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Passion, People and Principles

The One-Firm Firm Marches On

post # 500 — February 11, 2008 — a Strategy, Strategy and the Fat Smoker post

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?


richard "dick" Levine said:

David, it has been a number of years since our paths last crossed when I was very involved in management consulting as Head of U.S. Consulting for Main Hurdman(now part of KPMG). Now very happily retired, I teach a course in Leadership at Stony Brook University and include a session on Leadership in the Professioanal Services Sector drawing heavily on your writings. Included are case studies on Goldman Sachs, McKinsey and Skadden Arps, three firms that have adhered to the “one-firm” concept and have profited as a result. Yes, the one-firm concept surely lives on.

posted on February 11, 2008

Jim Tindale said:

David, I suggest that it depends on your definition of a star, the attitude of that star and how that star is rewarded and encouraged. Stars can be team players rather than solely individualistically motivated. This can be witnessed in team sports where some stars embrace the team ethic (though many others don’t). I also suggest that a one-firm firm ethic can remain through external recruitment and merger, provided the right people and cultures are brought in and the expectations are clear from the start. Again some sports teams demonstrate this in a publicly visible arena.

I believe that the firm that I am part of embraces much of the one-firm firm mentality and maintains and develops that in recruitment and rewarding stars who fit the culture. There are failings here and there, but the current path is one that I believe will integrate these potentially opposing cultures – the secret being people with the right attitude.

posted on February 11, 2008

Wally Bock said:

David, my own work on leadership development tells me that the same principles also characterize large industrial companies that seem to avoid the recurring succession problems of their peers. The very best of them have stars, but don’t have a star system. They grow their own talent and help it develop. They use training more as a carrier of culture that for transmission of specific techniques. And they work hard to develop systems that allow everyone to succeed as the company succeeds.

posted on February 14, 2008

Bruce Lewin said:

Very interesting! Reading between the lines, I’m intrigued that around half, perhaps more, of the 9 points are heavily skewed towards the intangible aspects of an organisation and its people. Equally, they cannot readily be bought but instead have to be fostered over time and developed from an internal standpoint.

  • Development
  • Docialisation
  • Avoid individualistic
  • Loyalty
  • Intra-firm communication

I wonder if Latham & Watkins (or other one-firm firms) would acknoweldge the intangible nature of these ideas? In the same vein I wonder if aspiring firms would similarly acknowledge these ‘soft’ aspects themselves, or do they prefer do have ‘a firm grip on reality’?

posted on February 16, 2008

John Jensen said:

It was very interesting when I showed your e-mail to my HR director. She was so adverse to the message you were giving. I work for a small division of GE.

posted on February 20, 2008

David (Maister) said:

I’m curious. What were her reasons for being adverse?

posted on March 13, 2008

John Jensen said:

She supports GE “star” system.

posted on March 19, 2008

Loan said:

David, do you think that following these policies one can really become successful as i see more of idealism in this.

posted on April 18, 2008