The Importance of the Non-Lawyers

I recently read a post on the Law Gazette’s blog entitled ‘Professional managers must be accepted into law firms, and fast’. I couldn’t agree more with this sentiment.

The results of a 2008 survey by Managing Partner Forum showed that 50 per cent of Finance Directors are not on the firm’s board, and 70 per cent of partners do not consider the FD an equal. Presumably the same sort of attitude would extend to the Marketing Director, and even more so to other non-lawyers in the firm.

In our previous posts we have underlined just how much the legal market is changing. In a nutshell, there is no longer room for firms that consider management as an aside to their legal work. Simon has already outlined how Business Development and Marketing professionals can benefit from the recession. The same is undoubtedly true for FDs, and for firms who properly value their finance staff.

The pressure on law firm managers couldn’t be greater at present – and there are two sides to this coin.

The onus is on partners to include their senior finance staff in the ongoing management of the firm, requiring regular and easily comprehensible financial information and cash flow forecasts which they can then use to drive change.

At the same time, quality Finance Directors will take the opportunity to impress upon the partners just how important they are – and to demonstrate in concrete terms exactly how they are helping to keep the firm on track while so many are straying badly off course.

Management in law firms may be well behind other sectors at present, but this will not be the case for long. So it’s time to let the non-lawyers in, and give them the support they need to excel at their jobs. Otherwise there may not be much more legal work to be getting on with.

Developing your Business during Recession

Now that times are tough, many firms seem to be taking the (somewhat short-sighted) view that non-fee earning functions ought to be the first to be cut back. On the other hand, the recession provides an opportunity for strong and effective Business Development professionals to prove their worth to their firm. In the current circumstances:

• The imperatives for change are usually driven by costs, rather than by service.
• The demand for new services (for the potential client) has fallen.
• The normal response is for clients to stay with what they know, rather than exposing themselves to the risk of unknown and unproven suppliers.
• Fee earners now have more time and less money for business development.
• In a recession, Economics must overcome Politics.

A New Priority

The role of the Business Development team therefore changes from being one of developing new business to keeping existing business.

Firms can no longer afford for individual partners to keep personal clients, at the expense of other departments or teams within the firm.

Therefore, the primary function of any effective Business Development department must be client service and team building, thereby protecting the firm’s key recurring client activity.

The Role of Management

This focus should be driven and supported by the senior management team, and they of all people should lead by example. There should be a detailed plan in place for the firm’s development.

This still means that a firm should be investing in seminars and targeting clients, but the emphasis has changed. Targeting opportunities to sell new services to existing clients is the priority, ensuring the protection of the client base from matter-hungry competitors. After all, if clients were happy the first time, they should be extremely receptive to further contact.

Cash is King in Recession

While panic still seems to be dominating opinion in much of the legal press, a number of commentators (this one included) have sought to provide practical recession response advice. In a recent article I wrote for FD Legal magazine, I highlighted a number of points that will be key to successfully managing your firm through the recession:

• Lawyers can no longer rely on their firms’ inherent profitability, and must learn to forge much stronger relationships with bank managers and other providers of funding.
• The role of the finance department is now more crucial than ever, to keep the firm on a sound footing, and to convince the bank manager that this is the case.
• Economics must defeat politics – partners cannot be allowed to derail financial management initiatives, as this could now be terminal for the firm. Management must provide a strong lead.
• The basis for a sound financial strategy through the recession must be cash flow, cash flow, cash flow.

We are already seeing opportunities arising for well-run, strongly managed law firms as recession inevitably leads to market consolidation. Increasing market share through careful business development planning will be an option, but a swift and effective response requires a strong funding position.

The immediate focus must be on cash flow and the systematic reduction of lock-up. This involves standards being set at a departmental level, and exceptions being identified in order to be eliminated. Responsibility should lie not only with individual fee earners, but also with a nominated partner in each department who will be entrusted with persistent follow-up. This is where the importance of the management board, and the ability to achieve partner buy-in, demonstrates its value. Only then can the firm’s management turn its attention to cost structures, and longer-term profitability.

Cash management has historically been a ‘Cinderella’ function in the legal sector, but strong demand and the barriers to entry to the legal market meant that firms could prosper in spite of this. The market has turned, however. Money is scarce, and banks prefer lending to customers with good financial management and management information, and so these will no longer be optional, while the Legal Services Bill and private equity will step up the pressure next year. 2009’s market therefore requires a fundamentally different approach, recognising the vital role of cash management in ensuring a firm’s survival and prosperity in the changing legal landscape.