Do law firms need one management board or two?

We all know that the profession has changed dramatically in the past 30 years. This has been reflected in the governance and management structures adopted by firms. Many firms now have fewer partner meetings, so the partners want to see a management structure in place that combines checks with balances, including management accountability. who ?watches the watchmen?)

The most common models adopted have been either a single board or two boards. The two-board system would normally be an executive board and a board representing the interests of the partners because, if there are fewer partner meetings, the feeling develops that a representative board is needed to monitor the management board.

One way of looking at this two-board model is that, in a corporate sense, one is composed of executive directors and the other of non-executive directors. The advantage of the two-board model is that it produces two boards with different responsibilities, but interlinking roles. The disadvantage is that it can create duplication and confusion if the two boards are not aligned in their objectives and opinions. And some partners may see a non-executive board as a form of appeal mechanism against the decisions of the executives.

Key considerations

If the two-board model is adopted, it is essential that both boards understand ?how they work together. It is here that ?the analogy to executives and non-executives is instructive. The relationship ?of the two boards may also mirror the relationship between a senior partner ?and a managing partner.

The alternative model is a single ?board made up of both executives and non-executives. This has the advantage ?of creating fewer meetings and removing the risk of having two competing sets of opinions. On the other hand, partners may believe that non-executive board members, who they see as their representatives and as a brake on the executive managers, have lost their independence and are not properly performing their roles. But, the separate constituencies of the board could have separate meetings when necessary. A single board also risks blurring distinction between executive and non-executive board members.

Another issue to work through is the composition of the boards. In some firms, the executive members are chosen for their particular skills in certain areas. In other firms, they already have executive responsibility, usually as heads of department. These roles can be elected or nominated by, for example, the managing partner. There is a separate issue about where non-lawyer professionals fit in and whether they sit on boards or not and, if so, on what basis.

The level of consultation and communication by boards is always an issue. Arguably, there can never be enough communication with partners and staff. Some firms have a system of regular meetings between groups of partners and the non-executive managers so that partners have direct access to the management structure and the non-executives can canvass the views of these groups. This also creates a forum in which partners can let off steam. But, it is vital for any system to have built into it lines of communication and consultation that operate in both directions, as well as arrangements to allow non-partners to express their views to management.

Choosing a model

When deciding which model to adopt, the starting point is to create a checklist of objectives to be considered when building or reviewing the management structure. The process should also ensure that the values of the firm are reflected in the scheme. This will often result in a debate focusing on checks and balances versus power and authority. Once the values and objectives have been agreed, they can be tested against the various models available.

It is important that any model be reviewed regularly to see if it is working. For instance, are the opinions expressed by management representative of the body of partners? Are issues tested and challenged by the boards or taken at face value?

Whichever model you adopt, it has to be flexible and work in this modern competitive world. What is suitable for your firm is most important. But, it is appropriate to consider the structure in the context of the common corporate model of management and shareholders, rather than the traditional structure of partners or limited liability members.

Looking at the issue from that standpoint, my preference is for a single board made up of professional and non-professional managers, including some non-executive figures. This concentrates decision making and responsibility in the hands of those with the skill and knowledge to move the business forward. And, one skill needed by all managers is a willingness to watch and challenge the other managers.

Guy Vincent is a partner and the former managing partner at UK law firm Bircham Dyson Bell (www.bdb-law.co.uk). He specialises in legal and management issues facing law firms.