Challenges in the economy have cast a spotlight on
the need for proper management in law firms, writes Bronwyn Pott, and it's
unlikely to come from the managing partner.
Poor cash flow, dwindling work
and associated redundancies have placed a heavy strain on the legal profession in
the last 12 months.
Now, more than ever, it is imperative for lawyers to recognise that
law firms are businesses which need professional management to survive and
thrive.
Unfortunately, within many smaller firms the myth persists that a
managing partner is a kind of super-being whose schedule has a magical
elasticity to accommodate both client work and practice management.
In fact, most partners are already overloaded - juggling doing and
supervising client work, running teams, mentoring junior staff, attending
partner meetings, marketing, administration and their own continuing education.
At the same time the complexity of practice management is now
greater than ever. Whoever manages the practice is responsible for finance, IT,
HR, marketing, compliance and administration, as well as ensuring that staff
members are engaged, teams are functioning and, most importantly, the practice is
profitable. These multiple roles require specialised education, skills and
experience that lawyers by and large do not have.
Unfortunately lawyers can find it difficult to recognise that merely
owning the business does not automatically qualify them to run every aspect of
it. Companies learnt to separate decision-making from business owners 200 years
ago when the first corporate boards were established. Lawyers need to realise
that they will see an improvement in their quality of life - as well as their
financial position - if they do the same.
It has been said that lawyers are reluctant to hand over the management
function to professional managers because of the persistent belief that only
someone who has a law degree can have a valuable opinion or be trusted to make
decisions in a law practice.
As
a result, many practices persevere with outdated and inefficient management
structures. In some cases, an overworked managing partner maintains ludicrous
hours at the expense of leisure time and health.
In
others, the nominated HR partner, marketing partner or IT partner can lack the
qualifications and the time to make the best possible decisions. Typically this
can lead to low morale and a high rate of staff churn.
Still
other firms persist with the consensus management model, in which everyone has
to agree before anything can be done. Again partners are influencing matters
outside their functional specialty. Any decisions that eventually do see the
light of day may not be in the best interests of the firm as a whole.
One
of the hallmarks of the consensus model is low-level management - that is,
management exists but has no authority to influence the firm's direction nor to
challenge questionable decisions.
All
of these flawed models hold law firms back, eroding profitability and, in some
cases, even threatening viability. While spectacular failures are not commonplace,
poor management has forced some of this country's venerable firms to merge in
order to survive.
Quite
often a poorly run firm will be highly leveraged with debt. Other telling
symptoms include high client churn, low productivity or profitability, poor
debt recovery and unhappy or disenfranchised staff, coupled with a low level of
client satisfaction and a high number of complaints.
Even
in the absence of dire outcomes, one of the most regrettable consequences of
bad management is a failure to maximize opportunities. Partners can work
incredibly long hours doing everything to keep their practice afloat, but never
see the financial rewards they deserve. If they don't have the time to
recognise a trend or a change in the market, opportunities will pass them by.
The
greatest benefit of professional management is that it allows lawyers to do
what they are trained to do. If partners are relieved of the administrative
burden, their own billings can increase and their firm's financial position
will be more robust. The cost of a professional manager versus the cost of a
managing partner's lost billings is generally a very simple calculation.
As
members of a profession famously afflicted by a high rate of depression and
other stress-related illnesses, lawyers must realise that they can only benefit
by employing qualified professional managers and separating their legal work
from the running of the practice.
Bronwyn
Pott is the president of the Australian Legal Practice Management Association
and the CEO of Swaab Attorneys.
