Nonlawyers now a fixture in firm management

 Rules and concepts of business apply to law firms as well

By Gary Gosselin and Jennifer Mann
The Daily Record Newswire

ST. LOUIS — The country is coming out of one of the worst recessions in decades. In addition to dealing with a sea change in the legal profession, many firms are positioning themselves for a healthy future.

How? By letting lawyers be lawyers and hiring business experts to operate the business side of the enterprise.

Most lawyers will tell you they got into law to practice law and not to be business people. But law firms are businesses, and the rules and concepts of business apply to them as well. It’s not a new concept, but with change comes more acceptance of business professionals in law offices.

“What I can bring is a business perspective and business processes, and biz principles to an organization where we have incredibly talented people but not all have MBAs,” said Robert D. Kubic, chief operating officer of Michigan-based Honigman Miller Schwartz and Cohn.

“But from the standard of business practices, it’s an important role and one that the firm really looks to me to bring to bear, and that’s why they hired me.”

As COO, Kubic plays a significant role in the firm, setting strategy, and developing sound and proven business plans for business growth and profitability growth.

‘Makes sense’

Bruce A. Courtade, president of the State Bar of Michigan and partner at Grand Rapids-based Rhoades McKee, said law firms relying on nonattorney professionals is not a new phenomenon, and “arguably makes a great deal of sense on a number of levels.”

“Law firms are like any other complex business organization, facing the same issues experienced by most large corporations, ranging from human resources to marketing to compensation issues, etc.,” he said in an email. “It makes sense that they would look to bring in qualified professionals to help them run their businesses, just like other businesses do.”

Many law firms face issues arising because they are a multitiered ownership group and have a compensation system that is unlike most other businesses, Courtade said. Depending on the firm, the issue of compensation based on personal production, origination or some combination of both, presents its own problem set, he said.

“While in theory, vesting management responsibilities in one or more of a firm’s partners — especially since many lawyers make their livings advising their clients how to manage and run their own companies — sounds like a great idea,” he said. “But in practice, what can happen is some of the busiest, most productive and profitable partners are tabbed for firm management, reducing their ability to maintain their own practices. The effect can be minimized or eliminated by delegating more of the responsibility for the firm’s day-to-day operations to nonattorneys,” he said.

“Firms often benefit from delegating more administrative functions — even high-level administrative functions — to nonattorney professionals,” he said.

Can’t separate

Terry Brummer, chief operating officer at Stinson Morrison Hecker, has been helping manage that firm for 25 years, giving him a long-term perspective on non-lawyer management.

“There are a lot of aspects to running a large law firm that are better with a management that can focus on best practices and all the things that go into the cost of producing our product,” Brummer said. “And at the same time, it does put the right emphasis on attorneys, that is, practicing law.”

Brummer said he was an integral part of the team that helped Stinson navigate its recent merger discussions with Leonard, Street and Deinard in Minneapolis, including in the decision to move ahead once there had been overtures.

“You can’t separate out the business and the practice sides of the firm when you’re trying to put together a new organization,” Brummer said. “There is so much interdependency, and thus it demands that we all be involved.” 

In everyone’s interest

Richard E.F. Holdup, a Harvard MBA grad, began as the new COO at Dykema Gossett in mid-August. He has been in business for 30 years and has been working with law firms for the past 11. He leads all operational and administrative functions of the firm, including finance, marketing and business development, human resources, practice management, operations and information technology.

“Firms realize they have become large, complex businesses — and you need that [business] expertise. And lawyers aren’t necessarily trained as business managers, and their higher use to the legal firm is to practice law,” Holdup said. “Part of my role is to take a lot of weight off the chairman’s shoulders so he can help drive revenue, and I can shoulder the burden on the administration side.”

Ken Young of Young Mayden, a nationally known legal recruiter based in North Carolina, said some firms have a haphazard process for choosing upper management.

In the traditional scenario, a firm chooses the best lawyer and/or most respected lawyer for its managing partner. Young said that person is probably one of the firm’s best producers and inevitably will be taken out of commission if he or she has to run the firm.

Setting guidelines

The role of law firm COO has evolved in the last decade.

“COOs have really had the kind of influence in the business that you would hope to see as a professional in the role,” Kubic said. Before, the firms generally had a  role of executive director, and it tended to be more administrative in nature, managing HR, tech functions, firm operations and sometimes marketing.

“And really, in the last 10 years pioneering firms have a COO who plays a significant role in setting strategy, develop business plans for top line and profitability growth,” he said. “And I would say it is a trend for more professional management.”

But it must be clear, Young said, that the managing partner passes for the top manager in a firm and must be insulated from a lot of day-to-day operations.

“By the same token, you don’t want your managing partner supervising IT or personnel, jobs that you should have your COO doing, and you don’t want [a managing partner] compiling numbers — you want him evaluating numbers and strategies and making strategic decisions.”