What Does a COO Do in a Law Firm?
The COO in a law firm is a position on the management team that has a focus on the internal operations of the firm. Law firms are unique organizations, from a management perspective, in that they run a professional services business while being owned by their employees (the lawyers). While other professional services companies, like doctor’s offices and financial firms, face some of these same challenges, the legal profession is a unique category that requires its own approach to management of the operation .
A COO is best used to function as the "inside" person, working with outside vendors on behalf of the firm and responsible for implementing the plan of the managing partner on the global firm issues. Unlike a permanent tie to any particular outside company, a COO is focused on the interests of the law firm and their clients. Whether its technology, HR, payroll, recruiting, marketing or finance, an effective COO has a mindset towards how the firm relates to any outside vendor against a backdrop of which corporation they represent. Obviously in the case of larger firms, the COO may have support within their team across many of the functions a COO would oversee in a smaller law firm.
Responsibilities of a COO
The COO is a critical member of a law firm leadership team. The COO in a law firm setting is a strategic leader who directly influences the operations of the firm at the highest level. Reporting to the firm’s Managing Partner, the COO often serves on or works with the executive and/or compensation committee of the firm. The COO serves as a communication bridge between the firms leadership and the operations of the firm.
A COO position in a law firm does not typically handle the functions that non-law firms COO’s oversee. Although a COO is broadly responsible for various aspects of firm functionality, the vast majority of COO’s in law firms are attorneys, have often worked as a lawyer within the business development, marketing, or operations departments of their firm for at least a few years. For that reason a COO in a law firm generally relies on department heads and their managerial skills to oversee those functional areas.
This is an over-generalization but in many cases a law firm’s COO is responsible for overseeing administrative functions including accounting, finance, information technology, business development, marketing, human resources, facilities, operations, and policy and compliance.
In a law firm setting, the COO is often responsible for overseeing the financial, strategic, administrative and human resources functions. These functions include:
Law Firm COO Skills
A Law Firm Chief Operating Officer is someone who is skilled at maximizing the financial health of a firm and determining the most effective use of its human resources. Speaking of human resources, the COO is good at hiring, firing, coaching, counseling and mentoring. He or she can also develop and implement operational communications and policies for the entire enterprise, ensuring all partners and associates understand the firm’s objectives. In the process of developing communications and policies, the COO resolves conflicts, whether between partners, partners and associates or among multiple practice areas. They are decision-makers, but they’re not autocrats. They strive to involve everyone at every level in the governance of the firm, and ensure accountability along with ownership by all.
As operational leaders, COOs develop ideas for new legal services and product lines, and oversee the development, marketing, delivery and support of those services. They conduct business development, one-on-one, with potential clients. They evaluate, select and negotiate with vendors and unless there’s a great reason not to, are involved in the selection of new partners. Because they’re responsible for the financial viability of the firm, COOs plan and manage the annual budget process, and once the budget is approved, they measure and report on progress to the targets established for a range of metrics from work in progress to realization rates to return on compensation.
COOs also initiate, champion, sponsor and facilitate operational efficiency and quality improvement initiatives, and/or evolution of workplace behaviors toward best practice models, meanwhile building bridges across practice groups.
Ideally, a Law Firm COO has an MBA with a concentration in operations management or accounting, and sufficient experience – no less than 10 years – in one or more of the following areas: business management, consultancy, business development, accounting, technology, financial analysis, banking and real estate, human resources. Their professional experience has given them a broad base of knowledge and exposure to technology applications, financial analysis, human resource management as well as operations and business planning. Because they’re strong verbal and written communicators, they’re able to develop strategic long-term business plans, which are the foundation for senior professional development and compensation plans. If the COO isn’t a lawyer, he or she understands the language of the practice.
COO Impact on Law Firm Success
The impact of a COO or COO function often begins and ends with performance analysis and measurements, directed at the areas that drive success in law firms. These areas often include net profitability, realization and collection rates, client loyalty and profitability, costs and expenses, income per equity partner and more. Many of these factors are the direct result of the company’s efficiency and effectiveness. It is important to note that success and profitability focused on what is easy to measure and manage can be misleading. Like any other equity-driven firm, there must be a balance of aggressive pricing, expense management, and delivery of services. Significant price erosion in a competitive market must be met with an initiative focused on top-line revenue enhancement (e.g., productivity and competitiveness).
The COO role may include a combination of strategic planning, financial management, marketing, and IT. A COO’s overall purpose is to assist the firm in achieving its goals and objectives by balancing priorities, optimizing resources, and coordinating internal efforts.
In addition, the COO should monitor all departments’ adherence to budgets and provide management with data necessary to make marketplace and operational decisions. All of this creates the foundation for improved decision-making.
Labor statistical data shows that over the last few economic cycles, those organizations that have been able to segment out their cost, track performance, measure internal and external forces, and integrate those analytics into the strategic development process, are the ones that have performed above their peers .
Additional evidence of law firm COOs’ effectiveness is the fact that the COO role is rapidly being established within legal organizations of all sizes. The COO is already commonplace in corporations, healthcare institutions and professional services organizations. The ALA COSA network counts over 700 members, representing hundreds of legal organizations and hundreds of thousands of employees in the United States and internationally.
A COO can also influence the speed of decision-making. By gathering and analyzing financial data and other information, a COO can offer insights and recommendations to management. The quick access to this information can help a firm move forward. And, because many of the decisions made by law firm management longer-term, having a consistent lookout on potential change can keep a company ahead of the curve. By focusing on strategic issues and monitoring key business statistics, a COO can help identify trends and manage the conformity of the firm’s tactical actions to its strategic goals.
Today, the most progressive law firms are recognizing the importance of integrating business considerations into firm strategy and management. They know that to do so, they need to bring in expertise traditionally used by corporations; and that to be fully effective, it needs to coordinate this integration across all functional areas of the firm. So many law firms have honed finance and management functions that implementing the COO position in its true role has become the next evolutionary step in improving strategy alignment with law firm operational decisions. It should be used as a key member in the strategic development and management of the firm and be a trusted advisor to the partners to help grow and successfully manage the firm.
COO Challenges in a Law Firm
A law firm COO faces several challenges to be successful in their role. Prominent among these is the highly – and often contradictory – conservative and aggressive nature of the legal industry. Lawyers have a very particular view of how the world should function, which is sometimes in opposition to the way the legal industry operates, and the COO has to navigate this tightrope.
Lawyers are nominated for partnership based on seniority as well as other factors, but chiefly seniority. Once nominated for partnership, the partner’s compensation will be based almost solely on the amount of hours they recorded. The more hours, the more money. Because of this, lawyers are always incentivized to bill as many hours as possible, and thus are hugely resistant to any action that could be interpreted as either a threat to billable hours, or an attempt to increase anything that isn’t directly connected to billing hours, thus detracting from the core function of a law firm – that of billing hours.
Because of this paradox, the COO must find a way to simultaneously balance an extremely warp-speed legal industry with lawyers resistant to rapid change, as any change could lead to a loss of billable hours. For example, a COO needs to implement new software across the company, to increase the efficiency of the firm, but partners resist. Thus the COO has to try to convince the partners that the new software will actually give them more time to bill. This is much easier said than done, to say the least.
Another big issue is that the COO has to build a team that they can work with to reach the goals of the firm, but at the same time, the COO is at a slight disadvantage. Because of the unorthodox nature of the COO role in most firms, the COO is not as likely to be able to pick their team as a COO or director in any other industry would. This can lead to frustration, if the COO has to work with people who they believe are ill-suited to their role.
There may also be concerns that the COO is a temporary figure in the firm – the Founding or managing partner may wish to step back from the day-to-day delegation, or there may be a desire to get a COO to come in to help guide the process of greater efficiency. Thus the COO may be cynical about signing up a team of experts, in case their services are no longer needed if a new COO is appointed.
The COO is often seen as the fixer. Law firms usually set a goal of either increasing revenues or decreasing costs, and the COO is charged with making it happen. While this is true in every industry to some extent, the COO in a law firm will have to tackle the project without the same level of support resources as they would in another business. This may lead to resentment amongst other areas of the company, employees may have to pick up slack to allow the COO to focus on reaching those goals.
This is why having a COO with legal experience is important. They will more readily understand the obstacles a law firm faces, and how to navigate the personalities they’ll run into.
Future of COOs in Law Firms
The future trends for COOs in law firms can be anticipated using the strains on our industry today. Lawyers, clients, staff and society are all suffering from the change brought by the internet, 24-hour news cycles, electronic communication, productivity improvements, job loss in low value-added work, the internet-of-things, artificial intelligence and machine learning as well as other highly disruptive technologies. In the fray lawyers, in droves, have elected to elevate their own private brand rather than their firm brand. The impact of disaggregating the firm brand has been devastating to law firm profits and so disbanded partners have chosen to join other firms or hang out their own shingle. Law firms have been forced to either take a hard look at their strategic plan and organizational structure, grow by acquisition, or suffer the consequences of not adapting to a more competitive legal marketplace. COOs find themselves at the epicenter. At the forefront of battling the turbulence, COOs are now able to use AI and machine learning based algorithms and methods to augment their firm management skills. There are cutting-edge cloud-based solutions out there that are designed to help COOs actually evolve past managing the firm to leading the firm. It is must that COOs adopt an agile approach to leading their firms. The days of making large strategic changes at 3 to 5 year intervals are rapidly being replaced by a need to make smaller strategic changes at shorter intervals – say 12-18 months. COOs should evolve in their role as managers to become more like leaders who are trying to get their firms through a maze of challenges. A leader is less concerned with how the maze is navigated and more focused on empowering staff to find the best route through the maze. COOs should look for cloud-based solutions that focus on agile project management; and automating repetitious work as a way of freeing up time to explore more complex problem solving as a leader. Cloud-based systems powered by AI and machine learning will become increasingly popular because of reduced set-up costs , faster implementation timelines, easier to change system parameters, lower IT costs, scalability, and better interconnectivity with third-party solutions. Using these advanced systems, COOs can easily help their firms make a transition to an agile enterprise. If the COO is to manage both the strategic and operational issues at their firm, it is essential that COOs make a transition from being the gatekeeper (manager) to a servant leader (leader). To do that, they must, in part, let go of the tightly-held control of being a judge, manager, director and overseer to become a coach, a guide, a negotiator, a mentor, a facilitator, an overseer, and a servant. COOs should allow for and promote manageable control systems, delegation of responsibility and collaborative participation. They can provide value by helping their lawyers and staff understand both the operational and strategic aspects of their organization. They should occasionally step away to let lawyers and staff experiment and learn from their experiences. COOs will help build a culture of excellence and innovation. COOs will be instrumental in building a culture of excellence and innovation.