ALM’s recently released report, The New Law Firm C-Suite (Get the Report Here), highlights the progress law firms have made over the past several years at incorporating non-lawyer executives into their leadership teams. It also highlights some of the challenges law firms are still struggling with to get the most out of their C-suites.
Progress made and work that still needs to be done
The report, based on survey responses and interviews with C-suite professionals at large and medium-sized law firms, found that non-lawyer executives feel they have a good relationship with partners. This is good news for law firms. In years past, many non-lawyers, even senior ones, complained of being treated as second-class citizens by lawyers. These findings suggest that the vast majority of firms have reversed a counterproductive mindset (see figure below).
The research also sheds light on areas where firms still have room to improve. Most notably, many firms do not appear to be incorporating the C-suite into law firm decision-making processes. Only 13% of C-suite professionals reported that they have a vote on their firm’s executive committees. Only 61% reported that they play a pivotal role in making major decisions that affect the firm. These figures suggest that law firms see the C-suite as managers brought in to professionalize operations, rather than advisers or business partners. This is a missed opportunity. C-suite professionals have a unique view of their organizations and a diverse range of experience that can be used to help firms adjust to increasing competition and new client demands.
Managing competing interests and difficult ethical issues
Interviews revealed that many C-suite professionals are becoming more involved in pricing, project management and process improvement. This shift in responsibilities is migrating their role from one that was strictly focused on the business of law to one more connected with the delivery of legal services to clients. This transition offers C-suite professionals an opportunity to become more embedded into the core business of their firm but also creates business and ethical risks that must be managed carefully.
These risks are particularly evident when law firms engage in process improvement initiatives aimed at redesigning how services are delivered. One CMO reported that his firm, in the Am Law 100, had spent the last two years redesigning several services to improve consistency and profitability. A key aspect in this initiative, which lowered the cost of delivery in some services by as much as 50%, was identifying tasks that could be performed by less expensive, and typically less experienced, individuals.
While law firms should be engaging in these exercises, the line between increasing efficiency and cutting corners is often blurry. Non-lawyers tasked with increasing profitability may not have the legal background to understand the impact of limiting the amount of time associates can spend on a task or delegating tasks to less experienced individuals. This can create significant risk.
Law firms have a duty to provide high-quality advice to their clients. Cutting corners not only puts clients at risk but also puts firms at risk through the possibility of poor service (at best) to malpractice (at worst).
In interviews, C-suite professionals reported that they understood the risk of getting this balance wrong. Nearly every interviewee said that they let lawyers lead in discussions on process improvement and defer to them when profitability might be at odds with quality.
The lawyer-led, C-suite-supported approach to process improvement has strengths as well as weaknesses. Letting lawyers lead lessens change management problems and reduces the risk of putting quality over profitability. It also tends to slow the adoption of new service delivery methods, which can ultimately hurt firm competitiveness.
Currently, most firms are willing to accept the costs of letting lawyers lead. If competitive forces increase, however, the balance of power could shift. If this happens, and the C-suite becomes more embedded in the delivery of legal services, law firms will need to carefully re-evaluate how decisions in this space are made.
ALM Intelligence Notes:
- Another Big Merger: The combination of Arnold & Porter and Kaye Scholer is further evidence that the trend toward greater consolidation in the legal industry is not coming to end anytime soon.
- What it Takes to Become a Partner: ALM’s survey of new partners reveals that earning a spot in the partnership involves a mix of challenging but not impossible goals.
- Intelligence in Your Inbox: Subscribe to the ALM Intelligence Analysts Brief, featuring the latest thinking from our analysts, delivered straight to your inbox each week.
Nicholas Bruch is a Senior Analyst at ALM Legal Intelligence. His experience includes advising law firms and law departments in developing and developed markets on issues related to strategy, business development, market intelligence, and operations. He can be reached at NBruch@ALM.com.