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Leveraging Human Assets in Law Firms: Human Capital Structures and Organizational Capabilities

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  • Peter D. Sherer

Abstract

Partners in a law firm are the source of firm knowledge and hold claims to the firm's residual income; associates work for partners, acquire knowledge, and receive a fixed level of compensation. The author uses the ratio of associates to partners to measure the leveraging of human assets in law firms, which he likens to the leveraging of financial capital in other firms. Analyzing data on 312 large offices of law firms in 1991, he finds that this leverage ratio was related to business strategy, human resource management, and organizational structure. As an index of law firms' human capital structures, it also had important implications for organizational capabilities and firm competitiveness. For example, offices characterized by a rare and tightly controlled human capital structure had the highest billing rates, reflecting their capability of providing clients with services that deeply embody the knowledge of partners.

Suggested Citation

  • Peter D. Sherer, 1995. "Leveraging Human Assets in Law Firms: Human Capital Structures and Organizational Capabilities," ILR Review, Cornell University, ILR School, vol. 48(4), pages 671-691, July.
    • Handle: RePEc:sae:ilrrev:v:48:y:1995:i:4:p:671-691
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    Cited by:

    1. Forrest Briscoe, 2007. "From Iron Cage to Iron Shield? How Bureaucracy Enables Temporal Flexibility for Professional Service Workers," Organization Science, INFORMS, vol. 18(2), pages 297-314, April.
    2. K. Skylar Powell, 2014. "Profitability and Speed of Foreign Market Entry," Management International Review, Springer, vol. 54(1), pages 31-45, February.
    3. Namrata Malhotra & Timothy Morris, 2009. "Heterogeneity in Professional Service Firms," Journal of Management Studies, Wiley Blackwell, vol. 46(6), pages 895-922, September.
    4. Alvehus, Johan & Spicer, André, 2012. "Financialization as a strategy of workplace control in professional service firms," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 23(7), pages 497-510.
    5. Royston Greenwood & Stan X. Li & Rajshree Prakash & David L. Deephouse, 2005. "Reputation, Diversification, and Organizational Explanations of Performance in Professional Service Firms," Organization Science, INFORMS, vol. 16(6), pages 661-673, December.
    6. Bill McEvily & Jonathan Jaffee & Marco Tortoriello, 2012. "Not All Bridging Ties Are Equal: Network Imprinting and Firm Growth in the Nashville Legal Industry, 1933–1978," Organization Science, INFORMS, vol. 23(2), pages 547-563, April.
    7. Nisar Ahmad & Amjad Naveed & Amna Fazal, 2018. "An Empirical Analysis of Boardroom Diversity on Firm Performance," Review of Economics & Finance, Better Advances Press, Canada, vol. 13, pages 62-76, August.
    8. Noam Wasserman, 2008. "Revisiting the Strategy, Structure, and Performance Paradigm: The Case of Venture Capital," Organization Science, INFORMS, vol. 19(2), pages 241-259, April.
    9. Isychou, Despoina & Chountalas, Panos & Magoutas, Anastasios & Fafaliou, Irene, 2016. "Human capital and performance appraisal in the public sector: An empirical investigation from employees’ and senior managers’ perspective," MPRA Paper 72405, University Library of Munich, Germany.
    10. Powell, K. Skylar & Lim, Eunah, 2018. "‘Misfits’ DO try to fit: Deviations from firm-specific optimal multinationality and subsequent market entry or exit in US law firms," Journal of Business Research, Elsevier, vol. 82(C), pages 141-148.

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