Chief operating officers: does your law firm need one?
Alexandra Hatchman explains why appointing a dedicated operations resource makes sense in an ever more competitive market
The already saturated legal sector has become even more competitive, following the entrance of the big four accountancy firms into the market along with an influx of agile, innovative startups.
This has forced many legal practices to re-evaluate their business model, leading many to abandon traditional partnerships in favour of becoming a corporate entity.
Increasingly, looking to restructure their business to meet the demands of the highly competitive market these firms have been making the significant step of hiring experienced chief operations officers (COO).
What is a COO?
While the specific duties of a COO vary from sector to sector, and even business to business, a COO is generally responsible for the people, end-to-end processes and systems within an organisation. They help their organisation allocate its resources optimally in order to deliver the current and future goals of the business.
Crucially, the COO routinely reports to, and works closely alongside, the highest-ranking executive, which is usually the chief executive officer (CEO).
It is important to note that, unlike other C-Suite positions, such as the chief finance officer, which tend to be defined according to commonly designated responsibilities across most companies, the COO job is often defined in relation to the specific CEO with whom they work, given the close working relationship of these two individuals.
COOs first began to emerge in large legal practices around 20 years ago. Although they have become increasingly prevalent over the past 10 years or so, recent research shows that 56 per cent of global firms with more than 500 employees are yet to appoint one, indicating that the role is yet to become universal.
As in other industries, the COO is generally one of the most senior full-time executives in their organisation, and reports to the most senior executive, whether that’s the CEO or managing partner. However, COOs in other sectors are often seen as the natural successor to the CEO. In law firms this is unusual, as there is a long-held view that the CEO should be a qualified lawyer. It is worth challenging this view.
Some law firm COOs have moved into the role from legal practice, often by internal promotion. In some cases the role is seen as reserved for partners from within the firm, however the majority will have a background in other business functions such as strategy, finance, human resources, IT or business development.
Why have a COO?
Given that the role is still relatively new in the legal sector, there is currently disparity between the responsibilities of each individual COO.
However, in many cases, the COO is hired to support an increasingly overstretched CEO or managing partner. The COO can take on all of the CEO’s business support responsibilities, enabling them to concentrate on non-operational tasks.
According to legal consultant Chris Bull, in this model, the COO’s role usually includes:
Full executive oversight and line management of all business support functions, including IT, HR, marketing, business development, infrastructure and risk.
Report lines for all directors in business support functions.
Responsibility for the planning, investments, reporting and improvement of business performance.
Board membership and regular reporting to board and partnership.
Particularly in a growing law firm, a CEO or managing partner’s valuable time is much better spent focusing on the business’s culture, their vision, client relationships and business development, and making important decisions about the future of the firm.
With a COO on board, they no longer have to split their time between these activities and the operational management of the firm, which can lead to both areas suffering.
Appointing a COO without a legal background has the added benefit of introducing skills to the firm that are not taught in law school. For example, administrative issues that stand in the way of effective client service are usually best handled by those who have been trained to do so.
Are there any drawbacks?
Although the potential benefits of appointing a COO are significant, there are a number of factors a law firm needs to consider before doing so.
Inevitably, appointing a highly experienced COO is likely to come at a significant cost to the business.
In order to justify the outlay, it must be clear that the CEO or managing partner is overloaded, and that the firm is not reaching its full potential as a result.
It’s also important that the culture of the firm is accepting of someone from outside not only the business, but the legal profession, taking on a very senior and influential role.
Despite the apparent cost, it’s worth noting that a specialist in operational management should be able to make considerable improvements to the effectiveness and efficiency of operations.
Effectiveness drives the top line in an organisation and efficiency drives the bottom line. The impact of increases in revenue and reductions in cost should quickly outweigh the expense of appointing an experienced COO.
What about smaller firms?
For smaller firms, bringing a COO on board may not be a viable option. If this is the case, then it is crucial that there is somebody else in the firm who is operationally minded and understands the value of running and innovating operations.
It would be possible for a partner to take on some of the role, but in order to be effective they must be passionate about improving the running of the business, and have the ability to do so.
If they adopt these responsibilities unwillingly, then they are unlikely to bring about positive change. It is also probable that the average partner’s understanding of operations isn’t comprehensive; after all it is a specialist skill just like the law.
On the other hand, appointing a dedicated operational resource needn’t be prohibitively expensive. Instead of a COO, a small firm could instead look to bring in an operations manager, or someone with a business certification such as Six Sigma, who would still be able to make a large difference to productivity.
With small law firms under so much pressure in the current environment, they should be encouraged to redefine themselves as small businesses.
Businesses need to have the skills to provide a great service to customers and capabilities to run the financial and operational aspects of their business; that doesn’t change whether you are providing a legal service or any other service.
Small law firms are no different to any other small business in that they need to embrace core business skills or risk being left behind.
With this in mind, smaller businesses should be looking at their bigger counterparts, and using them as a guide. There is a reason that large firms have these structures in place, and they can and should be replicated on smaller scales.
In such a difficult market, operational excellence is likely to be central to legal success in the years ahead. An enthusiastic, innovative COO at the heart of the business is arguably the best way to achieve this.
Alexandra Hatchman is chief operating officer at Fletchers Solictors fletcherssolicitors.co.uk