Updated: Feb 18, 2021
You might be surprised if you knew how often the I get asked about what I think is the best governance structure for a law firm. It seems like many partners are searching for a Silver Bullet as it comes to how to best manage their firm. The mere fact that I get asked so often, is already a clear indication that there is that lingering feeling that law firms are not managed in an optimal way.
So are law firms really poorly managed? Looking at it from a distance the answer should clearly be no. Few businesses succeed in making so much money without investment as law firms do. Delivering such high yield, law firms must clearly be doing something right.
Looking at it more closely, it turns out that there is much room for improvement. Law firms have largely become successful ‘despite’ their management instead of ‘thanks to’ their management. The legal market has been so buoyant for the past decades, that it is almost impossible NOT to make more money than the average university graduate with the same years of experience.
The ‘Herding Cats’ Myth
“Managing a Law Firm is like Herding Cats” as the saying goes. This popular ‘wisdom’ can be heard being used ad nauseam by Managing Partners (especially former Managing Partners) and Law Firm Consultants. In effect it has become used so often that people have started to believe it is true. Well, it is not. It is just a lousy excuse for poor management. (Former) Managing Partners use it to justify why they have achieved so little, and consultants use it to sell their services and also to explain why they didn’t contribute much.
The road to better management starts with denouncing the ‘Herding Cats’ myth. Effective Law Firm Management is absolutely possible (and necessary!).
Many Law Firms are ‘Managed by Fear’
When I say law firms are 'managed by fear', I certainly do not mean the fear of brutal and unpredictable leadership. It is not that Managing Partners are managing their firm like Joseph Stalin used to rule Russia. On the contrary: it is not the partners that fear the Managing Partner, it is the Managing Partner who fears the partners.
Managing Partners commonly fear falling out with the powerful partners in the firm. Their fear is that when they rub partners up the wrong way, powerful partners will either call for the Managing Partner to step down, or might themselves take their book of business and leave the firm. This in turn could cause the other partners to demand the Managing Partner to step down and ultimately even be asked to leave the firm.
Permanent subconscious fear of being demoted can prevent Managing Partners from effectively leading their firm. They become expensive caretakers instead.
Perhaps Jack Welch (1935-2020), the legendary former CEO of General Electric can be considered the architype of a boss. Mr Welsh was a notorious micro-manager. He famously said: “I’ve managed a lot of people, and one thing I have found is that the staff was more productive and attuned to how and what we needed to get done when I was closely involved with them”.
Being lawyers, many Managing Partners feel the same and they resort to micro-management. Driven by the fear of being held responsible for mistakes that are made elsewhere in the firm, and at the same time being convinced like Jack Welch that others will greatly benefit from their insights and infinite wisdom, some Managing Partners put a disproportionate amount of time and energy in micro-managing every aspect of the firm: marketing, HR, IT, knowledge management, you name it, the MP knows best.
Having a Managing Partner, who is by definition a career lawyer, micro-manage the firm is a poor use of resources. On top of that, all the time, effort and energy spent by a Managing Partner on micro-management, can not be spent on leading the firm to a better future. Micro-management is often a form of escapism, and an excuse for not leaving the firm in a better position at the end of the tenure.
Many lawyers make a lot of money almost by accident. Partner incomes North of Half-a-Million are the rule, rather than the exception. It does not look like this is going to change anytime soon. The business of law will remain extremely profitable for the foreseeable future.
It is not that law firms are not doing well; they are not doing well enough. Those who cannot keep up, are bound to spiral downward. There is an urgency to do better in order to attract, grow and keep talent. In the world of big law, there is a race to the top. The income gap and the gap in quality of clients and mandates between the firms who succeed and those who don’t will increase. To have a living chance of surviving this race to the top, a firm needs a leader and not a caretaker.
An Iron Fist in a Velvet Glove
Coming back now to the initial question: “what do you think is the best governance structure for a law firm Jaap?” It will come as no surprise that the answer will be “it depends”. That is not because I am a lawyer, but because effectively it does not matter whether a firm has just one Managing Partner, or a Managing Partner and a Senior Partner, a Managing Partner and a Board, or an Executive Committee. The only thing that does matter is ‘Leadership’: Is the management capable to effectively lead the firm?
Leadership implies the capability to overcome resistance-to-change among the partners. Leadership entails the courage to face the possibility of strong opposition, to press ahead with the strategy while keeping the partnership together. Leadership means focus on the things that really matter and not shying away from ‘fighting’ with powerful partners if needed. An effective Managing Partner should be an 'Iron Fist in a Velvet Glove' and not a ‘Push-Over-Pussy’ hesitant to take the lead.
I am fully aware that there is much more to be said on this topic and that for the sake of clarity I have had to skip some nuance to get my point across. I will elaborate more on the topic in the weeks to come. Don’t want to wait?, drop me an email and we can discuss what is appropriate in your specific situation.