III. Building a Top-drawer, Sophisticated “C-suite” of Non-Lawyer Executives—and Giving Them Real Power and Autonomy
Of all three “leading indicators” I’ve discussed in this column, this may be the one which bodes well to create the most energetic pitched battle pitting lawyers’ perception of their role in their firms against the way sophisticated enterprises everywhere else in the economy operate.
I’m recommending here that you recruit individuals at the top of their respective games for every one of your important executive functions, including at least your chief officers of:
- operations
- finance
- strategy
- marketing
- technology;and, if you’re serious about building offensive competitive advantage and not merely playing defense, also powerful heads of
- talent recruitment and professional development
- pricing, and
- business process optimization.
If you’re patting yourself on the back because your firm finally hired a “real” CFO with a CPA degree and a background in professional services—to replace the comptroller who had risen through the ranks from the accounts receivable desk—then I would applaud your taking a step in the right direction, but you’re still on your own 20-yard line. Prepare for a long drive on the ground and through the air. You can get there, but some people on your team may endure hard hits on the way.
I’m talking about a C-suite commitment of a different order of magnitude. I’m really talking about stealing a page from the corporate world, and purposefully going on a mission to recruit—and pay, as in top of market—the most experienced, sophisticated, and capable CXO’s you can find. Take them from where you find them; if you limit your search to LawLand, you might as well limit your search to left-handed candidates with birthdays in June. You just cleaved away 98% of the talent pool.
Second (again), be prepared to, and do, pay them what they’re worth. You may in fact have to pay them a bit more in ordinary income than strict “comparables” would indicate, since you can’t offer stock options.
Finally—and this is where you need to be prepared for a sustained autoimmune rejection response from your own organization in the form of your partners—give them real power and autonomy. Do not under any circumstances let them be second-guessed. Leave them alone to do what they do best. “Manage” them, yes, and have high expectations for their performance—I’m not suggesting otherwise—but don’t permit anyone at the firm (most particularly including the gorillas—see installment #1 of this) to micromanage, undercut, double-deal, subvert, sabotage, or second-guess them.
Why is this important?
Would you permit your C-suite stars to second-guess the way your partners handle their litigation and transactional matters? If you answer that in the way I expect (NFW, or words to that effect), then you know why reciprocal respect and autonomy is important. Let lawyers lawyer, let business people run the business.
A larger issue is afoot here.
Thanks for another thoughtful, and thought-provoking article.
Your closing perspective is what gets me. Some of the paths to improvement seem well-defined; upgrading and empowering the c-suite, for example, would seem to be a relatively quick way to get a leg up on the competition. I understand that for many it won’t be “quick and painless.”
But as someone who competes mostly against BigLaw firms, the slower the better.
Bob and all:
“Quick and painless” is surely the American Disease, at least in our time. I am sure it is not part of ASE’s advice, and it seems solidly counter to most thinking of the Enlightenment that I know, so I imagine Adam Smith, himself, would have found the idea risible in any significant situation.
If lawyers were so smart at running businesses, then no Biglaw firm would ever fail.
May I quote you on that? 😉
Seriously, it is rather an accomplishment to drive a business with intrinsic gross margins of 30-50% right into the ground.
You’re welcome to quote me, though the thought (if not the exact wording) has probably crossed the mind of the management of every large business that’s seen one of its law firms close its doors.
One of the other mysteries about law firms closing is that, compared to their clients, they don’t require much capital investment. General Mills, for example, has 41,000 employees and about $23 billion of assets at balance sheet values, or about $560,000 of assets per employee. Apple Computer has 80,000 employees and $207 billion in assets, or about $2.5 million in assets per employee. By contrast, K&L Gates has about $500 million in assets (including my estimate of the firm’s A/R based on its public financial reporting) and 2,200 lawyers and legal professionals, for assets of about $230,000 per legal professional. As the reported headcount doesn’t include other support staff and administration, K&L’s assets per employee is likely around $100,000 to $125,000. It’s a lot harder to go out of business if you don’t have to sink much money into it.