I was recently having a discussion with a friend of mine who is the Managing Partner of a firm I love and greatly respect. We were talking about Valorem’s Advisory Board and what a great experience its been for us. She lamented that she would love to create a similar board for her firm, but had run into resistance from some of her partners. Her comment got me thinking about the difference between having an ownership stake in an enterprise and controlling its operation, traditionally the function of enterprise management.
Perhaps dating back to those “olden days” (a phrase my kids use with me all the time) when men were men and partnerships were collegial and law was a profession instead of a business, our profession has been burdened with the notion of decision by consensus. That is, partners will hash an idea out and eventually a decision on the issue at hand will be made by general agreement. Sure, the legal documents provide for votes, but consensus is the favored approach.
As firms grew in size, the folly of this approach became apparent. Key decisions were delayed because “Bob” was traveling. Not all partners had the same appreciation for financial dynamics or client relations or other practice nuances, and only a few seemed to appreciate the “ways of the future.” Because no one was accountable, lots of things never got done. Some firms did, in fact, embrace concepts of enterprise management that would be recognizable in at least some business schools. Still others concentrated power in the hands of a few partners, although this approach typically has led to turf wars. The common denominator among most of these newer approaches is that they lack accountability. The absence of change amongst the managing partners in BigLaw during the last two years illustrates that essential failing in the management models of most firms.
Let’s look outside the law for a minute. Can anyone imagine Mabel Jacobs, an 82 year old retired homemaker who owns a few thousand shares of stock in Microsoft walking into Steve Ballmer’s office to talk about her views on what Microsoft should be doing over the next few years? About executive personnel decisions? About how it should use its working capital? Can you imagine a line of shareholders waiting to have similar discussions? Of course not. In the real world, we distinguish between ownership and management. Ballmer may be elected by the Board which is elected in turn by the shareholders, but once in, he makes decisions until the Board decides to remove him from his position.
Why should law firms view management differently? Yet partners routinely mistake ownership interest–a right to profits–with management. In my own experience, I’ve seen the interest of former partners in management issues vary greatly according to their workload. Get close to a trial and suddenly the business of the law firm is irrelevant. Some people are not interested in the economic circumstances of the business world. Why on earth would we want them influencing marketing and pricing decisions? I’ve seen firms elevate their primary rainmaker with a thirst for power even though that person could neither management their way out of a paper bag or lead a firm to ice in the Arctic. And why, as the pace of change accelerates to a speed that will shake foundations of virtually every enterprise, would any group of rational actors embrace of form of business management that is the antithesis of nimble and effective?
I am not, by the way, suggesting that every decision be concentrated in one person’s hands. Decisions like admission of new partners, merger, and other core issues ought to be discussed and voted upon. But a decision on whether to create an Advisory Board and who would be on it would never qualify as a core issue. Certainly an effective manager and leader will prize communication with his or her constituents, perhaps embracing what Tom Peters calls MBWA—management by walking around. But firms that tie the hands of their senior managers risk paralysis and unfortunately, obsolescence.