Change #2: Treat your business like a business

Many law firms are now globe-spanning, billion-dollar a year enterprises. This presents a sophisticated management challenge. Heck, even a $10-million/year firm has a respectable client base that has come to rely on it, not to mention providing all or a substantial component of the support to dozens of families. Treat it as the complex and dynamic organization it is.

Floating around in the management literature (I’ve tried to find the source but can’t) is a rule of thuimb that the complexity of managing a professional service firm is something on the order of 5X that of a conventional company in (say), retail or wholesale trade, manufacturing or construction or transportation.  If you believe that’s at least directionally correct (I do), then your $10-million/year law firm presents challenges equivalent to (say) a $50-million/year retail chain, and running a $1-billion/year law firm requires as much sophistication and expertise as running a $5-billion/year general economy business. (For perspective, Xerox is about a $20-billion/year business, and Hollywood ticket revenue is just over $10-billion/year.)

We can debate (and I invite readers to do so among yourselves) whether the proper multiple is 5X, 3X, 7X, or some other number, but what matters is something I think we can all agree on: It’s >1X.

Don’t shortchange what this requires.

To begin with, take a sober second look at whether you as Managing Partner can maintain a serious, active practice caseload and manage the firm.  Your primary job is now management, not practicing. In what other industry with similar-sized enterprises is management pitching in on the assembly line as well?

Specifically, it requires accomplished senior-level people running the business side. I’m referring to specifically to your “C-Suite:” The firm’s COO, CFO, CIO, CMO, head of HR, and maybe more.

If you or your partners think of these executives as “non-lawyers,” stop reading. Not only is that demeaning to them, it reveals a fallacious and unattractive sense of superiority. For reasons that escape me but appear to be effectively widespread, lawyers are inclined to assume they can do anyone else’s job but no one else could possibly do what they do.

Stated that way, it sounds absurd, no? But admit it: The thought has crossed your mind. Exterminate it.

Because if you don’t, it becomes a self-fulfilling prophecy. Your firm (say) thinks the IT function is being handled if the network stays up and you can find your documents again where you saved them, so hires the most inexpensive IT leader you can find who exhibits baseline competence. Don’t then complain if a competitor firm turns out to have far more robust and fluid collaboration tools, which clients enjoy the benefits of and come to appreciate.

Too many staffers are lapsed lawyers with little in the way of credentials (the JD does not count) or expertise in their functional areas. Partners are reassured by staffers having  JDs? Wrong question. The question must be what the individual brings to serve the business needs of the firm.

Historically, perhaps the saddest example—with dashed expectations and “I told you so’s” flying in all directions—has been the marketing function.  Not so very long ago, marketing (or “Business Development,” as it was often revealingly labeled) was too frequently staffed by junior people innocently promoted into roles they had no training for and whose job functions, truth be told, were largely those of advanced PowerPoint jockeys and party planners.

And what happened?  When partners called on “marketing,” nothing remotely transformative or strategic could possibly occur. When marketing failed to move any visible needles, partners condemned the marketing function as ineffective, which justified cutting spending, ensuring the firm could only hire the more of the greenest and least capable junior people, launching another round of marketing disappointments, and you get the idea.

That this is changing is the good news; that it ever happened to begin with teaches a lesson we’d best not forget.

Treat your business like a business.