What’s Wrong with Law Firms? A Corporate Finance Solution to Law Firm Short-Termism – Article by Jonathan T. Molot

From Volume 88, Number 1 (November 2014)

Lawyers and clients are unhappy with the contemporary law firm. Associates complain of being treated like “leverage tools” and given inadequate opportunities for mentoring, training, client contact, and career advancement. Clients feel overcharged and underserved, and are constantly searching for a better deal from a different firm. Even partners—the ones who profit from associate hours and client billings—have grown tired of a “what-have-you-done-for-me-lately” culture in which they have to bill and earn as much as possible during their productive working years and who, like clients, are all too willing to chase a better deal at another firm.

What is to blame for this discontent? This Article suggests that the cause is law firm short-termism. Law firms place too much emphasis on current revenue generation—the annual “profits-per-partner” numbers—and not enough emphasis on building long-term value. At core, it is this short-term outlook that leads law firms to squander valuable opportunities to build long-term loyalty among their clients and lawyers.