The following was authored by Julia Zemnick Gill, Winner of the 2015 GWSB Student Leadership Essay Competition
Law firms have experienced excruciating growing pains over the past decade. The legal industry is one of the largest and most profitable industries in the United States. According to Statista, the U.S. legal industry generated, “$256.66 billion US dollars in revenue in 2013 expecting an increase to $288 billion by 2018.” Figure 1 shows the trend in revenue from 2008, just after the financial crisis expected through 2018. With increasing demands from clients to show the value of their work, and the need to develop creative pricing models that mimic client business practices, lawyers have turned to non-lawyers for help.
Shortly after the financial crisis, many law firms felt the need to more closely manage their business while continuing to nurture client relationships and foster young associates. It was becoming increasingly difficult to dedicate time to the management of the firm and the practice of law. The clash between the two gave birth to a newly created service provider in a law firm: the practice and business management professional. At this pressure point, law firm management began to rely on non-lawyers for the advice of practice decisions: economic performance, strategic expansion, succession planning, practice valuation, and growth strategies among other law firm priorities. As the non-lawyers slowly infiltrated the practice, providing value and saving administrative time for the billing attorney, trust for the position grew.
Over time, non-lawyer positions have grown in number and have gained traction in leading management roles. In many law firms, there is still a culture of distinction and law firm management has traditionally been led by practicing lawyers, even to the detriment of law firm operations. There is still an “us” versus “them” mentality between lawyers and non-lawyers. There is a chasm between form and function because non-lawyers are 1) not practicing law, and therefore 2) an overhead expense, and most importantly, 3) not contributing to the profit. While most, if not all, non-lawyer management team members are highly educated, one sticking point remains. The idea that the educational background of management professionals is not the same quality as those who earn a law degree.
A few problems arise from this traditional mentality as firms inch towards building and adopting a more sophisticated approach to executing on business operations. Firstly, as law firms strive to operate more like a business, they are recognizing and rewarding the impact on the bottom line of the business actors, a/k/a non-lawyers. While there is a clear path for lawyers to reach partnership and share in the rewards of the firm, the business professional has no such path forward. Many work just as hard and as many hours as practicing lawyers with far less compensation and even less chance for equal reward. In most businesses, if someone is able to save the company 10 percent of the expense budget, or increase revenue by two percent, there often is a justification for a reward and recognition. However, most law firms do not reward non-lawyers for this type of behavior. Secondly, since the decision-making resides with the lawyers, a business professional may advise or consult on an issue, but the final implementation must come from the attorney. Often, this delays action or even weakens the authority of the non-lawyer. Finally, if law firms would like to progress to a business operation, recruiting and retaining exceptional non-lawyer talent will need to become more of a priority and focus. Similar to hiring associates, the talent required to develop, maintain and manage the business should not be considered lightly. In other words, just as much consideration and thought should be given to the talent pool for those managing the business as it is to those servicing clients. As such, professional growth plans, compensation and rewards for this type of talent should be a key component to building a successful business.
Ultimately, for a law firm to build a sustainable business model, it can no longer just be about the type of lawyers the firm hires or the business of practicing law. Rather, it has to be about the long game. The business is an organism that requires leadership from a host of supporting, talented actors who contribute to the business by adding value, and are recognized and rewarded for doing so. Non-lawyer professionals will continue to play a pivotal and compelling role to the success of a firm. As such, a cultural change will require the managing partner to demonstrate the need for business professionals to lead the strategic growth of the business practices of the law firm. The combined pressure internally from the managing partner and externally from the client to heavily rely on the talent and expertise of trained professionals will increase the value of business leaders in a law firm. Moreover, clients are looking for a business professional to join the conversation on behalf of a law firm when negotiating rates and terms of agreement. The future of the firm’s profitability will be heavily dependent upon the trust built between the lawyers and the business professionals hired to navigate the firm to a more stable economic footing. As the non-lawyer business professionals are able to reduce costs and increase profit margins, this is an opportunity to reward forward thinking and business-minded behavior. While non-lawyers are not compensated the same as lawyers, the firm can recognize the value added through ingenuity and new business practices. In the end, this out-of-the-box thinking may help move law firms closer to the business model they are hoping to emulate and help retain the high-qualified professionals they need to strategically manage their cash business.
- Balance of Business and Law - March 1, 2016