Do today's law firms need professional managers?

Across the globe, it is accepted that the quality of management can enhance or damage the value and effectiveness of any enterprise. The legal world remains one of the few areas in UK business in which many firms still resists employing professional managers. Why is that?

It is interesting to reflect on the development of law firm management during the past 30 years, as the profession has changed dramatically. Part of that change has been reflected in the governance and management structures adopted by law firms.

The traditional method of management divided the responsibility for different aspects of running the business between partners. Firms used to be small enough for most decisions to be made in partners’ meetings chaired by a senior partner. The senior partner was usually the person with the longest service.

Often, the only support service was finance, which would normally be run by a finance professional, who may or may not have any influence on the day-to-day running of the business. Everybody had a go at management to keep the wheels of the business turning, whether that meant being responsible for the stationary cupboard or the finances.

As legal practices grew and became more complex and information technology became commonplace, firms began to find that enthusiastic amateurs were not enough to run the business. IT professionals were introduced to run these areas as they became more complex. Over time, HR, marketing and facilities professionals were also hired into law firms. Partners realised that they did not have the skills or interest to continue to run these areas in bigger environments and understood that their time was more profitably spent on fee earning than trying to figure out how to network computers. 

As non-lawyer professionals came into the legal environment, it was felt that somebody had to manage them. Initially, the model used was that partners – usually ones with an interest in a particular area – were nominated to manage the professionals.

The next stage was the introduction of a managing partner and a management board or executive committee. This was usually made up of lawyers – again, people who were interested in the subject of management rather than necessarily having any skills. Sometimes, non-lawyer professionals were part of these teams or, if not, they reported to them.

As management moved from the partnership as a whole to a committee, partners – particularly as partnerships got larger – became concerned about the oversight of management. Often, the answer to this was the creation of an additional board which acted as trustees of the partners and had an oversight role and strategic responsibilities.

Natural tensions arose in partnerships as they became bigger and more management structures were put in place. A partnership is a very flat structure in which many or most of the partners have an equity stake in the business or an ambition to acquire one.

Management structures in partnerships or LLPs now tend to follow a corporate management structure and the management will usually be similar to the board of directors. However, while a corporate structure will usually mean that the shareholders (equivalent to partners) are either all on the board of directors or are external investors, the partnership model means that the equity stakeholders are in the building and are some of the main financial drivers of the business.

Not surprisingly, many partners are very suspicious of their business adopting a more corporate structure. Partners worry about whether they are being adequately consulted or given enough information, particularly in respect of matters that interest them. In some cases, there is an unwillingness to be managed or to be asked to change. This often creates a tension with management.

Another tension often arises where non-lawyers are in management positions. Many lawyers are reluctant to trust the conduct of their business to non-lawyers, which is why, in many management structures, there are still non-lawyer specialists (finance, IT, HR and others) being supervised by lawyers.

Most of these lawyers do not have specialist qualifications in those areas and are thus unqualified to scrutinise the work of those specialists. There is likely to be particular resentment in circumstances where a non-lawyer is given authority over a partner, is given voting power in respect of the partnership’s business and, in particular, if they have any influence over partners’ compensation. These are some of the reasons why there are still few CEOs or COOs in the legal profession.

However, in the past few years, there appears to have been some changes in the attitude of partners to management. If only because of the enormous threats caused by the recession, many practices have accepted that proper management of the business is essential if the business is not just to prosper but, in some cases, to survive.

Strong and energetic leadership, coupled with adequate consultation and professional support, has generally replaced the regular partnership meetings. But, as a profession, we still have a long way to go and are still reluctant to trust our businesses to professional managers. We must embrace professional managers in all aspects of our businesses and also be willing to appoint non-lawyer CEOs.

Am I right? Do we need more professional managers?

Guy Vincent is a partner and the former managing partner at UK law firm Bircham Dyson Bell (www.bdb-law.co.uk)