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Law firm partner returning from holiday. 3 things on your to-do-list right now. Book Law Firm Partner Compensation

Once September arrives, the leisurely summer feeling is replaced by the regular drum of the office. Summer is more than a time to unwind and relax with family and friends, away from the city. It is also a time to recharge and get new energy and inspiration. Judging from the comments, a number of you used the break to read my book on Law Firm Partner Compensation (www.lawfirmpartnercompensation.com). The feedback has been overwhelmingly positive, thank you for that.

I remember as a kid the excitement when the new school year started. I went to buy new books and a fresh agenda. Everything new, holding a promise of a new year, in which I could have a fresh start and a clean, well-organized way of studying. Unfortunately, after a week or so at school, all good resolutions had faded.

The challenge is to convert inspiration into action. All too often within days back at the office, or even hours, routine sets in, inspiration and resolutions are forgotten, and everything pivots back to how it was before. This happens every time and it is a missed opportunity. To help you avoid that this year, here are three things that should be on your priority list right now.

1. Invest in talent

The time-based pyramid model is running out of road. For decades a law firm's structure was simple: a broad base of associates billing hours, a thin layer of partners capturing the margin. AI is now eroding the fundament that sits at the base of this business model: every routine task can be done faster. Associates will need more than knowledge of the law to remain valuable. (Chapter 14 in the book)

The leading firms are already recruiting differently. Some US firms have gone as far as recruiting students on campus who will not start their first year until this September, locking in talent early because they know the competition for people who can operate at this new level is only going to get tighter. Big-four accountancy firm Ernst & Young has reserved 100 million in bonusses for ‘human’ skills.

What should you be looking for in that talent? Focus on critical independent thinking and the 7-Core Dimensions©: understanding the client's business, creativity, practice development, practice management, people skills, presence and confidence, integrity (Chapter 4 in the book)

This matters more, not less, as AI takes over production. As the pyramid transitions into a diamond, the associates who remain need to be more capable. Focused on judgement and client communication rather than document production. The gap between an average lawyer and an exceptional one is no longer capped by the hours in the day. A lawyer with real judgement, directing AI, can produce what used to take an entire practice group. A lawyer without that judgement just gets faster at producing average work. Recruit and develop on the 7-Core Dimensions©, and build them into how you train and pay people, and you end up with more of the first kind.

2. Develop alternative pricing models

The hourly rate is not a legal tradition. It is a mid-twentieth-century invention that became standard practice from the 1950s onward, and it is about to sunset. For most of legal history lawyers charged based on the value of the work at the end of a matter. The billable hour shifted the risk of inefficiency onto the client: the longer a task took, the more the firm earned. That arrangement worked well and law firm profitability has grown consistently substantially over the past decades. AI breaks that business model, because it attacks and erodes the time a task takes, and the legal market is not growing fast enough to absorb the difference.

Here is the arithmetic. Take a firm of 200 lawyers generating $500,000 revenue per lawyer, 50 equity partners, a 50% profit margin. The firm spends $1 million on AI that makes its lawyers 5% more efficient. If the volume of work stays the same, the firm bills fewer hours for the same output. Revenue drops roughly 5%, to $95 million. Costs go up by the $1 million spent on the technology, to $51 million. Profit falls from $50 million to $44 million, a 12% drop, and profit per partner falls from $1 million to $880,000. That is a conservative estimate. Firms that keep billing by the hour while adopting AI are effectively cutting their own profit.

This is where the Value Matrix© comes in. What a client is willing to pay depends on two things: the return on investment the work generates for them, and how many other lawyers could do the work equally well. It has never depended on how many hours it took. Price on that basis before your clients do it for you. In-house teams are investing in technology, over half have already adopted generative AI themselves, and most expect to rely less on outside counsel because of it.

Getting good at fixed fees and value-based pricing now, while you still have room to experiment, beats being forced into it later with no margin left to give. (Chapters 2 and 14 in the book)

3. Get out of your silo and break down the walls

Most blue-chip clients do not hire an individual lawyer. They hire the firm, expecting access to the full range of talent, contacts and experience the brand represents. That only works if partners actually operate as a team rather than as a collection of individual practices sharing a building and a billing system. When partners hoard clients and refuse to bring in other departments for fear of losing credit, the firm's collective value stays locked up. The sum of everyone's revenue ends up lower than it would be with real cooperation, even if a few individuals do better for themselves in the short run.

We call the alternative swarm intelligence: combining the collective knowledge, experience and creativity of the whole partnership instead of leaving it trapped in individual practices. I know a premier AmLaw 100 firm where partners routinely consult the wider partnership for ideas on a matter. That habit is part of why they keep beating firms with more individually talented partners but less willingness to talk to each other.(Chapter 6 in the book)

Here is the uncomfortable part. Swarm intelligence and real collaboration are in the interest of both the client and the firm, and most partners will agree with that if you ask them directly. In practice, plenty still prefer to work alone, keeping their clients away from other partners rather than bringing the wider team in. Some of this is income: a shared mandate usually means shared credit, and a smaller number next to your name at year end. Some of it is trust, or the lack of it: a partner who doubts a colleague will deliver the same quality will not risk the client relationship to find out. A compensation system that puts individual performance under the magnifying glass, origination, hours billed, revenue booked under your own name, rewards exactly this instinct. It tells every partner that protecting their own book is the safer bet.

There is also a tribal element underneath it. It is my firm against the competition, but my practice group against the firm, and my team against the practice group. Loyalty runs strongest at the smallest unit, not at the level of the partnership as a whole. A compensation system built solely on individual numbers reinforces exactly that. So look hard at what yours actually rewards. If it only measures individual production, it will keep producing individualism, no matter what the culture statement on your website says. (Chapter 5 and 12 in the book)

Read the book!

All three of these, talent, pricing and culture, are covered in more depth in Law Firm Partner Compensation, including the full framework behind the 7-Core Dimensions©, the Value Matrix© and what AI is actually doing to the economics of the profession.

This article is part of a weekly series drawing on the themes of Law Firm Partner Compensation by Jaap Bosman and Jaime Fernández Madero. If you would like to know more about this topic, read the book.

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