Best Practices in Law Firm
Administration and Administrators:
Skill Sets of Superior Law Firm Principal Administrators
Principal administrators of major law firms typically oversee and are responsible for up to six different areas of operation:
- Finance and accounting
- Human resources
- Information technology (IT)
- Marketing and business development
- Office services
In some firms, one or more of these areas is not under the oversight of the principal administrator. The most common example of this is marketing and business development — functions that often are the bailiwick of the firm’s chief marketing and business development officer to the exclusion of the principal administrator (i.e., when the CMO does not report to the principal administrator).
Each of the six functional areas can be broken down into component parts. Money matters, for example, relate to both accounting and finance (and analysis), and they typically are combined into one department in the firm. Human resources also has two primary components, the employee relations/employment function, and the benefits function. IT is IT; yet, as we know, it has taken on significant importance to the strategic direction and the basic operations of major law firms. The facilities function encompasses such things as the relationship with the firm’s landlord, housekeeping and maintenance, office space, lease identification and negotiations, and improvements to or build-outs of new or rehabilitated office space. We’ve already mentioned the two-pronged nature of the marketing and business development function. Finally, office services include document production, messengers and delivery, mail and fax, copying, etc.
Clearly, finding one person with significant experience in all the above areas of law firm administration is difficult. The best candidates exhibit different mixes of experience in the relevant areas. What a firm needs most in its principal administrator can of course change over time as circumstances at the firm change. So what is a firm to do in choosing among needed skill sets when it is hiring a new principal administrator?
The simple answer is to find the person with the best and most extensive mix of experience in the different functional areas, but in so doing, remain cognizant of the fact that not all areas are equal in importance. And, obviously, a firm needs administrators who are grounded first in the most important functions.
Without question the most important skill set for the principal administrator of any major law firm is finance and accounting. This is true even in firms where high-level, accomplished chief financial officers report to principal administrators. As we’ve often heard it expressed, “If the finances of a law firm and its profitability aren’t good, what else really matters?”
The essential reason law firms turn business matters over to non-partners is to improve financial performance and profitability by freeing up key lawyers to serve clients and earn fees, and by bringing in business people who are better trained than most lawyers to handle the various administrative functions. Thus, any principal administrator needs to understand the firm’s finances and its profitability thoroughly, and he or she must be qualified to help lead the analysis of the financial figures.
Does this mean that a strong financial background alone is enough? No. Human resources and IT (the two functions usually listed as most important after finance and accounting) are critical to the success of any firm. Most firms need principal administrators who are good managers of people and excellent leaders. An administrator should understand the big picture of what technology can do for a firm, its lawyers and its clients. But a principal administrator who doesn’t understand finance and accounting adequately is an administrator incapable of adequately overseeing the financial managers and the firm’s finances themselves. He or she serves at his or her own – and the firm’s – potential peril.