Law Firm Management, 1984--2004

One of the most promising and optimistic pieces I've read in awhile comes courtesy of John Smock, co-founder of Smock Sterling Strategic Management Consultants outside Chicago.  Essentially a look-back at his twenty years of experience being a strategic consultant to law firms, he reports that the landscape has changed—for the better—drastically:

• Law firms used to be in denial that they are businesses; no longer so.
• Work of impeccably high quality was thought to be all that was needed to win clients; firms now recognize that's merely the price of admission.
• "Marketing" was a dirty word; although to some extent this remains the case, enlightened firms are realizing its true value if it is premised on a keen understanding of client needs.
• "Finally, law firm management was just not very good—primarily because it did not have to be," but now management is far more professional and non-lawyers play pivotal roles.

What drove, or forced, these changes?

Competition.

Simply put, law firms are better managed today because they have to be.  While per-partner compensation has risen dramatically in real terms in the past two decades, that only means that laggard firms can fall victim to a self-reinforcing downward spiral as talented partners move to greener pastures, high-quality (and high-fee) work moves with them, the firm is no longer attractive to recruits, etc.  Law firms—yes, even law firms!—recognize that in this environment a reluctance to adapt is a slow-release toxin. 

What adaptations, specifically, has competition driven us to?  First of all, simply adopting Management 101 principles:  Set objectives, measure results, provide suitable incentives, define accountability, review, fine-tune, repeat.  Second, recognizing that over the long run strategic decisionmaking can determine a firm's future:  Exploit what you're good at, improve or kill off what you're weak at, choose your geographic footprint wisely.  Third, practice group management is being implemented at most firms, and while getting it right can include a period of trial and error, once you are doing it effectively and consistently "the results have been quite dramatic."  Lastly, in what is a fascinating observation which Smock almost uses as a throwaway line (the article is very high-quality, as I said), he notes that law firm CEO's are paid more or less on a par with their partners, unlike in corporate-land, and are thus not susceptible to the "Greedy CEO Syndrome."

What, then, remains to be done?  Well, plenty, but for starters:

• Create advisory boards to give firms fresh perspective on their strategic and tactical options.
• Make sure partner compensation is aligned with the long run interests of the firm and not just last semester's report card.
• Institute 360-degree reviews for partners, recognizing that a 30-something just-minted partner is and will be a work-in-progress for, one hopes, another 30 years.

If I lived in Chicago, I'd buy Smock lunch on the strength of this piece alone.