what is the business of a law firm

Peter Drucker and the 21st Century Law Firm. Part 6: What is the Business of a Law Firm?

All lawyers know what is the business of a law firm, don’t they? If you ask a lawyer what is their business the answer will probably be “a lawyer” or “providing legal advice to a client”. Do these answers stand up to scrutiny? How might they look through the prism of Peter Drucker’s thinking?

What is Our Business – and What Should it Be?

Drucker asks of a (law firm) business to answer this question “what is our business [and] what should it be?” He states that “Nothing may seem simpler or more obvious than to answer what company’s business is. Indeed, the question looks so simple that it is seldom raised, the answer seems obvious that it is seldom given. Actually “what  is our business” is all most always a difficult question which can be answered only after hard thinking and studying. The right answer is usually anything but obvious.”

“What is our (law firm) business is not determined by the (lawyer) producer, but by the (client) consumer. It is not defined by the company’s name, statutes or articles of incorporation, but by the want the (client) customer  satisfies when he buys a product or (legal) service. The question can therefore be answered only by looking at the business from the outside, from the point of view of the (client) customer and the market (for legal services). What the (client) customer sees, thinks, believes and wants at any time must be accepted by management as an objective fact deserving to be taken as seriously as reports of the salesman, tests of the engineer or the figures of the accountant [or the opinions of the lawyers] – something few management find it easy to do.

Now Drucker gets serious understanding the client by stating “And (law firm) management must make conscious effort to get honest answers from the (client) consumer himself rather than attempt to read his mind.” This can manifest itself both before an engagement to really

For all those firms that say that they are “client centric” or “client focussed” are can they really say that they are defined but what the client actually wants, not what the lawyer thinks the client needs? Go and ask you clients what they want from their lawyers, you might be surprised by their answers.

“What is our business?” 

“It is, then, the first responsibility of top management (partners, directors, managers) to ask the question “what is our business?” And to make sure that it is carefully studied and correctly answer. Indeed, the one sure way to tell whether a particular job as top management are not is to ask whether its holder is expected to be concerned with, and responsible for, but answer.”

How often do you sit down to reflect on that fundamental question? If more focus was given by law firm top management to answering this question (and formulating strategy) over doing client work might law firm’s be a different type of business?

Are you successful?

What about success? Drucker states “It is not a question [what business are we in] that needs to be raised only at the inception of the business or when the company is in trouble. On the contrary: to raise the question and the study it thoroughly is most needed when a business is successful. Failure to raise it may result in rapid decline.”

A salutary warning for the successful law firm. As recent history across the common law jurisdictions shows, there are plenty of firms which fail not long after having been (apparently) successful.

It should not take too much effort to regularly consider “what is your business”. If you do, you will be rewarded with continued success (or survival). If you don’t, failure looms.

Paddy Oliver

Managing Director

Lexcel Consulting

+61 431 174 124

+61 3 96363632

Lexcel | Law Firms Redesigned

Lexcel is a boutique consulting firm focussed on adding value to law firm management and in-house counsel across strategy, pricing, and management.

Paddy Oliver