As law firms evolve to address a constantly changing business environment, Andy Matthews explains why they are contemplating recruiting top managers from outside the legal profession




As leadership of law firms becomes more important, the question of who will be doing the leading becomes more intriguing. Partners are ready to embrace new ideas and appear – according to our research – more likely to accept external leadership.



Partnership structures are being reinvented to meet the demands of a new competitive world. The comparison is not entirely fair, but the running of some partnerships resembles the running of a football club when a director of football is brought in to work with the manager.



Confusion can reign and compromise can set in. There are too many ideas, too many voices and too little action. Compromise in lots of cases is, of course, a good thing, but in partnerships it can breed delay and indecision. The changing nature of the competitive legal world knows no place for delay and indecision. For any firm to thrive there must be an accountable sense of immediate leadership.



Historically, lawyers moving into partnership have expected the ownership deal to include, automatically, a large say in the firm’s strategy and plans. This expectation has changed in the larger firms, although of course there are partnership votes on matters of great importance. But it has to change in all firms for them to be able to compete and obtain an advantage.



A good managing partner will be able to involve all the partners and keep them engaged and informed. He or she will rely on and learn from their wisdom and experience. There must, though, be an obvious proactive and effective chain of command and decision-making.



A managing partner may have a committee to assist, report to or keep him or her in check, but there should be no doubt as to the job description, the importance of creating a vision and being authorised to implement all plans. Equity partners in a firm of any size will become more like shareholders of a ‘normal’ company. They own a part of the business, they get a return on capital, a salary for their job and a bonus for good performance and the risk element.



The management team is ultimately answerable to them, but the shareholders will not necessarily expect an input into the general management. The current downside is that, unlike shareholders, there is – in most cases – no ability to enjoy capital appreciation. This is why the notional salary/profit share is so much higher in most firms than the actual delivery of the job that the partner is doing is worth. Otherwise a greater proportion of remuneration would be merit-based. You make your money when you are there and not on any sale.



But with all this talk of the corporate world, there is an undoubted change in the way firms are looking at their management. It is common practice in companies for the chief executive to move on after a few years and take their experience elsewhere. It is certainly true of marketing and IT directors. And it would appear it is becoming more common in the world of chief executives and managing partners of law firms. It is an entirely logical course for the profession to take.



We are coming across firms which for the first time, and sometimes quite urgently, are looking for leadership from outside their firm. More managing partners and chief executives will move firms. From the individual’s point of view, they will undoubtedly feel a great loyalty to the firm they have been at and a great pull of association with their partners. But they may also realise that it is not a job that makes sense for them to do forever and their input at a new firm could be invigorating.



The average age of managing partners appears to be getting younger. As a result, it may well be that when they stop &150; maybe because their term is up or because they believe new blood is required &150; returning to a position as a fee-earning partner in the same firm may not appeal. They believe their return may be awkward for the new person in charge and they may want a new challenge.



We are also seeing firms contemplating taking on leaders from outside the profession. There have been some highly successful examples of this over the years – usually from accountancy – but there is definitely a growing trend to look at proven leaders from elsewhere.



It is an attractive job. A recent case in which we have been involved has seen leaders from other businesses approached to fill a job as chief executive of a successful law firm. The initial surprise at the approach turned into genuine excitement as they found out more about the role.



Some will always say that only a lawyer could manage a law firm. I do not agree. If there is a lawyer who is of sufficient vision and charisma, then that is great and could well be the best option. But a proven leader from elsewhere will arguably be a better bet than a reluctant or inadequate lawyer.



And in any event, how many lawyers want to take up the role?



We recently surveyed lawyers across firms of different sizes in the East Midlands. Some 62% of partners said they could not conceive of wanting a management role at the expense of fee-earning, and 85% of the associates did not think they would want to take on in the future a managerial role at the expense of fee-earning. More relevant still, 100% of partners surveyed and 93% of associates were entirely comfortable with the idea of non-lawyer managers becoming shareholders in the business when appropriate.



It seems there is an understanding that the profession is moving into a fluid and changing time. Managing partners moving elsewhere at the end of their term rather than returning to the fee-earning ranks is just one example of the effect this rapidly changing world may have on the partnership structure.



Andy Matthews is co-founder of legal consultancy V Formation