Leading the way

The opportunity for non-lawyers to become partners or owners of law firms through the arrival of legal disciplinary practices (LDPs) has met a muted response since its arrival on 31 March, and opinion over whether the model is good or bad remains divided.

Some solicitors are unhappy about the relaxation and dilution of the traditional law firm model, others believe professional managers are essential in leading law firms through the challenges and opportunities of the Legal Services Act '“ by helping law firms market and manage their practices more effectively as businesses.

Most of the small number of law firms that have decided to become LDPs and embrace the possibility of up to 25 per cent non-lawyer partners are progressive in their thinking and tend to be exceptionally well-run practices. This reflects the inclusion of non-lawyers in positions of authority.

The Legal Services Act has rightly opened the door to huge opportunities for those professionals delivering incredible value to their practices and providing the skill sets that many lawyers lack. Many solicitors admit that they lack training in running a business, managing cash flow or understanding working capital requirements. Yet, as stringent lending sees banks wanting business plans, cash flows and evidence of well-managed practices, law firms need partners who have the understanding, skills and knowledge to deliver.

Business logic

On 31 March, practice director Mary Mocklow became a partner in her firm, DBL Talbots, part of West Midlands law group Talbots, which has a £4m turnover, six offices and 100 staff managing a mixture of publicly funded, private client and commercial work.

With a background in accountancy and management, she acted as consultant to the firm before joining permanently in 2001 and taking on the role of practice manager. This led to her present role of practice director with responsibility for the strategic development of the business.

She believes that 'a law practice is like any other business '“ clients are king and you have to make a profit'. She fears for firms where partners 'are burying their heads hoping that things will improve'.

'If a partner can charge out at rates of around £200 per hour and earn say £200,000 per annum in fees, then why detract from this by asking him or her to be responsible for finance or HR or any non-income area of the business?' she argues.

'It is surely more cost-effective to employ someone trained and experienced in those areas and who, in reality, will probably do the job better.

'In an economy where it is hard to earn those fees, business logic dictates that all efforts should be focused on client retention and bringing new clients through the door.'

'Many partners haven't the interest or skill set to manage a law firm and often aren't good at financial management,' agrees John Durkan of Switalskis. 'People who are the best in their field usually carry out their specialist roles 100 per cent of the time. So unless a solicitor performing the role of managing partner is prepared to spend 100 per cent of their time managing a law firm, it makes sense that solicitors should concentrate on fee earning rather than juggling management with a busy case load.'

Durkan, a chartered accountant, joined the West Yorkshire law firm in 2001. Appointed as practice manager, his remit included attending partner meetings and within a year he was running the firm on behalf of the partners, freeing them to concentrate on clients.

Since then, the now £6m turnover firm has grown from one branch with 20 staff to six branches with 165 staff and has become one of the top ten providers of publicly funded legal services in the UK. Durkan was appointed managing partner immediately following the arrival of LDPs.

A fresh perspective

One of the benefits of bringing in professional management, he believes, is that a fresh perspective can be cast on existing working practices. Recognising the importance of issues such as time recording and having the time to ensure changes are actioned can have a significant impact.

A key feature of LDPs, Durkan says, is that titles have finally caught up with seniority of roles and responsibilities.

'Internally, staff have regarded me as a partner for many years and in many equivalent industries my role would have been that of managing partner or director. The fact that LDPs enable those running practices to now have a title to match responsibilities will help retain talent within the profession.'

A third law firm already enjoying the benefits of becoming an LDP is Brethertons, an 11-partner commercial practice based in Warwickshire and Oxfordshire with 170 staff and a £7m turnover. The firm appointed finance director, Trevor Dyer, as partner on 1 April.

Having initially trained as a legal executive, Dyer retrained and qualified as a legal accountant in the 1980s. He spent 12 years as head of finance for another well-respected law firm before moving to Brethertons in 1991.

He now sits on the firm's management board and is head of administration, leading a team of finance, IT, HR, marketing and office services professionals. He also plays an active role in strategic planning, client relationship development, staff consultation and risk management.

'Quick decisions, firm leadership and a firm eye on the financials are all key to growing successful law firms,' Dyer explains. 'Having a finance or HR professional at the top table will prevent costly mistakes from happening and they also bring a different perspective to that of a solicitor partner who may be too close to the coal face to see the bigger picture.

'Solicitors on the whole are trained to pore over detail and pick holes. Most don't have a great deal of management training and are naturally cautious and risk averse. They aren't born entrepreneurs. Many just don't understand how the finances of their business work.'

Equal treatment

This isn't to say that becoming an LDP is all plain sailing. Dyer believes that for a non-lawyer manager to succeed and function effectively as a partner, he or she has to be accepted as an equal by solicitor partners. He was fortunate to be treated as such by the Brethertons partners for many years before earning the partner badge.

However, he says, 'there appears to be reluctance from some solicitors to acknowledge that a legal executive or non-lawyer finance, HR, IT or marketing professional can really make a difference at a senior level'.

Mary Mocklow agrees. 'At Talbots, all the partners and staff have bought into the model and ideology '“ but it hasn't happened overnight.'

Equally, lack of understanding of a law firm's culture and assumptions of high return on investment from non-lawyer partners will create tension and frustration.

'Being practice manager meant that I knew how the partners worked,' reflects John Durkan, 'and I had realistic expectations financially and understood the risks, which are the same as in any other business.'

'The rewards can be great for both sides but non-lawyer partners have to accept that the hit will also be theirs if the bad times come,' adds Trevor Dyer.

Losing talent

However, it seems that the introduction of LDPs is likely to have implications far beyond those few progressive firms who are leading the way.

'Traditionally professional managers in law firms had nowhere to go beyond practice manager or director. But times are changing and many may now find their best non-lawyer professional staff pushing at the door for partner status,' predicts John Durkan. 'Those firms who are not willing to consider the option may run the risk of losing some of their best talent to other more progressive practices.'

Trevor Dyer agrees, citing the example of a legal executive he knows who contributes more profit for the firm he works for than all of the partners put together.

He does so through the management of a close relationship with the firm's major client, who sees the legal executive as his lawyer, rather than the firm.

'His firm is not prepared to offer him partnership so it is likely to lose him, the client and, as a result, a major part of its profits,' says Dyer.

'Their loss will be someone else's gain because the legal executive feels he deserves the partnership badge '“ and there will be other more enlightened firms who will give it to him willingly.'

Slow uptake

Nonetheless, to date the profession's response to the introduction of LDPs has hardly been overwhelming. Despite the SRA reporting that it had received some 1,500 queries, only 14 legal disciplinary practices went live on 31 March.

Timing must have been a major factor. In the current economic climate, it is little surprise that only a handful of non-lawyers have taken on the challenge.

One could argue that, considering the liabilities of ownership and in the light of a recent survey by the 360 Legal Group showing succession planning to be almost non-existent in 70 per cent of firms, even this small number is impressive.

John Durkan agrees. 'I think the uptake would have been more if firms hadn't already had so much on their plates with the recession. Many will want to let the dust settle and be back on a firm financial footing before they consider such a step. Others will be interestedly observing the application of the new model before deciding if it's right for them.'

Not every practice needs outside assistance, he adds. Existing partnerships may well have the skills to run their firm profitably and successfully.

'But where a firm is struggling because it doesn't have strategies, whether financial, marketing or IT, for example, it will need to find that skill set from somewhere.'

I question how many law firms have the vision and foresight to follow the Brethertons, Switalskis and Talbots model.

The average age of equity partners is 58. Many are finding the changes sweeping the profession too much to take and yearn for pre-Clementi days.

However, we cannot turn the clocks back, and the sooner we accept the wisdom of the LDP model and the need for non-legal professional help at partner level in law firms, the better.

LDPs are a halfway house to ABSs (alternative business structures), a model less than two years away. Smart firms will already be thinking about attracting external investment and the structure to make that happen.

There has never been a more crucial time for law firms to bring in the professionalism they need to get their strategies right.