Rise of the C-Suite in law firms and increased profitability 

Over the years, we’ve seen the rise of the C-Suite in law firms. While many law firms still prefer their own lawyers to manage the business of the firm, an increasing number are recruiting business professionals such as a CEO, CFO, COO, CIO, CHRO. Others may not provide a C-Suite title but will have non-lawyers responsible for aspects of the firm’s management.

In her research paper entitled, Evolution and Revolution in the Governance of Law Firms, Laura Empson, Director of the Centre for Professional Service Firms at the Cass Business School London advises that “as the firm’s model of governance evolves, the balance of power shifts within the firm to a smaller group of senior managers who have been delegated authority by the larger group of professionals.” Increasingly, these professionals are not trained lawyers.

Of course, the million-dollar question is whether this has led to an increase in profitability. In Canada, we don’t currently have enough statistical data to answer this question. Colliers International conducted a survey earlier this year of AM Law 200 firms to determine which C-Suite positions firms employ and whether the existence of any C-Suite position correlates with higher profitability. To summarize Anita Turner of Colliers:

• The most successful Am Law 200 law firms have evolved from being partner-run to being run by a group of highly skilled professionals.
• The data collected indicates that it the recruitment of highly skilled professionals for C-Suite positions is generally conducive to increased profitability for firms.
• For growing firms, often the addition of a newly formed C-suite position is driven out of necessity to add order and control to firm management and operations.

Firms can be reluctant to add these positions due to the additional overhead burden, but the research shows a strong positive correlation between PPEP (Profit Per Equity Partner) and firms with a more extensive network of business executives (i.e. non-practicing lawyers) in leadership positions.

– Dal Bhathal, Managing Partner