At big law firms, chief operating officers fall into three general groups. First, the enormously successful ones, who operate at the highest levels with the trust of the firm’s leadership and partners. Second, the recent arrivals from famous financial, accounting, or consulting houses, who are finding their way through a new jungle, smiling at the profit margins they’ve inherited, and chuckling at the thought that their new employers operate as real businesses. And, finally, the always-anxious administrators, who try to manage in an environment where they will never be seen as equals.
Each has his or her place. But in a time of steady change in the law firm market, each is also facing a new challenge. Will they be able to change their roles from the quintessential inside job to one that begins to face outward? No pressure: Only their livelihoods and the fates of their firms are at stake.
There’s little debate about the inward focus of most of their tasks. When COOs gather to talk about law firm management and profitability, they almost inevitably refer to the five levers they can pull: rates, realization, expenses, leverage, and run rates. The last is also known as: Work harder, damn it—or, as I prefer to think of it, the Iron Butt Syndrome. Each of those tactics calls for an inside move: Charge more and write off less; hold down costs and broaden the pyramid; and, of course, just how much sleep do you need, slacker?
Those five levers are so 2005. They’re tried and true, of course, except that they fail to take into account the secular changes wafting across the legal market. By now you must know the litany: a drop in inflation-adjusted client spending; a segmented and discerning market that resists automatic price hikes; and, for equity partnerships, an overall Am Law 200 no-growth policy. The point is that while firms may pull all they like on their usual levers, they’re discovering that they’re tugging on rather limp reeds.
Which brings me back to chief operating officers. With spending flat, at best, firms would be well advised to increase their focus on clients. Which is another way of saying that they need to ease their obsession with internal measures and increase their outward attention. Who might lead that charge? The COO. I say that for two principal reasons. First, this call to action is pretty standard in other lines of work, and the chances are that the COO will have participated in or at least seen how this work is done elsewhere. (If not, as Michael Corleone said in a different setting, you might need to find and hire a wartime consigliere.) Second, the assessments here need to be empirical and not sentimental or wishful. Relationship partners will have a place in any exercise, just not at the wheel.
What might a firm measure? Let’s start with two possibilities: behavior (an easy one) and value (a difficult one). I’ve spent most of this year talking with clients on behalf of law firms, and I’ve found that general counsel are very interested in both traits, but like their outside providers, they have an easier time gauging the first. What do they want? It varies, of course, but at the core they like lawyers who understand their business, give advice they find practical, treat them as equals, and help them manage their increasingly demanding jobs. I’ve found that while most clients do like and appreciate most of their lawyers, they can tell the difference between those who are truly helpful and those who are checking the boxes of their assignments. No surprise, they prefer the former and tend to give them more work. Now, in this environment, firms can assume the best and wait passively for the phone to ring again. But if their futures depend on satisfying their clients—and for the most part, they do—why wouldn’t they ask how well they’re doing?
Value is a harder inquiry, but it is a necessary one. As I’ve talked with your customers, not one has said that they get up each morning hoping to buy another dollop of your time. Instead, they speak of wanting your judgment and your expertise, and sometimes your courage. Yet they buy, for the most part, by the hour, and that’s how you sell your services. That sort of contradiction between what the customer wants and what the vendor sells won’t last forever. In my view, a complete change will take a long time. But the process has started, and it will proceed over the course of your careers. This is the moment to begin exploring ways to measure what your clients really value. And here’s the payoff: you might translate that new knowledge into the language of services offered, rather than time sold and bought.
Who might be best positioned to manage these inquiries? Law firm leaders don’t have the time. Partners are too caught up in the producer-manager web to have the inclination to look at this freshly. You could, I suppose, retain an astrologer, but your peers would laugh. That leaves your business-trained, numbers-crunching COO. Of course, he or she would lean heavily on your chief marketing officer, pricing captain, IT director, and client team managers. And these projects would be slow, trench-by-trench affairs: One answer will not fit all. Surely this will require a shift of perspective, a reassignment of duties, and forced marches outside comfort zones. Difficult, but it’s what the times demand.