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As a result, many practices persevere with outdated and inefficient management structures.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.
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