Managing the Firm as a Business

Volume 38 Number 2

By

About the Author

Bob Denney is president of Robert Denney Associates, Inc. He and his firm have been providing strategic management and marketing counsel to law firms throughout the United States and parts of Canada for over 30 years.

About 10 years ago, in one of our firm’s legal communiques, I wrote: The practice of law is a profession, but a law firm is a business and must be managed like a business. That statement produced indignant replies from quite a few lawyers saying emphatically that a law firm is not a business and castigating me for saying it is. Today, however, most lawyers realize that a law firm is a business. So the question for many firms—perhaps including your own—is what structure is most effective for management in a businesslike manner? In this column we will look at some of the trends you might consider. 

Of course, most firms have always had a managing partner (MP), managing director or president. Until a few years ago, various surveys reported that over 70 percent of the MPs did not have a job description and that most partners in these firms did not know what their MP did. As a result, even though some firms also had an executive committee, the MP’s responsibilities and authority depended pretty much on what he or she wanted them to be. This sometimes led to the description of many MPs as “benevolent dictator.”

The days of the benevolent dictator have pretty much passed, as management of the firm has become much more complex, requiring the MP to devote more time to the position at the sacrifice of his or her own practice. In a growing number of larger firms, managing partner is now a full-time position, complete with a job description. Simultaneous with this trend has been an increase in the role and responsibilities of the executive committee, which now may comprise, together with the MP, part of the management team. Another important part of this team is major practice group leadership or, if there is such a position, practice management committee chair.

In addition to expanding the management team, some larger firms have addressed the fact that most lawyers do not have business skills by providing formal training for partners and senior associates in management and leadership, many times in conjunction with a leading business school.

THE GROWTH OF SHARED RESPONSIBILITY

Most BigLaw and even some MidLaw firms today will also have a firm chairperson in addition to a managing partner. One of these positions will be designated as the CEO. This is usually, but by no means always, the managing partner. A few firms have gone to a different structure by having co-managing partners, with one MP focusing externally on client relations and enhancement of the firm’s reputation in the marketplace, and the other focusing internally on operations including finance, technology, administration, staffing and practice management. If one of the two is unavailable, the MP that is available can handle matters for the one absent, as necessary.

Another approach to shared responsibility is the position of COO (chief operating officer), which is a position that may report directly to the managing partner or, in some firms, to the executive committee (although reporting to a committee rather than to an individual is rarely a wise structure).

Generally, a COO’s responsibilities are internally focused. The most significant rapidly growing development is that a COO is not a lawyer but rather an experienced businessperson, often with a background in finance, accounting or operations. Whether or not he or she reports to the MP, the COO is usually a member of the executive committee and, in some firms, is a voting member. I also know of two firms that have recruited a nonlawyer as CEO, just as many hospitals and some group medical practices have nonphysician CEOs.

The COO is not the only position where a non-lawyer executive may have considerable management responsibility. In many BigLaw and also some MidLaw firms, the CMO (chief marketing officer)  may be a member of the executive committee, although rarely a voting member. CFO (chief financial officer) and chief technology officer or director of technology are several other positions that have become—as they should be—part of the senior management team.

BRINGING OUTSIDERS INTO MANAGEMENT

BigLaw firm DLA Piper recently took what is probably an unprecedented approach to senior management. Instead of electing one of its partners as co-chair, the firm recruited an outsider for the position. That individual had most recently held two top-level corporate management positions and, prior to that, for nine years had been firm-wide managing director of Linklaters, another BigLaw firm.

Although not bringing them into management positions, some other firms—both large and midsized—are involving outside business executives in management, some of whom might be non-lawyer industry experts, or top legal consultants. For instance, several years ago national insurance law firm, Nelson Levine de Luca & Horst, formed an executive board of retired executives from the insurance industry to advise it on operations and strategy.

So, while the term hasn’t been used in this context, the “new normal” in the legal profession is gradually moving toward managing a law firm, no matter what its size, as a business. As Martha Stewart used to say: “It’s a good thing.”

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