Image credit: REUTERS/Phil Noble
Law firms are breaking out of the sector’s traditional management structure to improve productivity and profitability. Firms are recognising its limitations in today’s business of law, though traditionalists may struggle to shift from a mindset where the partner rules—a mentality that can stifle new initiatives and hinders the bottom line.
Those implementing successful new management structures are creating specialist support roles to increase fee earner productivity. Unsurprisingly, big law is ahead of the curve. A PwC report, Adapting to a new world, says more firms are employing specialists across business support functions including pricing (63 percent of top 100 firms now have pricing specialists)—and there was a 19 percent increase in the recruitment of legal project management in the same period.
Other growth areas in business support include client engagement managers and strategy and innovation. But in some quarters, the continued reliance on traditional management structures is proving a barrier to productivity while others have really increased their spend on support roles—a growing trend at the smaller end of the market—and solutions are becoming cheaper.
As Kirsten Maslen, Thomson Reuters’ Director of Market Development says, the pressure for law firms to innovate is coming from the client side, “forcing law firms to up their game”.
One increasingly structural change of choice is dividing key functions into the COO, CEO and CIO trinity. Edward O’Rourke, CEO at Ashtons, says the firm’s post-COVID-19 plans include re-structuring the management team and appointing a COO alongside the CEO creating a more streamlined management team. It plans to restructure all support functions and centralise them.
The aim, explains O’Rourke, is “a greater level of standardisation”.
Maslen explains: “There is an increase in the adoption of, for example, sophisticated strategy, innovation, business development techniques, and more systematic use of legal project management and other disciplines. As those people come into more senior positions these ways of working become less of an add-on and more a core component of how the law firm operates”.
West Midlands based law firm, FBC Manby Bowdler, recognised four and half years ago that it needed to do something different to lift performance. It recruited Neil Lloyd (formerly in sales management at RBS) as sales director and, over the first two years, changed the team structure. Bowder explains that the traditional heads of family, corporate, etc., were outdated and didn’t drive performance—they “had too many people to manage effectively”.
Lead partners (equity partners) and team leaders (equity partners/partners/ associates) were put in place, and there are 24 teams each comprising five or six fee earners and non-fee earners.
Recently, the managing partner stood down after 12 years and Lloyd was appointed managing director. A non-lawyer Operations Board was set up comprising finance, sales and marketing, HR, and risk and compliance. Today, Lloyd reports to an executive board (him and two equity partners) which, in turn, reports to the partnership once a quarter.
Has it worked? Over the past four years the firm has seen growth in turnover and, for three years, a growth in profits (last year’s performance was affected by IT spend). This year has been the same as the first two months of last year and profits considerably increased “and we’re only two months in our costs performance”, adds Lloyd.
“I believe this is part due to the improved management controls”, says Lloyd.
A concerted change in attitude proved the key to Biscoes’ successful breakout from a traditional management structure. In 2015 it converted from partnership to private limited company and appointed the former partners as directors. It subsequently appointed a director of operations and marketing, along with a couple of salaried directors. “That’s how the firm progresses people through the firm”, as managing partner Alison Lee explains.
The firm implements management training for ‘up-and-comings’ so nobody would join its board if they had not done some kind of training. Lee says people identified as future directors undergo executive training and people are promoted “because of their skills beyond fee earning”.
Lee adds: “We have a group of people leading the firm but our attitude towards it is, we are leaders of the firm not just the people who make the most money”.
It is a profitable approach to management. Lee reports: “We went from a £3.5m turnover firm in 2014/15 and we turned over just over £6m in 2019”.
For more information on innovative legal technology, please click here.