158
Lawyers in average major firm
acquired in 1998: 71
SOURCE: HILDEBRANDT INTERNATIONAL
MERGERWATCH 2003
viewed as middle management,
they now play an integral part in
directing vision, strategy, and
image, as well as ensuring efficient implementation.
Another key ingredient of a
corporate support system is
marketing; our efforts have been
a major catalyst in our growth.
In addition, we, like other firms,
have strategically focused on
strengthening knowledge management, information technology, finance, and human
resources. Our “product” is the
knowledge and capabilities of
our lawyers; effectively supporting and recruiting talented attorneys will continue to grow the
firm and better serve our clients.
Law firms can make remarkable strides by reaching a balance between the key attributes
of its partnership structure and
creating a corporate-type framework for its strategic administrative functions. This mode of
operation allows firms to look
forward while finding new ways
to capitalize on growth.
With a long-term focus—as
well as the infrastructure and
fresh insight to support it—law
firms can plot their course
years in advance while remaining flexible enough to tackle
new opportunities as they
arise. Large or small, global or
national, and regardless of their
strengths in particular areas, law
firms must set a strategic course.
Only in this manner can they
not only adapt to changing conditions but also thrive—and survive—in the years to come. •
Regina M. Pisa is chairman and
managing partner of Goodwin
Procter LLP. E-mail her at rpisa@
goodwinprocter.com.
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