Law firms may practice law, but they still have to operate as businesses.
That distinction is becoming more important as firms grow larger, expand across offices and manage increasingly complex mixes of clients, practice areas and compensation structures. Scott McPherran, founder of Enright-McPherran Professional Consulting, believes many firms have reached a scale where informal management is no longer enough.
McPherran’s approach was shaped long before he began advising law firms. While serving in the military, he volunteered to work in the worst-performing post office on his base because it offered the greatest opportunity for improvement. Faced with severe understaffing and unusually high demand, he identified the operational bottleneck and recruited volunteers to increase throughput.
He did not call it business intelligence at the time, but the principle was already there: understand the real problem, identify the available resources and build a system that improves performance.
Today, McPherran applies that thinking to law firm economics.
Growth Creates New Risks
Many successful law firms were built around exceptional attorneys, strong client relationships and respected legal work. Those strengths can generate substantial revenue, but they do not automatically produce effective financial controls.
As firms add attorneys, offices and practice areas, leaders must manage more than legal outcomes. They must also understand profitability, expenses, cash flow, work in progress and accounts receivable.
A smaller firm may be able to operate through personal oversight and experience. A larger organization cannot rely on the same approach indefinitely.
McPherran argues that the central challenge is giving firm leaders visibility without overwhelming them with spreadsheets and financial detail. Managing partners generally want to practice law and lead the firm, not spend their days assembling reports.
The reporting therefore has to be simple enough to interpret quickly but sophisticated enough to support meaningful decisions.
Measuring the Economics of Legal Work
Different practice areas create very different financial profiles.
Trusts and estates work may produce relatively predictable billing and collections. Contingency litigation can require a firm to carry expenses and unbilled work for months or years, with no guarantee of recovery.
Neither model is inherently wrong. The issue is whether the firm understands the risk-and-reward balance across its portfolio of work.
McPherran reduces that analysis to three core questions:
How much cash did the firm collect? How profitably did it collect that cash? How much work in progress and accounts receivable did it have to carry to achieve the result?
His firm uses visual reporting to compare expected and actual performance across revenue, operating income and outstanding work. When the indicators remain aligned, leaders can see that a practice area or office is generally performing as planned. When they move apart, management knows where to investigate.
The objective is not to eliminate every variance. It is to expose problems early enough that small adjustments remain possible.
Small Corrections Prevent Painful Decisions
When firms fail to monitor performance consistently, minor problems can become major ones.
A delayed settlement, weak collections or rising expenses may appear manageable in isolation. Over time, however, those issues can affect payroll, partner distributions and the firm’s ability to invest in growth.
Late intervention often means severe measures such as reducing headcount or cutting essential resources.
Frequent visibility creates more options. A managing partner may discover that one billing attorney’s collections consistently trail comparable attorneys. The response might be a targeted collections plan rather than a broad cost-cutting exercise.
The same applies to expenses. Premium office space, dedicated support staff and other resources may be justified, but leaders need to see how those decisions affect profitability.
Data makes that conversation more objective.
Turning Professionals Into Analysts
McPherran defines effective business intelligence as moving people from data gathering to data analysis.
Finance teams in many organizations spend substantial time collecting, cleaning and assembling information. That leaves less time to interpret what the numbers mean or recommend what management should do next.
Automation and artificial intelligence can reduce that burden by producing tailored reporting for different levels of the organization. A managing partner, practice leader and associate do not need the same information, but each should understand how individual performance contributes to firmwide goals.
The technology is not intended to replace judgment. It is meant to give leaders the right information early enough to apply their judgment effectively.
That is the larger promise of Law Firm Economics: treating financial visibility, cash-flow forecasting and operational discipline as essential parts of running a modern legal organization.
For firms navigating rapid growth, the question is no longer whether they produce revenue. It is whether they can understand how that revenue is produced, how much it costs and whether the underlying model can continue to perform as the organization becomes more complex.
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