The Global Legal Post reported last week that, according to research by executive search firm Edward Drummond, law firms with one or more non-executives on board have grown by more than one third compared to those who have not.
The issue of practice management is not a new one, but, particularly post 2007/8, in a world where many apparently successful firms have crashed and burned and the financial performance of firms is being more closely scrutinised than ever before (not least, by the SRA and insurers) it has never been more relevant.
At Stanley Davis Practice Support, we have long advocated the value of a corporate model for practice management. Regardless of the actual business structure (partnership, LLP, Limited Company) even small firms can benefit from adopting some of the processes for management decision making that a corporate model brings. Many law firms have retained a conventional partnership hierarchy - but while most will be excellent at their particular area of law, and some may be great business developers, the traditional lawyer training has not necessarily fostered a commercial business mindset to the same extent.
As a result, law firms frequently suffer from a lack of business techniques notwithstanding the requirements in the SRA principles to "Run your business...". Non executives can bring invaluable expertise into the firm, and provide the benefit of a different perspective.
While the statistics quoted by Global Legal Post cannot be taken as in any way definitive, they probably do reflect a truth - which is probably as much about the culture and approach of the firm as a whole as it is about the existence of non-execs in their own right.
That culture starts at the top - with the Managing Partner/Chief Executive/Managing Director, and the management board. How does your firm measure up against our practice management 'checklist':
Practice Management Checklist
Non-lawyers have traditionally not been welcomed within law firm management, and their role something of a side-show to the main event. Instead, their input should be embraced:
- Non-executives should be selected based on business experience rather than legal experience
- They should be independent without any vested interest
- They may be selected for certain business attributes, or specific relevant experience (e.g. the appointment of a former executive from the oil industry to a firm with a strong energy specialism)
- Their role is to provide constructive criticism and objectivity
- They should be involved in the selection of people for key roles in the practice
- Non- executives should be invited to all partners (board) meetings and the benefit of their business experience heeded
- The managing partner should feel comfortable with the non-executives and use their knowledge and experience and consult with them as and when required not just at partners meetings
- Partners meetings must be held regularly (monthly?) and minutes taken and circulated to all those who attend.
- Decisions should be taken following partners meetings, as necessary.
- At every partners meeting there will be full discussion on financial management information including monthly management accounts, cash flow forecasts, and variance reports.
- The business plan will be updated regularly and varied as required.
- There must be a managing partner (managing director) with relevant powers.
- The managing partner will be in place because he/she is the best person for the role not because they have been in the firm longest nor the partner with time on their hands?
- There must be a realistic and affordable strategy which will be devised with input from the non-executives.
- The managing partner may have to give up client facing work to a significant degree to run the business efficiently. It cannot take second place to 'real' fee earning work.
- All the partners must be committed to the strategy
- The managing partner is like a managing director in a commercial business- able to run the practice on a day to day basis without constant reference to others
Eric Golding, FCA, is Managing Director of Stanley Davis Practice Management Support Limited. He advises firms regularly on issues of financial and corporate management.