Practice Groups Lead To Better Management

The evolution of law firm management has been slow and deliberate, usually built around established business management models. For most firms, the model is flat: A few senior-level administrative managers work closely with the partnership's executive management and make most of the decisions. But recently, several firms have adopted a new management model: practice group administrators.

Practice group administrators can be compared with business managers at the division level in the corporate world, who support the chief financial officer or finance manager. The business manager focuses on the details and inner workings of a line of business, while the CFO focuses on the bigger picture. Specifically, a business manager analyzes the financial results of the business line and compares the results with the planned strategy.

Similarly, a practice group administrator's role is to help the partner-in-charge maximize the performance of the practice group from a financial and operational perspective. The practice administrator, like an executive director, focuses on the intersection of revenue generation, profitability, cost containment, and strategy. Working closely with the partner in charge of the practice group, the practice administrator helps ensure that the practice operates efficiently and fulfills its potential.

Some firm leaders question the wisdom of creating a new position that mirrors the role of the executive director. But that's the point. Executive directors have become overloaded with responsibilities, and the problems competing for their attention have multiplied. At most flat organizations, the lower level of management is not allowed to make decisions on smaller issues. Frustrations grow as small issues fester and become big issues. Many problems are addressed at the office management level, but some problems belong to practice groups that stretch across offices.

Practice group administrators support the executive director by filtering out smaller problems that can be resolved at the office or practice group management level. An office administrator and a practice group administrator, working together, can provide checks and balances to each other's decisions, allowing the executive director to comfortably redirect some authority.

Here are the major benefits that can accrue from taking a practice group approach to management, with the help of a practice group administrator:

• More focused management. While the CFO directs cost-cutting measures, strategies to increase revenue must come from the partners. Partners prefer to think about legal strategies and taking care of their clients, not the business aspects of their practice. They think about the business perspective when they are forced to, usually when the numbers aren't where they are expected to be. And partners usually lead better than they manage. A practice group administrator can let the partners concentrate on leadership (finding the answers to business problems), while the administrator concentrates on management (implementing the solutions).
• Tailored approaches to common objectives. Typically, profitability and revenue-generation problems are addressed with partners on a firm-wide basis. And once the partners generally agree on a proposed solution, it is intended to be applied to all practice areas. For example, changing the ratio of secretaries to attorneys or paralegals to attorneys can often improve profitability without a loss of efficiency by the attorney. At the partners meeting, they will vote to reduce the ratio, but some partners are thinking, “While that's a great idea, it really doesn't apply to my practice group because we have unique circumstances.” The end result is that almost no one implements the solution, leaving the executive director and CFO to try to force the implementation of the solution on all the lawyers.

A better process is to identify the objective (such as increased profitability) and then ask the partners to find the best solution within their practice. A practice group administrator can help the partners outline the best solutions for their practice.

• Truer measurement of profitability. Strategic plans are often focused on specific practice-area development. Yet most firms are not structured to manage at the practice level, which means they aren't prepared to measure results as they implement their strategy. The profitability model is usually built around each office, not each practice group. The problem with this model is that one severely underperforming practice area can make the entire office appear to be unprofitable.

Examining the matrix, looking at the profitability of practices as well as offices, gives a truer and multi-dimensional perspective of the financial health of the firm. Cause and effect can be linked and tied back to the strategic plan.

• Minimized silo effect. In a flat organization, power is concentrated at the very top. The firm's managing partner, the executive committee, and the office managing partners hold the power. Each practice group in each office may have a partner in charge, but they may lack the power (or the desire to buck the power structure) to make the best plan for the practice.

That structure often creates a silo effect, as each office managing partner tries to hold complete power over his silo. The result is a firm-wide strategic plan built around the practice areas but limited by the lack of interaction at the office level. Supporting the matrix, looking at the practice areas across the offices, helps minimize the silo effect.

• Strategic plans that work. Strategic plans built around practice areas are more likely to be implemented because they focus on practical changes instead of grander, theoretical changes. The business manager can help the partner develop and implement a strategic plan for the practice that incorporates plans for business development and marketing, measurement of productivity and results, appropriate staffing levels of lawyers and support staff, and business continuity.
• Reduced turnover. Turnover is expensive for any business, especially law firms. Recruiting and hiring lateral partners is also expensive. If turnover can be minimized, firms can grow their own partners. A practice group administrator can help associates understand where they fit in the practice group and where their practice group fits in the firm. Sharing financial and productivity information with associates gives them a new perspective on their contribution to profitability and an incentive to commit to the firm for the long term.
• Retention of good staff. The practice administrator can also help create a training ground and career paths for the firm's support staff. The typical administrative structure can cause its own silo effect, both within offices and within departments. When employees understand that future opportunities in the firm may come from outside their department or office, they pay more attention to what is happening in other departments and offices. Future practice administrators, for example, may currently be financial analysts in the accounting department or office administrators. Talented people, lawyers and nonlawyers, are willing to invest in their future if they can visualize the path to success. The best law firms show their best people that path, and they retain them.

Practice group administrators can be a sound investment: Improved productivity translates into increased profitability. A practice group administrator can make a positive impact in a short period of time, but the payoff continues for a long time, especially in happier lawyers and staff.

The evolution of law firm management has been slow and deliberate, usually built around established business management models. For most firms, the model is flat: A few senior-level administrative managers work closely with the partnership's executive management and make most of the decisions. But recently, several firms have adopted a new management model: practice group administrators.

Practice group administrators can be compared with business managers at the division level in the corporate world, who support the chief financial officer or finance manager. The business manager focuses on the details and inner workings of a line of business, while the CFO focuses on the bigger picture. Specifically, a business manager analyzes the financial results of the business line and compares the results with the planned strategy.

Similarly, a practice group administrator's role is to help the partner-in-charge maximize the performance of the practice group from a financial and operational perspective. The practice administrator, like an executive director, focuses on the intersection of revenue generation, profitability, cost containment, and strategy. Working closely with the partner in charge of the practice group, the practice administrator helps ensure that the practice operates efficiently and fulfills its potential.

Some firm leaders question the wisdom of creating a new position that mirrors the role of the executive director. But that's the point. Executive directors have become overloaded with responsibilities, and the problems competing for their attention have multiplied. At most flat organizations, the lower level of management is not allowed to make decisions on smaller issues. Frustrations grow as small issues fester and become big issues. Many problems are addressed at the office management level, but some problems belong to practice groups that stretch across offices.

Practice group administrators support the executive director by filtering out smaller problems that can be resolved at the office or practice group management level. An office administrator and a practice group administrator, working together, can provide checks and balances to each other's decisions, allowing the executive director to comfortably redirect some authority.

Here are the major benefits that can accrue from taking a practice group approach to management, with the help of a practice group administrator:

• More focused management. While the CFO directs cost-cutting measures, strategies to increase revenue must come from the partners. Partners prefer to think about legal strategies and taking care of their clients, not the business aspects of their practice. They think about the business perspective when they are forced to, usually when the numbers aren't where they are expected to be. And partners usually lead better than they manage. A practice group administrator can let the partners concentrate on leadership (finding the answers to business problems), while the administrator concentrates on management (implementing the solutions).
• Tailored approaches to common objectives. Typically, profitability and revenue-generation problems are addressed with partners on a firm-wide basis. And once the partners generally agree on a proposed solution, it is intended to be applied to all practice areas. For example, changing the ratio of secretaries to attorneys or paralegals to attorneys can often improve profitability without a loss of efficiency by the attorney. At the partners meeting, they will vote to reduce the ratio, but some partners are thinking, “While that's a great idea, it really doesn't apply to my practice group because we have unique circumstances.” The end result is that almost no one implements the solution, leaving the executive director and CFO to try to force the implementation of the solution on all the lawyers.

A better process is to identify the objective (such as increased profitability) and then ask the partners to find the best solution within their practice. A practice group administrator can help the partners outline the best solutions for their practice.

• Truer measurement of profitability. Strategic plans are often focused on specific practice-area development. Yet most firms are not structured to manage at the practice level, which means they aren't prepared to measure results as they implement their strategy. The profitability model is usually built around each office, not each practice group. The problem with this model is that one severely underperforming practice area can make the entire office appear to be unprofitable.

Examining the matrix, looking at the profitability of practices as well as offices, gives a truer and multi-dimensional perspective of the financial health of the firm. Cause and effect can be linked and tied back to the strategic plan.

• Minimized silo effect. In a flat organization, power is concentrated at the very top. The firm's managing partner, the executive committee, and the office managing partners hold the power. Each practice group in each office may have a partner in charge, but they may lack the power (or the desire to buck the power structure) to make the best plan for the practice.

That structure often creates a silo effect, as each office managing partner tries to hold complete power over his silo. The result is a firm-wide strategic plan built around the practice areas but limited by the lack of interaction at the office level. Supporting the matrix, looking at the practice areas across the offices, helps minimize the silo effect.

• Strategic plans that work. Strategic plans built around practice areas are more likely to be implemented because they focus on practical changes instead of grander, theoretical changes. The business manager can help the partner develop and implement a strategic plan for the practice that incorporates plans for business development and marketing, measurement of productivity and results, appropriate staffing levels of lawyers and support staff, and business continuity.
• Reduced turnover. Turnover is expensive for any business, especially law firms. Recruiting and hiring lateral partners is also expensive. If turnover can be minimized, firms can grow their own partners. A practice group administrator can help associates understand where they fit in the practice group and where their practice group fits in the firm. Sharing financial and productivity information with associates gives them a new perspective on their contribution to profitability and an incentive to commit to the firm for the long term.
• Retention of good staff. The practice administrator can also help create a training ground and career paths for the firm's support staff. The typical administrative structure can cause its own silo effect, both within offices and within departments. When employees understand that future opportunities in the firm may come from outside their department or office, they pay more attention to what is happening in other departments and offices. Future practice administrators, for example, may currently be financial analysts in the accounting department or office administrators. Talented people, lawyers and nonlawyers, are willing to invest in their future if they can visualize the path to success. The best law firms show their best people that path, and they retain them.

Practice group administrators can be a sound investment: Improved productivity translates into increased profitability. A practice group administrator can make a positive impact in a short period of time, but the payoff continues for a long time, especially in happier lawyers and staff.