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