Where (or who) are the most important profit centers of your law firm?

Most lawyers would reflexively respond, "Our partners, of course!"  or, if they are in a generous mood, "Our lawyers."

Well, not exactly...

These are true answers for some law firms.  Indeed, the fee earners are the ones who earn the money that, one hopes, will produce profits.  However, this traditional view overlooks the fact that, especially in law firms in the 100 to 300 lawyer range, the senior management team and their staffs actually can have a greater influence on the firm's bottom line than the firm's biggest rainmakers.  This is because, in a well-managed law firm, the senior management team -- the firm administrator, CEO, CFO, and others -- do more than just control costs.  They also maintain the infrastructure that fee producers need to be as productive as possible.

So how can your management team become a de facto profit center for your firm?  My colleagues at Walker Clark LLC and I suggest two starting points:

  • First of all, understand the internal customer-supplier relationships within your firm.  To what extent are some of the key internal suppliers  (e.g., the CFO, the facilities manager, and the marketing director) meeting the needs and expectations of their internal customers (i.e., the fee earners)?  To what extent are these customers giving their internal suppliers the information that the suppliers need to meet their customers' needs the first time and every time?

This might sound too "industrial" for the cultures of some law firms.  However, in almost every instance in which our firm has diagnosed a serious profitability problem in a law firm, one of the most important contributing factors -- and sometimes the main cause -- of the problem has been a breakdown in the two-way flow communications and support within the internal operations of the firm.

  • Second, identify the most serious risks in your internal operations.  Every law firm offers almost infinite opportunities for improvement.  Unfortunately, many law firms spend far too much time and money chasing improvements that might change things, but don't improve them.  We advise our clients to carry a strong risk-management perspective into their evaluation of their internal infrastructure and to prioritize improvements accordingly.  Weaknesses in internal operations have a very high probability of also being serious profitability vulnerabilities, especially if they inhibit or complicate productivity, rather than facilitate it.

To learn more about how to turn internal operations into a a profit center for your firm, click here to learn more about the Walker Clark Comprehensive Management Systems Review.

Norman Clark