With thinner profit margins firms can no longer carry unproductive partners. Law firms are demanding more from their partners and asking everyone to think outside the box to help the firm innovate for the future and obtain/retain a competitive advantage. This has renewed discussion and debate on the topic of partner compensation and in particular whether compensation can make a difference in motivation, actual performance, and contribution.

Many firms are expecting miracles from their compensation systems and are asking and expecting more than they will ever be able to accomplish. Often the real solution is to Get the Right People on the Bus and in the Right Seats (Hire Right and Retain).

The linked article provide a review and discussion of some of our key ideas on this topic.

I believe that law firms that are "firm first" team based firms and organized along these lines have (or will have) a competitive advantage with respect to clients, legal talent, and merger partners. As law firms grow the "lone ranger" confederation approach no longer works. Decision-making is too time consuming, partner time is wasted, and opportunities are missed. Synergy (where one plus one equals three or four) is not achieved and the firm achieves little more than any one of the attorneys could achieve in solo practice.

Recently I was working with a firm in Chicago that was looking for a merger partner. When the other firm learned that my client was a "lone ranger" firm they discontinued discussions. Larger firms that are "team-based" are not interested in merging with "long ranger" firms - they tend to cherry pick key talent from these firms rather than pursuing mergers or combinations.

Question We are a two lawyer firm in New Orleans. We are both partners in the firm. We have 5 staff members. My partner is 68 and I am 63. Recently, we have starting thinking about what we are going to do with the practice in the next few years and we aren't sure where to start. Do you have any thoughts along these lines?

Answer:You will need to consider whether you should consider merger, sale of the practice to an outside buyer, or sale of the firm to the other lawyers in the firm that you bring in and grow over the next few years. You need to find ways to institutionize the firm so that in additional to professional goodwill (your personal reputation and goodwill) you develop practice goodwill (goodwill of the firm that will remain after you have left the firm). If you bring in other lawyers develop them and create a desire and motivation for them to want to be owners/partners in the firm. Develop your staff and practice systems. Diversify and stabilize your client base.

If you decide to sell to attorneys in the firm - begin the process early so that most of the buy-in is completed before your actually leave the firm. The longer the planning horizon - the easier they buy-in burden will be for others.

Are you looking for a quick and dirty checklist to use to review the profitability of your practice. Click below for a copy of our Law Practice Profitability Checkup.

We frequently consult and work with law firm clients working on implementing succession strategies that involve the sale of a law practice, merging with another firm, or hiring lateral talent. If you are looking to join up with another firm keep us in mind. We will be posting confidential listings on our website in the near future.