The Bridge Between Law & Business (Top 3)

Have you ever noticed that even the largest law firms look puny when their earnings are compared to the biggest businesses?  Combine that with the fact that corporate clients are trying to obtain greater value from their firms, and you have a less-than-rosy picture of the world of law.  As an industry, we have to make changes.

Two of my favorite business books are Good to Great by Jim Collins and The Breakthrough Company by Keith McFarland. Both books track successful business in order to find some of the common traits among them.  Collins focuses on publicly traded companies.  McFarland focuses on smaller companies that are privately held.

After reading both books, I have concluded that most law firms are not built like successful businesses even though they should be.  However, there are a few things we lawyers can do to remedy that.  I have compiled my own “Top 3” list.  NOTE: This list does not pertain only to big firms.  Law firms of all sizes, along with legal service providers, can benefit.

1.    “Crowning the [Firm]”

I placed this one in quotes because it’s not my phrase.  It was coined by McFarland, who referred to “crowning the company.”  He uses the term to emphasize that the most successful small companies achieved “breakthrough” because their leaders focused more on their organizations and less on themselves.  In short, the organization was more important than any one individual or set of individuals.

How many law firms operate like this?  More often than not, lawyers are rewarded for their individual revenue contributions, measured in billable hours.  This incentive structure, arguably, is the opposite of “crowning the [firm].”  Perhaps providers of legal services should borrow from McFarland and focus more holistically on their organizations.

2.    Market Share!!!!

This one is my own observation.  I cannot rely on a great thinker.  However, it is amazing to see how much lawyers and law firms emphasize revenue per client matter over market share.  Look at household-name companies, and you can see that they do not focus on maximizing revenue per can of soda, per burger, per tire, etc.  They focus on capturing a larger share of the market while keeping enough margin to make a profit and grow.  Law firms tend to focus on revenue, whether that comes from more billable hours, higher rates, or “upcharging” for other services.  When lawyers think in terms of revenue, and clients think in terms of market share, I propose that there is a disconnect. Will the law firms of the future shift their thinking?  My hypothesis says “yes.”

3.    Collective Character

Talk to a non-lawyer about law firms and legal services, and they often cannot differentiate between providers.  Why?  Perhaps that is because those of us in the legal field have not spent enough time thinking about company/law firm character.

Both Collins and McFarland emphasize company character.  The best companies will decide on their overarching goals and ascertain what their companies stand for.  Examples include creating a place where people bring value through their work, making sure customers feel that they are treated fairly, and making sure people with the right attitudes join the company.  Money and revenue do not fit into discussions on company character.

What does your law firm or your company stand for?  Are you living it?

Conclusion

I am fully aware that many people will disagree with my views.  Some might even get angry.  That’s okay.  Just know two things: (1) I am working on these issues myself, and (2) I have not yet mastered them.  Back to work!