Law firms originated simply enough. Two or three lawyers associated with each other, gaining benefit from the alliance. As each attorney’s client base grew, additional lawyers were hired.
Fast forward to the present. Law firms are now complex, multimillion-dollar enterprises. Local firms grew into regional firms, regional firms into national firms, and national firms into global firms. Today, AmLaw 100 firms average $500 million in annual revenues. That’s no typo.
So, too, has the world’s complexity increased. Clients grew and went global. Technology and society evolved. Cases and deals became more sophisticated. Infrastructure and work flow spread across offices and cultures. The challenges today’s law firm leaders face are mounting.
Current Operational Models
What hasn’t changed much is the way law firms are structured. The top three operational constructs are:
The Managing Partner. Whether led by a benevolent monarch or a tyrannical dictator, most firms delegate the firm’s operations to a single, elected partner. The prerequisites for the position are generally three: (1) survival into partnership; (2) best-suited candidate given the pool of available talent; and (3) willingness to assume the role.
Most managing partners work with an administrative lead to accomplish the day-to-day functions. Depending on the managing partner’s leadership prowess, this administrator’s role ranges from functionary to operational leader.
The Wrapped Managing Partner. This leader is also selected from within based on the criteria noted above. The difference is they work with an advisory group — an executive committee, board of directors, practice group heads, etc. Daily duties are delegated to administrative personnel and the larger operational and strategic functions are shared by the MP and the advisory group.
The Corporate Facsimile. The firm elects a CEO or president, as well as a board of directors. In form, this looks and sounds like a “professionally managed” enterprise with the various administrative personnel receiving corporate-sounding titles like “director.” The executives and managers are charged with running the firm, reporting to and gathering direction from the board on a periodic basis.
The Last Mile
These constructs fail to maximize the firm’s strategic and operational opportunities for several reasons. First, the leader almost without fail continues to practice law, a huge distraction. Second, the leader is selected internally, ignoring the wider external talent pool. Third, the firm “poaches” from its own personnel and revenue-generating resources, cuckolding itself through reallocation.
As reported elsewhere, Peter Kalis, chairman and global managing partner at K&L Gates, believes law-firm leadership will truly evolve when law firms “look outside their own four walls” for their leaders. Regardless of title, law firms must: (1) look outside the firm for professional executive talent, and (2) delegate to them sufficient authority to manage the multimillion-dollar enterprise they’ve been selected to head.
The Uphill Battle
The need for focused professional management guiding a multimillion-dollar enterprise is self-evident. Yet, why do law firms continue to shy away from this fact?
Practice Group Orientation. As noted at the outset, law firms evolved as associated practices. That is, individuals focused on their own practices for growth. Other organizations tend to organize around a central vision — to make a widget or provide a specific type of service. This lack of centralized vision impedes effective delegation.
Advisors versus Executors. Lawyers are contingency planners by trade; we dispense advice for a living. Developing and executing a centralized vision requires assuming a fair amount of risk for the reward. Lawyers much prefer the conceptual discussion of vision to the difficult path associated with realizing one.
Egalitarian Ownership Principles. Partners in law firms are owners. Even in bifurcated partnership models, a large pool of individuals are “equity” partners — owners by a different name. Because they are all owners, they view interjecting their opinion as not only an obligation, but a right to be accorded due respect. Numerous decentralized opinions are difficult to reconcile.
These factors regularly accomplish one result: We constantly get in our leaders’ way. Though educated, astute and driven individuals, we are our own worst enemies when it comes to running our firms. Think not? Answer this question:
What advice would you give a multimillion-dollar client designing a leadership structure for its organization? Few would recommend the modern law firm model!
Necessity, the Mother
A number of changes loom on the horizon that will assist our departure from the status quo. First, the workforce is changing. The Millennial Generation is entering the practice of law with a different set of goals and aspirations. Many don’t view success as gaining partnership or making large incomes.
Second, portability technology is driving employers in all industries to view productivity as the central theme, versus physicality. Workers are no longer getting points just for showing up.
Third, the ever-expanding global economy requires more time and focus to understand. Leaders cannot be distracted by a personal client base if they want to track the evolving competitive landscape.
Though not a complete list, these factors will rapidly shift how law firms view their businesses. What course are they likely to take?
Possible Constructs
From 10,000 feet, these are good guesses for how future law firms will operate:
Business as Usual. Most will resist the change. It goes against a lawyer’s genetic grain to abdicate control. Moreover, as slaves to the billable hour, we shun the thought of a leader who doesn’t carry a production quota.
These firms will survive, making a fair income and maintaining a modest market share. This form is fundamentally a hunter-gatherer style of existence. The downside is the short-term, practice-group-centric, egalitarian ownership model runs contrary to building an institutionalized business and client base.
“Corporatization.” Some firms will move to this model. It’s already begun, with true CEOs being hired from outside the firm without a book of business. Marketing directors are getting traction with their constituency, a hard-fought battle. Further perspective shifts are required for partners to understand that letting professional managers do what they do best, while the lawyers do what they do best, is, in fact, the best for all. Namely, owners must elect their leaders, then get out of their way.
This operational structure also marries well to the corporate client’s, creating stronger ties between the organizations. Expanded opportunities will be identified and more strategic thinking applied to the development of the firm as an enterprise under this guise.
Professional Sports Franchise. What about mimicking a professional baseball team’s model? What if our “talent” was both highly paid and highly visible? What if we gathered together the best coaches and managers to support them? What if we found the best executives to strategize and position the organization? What if we viewed the practice of law as a game, instead of a battlefield?
The downside? Most professional sports franchises have very, very few owners. But, then again, that might just fit the change agents already on their way. It’s worth consideration.
The Destination
The rate of organizational change in the legal industry has been accelerating for years. There’s no sign it’s going to slow. Whether firms maintain the status quo, mirror their corporate clients or find new ways to operate is unclear. What is clear is the opportunity to evolve is currently upon us.
Paul Burton is a former corporate finance attorney with an extensive background in professional and organizational development. His firm, Vision Mechanix, works exclusively with lawyers and law firms, providing clients consulting, training and coaching in the areas of business development, leadership/management and productivity. He can be reached at paul@visionmechanix.com. © 2007 Vision Mechanix, LLC.
