Managing and Growing a Law Firm: Part 1 of 3

Print PDF

By Yarman J Vachha | Jul 2, 2018

In this series of three articles I highlight the legal scene in Asia, the changes to the legal industry, and the different resources available to law firms for expansion.

Being a lawyer and managing a law firm are two different spectra and require different sets of skills. Some 85% of law firms in Asia are actually not the big law-firm names that you might know, but are smaller law firms with fewer than five lawyers.

All law firms are in different stages of development and sophistication, which results in differing requirements and pressures. However, the common issues for all of them tend to be: tight or declining profitability due to stagnant revenues and increasing costs; increasing competition for work and talent; disruptors coming into the legal market; and fee pressures from clients.

In my experience, many law firms – including some large firms – are not efficiently managed, and are not maximising their full potential.

The Importance of Business Professionals within a Law Firm

One of the main reasons law firms fail to optimise their potential is that they see their support functions as a “cost” rather than as an “investment”. Many firms still refer to the back office as “support,” as they have a closed mindset and do not recognise those who fulfil these functions as business professionals in their own right.

If these business professionals are properly selected and invested in, they will bring much value to the firm. As a tongue-in-cheek analogy, would you trust a lawyer to perform heart surgery on you? Highly unlikely! So why is it a good use of a partner’s time to run the finance, human resources or information technology aspects of a legal business? The chances are that this partner does not have the expertise to do so. The key point is that in a very competitive environment, it is important to have skilled professionals to provide advice on operational strategy, and expertise in running the business.

Over the last two decades or so, firms that have recognised the need for professionals to advise and assist in running their businesses have, by and large, excelled, and they generally play in more sophisticated markets. This does not mean that the partners (who are owners of the business) relinquish power or control – the key is to leverage off the expertise of the business professionals to enable firms to maximise the potential of their business.

Where to Start?

I firmly believe that there is a gap in the market, particularly in Asia and India, for consultants to advise law firms (and professional-services firms) on all aspects of financial management, operational efficiency, pricing and pitching strategies, strategic planning, human resource policies, information technology rationalisation and improvement, remuneration structures, succession planning and mentoring of partners and staff.

I would however caution firms considering going down this route to choose wisely. Whilst there are many consultants out there, not many can boast having grassroots experience in the specific areas of focus of their clients. Engaging a consultant with the relevant background and hands-on experience will bring much value and can help firms professionalise their business operations. This will enable them to grow profitably, develop a strategy to sustain that profitability, and mitigate business and reputational risk. This is partly achieved through running a slick and well-managed business-services function, having a sound business-development strategy, educating the firm’s lawyers to think about the legal profession as a “business,” and establishing a sensible succession plan.

The Importance of Internal Grassroots Knowledge

I recently assisted a major global law firm with the integration of their North Asian and South East Asian business by creating one business with a single management, operating and remuneration structure.

This was a complex project as it required integration among multiple offices and jurisdictions, and created a single business with 2,000 staff. The biggest challenge initially was to bring the various parties to the table. Once an agreement was in place, we turned our attention to changing mindsets at all levels of the organisation, and mitigating the inevitable post-integration risks. This would not have been possible without my having had intimate knowledge of what makes a law firm “tick”.

Interestingly, the technical aspects of this internal integration were relatively straightforward compared with the human dynamics of accepting change. A tough job but very satisfying!

How Long Does It Take to See Results?

Based on my experience of the projects that I have worked on internally or externally as a consultant, success and the speed of this success are very dependent on the will of the management and the buy-in from the partners at large. There needs to be a mindset to change, and the key is a real focus on the end game. Once there is a general buy-in, the change and the results can be quite revolutionary.

The first hurdle firms need to address to achieve their goals is the need for an element of investment which, if made wisely, will mitigate future risks and improve the business considerably.