The increasing competition and commercial pressures firms face mean that management must now be seen as valuable to a practice’s success as earning fees, write Alastair Moyes and David Monk




There is a lot of management theory written and discussed about law firms’ partnership structure. Practically speaking, the usual reaction for busy partners is ‘I haven’t got time’.



Management issues tend not to be a high priority until they become a problem. They can then be summed up by the American economist Thomas Sowell’s phrase, ‘Most problems do not get solved. They get superseded by other concerns’.



The partnership structure of some firms, particularly those with 10 to 60 people, is often a hindrance to progress and only an asset to a few. It encourages a ‘fire-fighting’ style of management that perpetuates a disorganised approach and does little to reassure staff about the future.



Management tasks almost always lose out to fee-earning duties. This drift to fee-earning satisfies two of the three roles a partner has in a firm. Essentially, partners wear three hats: investors and part-owners; management or board directors; and senior fee-earners or department heads.



The strong historic idea of a group of self-employed individuals working together as a collective practice supports this position because earning fees is felt to be contributing to profits and achieving their own return on investment. This has been a successful business model in the past, but the increasing competition and commercial pressure on firms mean that management must now be seen as a valuable and important element.



In the future, clarity of planning, communication of vision, and speed in decision-making will be as important if not more valuable than the quality of legal minds and services.



The time-allocation problem is the most often cited reason why non-legal management problems are not fully addressed. As a general example, we have found that many firms have not fully implemented their costly IT systems. Once the PCs are on the desks and the fee-earners and staff have started using them without too many complaints, all the other potential benefits seem to be forgotten.



Management reporting, marketing management systems, database developments and the other benefits of using integrated IT systems never quite fulfil their promised value. This is indicative of how the management is lacking the drive to understand the business it works for. These systems provide the necessary insight into the business management of the firm and often highlight areas of strength or weakness that can significantly change profits.



It is understandable that small and medium-sized firms have not found management be to an issue. The reasons include: the historical rules still persist in spirit; some areas of work are still monopolies; and clients return to the same firms through lack of perceived open choice.



There are cosy relationships with local referrers of business and the fact that many firms are trading on the previous good name generated by the current partner’s predecessors. New competitors entering the market threaten this settled position.



Due to the nature of a partnership structure, the drive required to fully complete management development projects of all types fades as the conflict between the three ‘hats’ partners wear and how they prioritise their time eventually draws them back to fee-earner duties. However inspired and supported a senior or managing partner may be, as a full-time lawyer they cannot allocate enough time to managing their business to the extent required. Practice managers may alleviate some of the implementation pressure. However, as a manager, they need to be lead by the partners and this requires a time commitment.



In other businesses of a similar type and size, management is seen as central to a profitable organisation of high value and an essential, multi-disciplinary, full-time role.



For many of the larger law firms (roughly more than 200 people), normal commercial management is already in place. From a practical point of view, however, few small and medium sized firms can afford full-time (that is, non fee-earning) partner management. A balance must therefore be found to provide the time, experience and commitment to deliver the leadership required.



The titles are already well used – senior partner, managing partner, finance partner, marketing partner, IT partner, staff and personnel partner. What is missing is the allocated time and perceived value of the non-fee earning work that these titles suggest.



The most troublesome part is the commitment required from the partners not taking part in executive management duties. They must cede their management responsibilities to a ‘board of directors’ and exercise their influence only as an owner or as an employee.



Also, all partners must agree that a significant percentage of the time of the ‘directors’ must be credited to them as if it were fee-earning. As a minimum we would suggest a 10-20% reduction in fee-earning targets per ‘board director’. This would represent a half to a full day per week dedicated to management issues.



If the firm you work for has already implemented a management system of this kind, you are in a good position to prosper in more competitive times. Many firms have the structures and titles, but have not gained the full commitment of all concerned and therefore gain little from it.



An important issue that partnerships must address is how to retain the benefits of the partnership structure while using efficient and effective management techniques that do deliver the leadership and change that firms require. Clear responsibilities via a management board that can act for the best interest of the firm while not having to spend valuable time persuading all the partnership is possibly the only answer.



Other business types do not have the problem of the owner/manager/worker issue and solicitors planning for a successful future should learn from those management examples. Three hats on the same head do not work well. Choose the hat that best fits you and stick with it.



Alastair Moyes and David Monk of Marketlaw are writing a book on marketing in the new legal services market. It will be published by Law Society Publishing in 2008