Let the Managers Manage and the Lawyers Lawyer
/It's over. Innovation is complete. Access to justice is solved. Non-lawyers can go home now. So sayeth the guild.
A recent American Lawyer article “The Culture of Law: Can Non-Lawyers Successfully Run Law Firms?” discussed the increasing trend of business professionals taking top leadership roles in law firms. The article cites several examples where this has worked well (one is a longtime client of Corcoran Consulting Group). There are other good examples not cited. There are fewer examples where this hasn’t worked well, mostly because the vast majority of law firms haven’t tried putting a business professional in charge. The article goes on to describe the recent ouster of Minter Ellison’s CEO, who is not a lawyer, ostensibly as a result of her inability to fully grasp the loyalty lawyers must give to their clients.
I agree with much of the article. Lawyers own their firms. If they want to manage, it's their prerogative. But the smarter lawyers hire business experts to help, just as clients hire the firm's lawyers for their legal expertise. It’s a longtime trend in Biglaw to hire business professionals with deep domain expertise. Too many, however, are told their expertise is in all cases secondary to any partner’s preferences or whims, which in many law firms are equivalent to sound business decisions not subject to debate. It’s a more recent and skyrocketing trend to actually let the business professionals do their jobs without ill-advised micromanagement. Incorporating sound business practices serves as a catalyst for law firms to provide higher quality, more responsive, and more cost-effective legal services to their clients, all while generating greater profits.
Some don’t see it that way. In my work with law firms all over the world, there’s always at least one partner who believes the firm spends far too much on business professionals when “All we need are a few billing clerks and secretaries.” Other lawyers believe law firms are complex businesses beyond the grasp of many business minds. Hint: they are not. But McKinsey and Ivy league professors will happily accept large fees to restate obvious business maxims that <ahem> others are quite capable of sharing. Still others believe business minds can’t possibly comprehend a lawyer’s overriding obligation to clients and to the justice system.
"William MacNeil, dean of law at Southern Cross University, said the culture of law and the culture of management are incompatible—a fact that non-lawyers fail to recognize. 'They just don’t understand. They do not understand the culture because the managerial culture starts from some notion of utility. How can we maximize our profit and minimize our loss? That’s not the culture of the law. Lawyers have a duty to their clients, but above that, they have an obligation to the courts and the judicial system, and this trumps everything else. Things like quarterly profit, assets, targets, KPIs, all of that culture of management does not accord with this kind of equity and justice model.’”
If we buy his thesis, then we'd all agree lawyers have solved access to justice, client satisfaction, efficiency, and innovation, while forgoing profits. But the exact opposite is true. Law firms, especially Biglaw, are extraordinarily profitable while client demands for innovation often go unheeded. So let’s puncture his thesis.
After years of begging lawyers to change, clients turned to business, and business is delivering. A recent Thomson Reuters report indicated the alternative legal services provider market grew from USD $8 billion in 2015 to $14 billion in 2019, a growth rate more than twice that of Biglaw.
Jordan Furlong laments the lack of innovation by law schools and law firms, reporting that the profession is instead “offering ever-more-elaborate services to ever-fewer people at ever-higher prices, ignoring the growing population with straightforward legal needs but little time or money to address them.”
The Institute for the Advancement of the Legal Profession in its essay “We Must Radically Reconsider Lawyer Licensure and the Bar Exam” acknowledges the inadequacy of law school and bar exams in preparing new lawyers to practice law.
Lawyer and journalist Bob Ambrogi, among others, regularly reports on the staggering numbers of new legal technology providers appearing each year, most of which in one way or another are focused on providing greater client satisfaction by promoting efficiency within law firms. Why aren’t law firms efficient? Because the economic driver of law firm profits is inefficiency.
It’s well-documented that the vast majority of families and small businesses who need a lawyer cannot afford one, creating a colossal justice gap.
Altman Weil has been tracking for some years clients’ perceptions of their law firms’ desire for innovation. Every year the result is the same: Clients do not see law firms taking innovation seriously, with only 3% of clients stating that they believe their law firms are doing all they can. (See Law Firms in Transition 2020, p9.)
The Dean’s refrain above is familiar and predictable. Incumbents in any disrupted market always bleat loudly that new entrants will erode quality and that buyers will be dissatisfied with low-cost alternatives and substitutes. Incumbents sometimes acknowledge client dissatisfaction by making marginal adjustments, such as by lowering some prices, but they eschew opportunities for disruptive innovation. Instead, incumbents declare that only qualified experts can satisfy clients and they then pursue regulatory protections to restrict the free market from allowing competition. But what incumbents in every market ignore is that innovation happens only when dissatisfied buyers are no longer willing to wait for the incumbents to step up. By the time incumbents notice, their market dominance has already eroded.
Thankfully, business minds are trained to hear and heed what buyers of legal services are demanding. It’s a fundamental tenet of business that generating long-term profits is only possible by meeting client needs, and continually adjusting as those needs change. This is confounding to those convinced that business people will only pursue actions that harm clients. Business minds are also quite capable of balancing competing priorities, most of them not linked to the short-term profit model that plagues law firms. Balanced Scorecards and Triple Bottom Line are some notable examples.
While some may feel lawyers are best suited to run law firms because they understand lawyers, the market’s position is that the self-regulated and self-managed legal guild hasn’t fully met its primary obligation to the consumers of legal services. So it’s quite open to allowing others a chance. Notably, buyers don’t need the permission of lawyers or Bar Associations or academics to buy whatever they want from whomever they want in order to address their under-served legal needs.
Circling back to the Minters situation, I wrote about it (here) and I was interviewed by American Lawyer (here). I don’t believe it’s all that complicated. For all the rhetoric, I suspect the CEO was terminated simply for embarrassing a partner. This, along with challenging a partner’s unquestioned authority, is deemed unacceptable in most law firms. But should it be?
Good governance requires a clear definition of roles and responsibilities. Owners decide the vision and the strategy, and assert their will through periodic votes. Managers, whether lawyers or business professionals, as representatives of all owners execute this strategy and tend to operations, making most of the necessary battlefield decisions. Lawyers practice law. And many others support the above in these various pursuits.
An individual lawyer, even a partner, even a really important partner, and especially an owner, should know better than to unilaterally revise firm strategy, shuffle staff priorities, make sweeping pricing decisions, or decide to take on engagements that potentially harm the firm’s reputation, absent consultation with, and approval from, management. This applies whether management consists of lawyers or business professionals. (And anyone using the absurd term “non-lawyers” should stop, at the very least so they can sound like non-idiots.)
The larger point is that business people can and do make fine additions to the c-suite of law firms, whether advising the lawyers how to run the business or actually running the business, whether Bars or academics or partners accept it. It’s important to find the right skill set and temperament. It’s important to properly set and manage expectations. It’s important to measure the effectiveness of such a move on the benefits that will accrue to clients, which will, in turn, benefit the firm. Effectiveness is not measured by what’s most comfortable to partners.
In a competitive market where clients have many choices, bringing on trained business professionals and giving them a louder voice is smart. Of course, it’s no guarantee of success. Likewise, continuing to allow lawyers who aren’t trained in business to run the business is no guarantee of failure, particularly when competing with other law firms doing the same. The greater mistake occurs when lawyers don’t know the difference between effective management and mismanagement because their egos won’t allow them to try a new approach. The market is paying attention and is reacting accordingly. The lawyers who are also paying attention are in a position to secure a significant competitive advantage.
Timothy B. Corcoran is principal of Corcoran Consulting Group, with offices in New York, Charlottesville, and Sydney, and a global client base. He’s a Trustee and Fellow of the College of Law Practice Management, an American Lawyer Research Fellow, a Teaching Fellow at the Australia College of Law, and past president and a member of the Hall of Fame of the Legal Marketing Association. A former CEO, Tim guides law firm and law department leaders through the profitable disruption of outdated business models. Tim can be reached at Tim@BringInTim.com and +1.609.557.7311.
