Practice Management

The One-Firm Firm Marches On

Today’s papers report the 2007 financial results of law firm Latham &Watkins, which became the first law firm to break the $2billion revenue barrier, with profits per partner rising to $2.27 million from $1.86 million a year earlier. As the firm’s managing partner said, these results were accomplished without a merger or large lateral acquisition or any major contingency award.

I try to avoid commenting on individual firms, for fear of being seen to “play favorites” but it’s reassuring to receive confirmation that one of the firms I identified in my 1985 article “The One-Firm Firm” continues to shine.

In 1985, I identified the policies of the one-firm firms as:

1. A “grow your own” people strategy as opposed to heavy use of laterals, growing only as fast as people could be developed and assimilated
2. Intensive use of training as a socialization process
3. Rejection of a “star system” and related individualistic behavior
4. Avoidance of mergers, in order to sustain the collaborative culture
5. Selective choice of services and markets, so as to win through significant investments in focused areas rather than many small initiatives
6. Active outplacement and alumni management, so that those who leave remain loyal to the firm
7. Compensation based mostly on group performance, not individual performance
8. High investments in research and development
9. Extensive intra-firm communication, with broad use of consensus-building approaches

In STRATEGY AND THE FAT SMOKER, I include a chapter which revisits these firms, and find that, while they are not still “pure” on these principles (some of the one-firm firms have done small mergers or hired lateral partners) the core approach of emphasizing teamwork and intra-firm collaboration remains.

In my consulting work, I find that many firms like to “claim” that they are one-firm firms, (it sounds good) but it’s my view that they underestimate what it really takes. There is a huge temptation (and seemingly obvious benefit) in creating a culture that attracts, rewards and retains “stars.”

Firms try to have the benefits of both systems (a star system and a one-firm firm) but I believe now what I believed 23 years ago – the two systems are fundamentally incompatible, and a choice has to be made.

Does anyone else have a view?

Full post as published by Passion, People and Principles on February 11, 2008 (boomark / email).