Breaking Down Law Firm Leadership
Law firms are typically run by a group of shareholders or partners, who collectively control the organization. In general, large law firms are governed by an executive committee or management committee composed of shareholders or partners elected by the membership, which meets regularly to discuss the business of the firm. Decisions of general importance to the firm’s members – such as whether to open a new office or terminate an office lease – may be made in substantive decisions outside of the executive committee or management committee process. Law firms also may establish subcommittees of shareholders or partners to evaluate various issues affecting the firm, although they are not required.
Many large law firm governing documents (such as bylaws or operating agreements) provide for the election or appointment of a managing partner or managing shareholder. Generally, a large law firm managing partner is an experienced , successful lawyer in the applicable firm’s practice area or market. Larger law firms may have multiple managing partners, some of whom may oversee a specific region or practice group within the firm.
Managing partners are frequently part of the executive committee or management committee. However, depending on the size of the firm and its leadership structure, managing partners may be more or less involved in, or have more or less influence on, the day-to-day operation and oversight of the firm (compared with other shareholders or partners). In many cases, there is overlap between the managing partner(s) and executive committee or management committee membership.
By contrast, most corporations are "siloed" based on practice group, geographic location or product, and the management structure typically reflects this. Under this structure, department heads, division heads or even business unit presidents carry a great deal of authority.
Comparing CEOs and Managing Partners
In the context of law firms, the question inevitably arises of what the managing partner does and how that role compares to a CEO in a corporation. While corporate structure is more simple due to the hierarchy and clear lines of authority (board then executives), law firms are hierarchically challenged and it’s not as cut and dry.
While there are many similarities between a law firm and corporation, comparing CEOs to managing partners is an easy way to find differences in the roles. For instance, one of the most critical of the CEO’s duties is working with the board of directors to determine the strategic direction of the company. Generally, the CEO will draft the framework for such a plan, and it is the duty of the board to ensure that it is effectively put into place.
A managing partner also works with the board of partners to determine the strategic direction of the firm, however the duties and expectations of a managing partner are much more management-based. The managing partner is in charge of executing the strategic plan, overseeing the professional staff, all HR issues, handling more administrative-type concerns and serving as a liaison between the managing partner and executive team with the board of partners.
The CEO of a corporation is the highest level of executive. They are responsible for overseeing all operations of the company and ensuring that all the departments are functioning effectively. The CEO is also the person who represents the organization to shareholders, the board, employees, customers, suppliers, financial institutions, the community, and the general public.
At a law firm, while the managing partner is the top executive, there is a lot more cooperation and agreement that is involved with their peers on the managing committee. While the managing partner does have a vote and arguably a trump card in the case of a stalemate, the position is still given to someone who seeks collaboration, versus absolute power. The managing partner must also ensure that the law firm leadership is adequately representing the firm, and keeping it running efficiently.
Both CEOs and managing partners must represent the organization to the public, but in the case of a law firm that includes both clients and potential ones, as well as referral sources. They must also be the gatekeeper for the firm. Both are seen as the face of the organization, and will typically travel to represent the company at events or industry outings. Because of the potential for changes every few years, it is measurable that law firms are hesitant to make drastic changes to a group that is already working well together.
In both cases, the CEO and managing partner must have similar skills and attributes including: Regarding education and credentials, a college degree and MBA is common for a CEO, and a JD is also common to legal-related CEOs. It is not uncommon to see physicians leading health care organizations, so MD or DO degrees are also popular. Having a specialization in an area of business is also beneficial.
For managing partners of law firms, the most common degree is a JD, and many have or have had their own practice. An MBA is also a major plus, and individuals that have an MBA in combination with a JD are becoming increasingly popular as managing partners.
Law Firm CEO Titles on the Rise
Unlike the day to day operations of most businesses, a law firm traditionally operates under a governance structure that is not quite as recognizable as a standard corporate board with a corporate officer and CEO. Instead, firms are run by committees and practice groups. As time has gone on, more law firms are opting for a more familiar chain of command and calling their top leaders a CEO. Many are following suit and adopting variations of the title.
"Today, law firms are more like businesses than they have ever been. They have to be. The more I’m hearing of firms adopting a CEO or president title, the more it validates that they’re going to run their firm like a business. They are recognizing that a firm has to be run like a business to survive," says John Remsen, CEO of The Remsen Group, a professional development company for lawyers, law firm managers and marketers.
However, these new titles do not come without their perceived risks and difficulties. The top-tier leadership of any law firm today is more strong-headed than ever. Divisions often run deep where egos and strategic practice group visions clash. Not every member of management agrees on the best way to operate a firm or implement new technologies. Some management teams merely want the title rather than the implemented expectations the title entails. Effective communication becomes all the more important in these cases and issues between the members of management can become personal if not handled properly.
"The downsides to having a single leader or multiple leaders under a CEO title are: not everyone is going to agree with everything the CEO does, who performs under the title, and they will cause havoc and make untold problems within the firm. This person must be a strong leader and visionary," says legal consultant John Remsen Jr.
The increase in law firm CEO titles can be attributed to firms needing more structure to take responsibility for their business and firm-wide operations. Individual partners are trying to balance their emphasis on the business side and management of their clients. The firm is often put on the back burner when it comes to its management. A CEO or chief operating officer is able to look at the firm as a whole rather than individual groups or practices. This is what many are opting for, to move outside the reactive mentality of today’s ever-changing legal landscape and to work toward a more proactive stance.
It’s a change that is bound to take some getting used to as the firm structure is considered a "sacred cow" that many have said should not be altered. However, lawyers are starting to realize that this is 2016 and law firms have to change with the times or risk getting left behind.
Many firms are questioning their top leader’s knowledge and experience. "Is this person really good enough? How can there be a president or CEO who is not a lawyer? Other firms have had this for years and have survived quite well. If firm leadership is distributed equally among practice groups, there is no reason why a nonlawyer cannot lead the firm," says Remsen.
Pros and Cons to Having a CEO
While law firms are becoming more businesslike, the appointment of a single individual to lead a multi-member enterprise is still uncommon. In fact, it is difficult to think of more than one or two large law firms that do, although that may well change. The reason seems apparent. In multi-member firms, the leaders of the firm are generally selected by the shareholders, and then they have to answer to the shareholders. This makes sense because it is the shareholders who are paying all the bills.
And the shareholders are members of an "old boys (or girls)" network, and thus there is little choice but subjugation if the group is to get along. On the other hand, a single leader has fewer people to please, and is able to move forward on ideas without first getting buy-in from all the shareholders. The result is that many times larger decisions will not be made, simply because one or two individuals don’t like them.
Larger law firms (500+ lawyers) are beginning to appoint CEOs, and there is a reason for this. As mentioned in the past, an increasing number of clients are requiring managers and leaders in law firms. They want a singular point of contact, not a committee of five or six senior lawyers . The client wants and needs to know who is making decisions, and who is going to respond to them. Having multiple leaders can only confuse the issue. But while clients are requiring single contacts, they aren’t requiring a CEO, and the change within law firms must occur from within the firm, and not at the request of clients.
So what are the advantages of having a CEO? Assuming the CEO is a qualified attorney, the CEO can generally provide:
While these are obvious and beneficial advantages to any firm, there are also disadvantages that must be considered:
The disadvantages can almost all be overcome by proper training and development of the new CEO. He/she must be taught the value that shareholders provide, and how to leverage the shareholders. If the shareholders are displaceable and find that their positions are threatened by the new CEO, the situation will not go well. In addition, the replacement of one shareholder with another (the CEO) may not be well received by other shareholders.
The key to the smooth transition to a CEO is the development of a consensus of shareholders that the CEO can do the job and is not a threat to them. Without the consensus, an internal cell structure that is rewarded for risk-taking may be the outcome.
Examples of Law Firms with CEOs
Stinson Leonard Street: On October 1, 2016, Stinson Morrison Hecker LLP and Leonard Street and Deinard, P.A. became one firm and the lawyers from both firms formally adopted the name Stinson Leonard Street LLP. With this adoption, Leonard & Startz had two new co-managing partners (Marty Sternberg and Ellen E. Kreitzberg). Two months later, on in November 2016, three more leaders were appointed to leadership roles at the firm. Mike Gies (formerly of Stinson Morrison Hecker LLP) was appointed managing partner and CEO, and Angela Swearingen (formerly of Leonard, Seelig, Swearingen & Marquardt) and financial officer, and Michael Webb (formerly of Leonard, Seelig, Swearingen & Marquardt) was appointed as chief operating officer. "Appointing a true CEO was a conscious decision to ensure we can have the kind of leadership needed to think strategically about the future of the firm’s local and national practices," said Gies. "An entrepreneurial approach to law firm management enables firms to seize opportunities faster than they can in typical hierarchical structures, where the focus is on short term margin enhancement rather than long term margin expansion." Notably, this firm recently completed a round of layoffs after it merged, in part due to the heavy reliance on practice partners, according to Gies. This fall (between October and November), another round of layoffs occurred as the firm closed a practice group.
Armstrong Teasdale: In October 2017, Armstrong Teasdale announced that it hired former Harris Data Management Corp.’s president John Williams to be its new chief executive officer. "We have been looking for the right person to lead and drive the firm — a person who understands the highest level of service law firm clients need and the industry challenges our profession continues to face," said David DeGaris, Armstrong Teasdale’s managing partner. "John tracks issues and trends that other firms do not, and his experience will help us offer value to clients in ways that other firms don’t."
Faegre Baker Daniels/Hoover Hull: In January 2015, the combined firm of Faegre Baker Daniels and Hoover Hull announced its new leadership structure. The firm elected its new chair and vice chair as well as a CEO. Former Chair and Managing Partner of International Division David Dodds was elected Chair. Paul Morrison, who was the Managing Partner of the Denver office, was elected Vice Chair. And James Wootton, who has been with for 18 years and a member of the firm’s executive committee, was named the CEO. "This new organizational structure will allow for greater efficiency and central leadership. It also reflects the fact that the added scale of our combination allows us to operate differently than you might inside a single-office firm. So, it’s a great time to make this change; the firm is very well positioned to continue doing the great work we do every day for clients and to help them achieve their business goals."
The Future of Law Firm Leaders
As we move forward, greater pressures on law firm organizations are likely to result in expanded duties and responsibilities for those in charge and a decreasing tolerance for the kind of unprofessional behavior that is alluded to by the candidates. We will begin to see more legal organizations take a page from (and adopt organizational structures similar to) successful global organizations in other professional service industries.
We could also see more firms adopting the CEO structure – initially at the global headquarters level. Certain international firms have already gone down this route and those who do not will be at a disadvantage given new global business pressures that require leaders to focus on sales, idea generation, innovation and strategic change. Over time, the CEO structure will extend to other offices and offices where high value, higher margin work is being done. It is only a matter of time before law firms start hiring individuals from other businesses with relevant management and leadership experience. And, there will be an increased willingness and ability to pay for that experience.
Success will come to those firms that embrace and utilize the financial tools and management disciplines prevalent in other service industries (those in which management is viewed as a profession). Gone are the days of law firm management team leaders aspiring to (or viewing their role as) becoming managing partner . The successful leaders of tomorrow will possess as much depth and breadth of management experience and insight as professional proficiency or expertise.
Technology will also play a role in the new law firm. Already larger firms are investing heavily in technology to reduce costs and increase efficiency. But technology can also be used to increase partnership control and equality.
Clients will continue to demand that their outside counsel put a greater emphasis on value. With pricing so important to clients (according to various Law Firm Leaders surveys by Altman Weil), the new law firm will likely pay much more attention to understanding (and generating) profit objectives while working with shared risk and reward compensation models, alternative billing arrangements and other forms of measurement based value analysis.
We see a day when earlier career service professionals (e.g., business development specialists, pricing directors, project managers) will have substantial influence. They will be empowered and expected to contribute to the discipline and quality of life of the law firm. They will be demand driven and market focused. These professionals will have the training, education, and experience to contribute to the long term success of their firms. Those firms that fail to seize on these opportunities will find themselves lagging behind and unable to compete.