Leadership for Law Firms

• Publisher: Law Society
• Year: 2010
• ISBN:
  9781907698248
• Topic: Droit
• Subtopic: Profession juridique

Leadership for Law Firms contains integrated research and anecdotal findings from over 70 interviews with Managing Partners, CEOs and other experts. The report offers practical guidance on the particular challenges faced by contemporary law firm leaders.

Chapter 1

Leadership in law firms – is now the time?

Why is leadership relevant in law firms in 2010+?

Working with a wide selection of managing partners (MPs) and chief executive officers (CEOs), this research has sought to find out just what qualities a leader of a law firm needs in order to pull all the vested interests together. How have they faired during the past five years of boom, followed by recession, and how will they cope in these more austere times? It was found that leadership is not just the preserve of the ‘Magic’ or ‘Silver Circle’ or global firms, nor only of those who have a sophisticated infrastructure of business support directors. In fact, it is a mindset that enables the investors in the firm – currently the partners – to get the best possible return on their investment. Focus has been on the following questions:

• Do firms understand the difference and benefits between leadership and management?

• Can lawyers be led, and are they prepared to be followers?

• Is the size of firm a determining factor before the partners are prepared to invest in a non-fee earning MP as the leader?

• Is the structure of partnership in law firms outdated and unworkable in the context of leadership, and will the new options be any better?

• Are there particular circumstances that require a particular style of leadership? If so, what examples are there?

• Are there methods used for succession planning, selecting, grooming and appointing an MP as leader now and for the future?

• Is there life after being MP? What are the career options?

When exploring how leadership fits within the partnership model, there remain mixed views. Some are adamant that consensus is workable up to, say, 10–15 partners; others have suggested that any firm in the Top 30 is a totally different animal from a smaller firm with 50 staff and that comparisons are pointless. However, there are firms in the Top 200 which have between two and five partners, a clear leader and are achieving higher profit per equity partner (PEP) figures than firms with more partners and staff in the same grouping: it is impossible to generalise.

The patently successful firms say true leadership is critical, and without the direction, vision, empathy and guidance from the leader, firms will simply not make the necessary shifts in gear required to weather what Tony Williams of Jomati Consulting calls ‘a perfect storm’ currently brewing in the legal sector, not just in the UK but globally.

Through over 70+ interviews and discussions with MPs, global managing partners (GMPs), CEOs (both lawyers and non-lawyers) and a few experts in the field of leadership, infrastructure and consumers, a raft of views and opinions have been gathered about the relevance of leadership in a firm today. Drawing on this mountain of information, the following chapters set out how any firm can learn and benefit from what other firms have done and are thinking of doing, and so avoid time-consuming, costly and unnecessary mistakes.

Lawyers like to learn from lawyers, who will have had similar experiences. Almost universally, it is believed that managing a law firm has such unique elements, that comparing it to, say, a firm of accountants or architects, even though they share a partnership structure, is pointless: a law firm is just different. There is a quality about lawyers that apparently makes them:

• Not want to manage their business themselves – but be able to tell others how to do it.

• Want profitable relationships with clients – but show reluctance to shift their own behaviours.

• Want financial rewards, but not be prepared to keep their finances under control.

• Ignore individuals who don’t pull their weight – but hand the smoking gun to the MP, or human resources (HR), or someone else to get rid of them.

• Great at talking about and even agreeing to strategy, but hopeless at prioritising time to make it happen.

Why 2010 offers a greater opportunity for leadership

So why should this picture change? Why should any MP meet with any greater success now, in 2010, than they may have done in the past five years? According to over 90 per cent of the MPs interviewed, there are some critical factors that will simply not go away. Including:

• The perilous state of the UK and other EU/global economies, the UK’s coalition government’s budget cuts and the effect these are having on clients, their purchasing habits/power and requirements so that these have now irrevocably shifted.

• Technological advancements that provide clients with immediate and continuous access to you, their lawyer, now seen as a minimum requirement by the majority of clients, along with their need for demonstrable value-added services that are better than those of the next firm (regardless of size of firm and fee rates).

• Demographic trends forecasting a dearth of talented young people, with those who are available having shifted attitudes and expectations of what their working life and rewards should be, compared to the lawyers who are meant to be leading and managing them.

• At the other end of the employment chain, is the possibility of partners and staff choosing to retire well into their mid-60s and even working until 75 years of age, driven by a need to keep the old grey cells working, and to supplement their under-performing pension provisions (regardless of legislation).

• The shrinking world, with clients able to trade anywhere in the UK, Europe, or internationally, thus forces providers of legal services to have a national and global presence: to, in effect, be boundary-less.

• The critical balance between providing professional legal advice, putting the client first versus the commercial pressures to deliver fees (and profit). This has highlighted problems around compliance and risk issues, so much so that professional indemnity insurance (PII) premiums have become the third cripplingly biggest cost for some 8,000 or so firms across the UK. The wealthier firms are being levied to contribute to the Assigned Risks Pool, which has a disturbingly growing number of firms in it for whom PII is a cost that has the potential to bankrupt them. It is seen as an indictment of the profession that only the insurance sector is prepared to weed out the under-performing/negligent firms, rather than the legal profession itself, through tougher regulation.

• The Legal Services Act 2007 (LSA) is opening up ownership and investment to extend beyond lawyers themselves. This has thrown ‘sand in the eyes’ of many firms, whilst others have attempted to get ahead of the competition, and some had their fingers burned in the commoditisation arena. This will not go away, but it is not clear just what the full impact of the LSA will be – and the Solicitors Regulation Authority (SRA) would also appear (as at the time of writing) to be unclear about which services will remain regulated/reserved.

• Debates continue to rage over who would want to invest in any law firm, since most private equity (PE) looks for AAA-style firms (i.e. best in class) to invest in and help grow. Some firms are talking of incorporation or being listed on the Alternative Investment Market (AIM). All of this, however, appears to be badly hampered by:

– PE investors’ poor perception of law firms and how they fail to see the sophistication that is actually there, so cannot identify potential investments;

– partners’ perceptions that the PE money/external investors will bail them out of a bad situation, or help rid them of under-performing partners, and then allow the remaining partners to retire to their own desert island;

– the partners’ need for control over their lives – or not; and

– the partners’ concern about being scrutinised through the lengthy processes involved in meeting AIM or investor financial and decision-making requirements.

• Advanced technology opens up opportunities for some commoditisation, streamlining processes at front and back offices, reducing the cost base.

• And that, of course, leads to outsourcing and the extraordinary opportunities – and confusion – that this could bring to the whole structure of firms as they exist today.

As one MP of a Top 100 law firm confided: ‘If I was setting up a law firm today, I would not start with what we have here today.’ One can’t help feeling daunted for the MP who has to cut a swath through this morass of issues and pick the direction for his or her firm and at the same time manage the expectations and needs of their fellow partners and staff. The recession has highlighted the importance of loyalty, trustworthiness and collegiality of partners and staff who hang in and support the firms, as they have had to tighten belts and introduce changes.

One view is that, like most of our microwaves at home, most firms are completely under-utilised if one reviewed the knowledge, skills, and intellect of the majority of their partners and staff, and this is often due to ineffective performance management. Critical to success is the attitude, culture, values and longer-term objectives of these firms, which often colour and cloud decisions in a totally uncommercial, and in some cases, unviable manner.

Most MPs interviewed served their articles/traineeship in the firm they are MP of and have had no wider business experience outside of that. Even with internal training and development, gaining an MBA, etc., they have learnt, in the main, the hard way. Selecting an MP from similarly developed partners has sometimes not been the right solution, especially recently, so firms have brought in CEOs (lawyers and non-lawyers), initially to manage and then, in fewer cases, to lead the firm. This, too, is a thorny topic, which is explored in later chapters.

Here is a story called ‘War and Peace’, based in the fifteenth century, that has a lot of resonance with what we see in many firms today: indulgence is begged.

War and Peace – based on Watson the Kingmaker

At the turn of the fifteenth century, England was in a near continuous state of war, with battles for supremacy raging up and down the land, off the East and South coasts, even skirmishes across the seas into France and beyond. The prize, the greatest of all, was for the victor to be crowned King of England (and Scotland and maybe bits of France), with untold wealth, fame and fortune.

Many great families were established then (and still exist today) on the back of successful alliances, on funding the current king’s ambitions, sacrificing yokels, farm hands and the prized personal, well-trained and armed guards of the great noble families and estates. Lord Watson decided to back the House of A, selecting James – the eldest son of his good friend but sadly dying ally, the Earl of A – as the rightful heir to the throne. Watson worked hard to gather as many Earls and Lords together to support placing young James on the throne, by fighting and defeating the current king, King John. Watson raised levies, demanded fealty, and his persuasiveness meant that a great army was raised, the good-looking Andrew leapt onto his fine charger and plunged into battle after battle, successfully fighting back the ailing king to the water’s edge.

As in any war, there were numerous battles, some successful some not, many bloodied noses, lost limbs, lives and the like, but all in all Watson seemed to have picked a clever, wily lad in James and, soon, all opposition to him was quelled. In triumph, Watson set out to London to show off his protégé and have James, now Earl of A, crowned King of England. Lord Watson became known as the Kingmaker – much to his satisfaction.

From the beginning, King James worked hard to bring peace to his land, and every day, in between hunting and hawking, he passed new legislation, resolved petty disputes, flogged errant farmers, approved budgets, raised taxes (reasonably), planted vineyards and orchards, and sowed crops in the fields to feed the people. He built palaces filled with fine paintings, furniture and art. In the evenings, he had musicians play, mummers act, and poets recite wonderful erudite odes to the ladies dressed in the latest French fashions (yes, even back then, the French were leaders of fashion) and so gave work to many, many people.

Working against Watson’s views, he decided to re-arm his army, strengthen his fleet of ships (with trees from the Forest of Dean in Gloucestershire) and aimed to be a fair and generous king as he grew old, well into his thirties. After a while, King James decided he could do all this without the guidance of Watson the Kingmaker and started to do things ‘his way’. The over-confident King James had not spotted that there was, in fact, only grudging acceptance of his rule, and that he was upsetting Lord Watson rather a lot.

The allies who had fought side-by-side with James and Lord Watson had had to be rewarded. They wanted land and titles and to marry their various offsp...