How to Run a Law Firm

Even the nation’s leading attorneys may wonder how to run a successful law firm.

In fact, in June 2023, law firm advisors Patrick McKenna and Michael B. Rynowecer released a survey of 250 law firm leaders, the majority of whom work at the nation’s most prestigious firms. The survey revealed that most firm leaders (59%) had no job descriptions. Most weren’t trained for their positions, while only 11% had any formal evaluation of their performance.

At the survey’s conclusion, McKenna and Rynowecer wondered how those same lawyers would respond to clients who allowed a multimillion-dollar corporation to be run by executives with as little experience as the lawyers themselves had.

So, if you’re wondering how to run a law firm, here’s what to know.

A law firm is “a loose organization of entrepreneurs united under a common mission,” says Alan Kluegel, an assistant professor at the University of Kentucky’s J. Rosenberg College of Law.

And attorneys have little impetus to act as cohesive units. For example, ethics rules preclude lawyers from signing noncompete agreements common in other industries.

“And if the attorney can walk away with that book of business at any time, that’s going to impact every relationship they have with the firm,” Kluegel says.

Firms often measure success in the wrong way, says Tim Corcoran, who runs a consultancy helping firms with the business of law.

According to Corcoran, firms should look for long-term profitability, or year-by-year growth. But firms often use “profit per partner” to measure success, and that metric doesn’t reliably show increased revenue. It encourages attorneys to think short term.

With a longer view of success, firm prioritize change. Partners invest in staffing and resources that lead to sustained progress.

“You’re not just burning through associates. You have people who are capable, pleased to be there and to do good work,” says Cecilia Silver, a Yale Law School senior lecturer.

When it comes to law firm hierarchy, the basic construct is that a firm is made up of partners – with an equity stake in the firm – and associates working to join the partnership. (Recently, the middle of the hierarchy has expanded with attorneys “of counsel” and “nonequity partners.”) At the top of the pyramid is a managing partner.

While that’s the traditional structure, “I don’t think anyone would say it is optimal,” Kluegel says.

Trouble comes from firms promoting lawyers because of their success as lawyers, even when they don’t necessarily have the training or experience to lead a firm. Furthermore, behaviors that helped someone become a successful lawyer may be the wrong traits for a leader, Corcoran says.

According to McKenna and Rynowecer’s survey of leaders, 82% want to spend their days in strategic planning, but “what really occupied their agendas and consumed their precious time were administrative minutiae and sorting out the strong egos of their fellow professionals.”

But that is what managers should be doing. They should resolve interpersonal conflicts, keep partners focused and reduce intrafirm competition, Kluegel says. These efforts are essential for the firm’s success – not petty annoyances keeping leaders from more meaningful work.

Realizing the practice of law is different than the business of law, more firms are bringing in business executives for managerial roles.

Still, Corcoran notes that lawyers accept without question that law practices are highly specialized. But they often fail to recognize when business requires similar expertise.

That’s a mistake smaller firms aren’t making, says Carolyn Elefant, creator of MyShingle, an online resource for small law practices.

If anything, small firms are at the vanguard, Elefant says. For example, they rely on outsourcing and technology for specialized services – from virtual assistants answering calls to consultants launching social media campaigns.

Good leaders have a vision for the firm. Leaders get everyone on a unified course and mentor junior lawyers. They respect lawyers’ desire to be autonomous while making them feel like they belong at the firm, Corcoran says.

Good leaders are responsive to the needs of both clients and staff. Taking care of their people is a core value.

“Leaders should be looking at business decisions with a well-being lens,” Silver says.

Law firm management styles range from autocratic and benevolent dictatorships to collegial or chief executive officer models.

When firm leaders are autocratic or benevolent dictatorships, firms may have success but difficulty maintaining it because, when the leader departs, successors don’t know how to run the firm.

The collegial and corporate models find strength in partner consensus while preserving partners’ autonomy, Kluegel says. In the CEO model, a leader also acts as a chief problem solver.

When midsize and large firms want to increase profit, a common strategy is to hire more attorneys to increase billable hours. But there’s no linear relationship between headcounts and profit, according to Corcoran. The only guarantee is that a larger firm has a bigger overhead.

Firms increasingly rely on lateral hires – established attorneys with a book of clients – but Kluegel has found that laterals can weaken a firm over the long term. Firms relying on laterals may not invest internally, but laterals don’t need the firm as much as the firm needs them. So, they jump to yet another firm if there’s an issue.

Firms need to realize “the path to profitability is to find a different way to monetize your experience,” Corcoran says.

Most businesses rely on their expertise. They know what they’re doing and how they will do it. Therefore, they give clients a budget, and they only get paid when they’re successful. That formula is possible in law, Corcoran says. When plaintiffs’ lawyers accept contingency fee cases, they know which cases should prevail so, even with the occasional loss, their net is favorable.

By definition, solos can’t increase staff to increase revenue. So they know client services, networking and referrals are essential for success, Elefant says.

That’s what Kluegel has seen, too. True growth comes from deep networks of relationships between attorneys and clients.

While law firms adapt to thrive, Corcoran says, “With all of the technology and business opportunities, a leader can simultaneously improve financial performance, improve their quality of life and improve the quality of work product that they provide clients.”

He concludes, “There’s no better time to be a law firm leader.”