This article is by Janet Stanton, Partner, Adam Smith, Esq.:
“Non-lawyers.” This is the prevailing term for business professionals employed at law firms. Really? Let’s just start with the fact that it’s insulting to be defined by what you are not. (Thought experiment: How many “non-doctors” work at a hospital?)
Hard feelings aside, there are some hard-nosed reasons why firms should seek out, respect, engage with, listen to, and heed the counsel of high-quality business talent. We’ll start with those reasons, then address some of the expected pushbacks and, finally, provide some suggestions on how to make this happen.
First, a little background. It has been widely and accurately reported that Law Land is increasingly divided into the “haves” and “have nots” (or, more accurately, the “have less”); in every segment of the legal industry roughly 10% of firms are pulling ahead of their peers in terms of financial performance. Each year since the great recession, the chasm widens; the rich are getting richer. So, as diligent students of the industry, we asked ourselves “do these firms share common characteristics?” The short answer is, “yes” when compared to their less-successful brethren. The topline difference is that these strong performing firms are run in a more business-like manner, adopting and instituting approaches that have been SOP in Corporate Land for decades. In short, these firms are managed the same way clients manage their businesses.
What do we mean by “more business-like?” We’re talking about being more intentional, directed and strategic (as opposed to “opportunistic”). Developing a plan that is market-responsive and data-driven that includes goals (financial and otherwise), strategies and an action plan (with timing and responsibilities). Executing the plan with discipline; holding those responsible for elements of implementation accountable for their results. Regularly monitoring the plan’s progress and making mid-course corrections, as necessary. And (bottom line), recognizing performance in comp.
Other shared characteristics of these higher performing firms are decisive and visionary leadership and carving out a distinctive, compelling market position. And, last but far from least, the leading firms hire and heed sophisticated business professionals, starting with a savvy COO or Executive Director. But that is not enough. Firms need qualified expertise in marketing and business development, finance, recruitment and development, technology and operations.
The very simple rationale for this is – let the lawyers do what they do best, which is lawyering – and bring in similarly-credentialed professionals to lead and manage the business aspects of the firm. Seems to make sense.
I’m not quite sure why firms are so resistant or why this is such a difficult concept for many lawyers to grasp.
I have some thoughts on this.
First off, there is lawyer “psychology” which, it turns out is a real phenomenon. In rigorous, quantitative work done by Dr. Larry Richard, recognized as the leading authority on lawyer psychology, assessing the personality traits of thousands of white collar workers, lawyers, on average evince a much (much) higher desire for “autonomy,” which pretty much means they don’t like to be managed. All I can say is that in today’s hyper-competitive world is: Get over it!
According to McKinsey, managing professional services firms is five times more challenging to run than other types of enterprises such as, say, retail. This means that a $200 million firm is as difficult to manage as a $1-billion retail chain. I’d say that’s kind of daunting and you might think of bringing in some people who know something besides the practice of law and possess credentials other than a JD.
Second, it is a pretty well-recognized trope that lawyers appear to think they can do anything. My hypothesis here is that, generally speaking, lawyers don’t respect much except the practice of law. May sound harsh, but how else to explain the frequency of “JDs” in marketing, HR and development; where, let me state the obvious: a JD is completely irrelevant. (IT is the main exception; guess lawyers realize they have some limitations.)
We’ve also heard from firms that hiring capable business professionals would be too costly. This is often code for, “this would come out of partners comp and we don’t want to do that.” Frankly, many firms are cash machines and partners are generally very well compensated. So, a relatively small haircut in comp is truly a small price to pay for a much more well-run firm. Moreover, with lawyers billing more hours, the investment would have less impact on the firm’s bottom line; perhaps not investment-neutral, but likely not too far off.
We can also look to Corporate Land for support for a more heterogeneously credentialed management team. Corporations are run by those from a wide variety of specializations; Marketing, Engineering, Sales, R&D, Manufacturing, Finance, IT, HR, Operations (and, yes, Legal), etc. These are the groups and individuals necessary to run key components of their enterprises. Marketers don’t presume they know Manufacturing better than experts in manufacturing. Nor do sales folks decide they’ll run Operations. So, when you think about it that way…..
At most law firms, business professionals are treated as 2nd-class citizens. Don’t even try to deny this; we see and hear of this all the time; at firms of all sizes around the world. Sure, there are a (precious) few firms where this is not the case, and there are rare exceptions for certain individuals – but by-and-large lawyers and “staff” cohabitate in an “upstairs/downstairs” world. (Given truth serum, most of you would agree.)
This as any right-thinking person might imagine has a devastating effect on the business professionals and their potential to make meaningful contributions to the firm. The talented ones often leave (frequently to other, more-welcoming industries). The ones who hang in there, are often so-so performers (providing lawyers with a self-fulfilling prophesy that “X” department isn’t very good). The talented ones who stay are often beleaguered; they have great ideas and business acumen which are many times ignored or dismissed. This strikes us as wrong on so many levels – personally and professionally; it’s just bad business as well as disheartening.
So, how can a firm redress this? The place to start is to assess the capabilities and contributions from the “business” side of the firm – and how well they support the goals and distinctions of your firm. You can do this yourself, but again it might be better to engage with those who have experience in this area with a broad perspective of general practices in Law Land (and beyond) that may provide better guidance for your firm. (Not to be coy; but yes, we have provided these services to a wide variety of firms.)
It (should) go without saying that firms should be as discerning about, and as supportive of their business professionals as they are for their lawyers. Not just any jamoke with a CPA is going to be able to run your finance operations efficiently, offer nuanced guidance on fiscal issues and keep themselves and the firm proactively abreast of the latest developments (and “watch-outs”). Professional development is as important for business folks as it is for lawyers. In senior C-suite positions, you want folks with the same boardroom-level gravitas as your most senior partners.
A few other thoughts…
Consider looking beyond Law Land; there’s much to be learned from Corporate Land in terms of strategy, innovation and efficiency. People with experience in other industries can be enormously valuable to law firms.
Let these folks do their jobs without lawyers looking over their shoulders. If you have a strong Chief Marketing Officer, let him or her develop and implement the firm’s overall marketing strategy and plan, with, of course inputs from the firm’s lawyer management and key partners. Don’t let that person be second-guessed by a rogue partner who thinks, “I know better.” You get the idea.
Law firms have a couple of disadvantages in attracting and retaining top-flight business talent. A big one is the inability to offer stock or stock options. You could, of course, offer profit sharing. It’s not quite the same, but we’re not aware of firms that do this and it would help bind those folks to the firm and underscore their value and contributions to the firm.
And, remember where we started – having an accomplished C-suite is a hallmark of the firms that are consistently performing better than others. When you think about it, it’s not really surprising.
And, never ever use the term “non-lawyer” again.