Creating effective management structures

Scottish solicitors have traditionally been “men of business”.  The world however has moved on since the “Guid Ganging Plea” was commissioned. Every solicitor in private practice is now acutely aware that their business requires to be managed properly if it is to be effective. The problem for busy practitioners is establishing who is to be responsible for managing the business and what management structure should be in place. In addition, what skills are required for a modern business.

Solicitors normally carry on business in partnership and the Partnership Act, 1890, Section 24 (5) provides that every partner is entitled to take part in the management of the partnership. This however is too vague for the requirements of the modern world and will invariably require the partners to agree to a management structure. This is also the case in the small number of firms which operate as incorporated practices or limited liability partnerships. How each firm does, in practice, manage itself will depend upon the nature of the firm, size, location(s), and type of business being undertaken.

Partners are responsible for the conduct of its business. Invariably, they are also responsible for delivering the legal services that are the product of the firm. It is vital that the partners agree who will be responsible for the different aspects of the management of the business and delegate to them the necessary authority to carry out this task.

Management of a firm of two or three partners with perhaps ten or twelve employees is radically different from a firm of twenty or thirty partners and two to three hundred staff.  If you do not have a Partnership Agreement in place then you most certainly should do so immediately. However, this is no substitute for a management structure. Unfortunately there is no standard template for a management structure. There is, however, a process that should be followed to achieve the desired end result (i.e. an effective management structure and efficiently run practice).

The first step is developing a Business Plan. This will set out where the firm is, in its particular market and where the firm aims to be in the future. A management structure can then be prepared with a view to implementing the Business Plan. I would recommend that you consider using outside help to prepare a Business Plan. You should spend some time researching your potential market, profit levels, setting up costs, etc., and should complete costings.

How do I go about preparing a Business Plan? The most important factor here is to prepare a proper document. Many firms believe they have a Business Plan but they simply have not written it down. If it is written, it is much easier to communicate to partners, staff and others and it allows you to measure progress and adjust the plan, where necessary.

Ideally, the Business Plan should comprise an introduction to the firm, an outline of the current business, a review of the past performance of the firm, the vision of where you want to go including goals and targets, critical success factors and long term strategic objectives, future plans and an indication of how the firm is to implement these plans, resource implications (both financial and other) and, lastly, the financial projections.

Having gone through the planning process the management structure will be much easier to handle. The partnership, personnel and succession planning will need to put “round pegs in round holes”. As with any planning operation, it may be necessary, from time to time, to re-define tasks and offer training.

Following the preparation of the Business Plan the Partnership Agreement should be reviewed in the light of any major policy decision regarding how the firm is to be managed and by whom. Appropriate authority must be given to those appointed so that they have the freedom to act within the guidelines/parameters laid down.  Those appointed to the task must accept the discipline imposed by the structure. The management structure should be set out in writing and everyone in the firm should be aware of it.  If there is a staff handbook then perhaps the structure might be included to simplify an induction programme. It is vital that the partners fully accept the structure and all it entails.

In today’s fast moving pressurised world it is very necessary to measure management responsibility in relation to fee earning workload. Stress is a major factor. Differing responsibilities may combine to overstress even the best of us. Sometimes a person may suffer underlying stress or depression due to a lack of management responsibility and a perceived lowering of status. Again the management structure must be flexible and responsive to the people involved, fee earning and in-house needs.

What type of management structure?

There are many different types of structure appropriate to legal practices and these can vary from setting up a management board,  naming a management partner or even appointing a non-lawyer as Chief Executive! Historically, the benevolent dictatorship has existed where the Senior Partner has taken all the management decisions. With the right dictator, the decisions are taken quickly and the other partners do not spend unremunerative time on management matters.  In a small firm this may still be appropriate although today the complexities of business make it very difficult for one person to have sufficient know-how or indeed the time to fulfil the job properly. Moreover, new partners may be excluded from management and have little real idea as to how the firm is performing. Sadly there are examples from time to time of new partners whose experience of partnership are negative and costly to them financially. Succession may also be a problem.

Management is sometimes delegated to a committee of partners. Committees can bring together know-how from different areas of the business. The committee must ensure it is clear about who is responsible for implementing each decision.

The committee type structure leads on to one or more individuals having specific responsibility for managing different areas, e.g. Corporate or Private Client, Office or Administration, Personnel, Finance, Premises, IT and Online Services, Training, etc.  This will only work efficiently if there is proper co-ordination perhaps through the medium of a Managing Partner/Chief Executive or an Executive/Management Committee.

The most effective type of management structure will probably be the type where one person co-ordinates the management of the whole firm with individuals responsible to him or her for specific ideas. This can be shown as follows:

The designated Cash-Room Partner and the Client Relations Partner should be part of the Management Structure together with the Managing Partner and the Finance Partner.

In a larger firm it may not be cost effective for the partners to meet often.  In this case, the partners should appoint a Policy

Committee with delegated powers. The Chairman/Senior Partner would normally chair this Committee.

Who should be the managers?

The time and legal know-how of the partners are among the main assets of the firm and it is, therefore, vital that the use of these assets to deliver legal services cost effectively should be maximised.

In larger firms the Managing Partner may need to devote all his or her time to managing but where possible day-to-day operation should be handled by non-lawyers who are not in the main fee earners. It may be found beneficial to employ non-legal but professional managers i.e. Financial Services, Debt Collection, IT, Chartered Accountants or Law Accountants (S.O.L.A.S.), Marketing, Human Resources, Property, Health and Safety, Data Protection and/or others in the management structure and to give them sufficient authority to undertake their tasks successfully. Not every firm can justify the employment of full time specialists.  It is possible to hire part-time managers or use consultants.

It needs to be recognised that some partners have little interest in management, preferring instead to concentrate on the delivery of legal services. Some solicitors do not want to be a partner, because they are uninterested in management. However, some will be, or will have the potential to be, skilled managers. The management structure should include everyone from the most senior to the most junior and it will only work effectively if everyone is kept advised of who does what and everyone accepts the disciplines imposed.

I offer below some services which you may find helpful and I would take this opportunity to thank Sandy Weatherhead and Fiona Westwood who wrote the full papers on Management Structures and Business Planning respectively contained in the Better Client Care and Practice Management Guidance Manual which formed the basis for this article.

The Practice Management Committee offer assistance to solicitors through the Practice Advisory Service when those wanting to discuss management or business difficulties or opportunities receive a one day visit from an experienced member of the profession on a totally confidential basis. The Advisor will prepare a report that will be given to the firm either on the day of the visit or shortly thereafter. I would stress that the Society do not receive feedback from the advisor although the senior advisor may telephone the firm after the visit seeking comments on the service (not, I hasten to add, the matters discussed concerning the firm). Telephone 0131 225 9852 to be put in touch with the senior advisor.

The Better Client Care and Practice Management Guidance Manual provided to all solicitors by the Practice Management Committee is also available on the web site www.lawscot.org.uk.  The manual offers lots of good advice on Management Structures, Business Plans, Training and many other subjects. The manual is to be updated again in 2002.

The Marketing Committee provide the Marketing Advisory Service. The service is delivered by independent marketing consultants and I would commend it to you. Contact Linsey Lewin at the Society, telephone 0131 476 8174 or linseylewin@lawscot.org.uk

Since I did mention stress in this article I feel I should draw your attention to Lawcare. For solicitors suffering from stress, depression, illness or addiction or indeed for those affected by a solicitor displaying the aforementioned symptoms, Lawcare offer a totally confidential advice and support service by operating a 24-hour telephone helpline on 0800 279 6869.

Alan S Matthew is Convener of the Law Society of Scotland’s practice management committee