Historically, law firms have been run by lawyers, éminence grise types who shoehorn management duties in around their own preeminent practice. While many current Am Law 200 managing partners have dramatically reduced their client work, leaders of some of the New York firms, especially, consider it a point of pride that they can still madly juggle both high-powered jobs. (I assume their cardiologists, if not their children’s shrinks, are on speed dial.)
But now there’s another model: a nonlawyer CEO. This chief reports to a law firm’s executive committee/board, and the lawyers, in turn, report up to him.
One of the first case studies is Pepper Hamilton. Almost a year ago, the Philadelphia-based firm named Scott Green, a Harvard MBA and a CPA, to its top job.
What struck me from meeting Green was his focus on figuring out—both quantitatively and qualitatively—his firm’s positioning in the market. “Proper positioning builds competitive advantage,” Green says. “Lack thereof requires luck to be successful.” If a firm is properly positioned—for example, emphasizing the work where it has the deepest expertise—ideally clients will come to the firm for that work, which may lead to higher margins, and hopefully attorneys in that field will want to join the firm. Over time, Green says, you create a “virtuous circle.”
Plenty of managing partners think about these issues, too, and many also have highly paid chief marketing officers to help, but in my experience it’s unusual to have a firm leader as focused on positioning as Green.
He is putting these theories into practice at 500-lawyer Pepper. Highlights of the firm’s new strategic plan include increasing its West Coast work (Pepper opened an L.A. office this summer); growing its life sciences and popular “health effects” practice, which focuses on product liability for pharmaceutical companies; and expanding its white-collar and enforcement practice. Pepper acquired former Federal Bureau of Investigation director Louis Freeh’s legal and consulting group in September.
In October, Green said his firm expects to report “fairly dramatic” top- and bottom-line year-over-year growth for 2012. Profits are projected to rise by double digits. (Pepper reported revenues of $325 million and net income of $121 million in 2011.) Much of that growth is attributable to the firm’s transactional side. Pepper is getting more mid-Atlantic corporate work, in part because of its lower rate structure. But as any deal lawyer would likely point out, credit for this work should largely be given to the deal lawyers, not firm management.
The MBA as law firm leader isn’t a magic bullet. At many firms it would be a terrible fit. By definition, that person won’t be a lifer who is intimately familiar with the firm’s culture, traditions, and storied client relationships. A firm CEO can’t share in the profits (Green gets a salary and bonus), so theoretically that person might not be focused on the firm’s long-term outlook. And many partners might buck at the relentless focus on metrics. Not to mention, several elite firms with full-time practitioner/managers are doing exceptionally well.
But other firms grappling with competitive pressures might find that thinking creatively when it comes to picking their next firm leader is exactly what they need.