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Diversity of disciplines shape new business of law

1 June 03

Non-lawyers are becoming an increasingly important voice in law firm management

by Roger Mackenzie

News that Boyds have parted company with Scotland’s first non legally-qualified managing director, Martin Street, might suggest that the marriage between legal firms and non-lawyer directors remains a rocky one.

But as legal practices increasingly forego the traditionally cumbersome regime of partners’ meetings and replace it with a more streamlined corporate approach, in some firms non lawyers are playing a pivotal role in the boardroom and once traditionally managed legal partnerships are introducing corporate style designations.

Pagan Osborne’s transformation from the epitome of the genteel country law firm to the aggressive competitor that cocked-a-snook at its city rivals by winning the inaugural ‘firm of the year’ award at the RJ Cuthbert Legal Awards can be traced to shedding its traditional partnership model and introducing hard-headed business practices.

“Six years ago our management structure was outdated, partners’ meetings decided everything, big and small issues, and in trying to get consensus in decision-making we were either making no decisions or bad decisions. It was cumbersome in timescale and I guess that’s not untypical even of where many firms find themselves today,” said managing partner Alistair Morris.

The subsequent appointment of Alison Denton as Director of HR and Shaun Gillanders as Director of Finance has enabled partners to “concentrate on the delivery of high quality legal work”.

Both have quasi-partner status, attend partners’ meetings, have a forceful voice at the meetings and get a profit share.

“The roles we have are probably not that unusual now, but the extent to which we exercise these roles or are allowed to exercise these roles are probably quite different,” said Denton.

“The managing partner of a leading firm asked me ‘do you speak at partners’ meetings?’ He was a bit incredulous that I had an equal voice.”

Part of that process has involved looking at the roles of partners, and identifying three roles as shareholders, as a team leader and, finally, as a black letter law provider.

“What we try to do is get partners to play on their strengths and recognise that we have to bring in other people who have other strengths that the business needs,” said Morris.

What makes their approach different, according to Morris, is in taking a long-term approach.

“Most firms, partly because of the nature of partnerships and partly because of the tax regime, just live from year to year and they take out all the money rather than trying to invest it in the firm. Partners tend to want the firm to provide them with the lifestyle for as long as they are working.”

At Bishops in Glasgow, the firm runs a board of management which involves managing partner Alasdair Fleming and the non legal professionals, responsible for areas such as marketing, IT and HR, managing the firm on a day to day basis.

But where they are now attempting to stand out as truly different in their approach is with the launch of a new public sector consultancy, Bishops Consulting Ltd, which is being marketed as “a unique new division which will specialise in working with local government, executive agencies, non-departmental public bodies and housing associations to help address the modernisation agenda”.

Spearheading the consultancy are Benny McLaughlin and Derek Stewart, both headhunted from KPMG’s Public Sector Advisory Services, in a move which may signify that in the post-Enron environment, accountancy firms are having to retreat back to their core areas of business.

Bishops Consulting will operate as a separate company and is, says managing partner Alasdair Fleming, “a natural extension of our existing public sector work in our social housing and education units”.

“By integrating both specialisms, we will be able to provide a seamless range of services to public sector clients.”

Benny McLaughlin said: “Joining Bishops will enable us to diversify into other areas of public sector work. Previously, we have always had to outsource our legal business however, we will now be able to deliver a complete and wider range of services which will benefit clients. Bishops has been actively involved in the public sector market for a number of years and our services will complement and add to this.

“It was clear people don’t just buy in a service, they want to buy a solution which comprises a whole range of different services. In a PFI or PPP, you need a whole range of different advisers and people are increasingly looking for a one-stop-shop in terms of their professional services. It made much more sense to pool our resources.”

Derek Stewart predicts it will start a trend and help the market become more sophisticated. “Framework agreements create competitive pressures, and organisations are seeing services as a commodity. If we can pull the strands together, then we start to challenge the traditional way of buying services, so it could have a knock-on effect, not just in the way services are delivered, but the way they are procured in future.”

When in 1998 Brodies set about implementing a policy of significant change in their internal management systems, central to their thinking was the creation of a two tier board, one to establish strategy and the other to run the operation of the firm.

While the firm’s professionals from other disciplines don’t sit on the strategic board, they are key members of the operational board.

“The operational side of things takes forward the strategy. When we reviewed our business in 1998 it was clear that in order to make progress we needed to recruit capable people to run the support side. Lawyers are best at delivering legal services not selecting IT systems or marketing the firm. We saw our non-legal directors as essential in delivering the internal service,” said managing partner Bill Drummond.

“We took the view that the presence of our support operations on the operational board was a must to provide that seamless communication between legal and support and to allow lawyers to do their job.”

Drummond stops short of the Pagan Osborne approach – the non-legal directors aren’t quasi partners.

“They are like the HR or finance departments in any corporate or public organisation. They input into the thinking of the strategic board. Ideas flow up as well as down.”

At Scotland’s largest firm Maclay Murray & Spens, each of their 12 departments now run, if not quite autonomously, as separate business units. In addition to non-lawyer managers, the firm has introduced a conventional business discipline into its partnership structure.

“Essentially we now have four partners’ meetings a year, and one of those is essentially to sign off at the end of the financial year and on the business plans for the year ahead, so the real management of the firm is driven by the individual heads of departments.”

Part of the exercise has seen Michael Walker become Chairman and Magnus Swanson Chief Executive.

“We thought clients better understood the role of a chief executive than managing partner. If you try to operate any business with nearly 70 proprietors who are part of the business and who all equally believe they have a right to be heard you are going to run into problems unless you instil a bit of discipline and a chain of command.

“We are still pretty collegiate in our approach, which I think is a good thing for a partnership. We have not gone the whole hog on the corporate front, which I think gives us the edge,” said Michael Walker.