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

Peter D. Sherer

ILR Review, 1995, vol. 48, issue 4, 671-691

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.

Date: 1995
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