An alternative to the Traditional Law Firm Business Model
Insights 
Michael Moradzadeh · June 9, 2011
The traditional top-tier law firm model is based on a business structure of years gone by. Consequently law firms are operating inefficiently and in an antiquated fashion. This leads to under-served clients and a high rate of dissatisfaction among top-tier lawyers.
There is a better way. By modernizing the law firm business model, and thus allowing attorneys more freedom to serve their clients, firms, attorneys, and clients will all benefit.
Compensate attorneys for actual work product, not politics
The traditional law firm business model pays attorneys based on a black box calculation, factors of which typically include seniority, expectations, and perceived benefit to the firm. Clearly, the calculation is often very speculative, arbitrary, and perceived to be “unfair.”
Rimon’s solution to this problem was to compensate attorneys based on work they have done; direct value to clients. If they work more, and the clients are happy with the work, they get paid more. As simple as that. This way attorneys know exactly what they are getting and they are motivated by clients’ needs and satisfaction.
Give attorneys direct compensation for bringing in business
Under the traditional law firm business model, attorneys are recognized and compensated for bringing business to the firm – but the compensation is not often clearly tied to the value. Attorneys who produce a lot of business rarely keep a majority of what they bring in, while attorneys bringing in less business and doing less work often end up making more money. This unpredictability creates a disincentive to bring in business and embitters rainmakers from doing what they love best and leaves them with bureaucratic paperwork and firm politics.
Rimon’s solution to this problem was to compensate attorneys directly for bringing in clients. Attorneys are not pressured to develop business, but they know that they will receive a large portion of business they developed. This brings law firms in line with modern companies who recognize the value of business development.
Attorneys are also free to work with clients on alternative billing options, recognizing that one size does not fit all. This allows attorneys to serve more clients, and allows clients to get service that better suits their specific circumstances.
Remove arbitrary billing thresholds
Under the traditional law firm model, attorneys are pressured to meet an arbitrary billable hour requirement. As a result, partners are discouraged from focusing on what they love (i.e. business development or counseling) and from using more efficient means of serving their clients. Numerous top-tier law firm partners tell me they would prefer to focus their efforts on their clients’ big picture issues and have a paralegal do the more routine work. This would allow them to charge lower flat fees for the routine work (which paralegals tend to be better at anyway), which would be much less expensive for the client. Meanwhile, they would have more time to focus on what they love – business development. The result would be higher profits for the firm, more recognition for the attorneys, and better value to the clients. However, the box of traditional law firm thinking does not allow for this seemingly win-win solution, and undoubtedly contributes to the extremely high rates of dissatisfaction among attorneys. Further, it often leads to overworked attorneys who do not have adequate time (or sleep) to properly focus on each and every one of their clients.
Rimon’s solution to this problem was to simply remove any kind of billable threshold. Since our attorneys are compensated for what they do, there is no need to add arbitrary requirements or bureaucratic headaches. Instead we give the attorneys the proper incentives to increase efficiency and client service on their own, without burning them out. We have found this leads to far better results.
Law firm as a service to attorneys
The traditional law firm business model is a strict hierarchy, and functions almost like a feudal society. Senior partners serve as lords of the fiefdom, partners as vassals, and associates as serfs. Attorneys are indentured to serve everyone above them to ultimately serve the firm, sometimes at their own expense. As numerous psychological studies have found, hierarchy in itself causes high levels of stress and terrible health consqueneses (for examples, see 1) [url=http://www.sciencemag.org/content/308/5722/648.abstract]http://www.sciencemag.org/content/308/5722/648.abstract[/url], 2) http://longevity.about.com/od/researchandmedicine/a/hierarchy.htm , and 3) [url=http://www.uml.edu/centers/cph-new/job-stress/Documents/UML%20Work%20Stress%20and%20CVD–Evidence%20Summary%20Final_12-12-07.pdf]http://www.uml.edu/centers/cph-new/job-stress/Documents/UML%20Work%20Stress%20and%20CVD–Evidence%20Summary%20Final_12-12-07.pdf[/url] among many others
Rimon decided to eliminate the hierarchy. We decided that the firm should serve the attorneys, so that the attorneys could focus on serving the clients. Rimon’s attorneys are not required to put in face time, or serve on committees. Instead, the firm works hard to give the attorneys all the tools they need to serve their clients. This means helping attorneys collaborate with each other and with clients, giving them administrative and technical support, and helping them with business development and marketing services. We have found that this makes for much happier attorneys and better served clients.
Rimon is not the only law firm to move away from the old ways. Technology has led to a disruption in the law firm world and the new law firm model is still evolving – as it should continue to do. One thing is clear, however, law firms will need to adapt or get out of the way.
You can read more about the changes due to cloud technology in Beyond the Virtual Law Firm: Thinking Outside the Cloud and through alternative fee stuctures in The Life and Death of the Billable Hour.
