Law firm management

September 26, 2016

4541Historically, the management of most law firm had surprisingly little to do with what is really the primary business of the firm: the timely and effective delivery of high quality and valuable legal services to clients.  As law firms grew from relatively small enterprises of a few partners and associates to somewhat larger organizations with professional staffs, most found it useful to designate one of their partners as a part-time Administrative Partner. The functions of such an Administrative Partner were largely logistical—seeing to the needs of the firm for office space, secretaries, library resources, basic bookkeeping, etc. The job had almost nothing to do with the practices in which the firm was engaged, the clients that the firm served, or the ways in which legal services were delivered.

As firms grew, the functions of the Administrative Partner were often expanded to include supervision of the non-legal staff, financial planning and budgeting, technology and infrastructure planning, and a variety of other “ministerial” functions. Still, however, firm management had very little to do with the activities of lawyers in their practices. Even when Administrative Partners evolved into full-time Managing Partners and Management Committees were created to assist in running the administrative side of firms, there was only limited nexus between the activities of the firm’s central management and the real work of its lawyers.

This illogical split has begun to disappear in recent years as more and more firms—responding to the dramatic changes that have occurred in the U.S. legal market—have realized the need for strategic focus and have come to view practice management as the essential mechanism for implementing their strategic objectives. As a consequence, at least in larger firms, there has evolved a close alignment of central management with the operation of the firms’ primary business units: their practice groups.

Firm management now typically appoints and exercises oversight for practice group leaders, reviews and approves practice group business plans, relies on practice leaders for input in advancement and compensation decisions, and depends on practice groups for implementation of essential elements of firm strategic objectives. In short, in many firms today, practice management is an integral part of the overall management function, and practice groups are the primary vehicles through with the firms are positioning themselves in the market.

At the same time that law firms have become more focused on practice management, the governance and management structures of firms have become more centralized and more corporate in their look and Gutterman WLEC bannerfeel. Today, key strategic and management decisions tend to be concentrated in relatively few hands. Persons holding jobs as “Managing Partners” or “Chairs” of their firms increasingly function like CEOs; Policy or Management Committees increasingly function like corporate boards of directors; and the number and range of decisions reserved for action by the full partnership have been reduced considerably.  Additionally, law firms now routinely hire experienced non-lawyers in a variety of key management positions—from Executive Director (or COO) to CFO and from CIO to Director of Human Resources.   These non-lawyers are increasingly being vested with authority to manage the affairs of the firm—including, in many important ways, the activities of the lawyers themselves. Moreover, senior non-lawyers are now often included as full voting members of Management or Policy Committees. In short, law firms increasingly look and function like the significant and complex businesses that they are.

Law firm management has long since blossomed beyond being the orphaned after–thought of busy lawyers and a task assigned to lawyers perceived as lacking business generation skills. It is now clearer than ever that a competitive marketplace, and a turbulent overall economic climate, demands careful planning and deliberate action by law firm leadership.  This is certainly true for those law firms that have grown to become complex, sprawling global organizations; however, skills for law firm management are essential for leaders of smaller law firms also.  In fact, statistics compiled by the American Bar Association indicate that approximately 70% of attorneys in the private sector practice in firms with 20 or fewer attorneys and these attorneys and their firms have consistently been ignored in conversations regarding the development and implementation of effective management practices.

Business Transactions Solution was recently updated to include a new chapter on Law Firm Management (§§4:1 et seq.) that discusses the basic business skills that law firm leaders must have in order to successfully guide their firms including an understanding of effective management and leadership styles and practices, strategic planning techniques, organizational design concepts, organizational culture and technology management.  In addition, the chapter also covers a number of the core functions and activities of law firms including operations policies and governance, practice management and support, human resources, finance and accounting, facilities and equipment, supplies, compensation, professional development and training, marketing, risk management and insurance, information technology, office systems and procedures, ancillary businesses and pro bono activities. The chapter also includes checklists for formulating and implementing a law firm strategic plan, duties of law firm executive team members, steps in marketing strategy process, positioning in professional services, marketing roles and activities, topics for law firm marketing training programs and elements of an effective law firm risk management program; a slide deck presentation on leading the small law firm prepared to be used for law firm training purposes; and a selection of articles on various topics relating to law firm management.  A fuller discussion of many of the topics mentioned above can also be found in various chapters of A. Gutterman (Ed.), Hildebrandt Handbook of Law Firm Management (Eagan, MN: Thomson Reuters), §§1:1 et seq.

Titles by Alan Gutterman