Big firms enjoy many benefits. There are clearly huge efficiencies to be exploited from a well-resourced organisation and, a multi-lawyer business model ought to lead to much greater profitability than most sole practitioners can expect. Partners in big firms, however, insulated and protected by advanced systems, professional management and the comfort of co-workers, often lose sight of some of the harsh realities that face sole practitioners who spend much of their time at or near the front line of battle
There are at least three areas where lawyers in larger practices can learn from the experiences and working methods of sole practitioners and smaller law firms.
1. Cashflow Management.
The first – and perhaps the most obvious – is the management of cash flow. Sole practitioners are brutally aware that they will quickly run out of money unless they manage their work in progress, bill promptly and chase unpaid invoices persistently. Large firm partners sometimes leave these matters either until last or to somebody else. In order to gain a greater sense of personal accountability, some firms employ a ‘name and shame’ methodology to highlight poor performing partners and other firms align individual drawings to specific cash collection targets. The lesson is to create a compelling line of sight from the firm’s overall financial and cash collection goals to the day to day work and objectives of individual members of the firm.
2. Learning and Development.
The second area is that of self-learning. Few lawyers are able to devote much time to their own continuous development. In large firms, partners rely on a professional training department to provide holistic development programmes but it is often hard to get busy partners to attend. Such ease of service can lack individual engagement. It also seems easier to bail out of events at the last minute when the firm’s money is being spent rather than one’s own. In contrast, conscientious sole practitioners know that training and development will not happen unless they invest in it personally and therefore take that investment seriously. This is not just a financial dilemma but a cultural one as well. The old adage ‘live as if this day is your last, but learn as if you will live for ever’ is employed by too few in the legal profession. What is needed is a sense of personal accountability allied to a strong motivation to develop and improve. The message here – as man firms have found – is to strengthen a culture of discipline and learning in their firms, supported od course by systems and resources.
3. Profits and Drawings
The third lesson from sole practitioners and small firms is that this year’s profits result just from their own past efforts and can only be extracted to the extent that cash is there. Sole practitioners of course operate by default on an Eat-What-You-Kill (EWYK) basis and some large firms continue successfully to operate their profit sharing systems based at least in part on EWYK principles. Many small firms with several partners operate by sharing profits equally and I see firms all over the world of all sizes still operating on some form of lockstep or equality arrangement that embodies the principle of true and equal sharing partnership. There is however a growing global trend to base some or all of partners’ profit shares on performance in terms both of effort and outcomes. It is here that the principle of distributing the current period’s profits can come under strain as firms try to work out how much credit (if any) should be given to efforts that have not yet resulted in a successful outcome. Take business development activities. The small firm has no dilemma here. If efforts are being made to win work or develop business, no financial benefit accrues to the solo practitioner until and unless those efforts bring about success. In contrast bigger firms sometimes argue that credit should be given for such efforts in advance of success. One answer of course is only to recognise such efforts as and when successful measurable outcomes are achieved, but whilst that may (and probably should) work in the context of marketing and business development, success is often difficult to measure success in financial terms in areas such as training, team building and management activities. Here, an assessment has to be made about each partners overall contribution to the success of the firm and, in this context, credit for effort can be given if the firm is satisfied that the expenditure of time and effort has been devoted to valuable contributory activities rather than time that has just been captured on a time sheet.
The concierge-style comfort zones enjoyed by large firms have many advantages as they allow partners to devote the majority of their energy on the practice of law. It is however easy to for partners to lose touch with the front line combat realities that face sole practitioners. This can lead to irresponsibility in the management of budgets and fees and an increasing expectancy that the firm will provide for partners’ every need.
The lesson from small firms is that it is important for firms of all sizes to strive to establish a sense of immediacy and personal accountability that help to bring their partners closer to the hand to mouth cash demands that sole practitioners face every day.
This article first appeared in Managing Partner Magazine in June 2014 and is reproduced with their permission