The Law Firm COO: Working with the Management Committee
Depending upon the size of your firm and the direction of your strategic plan, you may already have or be considering hiring a Chief Operating Officer (COO). It is important to establish the protocols of how the Management Committee (MC) partners and the partners at large relate to and communicate with the COO in order to have successful relationships and communication at the top (executive) management level. If handled correctly, you can count on the COO to do the best job they are capable of doing, which in turn will enable the partners to concentrate on important partner issues and their practice.
The COO position is a relatively new position in law firms in BC. Until recently, Legal Administrator was the usual title for this position. As law firms grew in size and desired to rely more on business principles for the running of their firms, partners began to hire more highly trained professionals in the top executive positions. Larger firms may have several C-level executives: the designated accountant as Chief Financial Officer (CFO), the information technology (IT) executive as Chief Information Officer (CIO), and the business executive as COO. C-level executives are the norm in businesses. Law firms are usually structured as partnerships (most often LLPs). Some law firms have chosen to incorporate as LLCs and the partners become shareholders. In a partnership, the managing partner (MP) may be considered equivalent to the Chief Executive Officer (CEO) of a business; however, the partnership decision-making rules are far different from a corporation and this can be somewhat confusing and difficult to manage for the MC and COO.
Every partner is a part owner at a level agreed upon in the firm’s partnership agreement. Therefore, many partners believe that, because they are a part owner, they have management authority over the decisions and the staffing of the firm. It is a very rare business that is run successfully by a committee of all shareholders – or partners. Too many cooks. . . as they say. Therefore, it is important that each law firm decide on whether to have an MP (or perhaps two or more MPs working cooperatively) and whether to have an MC, including agreed upon rules as to which partners are elected to serve and the duration of terms. This must be agreed to by all partners and written into the partnership agreement. The MP and the MC then act on behalf of the partnership in making general business decisions and reporting back to the partnership. The partnership agreement also must lay out which decisions need to go to the full partnership and the MP/MC cannot act upon alone.
When a COO joins the firm and becomes a member of the MC, there must be an understanding amongst the partners as to who the COO reports directly to and takes direction/instructions from (the MP alone or the MC as a group). The COO cannot effectively report to and take direction/instructions from all partners of the firm.
The COO is in charge of managing operations. This includes all functional areas of business management including hands-on management or the oversight of functional managers, including Finance/Accounting, Human Resources (HR), Information Technology (IT), Marketing and Business Development, and Office Services and Facilities Management. The chosen COO should have education and experience in management of all of these areas; not just expertise in one given area. Most importantly, the COO should have solid experience in Strategic Planning and Partner Compensation Agreements and the implementation thereof.
The MP (and MC) should focus on partnership issues and ensuring that the strategic plan of the firm is executed effectively as well as communicating with the rest of the partnership on a regular basis. COOs should focus on operations and not involve themselves in partnership issues. It is important that the COO does not communicate outside of the MC with any individual partner, as that can be seen as favouritism by, or manipulation of, the COO. The COO needs to have the blessing and protection of the MP or MC, when engaged by individual partners at large regarding anything other than operations, to advise them to speak directly to the MP and/or the MC partners. It is extremely important that the COO maintain their reputation of neutrality by steering clear of partner issues, especially contentious ones.
Even once all of this has been contemplated and management (governance) rules have been put into place, there will still be bumpy times ahead. There will be external pressures in the market, competition, and changes in the law of the regulation of the practice that will affect the firm. There will also be internal pressures, such as changes in the partnership, disagreements in how to move the firm forward, and even power struggles. A seasoned COO is a great resource of information and experience on how you may handle various situations and can recommend the most appropriate outside resources, information and strategic modelling to help in making important decisions and navigating contentious issues. However, the firm belongs to the partners and the partners must make the ultimate decisions. Rely on your COO as a valuable resource but understand that the future of the firm is in the hands of the partners. The COO will advise but must take their marching orders from the partnership through the MP/MC.
The COO position is a confidential and isolated position. There is only one COO (or Legal Administrator) in any given firm. Therefore, this individual has no colleagues at their level on site with whom to relate. That is why, in order to have a happy, MP/MC and COO, which in turn creates a successful and well-run business, the MP/MC partners need to develop a trusting and open relationship with the COO. The COO needs to be able to speak freely to the MP/MC and be allowed to bounce things off of them when unsure. The MP/MC partners need to actively cultivate this relationship with their COO and stand behind them with the other partners at large.
Good luck to you all in your hiring of and continued successful business relationship with your COO.