FRONTLINES

TRENDS REPORT

STRENGTH IN FIRM MANAGEMENT: THE PENDULUM’S SWING

Whether or not you believe the law firm business model is actually broken, today’s firms are facing management challenges they have never faced before—and for which there are few, if any, precedents. In response, some are changing their approach to management.

In the recessions of previous decades, clients raised few, if any, issues about their lawyers, and law firms continued to operate more or less as they had before. Basically, business—and the practice of law—“returned to normal.” However, that same outcome seems unlikely this time. Here are trends that reveal how some firms are addressing the new challenges under way today.

The Management Pendulum

For many years, law firms were managed autocratically by their founders. When those “benevolent dictators” died or retired, the management pendulum would generally swing to the other extreme, with the firms adopting a democratic form of governance in which most issues were taken to the full partnership. This “excess of democracy” typically led to slow decision making, or even no decision making at all.

Then, over the course of the past decade, a trend started. Emulating their corporate clients, a few firms began moving to strong, centralized management and leadership. While some of these firms have modified aspects of their management structures as they’ve grown in size, they’ve still retained, and even enhanced, the strength of their leaders’ roles. Now more firms are following this trend, in recognition that the changes occurring in the profession require changes in their approach to management and leadership, too.

The Firm Leader’s New Role

In firms committed to having strong management and leadership, the role of the managing partner, or CEO, changes in at least three respects:

The MP is heavily involved in strategic planning, creating a vision and setting the future direction of the firm.

The MP shifts from managing day-to-day operations to pursuing an external focus, concentrating on the firm’s relationship with key clients.

The MP makes sure the firm listens to its clients, understands their goals and business plans, and looks for ways to assist clients in implementing their plans and achieving their goals.

To enable the strong MP or CEO to fulfill these responsibilities, corresponding changes are occurring in firm management structures as well:

Even in midsize firms, the MP position is becoming a full-time job.

Practice groups are headed by strong leaders who have the ability, and are given the time, to manage their groups and who understand what it means to be a client-focused firm.

The non-legal, business side of the firm’s operations are managed by a strong chief operating officer or executive director who heads a team of nonlawyer business professionals.

Technology, information systems and knowledge management are given high priority.

The marketing function is elevated to a strategic level and placed in the hands of a qualified chief marketing officer.

Business development is viewed as equal to marketing in importance.

Traits of the Strong Leader

Many lawyers have the mistaken perception that electing a strong leader as managing partner is equivalent to appointing a dictator (who may not be benevolent). The record of successful law firm leaders proves otherwise:

  • Strong leaders make few, if any, important decisions in a vacuum. They are skilled in forming consensus among their partners.
  • They are businesspeople as well as good lawyers.
  • They are supreme but prudent risk takers.
  • They are skilled listeners and excellent communicators.
  • They are highly effective at delegation, motivation and inspiration.

In addition to these qualities, strong MPs must also be successful lawyers and business developers or they will not have the respect and support of their partners. Given all these characteristics, it is understandable that it takes a unique individual to fill this role.

New Training and Compensation Points

CEOs and senior management in corporations usually have MBA degrees and have spent a great part of their careers learning how to manage a business. In contrast, few law firm CEOs or MPs have business degrees or much education and experience in the art of management. Fortunately, savvy partners and their firms are now recognizing that they need training in leadership and management, just like their corporate counterparts do. Therefore, a number of large firms and now some midsize firms have developed such programs or are investigating how to do so.

A final point is how partners in strongly managed firms recognize that the highest paid person in a corporation is almost always the chief executive—and that the other members of senior management are also highly compensated. It’s no coincidence that many of these law firms apply that same principle to themselves in compensating their leaders.

Ultimately, some shifts in the wind are really a mixture of good news and bad news. The continued economic effects of the recession, including high unemployment, are clearly lingering bad news. But these trends in firm management and leadership are certainly good news.

SPOTLIGHT

New and notable books and resources for the business of practicing law

The 2010 Solo and Small Firm Legal Technology Guide: Critical Decisions Made Simple by Sharon D. Nelson, John W. Simek and Michael C. Maschke (ABA, 2010).

In this definitive resource, you’ll find the most current information and advice on computers and printers, networking equipment and wireless options, smartphones, legal software, including case management, billing and document management, and security threats. Plus, the book includes a chapter by Ross L. Kodner devoted to paperless options.

The Lawyer’s Guide to Working Smarter With Knowledge Tools by Marc Lauritsen (ABA, 2010).

This new book explains what knowledge tools are, and how law firms can use them to help get everyday legal work done faster, cheaper and better. Chapters cover the different types of knowledge tools, including authoring systems, document assembly software, work product retrieval systems and interactive checklists, as well as information on how to select and implement knowledge tools to best advantage.

About the Author

Bob Denney , President of Robert Denney Associates, Inc., has been providing strategic management and marketing counsel to law firms throughout North America for over 30 years. He can be reached at (610) 644-7020.

Advertisement