After many companies experienced a very profitable 2020 and exorbitant levels of demand in 2021, they found themselves with more cash than usual. Although there is more than enough great law the money was poured out on associates and laterals recently, these aren’t the only ways companies are spend their wealth.
Companies are investing more in information technology after the pandemic showed the importance of a well-managed IT department. They also invest money in diversity, equity and inclusion efforts, which continue to be a focus for businesses and their customers.
And some are even making investments in the more traditional sense, as McDermott Will & Emery did with its Contribution of $10 million to the LegalTech Fund.
Yet many companies return the lion’s share of excess profits to their partners. That’s where most companies send most of their recent deals, said veteran legal industry consultant Tim Corcoran.
“Some companies have handed a lot of that money over to associates in their self-induced and frantic talent wars. Others write big checks to entice siders. But some of it gets reinvested back into the business,” Corcoran said.
He said corporations are increasingly funding “overlooked initiatives,” including DEI programs, job training and wellness programs. And some upgrade enterprise software upgrades, Corcoran noted, adding that “these purchases don’t skyrocket in times of plenty because the burden of outdated systems is usually borne by staff, while benefits of excess profits accrue to the partners”.
Mike Hammer, CEO of Detroit-based Dickinson Wright, said that while employees and their salaries are the company’s biggest cost, the company is getting back to IT.
“Modern business growth is in IT,” Hammer said. “You don’t want to spend too little, but you don’t want to overdo it either.ard.
Hammer said his company, for example, has invested in its data center and maintained technical and security certifications that make the company an attractive option for its banking customers, as well as DEI and business development.
Barbara Duffy, president of Seattle-based Lane Powell, said her company is also looking to increase investment in technology, DEI and business development, while aiming to reduce real estate costs.
Lane Powell is also looking to invest more in project managers and pricing specialists to reduce overall costs. But, as many companies have found, this requires convincing the partnership that hiring these professionals, which that they might consider overhead – is the right decision.
“We tried to increase our achievement,” Duffy said. “We have strengthened our pricing team and are looking to make sure people are trained to describe their time. We want to move away from work labeled as “work on brief, work on brief” for 30 hours. »
Another Lane Powell initiative aims to improve well-being, but not by spending resources. Instead, the company reworked its compensation structure to create a pathway for those who want to work fewer hours.
Following increases in the associate compensation market earlier this year, Lane Powell has not entirely matched its close competitors, but it has also reduced its minimum billable hours from 1,850 to 1,750. And for those crossing At the 1,850 hour mark, there are additional incentives that ultimately allow for higher compensation than that offered by comparable companies.
Duffy said she was aware of the potential for attrition from associates wanting that higher base salary, but, she added, so far the change has been well received. “We double the difference in pay over time,” she said.
Despite the investments some law firms are making, this is still far from the best practices adopted by many other industries, Corcoran noted. This is because the most common business model and tax status of law firms”discourages withholding profits or contributing to a rainy day fund,” he said.
“The one-year-at-a-time mentality causes partners to view any expense, even one that will yield a handsome return, as an undesirable dilution of current year earnings,” Corcoran said. “So even when the cash drawer is full, there is a functional limit to how much owners will allow to be diverted into their business rather than their pockets.”