Business of Law: The MBAs Are Coming

By John Reed
Attorneys with larger law firms, as well as the vendors that work with them, may find there’s a new sheriff in town, one who earned his badge at business school.

In an era when in-house counsel are increasingly demanding that their outside firms be more transparent – particularly in the areas of billing and fees, workflow, and staffing –firms are bringing on MBAs to take more active roles in matter oversight, and it’s a change that will influence the entire legal industry.

Professional, non-attorney managers in law firms aren’t anything new; taking a cue from the corporate world, MBAs have served in lead administration, finance, and marketing roles for years.  But the new infusion of business school talent is filling mid-level management positions attached to practice groups and client teams, and tasked with day-to-day project management directives such as overseeing costs, boosting efficiencies, and optimizing resources on a case-by-case basis.

To support the transition to a project-managed law practice, some firms have joined with top business schools to develop mini-MBA programs that not only instill in their associates and partners a deeper understanding of clients’ business environments and issues, but also give them insight into firm operations and profitability.  Other firms have put attorneys through Six Sigma and similar project management training to cast a brighter light on legal process workflow and matter management.  These efforts to educate attorneys as to both why this new direction is necessary and how they can contribute is critical to a successful transformation.

On paper, the anticipated benefits of legal project management are significant. Take, for example, the growing popularity (at least from the client’s perspective) of alternative fee arrangements.  Unlike the hourly billing framework where realization and write-offs are the law firm’s key concerns, value billing structures such as fixed-rate engagements, bundled and unbundled matters, and risk collars require closer monitoring of margins and expenses.  Allowing MBA-schooled project managers to handle forecasting and budgeting, propose appropriate billing alternatives, select and oversee vendor relations, and contain costs frees attorneys to focus on lawyering and business development.

In reality, the inflexibility of law firm culture poses a substantial challenge. For many attorneys entrenched in their own methods and philosophies, hourly billing and aggressive representation is the norm, a perspective that doesn’t necessarily correlate with maximizing efficiencies and optimizing allocation of resources.  Furthermore, relationship partners, client team leaders, and others in positions of prestige, responsibility, and visibility may not take kindly to relinquishing control, especially to a non-attorney.  It’s one thing to have to answer to the client’s business manager, but quite another to be accountable to one back at the firm, too.

Vendors will also feel the impact of legal project managers as well. In the new paradigm, working smarter and more effectively is paramount, which may mean restricting the approach that an attorney or client team takes relative to an individual matter.  This can narrow the scope of discovery or due diligence, resulting in fewer depositions and less of a need for records requests and document management.  It may translate into an early settlement or privately facilitated ADR rather than prolonged courtroom litigation.  Given this paradigm shift, the unique value that a vendor can offer a law firm and the end client becomes even more important. And value isn’t defined by results, but by level of service, sharing in the risk, and making oneself an invaluable business partner.

John F. Reed, Esq. is the founder of Rain BDM, a consultancy specializing in business development and marketing for attorneys and law firms.

John Reed

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