Corporate Model for Corporate Entities

A snappy title I agree. It all came about after a meeting I had with a former client. It's quite a large charitable enterprise that used to be extremely well run (well of course I would think that since I helped!). Some poor leadership in in the last five years, however, has led to some re-thinking on the part of the Trustees and management board and that is where everything has gone wrong.

Running charities is difficult, if only because it is so different to running a commercial or corporate organisation. I know, I've done both and am currently Chair of a small charity in Berkshire.

If a charity has been run badly, Trustees and boards often ask their auditors for advice or, if they are feeling brave, seek advice from large consultancies. These sorts of bodies tend to understand their own worlds and so offer a corporate model of governance. This can, sometimes, work - but generally only in the very large national and international charities which look quite like corporate organisations. For most charities and not-for-profit organisations it can be a disaster.

The key difficulty is in understanding that charities operate because of good will. Good will from staff, members, volunteers. The good will exists because everyone understands and agrees with what the charity is doing and believes that they are helping. Staff will accept what is usually a lower wage, members will join and then engage in the activities of the charity and people will volunteer to help out.

So steaming in with a corporate model can wreck all of that. 'Outsource non essential costs' is often the first cry and this tends to be catering, security, cleaning etc. I'm not even going to argue whether these can be considered non essential or not. The point is that staff in these areas in charitable and not-for-profit organisations are often engaged beyond their remit. They are working in that organisation because they like it and support it - so that means that a member of the charity or a member of the public who is served a cup of coffee, or who is greeted by the security guard at the door or who bumps into the cleaner meets someone who cares about the organisation, who knows what is going on and who passes on a real enthusiasm about the visit.

This does not happen in corporates.

Another problem with the corporate model is the profit centre. New managers in charities love to establish cost and profit centres and to encourage staff to think about ways to show profit in their centre. It is a charity - there is no profit. Staff in charities should be encouraged to do their jobs as well as possible so that more resource - time, effort and money - goes into the core charitable purpose. Prices in cafes and shops should be pitched towards market values, in general, but buyers should be made aware of why the price is what the price is - and that surplus goes towards the charitable purpose. If the charity has members and one of the purposes of the charity is to support those members (an educational charity, for example) then why should the organisation try to 'maximise profit' from selling them things - these are the people you are supposed to be supporting.

So - if your job is to run a charity, please try to run it like a charity and not like an accounting firm or a consultancy. It really just won't work. Remember about good will and work with your staff, members, volunteers and the public to drive understanding of the core charitable purpose - but don't forget that it is the people in the organisation that make the difference. Treat them like corporate and commercial staff (i.e. reasonably badly) and your organisation will start to look and operate like a corporate organisation, but without the financial resources and profit available. In the end your organisation will, at best, just end up looking like a badly resourced and run firm.

That can't be good.

Get a Professional

The days of the enthusiastic amateur - so far as running a legal business is concerned - are over.

In the past a law firm - even a large law firm - was entirely run by a management board headed up by a Senior Partner and/or a Managing Partner. In some cases the Managing Partner might have a discount from his or her billing target in recognition of the work they did to run the firm - but I've seen law firms with a turnover of nearly £50million where no-one got a discount. This means that the management of the firm - the discussion and setting of strategy, the planning to implement the strategy, the measurement of performance, fee-earner motivation and management, staff management, etc etc - is all done part-time, often at the end of the day, at night and at the weekend.

In a set of chambers, there are no billing targets to discount and so, if the member of the management committee, Head of Chambers or Chair of the management committee (assuming there is one) do not want to see a reduction in their own incomes, the situation is the same.

This has meant that for far too long, legal organisations were often run by enthusiastic amateurs. Some of these people have an extraordinary talent for management and so some firms have been able to perform very well. It is, however, too much to expect that someone will be an expert in their field, attracting high quality clients and high paying cases and that they will be an expert in business management.

Most law firms start to notice this problem as they get bigger and the management problems increase. They are often forced to 'outsource' some of the management of the firm to a professional manager - although that can lead to communication and expectation difficulties.

In this current and very difficult market for the law, the need for professionals has never been greater. More direct and public access means that members of chambers and clerks are suddenly dealing with a type of client with whom they are unfamiliar and who has a completely different set of requirements. Professional clients in law firms now have marketing teams who expect to be able to talk with their peers. Professional marketing from one part of the profession needs to be answered with professional marketing. Homely and home-made will no longer work.

It's not just marketing. With the importance of IT, more and more firms - and more and more chambers - have noticed how little they can get done if their systems aren't working. It's all very well to go for a fully hosted solution, but you still need to have someone on-site who is knowledgeable and who can translate what the 'techie' has said the problem is - and who can switch the router back on when someone accidentally switches it off, thereby saving the cost of an engineer's visit and (more importantly) about 2 hours.

The timescales have reduced. Clients expect emails answered immediately; twitter messages need to be dealt with in minutes sometimes; IT problems have to be resolved as soon as possible. I remember the days of the five day turnaround to answer a letter - but they have long gone. Staff problems will not wait for the next meeting of the management committee.

Professional management is also required. Unless you are trained and experienced in staff management, the chance of making a huge and eventually expensive error are high. Chambers and law firms need to have someone who can spend all their time getting the business to run better, making sure that the staff are motivated and know what they should be doing to support the strategy. The other professionals need to be managed by someone who knows what they are doing and makes the time to do it - and the legal professionals need to be released to do what they do well.

Clients don't want to have part-time and amateur legal advice - why should solicitors and barristers have to put up with poor support. The days of the amateur are over - long live the professional.

All about teamwork

I read James Dunning's recent blog posting (here) and was prompted to find my own comparison. Knowing even less about football than James, I felt it better to use another sport as my comparator and so selected Formula 1.

It is, I think, one of the ultimate team sports. Yes, there is the "name" driver sitting in the car during the race, but speed and reliability require very close communication and understanding between the driver, the engineers, the designers, the coaches, and the managers.

The same requirement for close working and communication exists in every business - and so in the law firm it is necessary that the lawyers work in conjunction with the support staff and that they work out a way to communicate with each other. Sadly in many firms the relationship is one in which success is often achieved in spite of the communication and trust (or lack of) which exists between lawyer and support, and occasionally the two are actively working against each other (think of marketing budget - some of which is controlled by the marketing team and some by the legal departments, who have been known, in some firms, to act without contacting the marketing team or with no regard for the marketing strategy of the overall firm).

Another thing that interests me about F1 is that the team principals are rarely ex-drivers - or certainly rarely ex-F1 drivers. Ross Brawn is one of the most successful in recent years. He comes from an engineering background but has a passion for F1. He has instinctive managerial skills, being able to motivate and direct a large group of people towards one single goal.

So the man running the organisation is not the star of the show - is not the person who, ultimately, "brings the prize home". He is, however, the person the the best experience in running the team and it is understood, throughout the organisation, that the driver has to be allowed to focus on his own area of expertise and his own job - that of driving the car as well as possible and of communicating the way the car is working to the engineering and design teams. No-one would expect the driver to jump out of the car and to start running the whole organisation - no-one would expect the driver to take a business-related call while on track. Schumacher is a fine driver - one of the best ever - but he knows his limitations and understands his (vital) place within the team, and he understands that his success is based on him being able to focus on his own skills while others get on with theirs.

This, however, is what seems to be expected of most senior lawyers. They will have achieved partnership and a place on the board through their hard work and legal expertise. They are then expected - at the same time as maintaining a business practice and their billing hours - to run the firm.

What is required is a Brawn for every group of Schumachers. Let the stars do the things they are good at and don't distract them with the (necessary) work of running an organisation. Yes of course they will be involved strategically - but then each member of the team should specialise - let the lawyers work and the managers manage. In particular, have one key manager who will run the firm while the partners do what the partners do - excellent legal work while developing new business and clients.

Do what you do best

Regular readers of this blog will know that I have been reading the "UK Annual Report 2009" from "The Lawyer" (available here). I have already commented on a number of things featured in the report (see here and here), but would like to use a quote from the article entitled "Crow Bar". Talking about managing and growing Quadrant Chambers, the new Chief Executive Tim Gerrard is quoted as saying:

"'Why would you give a barrister responsibility for HR or IT?', he queries. He suggests that barristers should be getting on with what they do best and leaving management to others."

To any reader who hasn't worked in management with (or of) lawyers, this will seem blindingly obvious and is something that most commercial enterprises discovered some decades ago. In most law firms, however, this could almost be thought of as heresy. One feature of the downturn - especially in mid-sized firms - has been the reduction in the number of senior support directors with their roles often being taken on (part time) by partners, with the day-to-day tasks given to more junior staff.

Even if the partner in question has an intimate understanding and knowledge of the role, the idea that they should spend time in the administration of the post rather than in acting as a partner in the firm is incredible. It can't end well. If the partner is dedicated to the support job they have taken on, they will inevitably reduce the hours spent working on client matters - and so reduce their revenue to the firm. If they do not reduce their client hours and so maintain their billing levels, they will not be able to dedicate the time required to their support job. There was a reason, after all, that the now-redundant director worked full time.

My impression is that the Bar has been better at this. Barristers have a track record of leaving the administration of their practice to their clerks, and so it is not a difficult step to install a professional management layer in larger chambers. Barristers are, of course, specialists themselves and so perhaps have a better understanding that they cannot be masters of all tasks. Solicitors, who have not had the same separation between the practice and administration of law, tend to find it more difficult to admit that they should leave the administration to a professional.

I shall be paraphrasing and quoting Tim Gerrard to those firms I work with. Engage professional managers and let the partners get on with what they do best - managing their clients, finding new work and cross selling the firm's services.