The ‘back office’ cranks up a gear
How law firms are adapting to the competitive market through the deployment of more sophisticated business services roles.
Every other conversation we have with a client about a new role touches on the ‘New World’ post October 2011. This is when regulation in the legal profession will bring about the most profound external change to the sector for several decades. It will allow legal entities to float or to sell part ownership to outside investors as a way of raising capital for business or other purposes. The changes coincide with a new solicitors’ code of practice, which shifts regulation firmly on to the entity with a far greater emphasis on a business to manage compliance. The new changes will also allow non-lawyers to own and manage a law firm.
In response, some firms like Irwin Mitchell have clearly stated their intentions; others know that change is approaching and that they need to articulate what it means for them. Very few seem to really know exactly how their firm will need to evolve to meet the new structure.
Without exception, however, all firms are embracing the need to manage aspects of their business better. Cast your mind back to the management structures of many sizeable law firms in the mid 1990s, when the Managing Partner, Senior Partner and Partners would represent the core support functions of finance, marketing, personnel and IT. These people had usually been selected on the back of a perceived strength with numbers, clients, computers or people. Fee earning came first – management was more hobby than business critical.
Wind the clock forward to 2011. In many instances the management boards of these same firms might easily have a Managing Partner plus a handful of partners heading up sectors or practice groups, working with a team comprising a non legally qualified Chief Operating Officer and (non lawyer) directors in charge of finance, business development, risk, technology and human resources.
On top, a number of firms have invested in a Non Executive Director (NED) from outside the profession and have senior experts looking after learning and development, diversity, corporate social responsibility and facilities.
In the recent downturn, law firms have continued to invest in what most people refer to as business support or business services functions. These aspects of a firm’s business are perceived by many as critical – indeed one Managing Partner said that he would sooner hire a best of breed HR Director in exchange for a couple of lateral hires.
The focus on recruiting the best support services has never been more obvious. The core support functions (finance, HR, BD and IT) are now headed up by high calibre, senior, strategically minded experts in their field. They are often rewarded as partners via the use of shadow equity points and they share in the gain and pain of the partnership’s results. But these people’s existence is really a given. To not have them in place would seem ridiculous in a modern law firm.
Perhaps the more interesting trend now is for firms to invest in the recruitment of highly specialist people to take ownership of aspects of the firm’s business that are deemed crucial to the firm in what is a rapidly changing market, irrespective of what happens in October of this year. In the mid-1990s it would have been inconceivable that these roles (and the people that fill them) would have plied their trade in a legal practice.
We thought it might be interesting to explore some of these new and emerging roles. We predict more roles like these and many more besides, as the legal profession adapts to the more sophisticated tastes of its clients and firms ensure they keep their edge in a market that is competitive as ever.
Chief Operating Officer (COO)
While a number of firms have had COOs in place for a while now, this role has been one that many firms have created for the first time in the last few years. In most instances a COO role sits alongside a Managing Partner and takes on overall responsibility for the firm’s support services (finance, technology, marketing and HR plus any other specialist functions that exist) and all issues with strategic, policy or internal control implications. It should be differentiated from the role of Chief Executive Officer (CEO) which usually replaces the role of Managing Partner. Non legally qualified CEOs running a firm are more rare. In our experience, the COO role usually comes about following the appointment of a new Managing Partner. Many of the COOs in the sector originally qualified as accountants, but this is not always the case.
Business Manager
The Business Manager roles differ to the role of COO, although some refer to them as COO roles for their practice group. The role of Business Manager provides first line support to the Practice Group Head in order to develop, organise and drive the group’s strategic business activities. A good Business Manager will guide and support the Practice Group Head in his/her leadership role and ensure that the strategy, plans and structures of the practice group are in place and are aligned to the firm’s strategic goals. The Business Manager will play a critical role as the firm implements its strategic plan, working closely with the business support heads to achieve effective integration and consistency of approach across the range of working practices from client targeting to financial management. The main objective is to take overall responsibility for the day-to-day non-fee-earning operations of the practice group and to provide a high quality managerial support service, both on a strategic and operational level, in order to optimise the productivity and profitability of the Practice Group Head, partners and lawyers.
Client Relationship Management (various roles)
It is trite to say that clients are at the heart of any firm’s business but our experience suggests that only in the past two or three years have firms really started to invest properly in the whole area of key account management.
The involvement of procurement in panel tenders and the general pressure on price means that client relationship management has become even more key – as much as anything because effective CRM will hopefully prevent clients going out to a competitive tender. Client relationship roles are strategically crucial to firms and deliver on client experience and sector insight. People in these roles have overall responsibility for identifying how the firm develops long-term business partnerships with clients as well as having hands on relationship management of clients in a particular sector or practice group. In the modern CRM role there is a significant amount of client-facing experience involved. Tangible outcomes from an effective CRM programme will include growth in key account revenues and existing client revenues and margins, increases in cross-selling meetings and implementation, and successful delivery of client induction programmes.
Strategic Analysis/Executive Manager
A number of firms have people dedicated to providing analytical support to key strategic decisions. These roles often report to the Managing Partner of the firm and will provide assistance in researching and managing projects relating to strategy, the market and competitor analysis. External areas covered might include mergers, bolt-ons/lateral hires or new office openings, while the role will usually have an internal aspect regarding decisions around areas such as restructuring activity or organisational design, where the role would support the board of the firm and include financial analysis to facilitate the decision-making process. These roles are very varied and will also provide ad hoc analysis of financial performance (eg, revenue/profitability trends) covering offices, practice areas and sectors. On top of this, the role often acts as the Chief of Staff/trusted adviser to the Managing Partner. A significant feature of this role is the need to be responsive to requests of a disparate nature, providing analysis and opinion on a very wide range of issues.
Head of Risk/Compliance
A Director of Risk and Compliance has overall responsibility for risk and compliance, client matter inception, conflicts, anti money laundering, complaints handling, and business continuity for a firm. These roles are becoming more and more prominent and several firms will have this person sitting on the main board of the firm.
Responsibilities will include ownership of the risk and compliance strategy of the firm and for ensuring that the firm has a culture that identifies, considers, assesses, monitors and, where appropriate, mitigates all risks affecting the firm. It will also have responsibility for ensuring the firm has policies and procedures embedded within the firm to ensure compliance with jurisdictional, regulatory and legislative requirements.
The person (or their team) will cover all aspects of client matter inception processes (eg, conflict checking, anti money laundering, reputational risk). They will also be the primary person responsible for designing and implementing the firm’s compliance procedures, managing the complaints handling process and considering any matters that have been identified as a reputational or financial risk to the firm.
Pricing, Project Management and Business Efficiency
Roles focusing on this area are probably the latest type of role to emerge in response to the increase in demands of the client.
The purpose of these roles (commonly called Project Manager or Pricing Manager) is to help improve the efficiency of project execution in the face of increasing pressure from clients to deliver alternatively priced projects (eg, fixed fees). These roles will ensure that, in providing this alternative fee structure, the firm is able to both deliver this service to the client but also that it represents profitable work to the firm.
Specifics of the role will include coordinating work effort, scoping and planning a new piece of work, fee monitoring, status reporting and liaising with clients. A key aspect is to identify improvements to work product, processes, tools and systems and to introduce new working efficiencies. There are likely to be several iterations of this type of role emerging, with some focused specifically on pricing, others on business process re-engineering and some on client focused project management.
Procurement
In a similar vein to the way law firms have been put under pressure by procurement led tendering, so too have suppliers to law firms – whether this relates to the provision of catering, recruitment or other services. The specialist procurement/vendor management role has been designed to support heads of the various business services functions to manage a number of the firm’s strategic vendor relationships including contract terms, commercial & strategic alignment, and risk. These roles tend to work with big spend functions, particularly in relation to IT and general operations, and they will take a lead in relation to major vendor selection and contract negotiations. The people will be responsible for annual spend of many millions of pounds and, on top of the requirement to ensure that favourable terms are negotiated on behalf of the firm, the role is also responsible for managing key vendor related risks (eg, those affecting reputation, CSR/diversity standards etc).
These roles are a snapshot of how the legal services sector has upped the ante when it comes to managing its business. There are many more specialist roles that exist – those covering digital marketing (yes, LinkedIn and Twitter have their parts to play in a lawyer’s business), others focusing on diversity and inclusion, specialist roles geared around corporate social responsibility, outsourcing, alumni programmes, talent management, reward, product development and internal communications. The list goes on and is set to increase.
At First Counsel we have a team of seven that specialise in the recruitment of professionals across the full spectrum of business services. If you are thinking of scoping a role – however bespoke to your firm and however specialist – we would be delighted to assist. TS
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