12 Questions to Ask About Law Firm Management
Law firm management relies on professional judgement, institutional knowledge and information from across the firm. As firms grow more complex, management decisions can be hampered by incomplete, delayed or fragmented information.
The challenge is not the absence of policies, processes or specialist functions. Most firms already have them. It is whether management has sufficient visibility across the firm to connect information from different areas.
This article explores twelve areas where issues that seem limited to one function can affect the firm as a whole. For example, a partner’s departure may affect succession, client relationships, revenue and knowledge. Similarly, a client request about AI or data security may have implications for business development, risk and insurance.
1. Financial health
Understand which practices, partners and matter types generate profit, not just revenue
The accounts system may contain the data. However, management must understand what it shows. A practice may generate substantial revenue yet deliver poor margins because of write-offs, discounts or high servicing costs.
A practice showing strong revenue growth may owe that growth to a few large matters consuming substantial partner and associate time, with frequent write-offs and discounts. Another practice with lower revenue may actually generate a better margin.
Understand where the firm earns profit, where margins are declining and what is driving the change.
2. Client concentration
Look beyond revenue and identify clients whose value also lies in referrals, strategic importance or reputation
Identify key client relationships that rely heavily on one partner. A major client may generate substantial revenue and remain vulnerable if the relationship is primarily personal to that partner. Conversely, a lower-revenue client may hold considerable strategic value through referrals or access to other work.
A partner may have a strong relationship with the general counsel of a major corporate client and generate most of the firm’s work for that client. The revenue may appear secure. However, if the client has few other ties to the firm, the exposure is greater than the figures suggest.
3. People and succession
Identify where the firm depends on particular people
A senior partner’s departure can affect far more than revenue. It can disrupt client relationships, take valuable institutional knowledge with it and weaken the informal leadership that supports a practice group.
The partner may be the main relationship holder for several key clients, a source of guidance on complex matters and the person who understands why particular approaches were adopted in the past. A succession plan naming a potential replacement does not, by itself, transfer those relationships, knowledge or authority. That requires time and deliberate handover.
Effective succession planning starts early, while relationships, knowledge and responsibilities can still be transferred gradually.
4. Risk
Consider how risk is accumulating across the firm
Professional conduct, conflicts, AML, cybersecurity, data governance, complaints, insurance and other issues may appear manageable individually, but together they can create significant exposure.
A client may raise data security concerns while the firm is also facing more phishing attempts, inconsistent data handling practices and gaps in cyber insurance. Although each issue falls within a different function, together they reveal a broader weakness.
Management therefore needs a structured view across these areas, not just visibility of issues that have already escalated. The absence of a serious incident does not necessarily indicate that risk is well controlled.
Key questions to ask include where risks are emerging, how they are connected, and whether warning signs are being identified early enough for action.
5. AI
It is not whether lawyers use AI tools, but where AI is entering the firm’s work
It is important for management to have visibility of what client or confidential information is entered into AI tools, which tasks are delegated without sufficient oversight, and who verifies outputs before they reach clients.
At first glance, using AI to summarise transaction documents may seem like a straightforward way to improve productivity. However, the firm must consider whether the tool is approved, whether confidential information may be entered, how the information is retained, and who reviews the output before use. The client’s own AI or data-security requirements may also apply.
AI therefore spans technology, confidentiality, professional responsibility, risk and insurance. Treating it solely as an IT matter can overlook these wider implications.
6. Information governance
Can the firm find, protect, control and manage its information?
Management should know whether the firm can locate, protect and use its information, including precedents, client data, documents, emails, and policies.
Important material is often spread across individual drives, inboxes and the records of different teams. Inconsistent storage, unclear access controls and excessive retention can create confidentiality, regulatory and operational risks, while making information difficult to retrieve when needed.
A client may ask the firm to identify data it holds or explain how confidential information is accessed and retained. If the relevant material sits across different systems and devices, responding accurately can be difficult and may expose gaps in the firm’s controls.
7. Client expectations
Understand what clients expect beyond legal advice
Sophisticated clients, particularly financial institutions and large companies, increasingly require firms to address cybersecurity, AI use, ESG credentials, pricing transparency, diversity data and business continuity as part of panel appointments and ongoing relationships.
A firm may lose its place on a client’s panel despite the client being satisfied with its legal work, because it could not provide adequate information about cybersecurity, AI practices or business continuity. If this feedback is not captured and shared, management may never understand why.
Is the firm in a position to understand its key clients’ expectations, and is responsibility for meeting them clearly assigned?
8. Operational resilience
Identify what would fail if a key system went down, a critical partner became unavailable or a major supplier failed
Resilience requires more than a business continuity plan. It is crucial to understand the firm’s actual dependencies such as essential systems, processes that rely on particular individuals, critical suppliers and the consequences of their unavailability.
A firm may have backup systems but rely on one person to restore them. It may also have a comprehensive-looking continuity plan that has never been tested.
A useful test is to identify the areas the firm could least afford to lose tomorrow and assess whether each has a viable alternative.
9. Business development
Understand how client relationships are developed and maintained
Look beyond practice group numbers to understand which relationships generate work, how they were built and whether they belong to the firm or mainly to an individual partner.
A corporate client may generate a substantial volume of work and annual fees across multiple practice areas, creating the appearance of a strong institutional relationship. Yet if one partner drives nearly all introductions, strategic discussions and new opportunities, the relationship may be less secure than the revenue suggests.
Business development information can reveal both future revenue opportunities and risks related to client concentration and succession.
For each key client, can the firm identify someone in the firm other than the relationship partner to explain how the relationship operates, where the work originates and what future opportunities exist?
10. Knowledge management
Determine whether the firm captures what it learns
Law firms often solve the same problems more than once. A lawyer may develop a position on a novel issue, only for another lawyer to encounter a similar issue months later and start again from scratch.
Knowledge management is about making useful knowledge available beyond the matter in which it was created. Advice, research, drafting solutions and lessons from unusual matters can be captured in a form that other lawyers can find, understand and reuse.
A lawyer who spends days researching an unusual regulatory issue may produce analysis that could be valuable to others. If it remains buried in a matter file, that knowledge is difficult to access and can disappear when the lawyer leaves.
The objective is not to capture everything or build a large database, but to preserve knowledge that has continuing value to the firm.
11. Information flow
Does management receive timely, relevant information to identify problems before they become crises?
Financial reports arrive monthly, risk issues surface only when raised, and visibility of the business development pipeline often depends on partners keeping records current. As a result, important information can exist within the firm without reaching those who need it.
A practice group could be facing declining matter volumes, rising write-offs and the loss of several key associates. Finance, HR and the practice head each hold part of the picture. However, unless those pieces are combined, management may not recognise the problem until performance has deteriorated significantly.
The goal is not more reporting, but to ensure relevant information reaches the right people in time to inform decisions.
12. Decision-making and accountability
Are important decisions clearly owned?
Responsibility for lateral hires, technology investments, client acceptance and partner performance may be shared across the managing partner, department heads, risk and finance teams, and the wider partnership. Without clear ownership, issues may circulate among several people or stall because decision-making authority is uncertain.
For example, a decision on a new technology platform will require IT evaluation, risk and security review, financial cost assessment and partners to consider the investment’s value.
Without a clear owner to advance the decision, such discussions can continue for months without resolution.
Clear ownership does not mean one person makes every decision. It means someone is clearly responsible for taking the decision forward, with the roles of those providing input and giving final approval understood.
Conclusion
Law firm management is often dominated by immediate demands, from difficult clients and partner issues to risk matters, financial decisions and operational problems.
To maintain a broader view amid competing demands, management needs to:
- look beyond the issues that reach its desk;
- connect information from across the firm; and
- recognise patterns before isolated concerns become wider problems.
The twelve areas discussed in this article illustrate why this broader view matters. Effective management depends on sufficient visibility to identify what matters and act before problems become crises.
