Back in the distant mists of time, when law firms were much smaller, it was perfectly logical to have a managing partner who was a lawyer. After all, it’s not the most difficult thing in the world, managing a business you can sit around one big table.
But as law firms have had to become commercial businesses, they have grown in size and complexity. Although law firms have developed out of all recognition, their main assets remain the same: great lawyers.
The best law firms aren’t the firms with the best processes, the most efficient procurement, or the best IT systems – although all those things are important – they are the firms with the best lawyers.
So why would you have what is usually one of your best assets manage the firm?
Self awareness In the November 2015 issue of Managing Partner, Mark Rigotti, co-CEO of global law firm Herbert Smith Freehills, argued that the law firms of the future will be run by ‘self-aware lawyers’ rather than by non-legal CEOs with professional management experience.
I don’t agree. Don’t get me wrong, many do it successfully: the vast majority of large, successful law firms are, today, managed by lawyers.
There are some advantages to this, of course. Lawyers understand lawyers, for a start, and law firms can be highly political environments, where being a lawyer has always conferred automatic status, as opposed to being ‘staff’.
But that understanding does not necessarily bring with it any competitive advantage. In fact, one might say that the predominance of lawyer-managers in the industry has given us a sector where few firms can claim a distinctive offering and, a cynic might say, where many have no clear strategy or direction.
It is a cliché that ‘all law firms are the same’, but it is a cliché for a reason, and the lack of apparent difference between providers often leads to confusion, inertia and exasperation among clients.
Taking one of your key fee-earners away from the front line is possibly not great business, even leaving aside the often unmeasurable decline in fee income which will result (given that you can never know what revenue you would have generated had the partner continued as a fee-earner).
Lawyers are best deployed being lawyers and managing key client relationships, not grappling with concepts that are often completely unfamiliar to them. Losing a key revenue generator and handing management to someone with (usually) no genuine business experience could be a double-whammy for the firm.
Problems for the non-lawyer However, it’s often far from plain sailing when a non-lawyer manager is installed to run a law firm. Another challenge of a flat hierarchy with many owners (equity partners) is that they all want to have their say on an ongoing basis.
This can, in the worst cases, make the post of CEO a poisoned chalice, where any progress faces organisational gridlock as multiple partners interfere. In this case, the daily grind becomes a nightmare, and few last very long in such a scenario, ironically causing the firm to conclude that non-lawyers just can’t hack it and to go back to appointing a lawyer instead.
Partners need to understand what the business needs to achieve, to trust that a non-lawyer CEO will be just as good – if not better – at delivering on the strategic objectives, and then let them get on with it, while the partners concentrate on what they’re good at.
The concept of making non-lawyers equity partners, something alternative business Sstructures now allow, is a bridge too far for some lawyers, however. That involves not just trusting a non-lawyer with ordering paper-clips and organising the IT and property, but allowing entry to a sanctum which has, for centuries, been open only to those with legal training.
As any senior lawyer will tell you, though, one of the curses of the law firm is short-term thinking. Distributing 100 per cent of your profits every year was fine for the ten partner business with only filing cabinets and typewriters to think about, but in businesses that need to invest in expensive IT and foreign offices, thinking needs to be longer-term, not least, as some firms have chosen, if external investors are in the mix.
Granting the CEO – and other business support directors – a stake in the business, just as they would in any major corporation, might be a good way to lock in long-term thinking and encourage top level managers from outside the law to deliver the business transformation tomorrow’s law firms will need.