The State of the Business of Law: Leadership and Governance

We are experiencing a turbulent, changing legal market, and the gilded age for law firms is over. Gone are the days when law was a seller’s market and lawyers could raise fees that clients happily paid. The Great Recession has had an enduring impact on the legal profession.

Law firms are facing the cumulative pressures of globalization and competition. There is an oversupply of lawyers. Clients are more demanding than ever, and lawyers must deal with market disruptors such as Avvo and LegalZoom. Industry consolidation, a changing workforce, and technology innovations also have had an impact on law practices. None of these trends are going away soon.

In response, many lawyers are burying their heads in the sand, in denial about what is happening. Yet, new solutions are required to adapt to these changing conditions.

As with all competitions, this new market will have winners and losers. Firms that evolve and adapt to the changing environment will emerge as winners. However, firms that just conduct “business as usual” might be in for a long and slow demise.

Now, more than ever, you need to run your law firm like a business.

How Are Law Firms Adapting?

So what are law firms doing about all this? How are they adapting?

At The Managing Partner Forum, we provide resources and communities that allow managing partners and law firm leaders to learn with and from each other ways to be more effective in their challenging roles. We survey firm leaders to learn how they and their law firm are evolving and adapting in the face of change and disruption in the marketplace for legal services.

In April 2017, we conducted our annual MPF Leadership & Governance Survey, in which 154 managing partners and firm leaders participated. Most lead law firms ranging in size from 10-250 lawyers, and here are some of the things we learned.

The firms that are adapting realize that bold leadership is needed to deal with these changes. Leaders are needed to make the tough decisions that law firms have historically swept under the rug. Leadership is needed to formulate a plan for change, advocate for the plan, and implement it.

Very slowly, we are starting to see more firms moving toward more structured governance models with empowered leadership. Yet, it’s not enough. We need more firms to hear the message and get on board. Too much “managing” and not enough “leading” is going on.

Firms must streamline governance and relegate the decision-making to an empowered firm leader. Managing by consensus is no longer feasible. Of course, everyone has opinions, and everyone wants to have a say in how things are run, however, everyone can’t be involved in the decision-making or nothing will be accomplished. Yes, some degree of consensus-building is needed, but so is strong leadership that is empowered to make the tough decisions, effect change and hold people accountable.

Far too many firms operate like loose confederations of solo practitioners, with too many decision-makers and committees. We call it “administrivia”—too many partners getting bogged down in the day-to-day operations. It’s inefficient and often ineffective.

Many small and mid-size firms intentionally elect weak leadership that will not rock the boat nor take away any of the autonomy that lawyers love. In addition, many managing partners want everyone to like them. This is not a popularity contest. The job of an effective law firm leader is to ensure a successful, prosperous law firm. Sometimes that means ruffling some feathers.

Here are a few snapshots of the results of our most recent survey.

MPF Recommendations on Leadership and Governance

Based on our ongoing research coupled with decades of work with smaller and mid-size law firms, here are our some of our recommendations for today’s law firm leaders.

Understand the difference between “leadership” and “management.” There is a critical difference, and in changing times, you need a leader at the helm.

Management entails keeping the trains running on time, administering the practices and procedures, ensuring adherence to policy, and not allowing any rocking of the boat. Leadership, on the other hand, involves vision, a long-term perspective, change, accountability and inspiration.

The title “Managing Partner” suggests a passive role. We advocate a more powerful title, like Chief Executive Officer, that stresses the importance of leadership.

Prioritize your time; it’s important to pick your battles.

Most managing partners get caught up in day-to-day administration, spending their valuable time on things that may be urgent but are not necessarily important to the long-term success of the firm.

Leaders must allocate time to focus on the big picture and tackle issues that are meaningful but may be difficult and underappreciated, such as creating a strategic plan for your firm.

Invest in your leadership skills. It will be the best investment you make.

They don’t teach you how to lead lawyers in law school, and lawyers can be a difficult bunch to lead, but that doesn’t mean you can’t learn.

Take advantage of the abundance of resources on law firm leadership. Take time to read, attend conferences, and find a circle of other managing partners with whom you can learn.

Build trust among your partners; this is mission critical, because you need their support to implement change.

Your partners must trust that you have the best interest of the firm at heart, and that you’re not doing this for the credit, power or money. They need to sense that you are sincere, responsive and trustworthy, and that you care about the future of the firm.

Connect regularly with your partners. Demonstrate credibility. Earn and keep their trust.

Build your guiding coalition—you need deputies who share your vision.

Managing partners often want to make everyone happy, which is an impossible task. As a leader, you will need help carrying out tough decisions and implementing change.

Find people in the firm who have influence and passion and who support your mission. This will be your inner circle of lawyers who have your back, whom you trust, and have the credibility to collectively effect change.

Know that you are the keeper of the culture, so lead by example.

One of your most important and sometimes difficult roles as managing partner is that of keeper of the firm’s culture. That culture is defined largely by what you’re willing to tolerate in performance and behavior.

If you tolerate chronic under-performance and bad behavior, it will become toxic to your firm’s culture. It’s part of your job to have the difficult conversations and hold people accountable.

Identify and groom future leaders. Invest in the rising stars who will be tomorrow’s leaders.

As the managing partner, you influence and appoint the next generation who will lead the firm. Don’t fall into the trap of only appointing senior people to leadership positions – they tend to protect the status quo instead of embracing change.

Invite new blood to participate in leadership roles in the firm and in the community. Identify your young people who have the energy and enthusiasm to innovate and carry the firm forward. Train and develop them so they grow into their roles as successors.

Create a job description for yourself as the managing partner or CEO.

It’s shocking how many managing partners don’t have written job descriptions. If you don’t have one, it’s impossible for your leadership role to be adequately valued and appreciated.

Work out a deal with your partners about 1) how much authority you will have; 2) how much time they expect you to invest in the role; 3) how you will get paid for all the non-billable time; 4) a plan for when you want to step out of the role and ramp up into private practice again. Put it in writing to avoid misunderstanding.

Establish managing partner terms with no term limits. Give the best candidates the opportunity to contribute.

Many firms are running a loose operation, with managing partners serving at consensus, with no set election or terms. Establish set terms of two to three years, then hold a vote of confidence at the end of each term.

However, don’t impose term limits—why force out someone who is great at the job? Allow a successful managing partner the opportunity to continue to serve.

Establish an Executive Committee with a job description—too often this authority and responsibility remains undefined.

Which decisions should the Executive Committee make? Which decisions must be brought to the entire partnership? Which decisions are relegated to the managing partner?

Also define how Executive Committee members are selected and whether you will have elections. What level of participation is expected? Term limits are a good idea, to rotate fresh blood every so often.

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About the Author

John Remsen, Jr. is president of TheRemsenGroup, a consultancy specializing in law strategic planning, and president & CEO of The Managing Partner Forum. He can be reached at JRemsen@TheRemsenGroup.com and 404-885-9100.

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