Flat hierarchies: how could this business model benefit the legal sector

The pyramid is as ancient a structure in the legal sector as it is in Egypt. In Ancient Egypt, the pyramid mimicked the primordial mound from which the Egyptians believed the earth was created. The pyramid enabled the few to benefit from the hard toil of the many.

Law firms have traditionally used the pyramid structure, where a small amount of senior, experienced individuals sit at the top, with a greater incremental workforce who are less experienced making up the rest of the firm. In other words, a typical law firm would have few partners, a greater number of senior associates, an even greater number of junior associates and, as for trainees, there would be so many that one would lose count.

The idea is simple. Clients are won-over by smooth talking, experienced partners. The work is given to hard-working senior associates to lead, who then delegate work that more junior colleagues could do to junior associates, trainees and paralegals.

The sell to the client is that work is done at an appropriate level of experience and therefore costs are minimised (though many a law firm client may disagree). For partners, the work is done cost efficiently, from a firm perspective anyway, and they can focus on their Profit Per Equity Partner, or PPEP. In fact, it would not be unfair to say that this is their core focus.

The pursuit of PPEP, as a core focus, has various negative repercussions, probably too many to list here. But as examples, it has the consequence of partners making associate bonus payments contingent on the associate hitting their billable hours targets. That means it is in the associate’s personal interest to record as much time as possible on any given matter. Hardly in the best interests of the client.

It is unsurprising, given the reluctance of law firms to embrace change, that the practice of promoting senior technicians to managerial positions is still the norm. Partners who are either experts in their fields, excellent at business development or both are plucked from their positions and placed into the ‘executive.’ A bit like the very large hand in the cartoon bit of Monty Python’s Flying Circus, partners set strategy and run the show with little, if any, managerial training, and experience in the management of a sizeable business, not to mention questionable HR skills

Commands are sent down the chain of command. Mugs are printed by marketing with two words joined together to invent ‘new words.’ Associates are then left bewildered by management decisions made by inexperienced business people ie the executive.

Therefore, what is the chief strategy of the executive? Well, we’ve discussed that already, it is to increase PPEP. And, as we have found, chasing PPEP is neither in the interest of associates nor clients.

The evolution of different organisational structures

A recent survey by Lexis Nexis found that only 22 percent of associates wanted to become partners at their existing firms. Why? Not because of a lack of ambition, but a demand for a better work-life balance, a compelling business strategy, superb training and for Associates to have a seat at the table and be heard.

None of those things are necessarily a facet of the pyramid structure and in most cases, a more horizontal organization structure would better serve these Associates.

The birth of the consultancy model, in or around the early 2000s, saw the emergence of a type of horizontal structure that could appeal to disenchanted Associates. It offered autonomy and a share of the spoils. Each consultant running themselves as their own mini law firm. But consultancy is not for everyone. It lacks the guarantee of an annual salary, the collegiality of teamwork and puts pressure on the associate to excel at business development, when it may be something that they have never been given the time to develop and some may never develop those skills.

Another concern is career progression, in circumstances where a consultant, operating their own mini law firm, have no clear development path (something which Big Law has become fairly good at, if a little unimaginative, by offering Legal Director, Of Counsel and other job titles). So that is not the answer for the many. As the consultancy model firm and brand itself is distinct from the mini law firms created by its consultants, consultants necessarily become detached from business decisions made by the firm. As the tail cannot wag the dog with so many consultants with competing demands.

How inhouse isn’t that different to private practice

75% of those associates surveyed by Lexis Nexis were not prepared to abandon private practice to work in-house. Working in-house offers something different, but as the research highlighted, the many want a better work-life balance, a compelling business strategy, superb training and to have a seat at the table and be heard.

In some businesses, there will be a familiar structure to the legal team, with a pyramid structure absent Partners. This provides collegiality and a supervisory system, reminiscent of private practice. But workloads can be substantial and internal clients demanding an associate by an expert of five distinct areas of law in one day (which sounds like a Crowded House reference) can be overwhelming and stressful. Training can also be lacking, often externalised and sometimes forgotten about altogether. The purpose of an in-house legal function is to enable commercial, the business itself is not selling legal services, hence why the legal function lacks a voice in the executive. Legal provide a function to the business, but does not have an influence on the business itself beyond the provision of legal services. It is not for the many.

The benefits of a horizontal law firm structure

The answer, dear reader, for those associates that want to remain in private practice, is a law firm with a horizontal organisation structure, like we have at Ridgemont. Absent a partnership, the law firm is not shackled by the focus on PPEP, taking a more holistic approach to business growth. Associates are released from their hamster wheels and given the opportunity to breathe, enabling them to develop business development skills.

Without a partnership and executive, everyone can have their say and there are no office politics. Everybody is appreciated and heard. We have regular meetings where everyone and anyone can make suggestions or voice an opinion about business decisions. No one’s opinion is invalid. Consensus is built before decisions are implemented. Of course, that does not mean that everyone’s opinion can be incorporated into the strategy, but everybody is heard.

Our environment is supportive, not competitive. When colleagues need help meeting their KPIs, we help them. And although we provide high quality advice, doing great work, for some of the biggest names in the construction sector, we ensure that our team have their lunch break and generally do not work evenings or weekends. That makes them better lawyers, which in turn benefits our clients.

While the pyramid structure is effective at driving profits, it does so at the detriment of many a lawyer’s health and wellbeing, creativity and efficiency. As we know from our clients in other sectors, other structures can be effective at bringing in profits. Perhaps the legal sector needs to remove its blinkers on PPEP, if we want future generations of lawyers to stay in the profession.