The legal profession is in a period of structural upheaval.

The late 1980s can already be considered an unreal period of self-fulfilling growth when management and structural issues could be put on one side.

In the tougher 1990s managing for profit is a key discipline that will distinguish the winners from the losers.Clients are becoming more sophisticated buyers of legal services.

They are more aware of quality of service, tougher on price, less loyal and more attentive to the right balance between in-house and outside legal services.As growth and demand has slowed, law firms are increasingly battling for a share of the available market.

Clients have used the shift in the balance of supply and demand as an opportunity to move the terms of trade in their favour.

The effects of this will undoubtedly outlast the recession and will probably become a permanent fact of life.At the premium end of the market the 'magic circle' firms will thrive, as they have throughout the recession, on their inherited reputations and strong corporate client bases.

'Niche' firms will flourish in those specialised areas in which demand continues to grow.The most aggressive of the regional firms are succeeding by competing on price and using their presence in local markets.

The strongest pressure will be on general practice firms which lack the identifiable brand name of the 'magic circle' firms, the precision of focus of the best 'niche' firms or the cost advantages of the regional players.Those firms which fail to develop a distinctive position will wither and not all will survive.Developing a distinctive position differentiates your firm from the field of competitors and appeals to clients whom you are wishing to retain - the cornerstone of profitability is client retention.

Only when you have positioned your firm does it become clear how to manage the various profit levers within the firm.The 'juggling act' involves key financial variables such as the number of lawyers, leverage, the number of hours worked, efficiency in billing and collection and overhead ratios.The internal structure needs to be aligned with the requirements of the service that a firm seeks to provide and will vary substantially from one firm to another and one branch of legal practice to another.

There are, however, a number of universal home truths whatever a firm's positioning.Clients must be persuaded that they are getting value for money.

One of the hardest commercial judgments is the affordable value of our services to clients and thus the price we should be charging.Consistent over-charging in relation to the value that the firm is offering may mean that the firm goes out of business.

Whereas under-charging means that legitimate opportunities for profit are denied.The distinction between price and value is crucial in making these judgments.

The traditional approach of charging by the hour will become less and less relevant, because hourly rates do not necessarily equate to value provided.Firms should distinguish between premium work, which is of high value to the client because of its importance to the future of the business and the complexity of the issues involved and commodity work, which is of low value to the client because of its repetitive nature and the lack of differentiation in the service provided between one firm and another.Different pricing mechanisms are needed which may range from the traditional hourly rate to fixed fees, transaction fees, success fees and discounted fees packages.

Pricing mechanisms must be flexible so that the firm can tailor charging arrangements to meet the client's commercial position and perception of value.Price is not everything and implicit in any attempt to provide value for money is an acceptance of three vital commitments: people, quality and technology.A high turnover of low calibre staff will not provide value to clients or profit to law firms.

Attracting and retaining high calibre people is still the challenge.

It is easy only to pay lip service to the suggestion that you should care for staff; it is more difficult to do so by example.The starting point is a policy of closer partnership with staff based on openness and greater staff involvement in the business.

Firms also need to be less bureaucratic to encourage staff involvement.

Managing partners should resist the temptation to 'corporatise' partnerships by taking control to the centre and creating a bureaucratic hierarchy.Suitably small and largely self-managed work groups should be supported rather than controlled by the management infrastructure.

In this way the management of firms should become better able to put clients first.A good quality programme is a powerful competitive weapon.

To retain clients firms need to give them what they think they want and then work out how to make money from it.

This is what a quality strategy is all about.

It certainly is not technical excellence alone.Blindly providing a 'Rolls Royce' service with today's cut-throat pricing pressures is probably a strategy for bankruptcy in some firms.

Quality is all about tailoring the legal service to exceed the value expectations of each client whilst still maintaining decent profit levels.Clients want value for money and, as it is necessarily a relative term, its meaning will vary from client to client.

A good quality programme should be based on openness and the involvement of clients; find out what they want and do not have the arrogance to assume that you know what they want.Finally, to manage for profit, law firms must make maximum use of technology wherever it makes economic sense to do so.