The lateral market for managers: why do so few law firm heads take leadership roles at rivals?

The recent move by DLA Piper's former global chair Nigel Knowles to join fast-growing UK firm DWF is one of the most intriguing lateral hires in years.

It is not just extremely rare for management figures from big firms to join another firm; it is almost unprecedented.

In fact, I can only come up with one other example where such a move involved the partner taking up a firmwide management role at their new home: Linklaters' long-serving managing partner Tony Angel, who joined DLA as global co-chair and senior partner in 2011.

A small handful of other instances involved former law firm leaders going back into full-time practice, such as Colleen Tracy, managing partner of New York intellectual property firm Fitzpatrick Cella Harper & Scinto, who joined Mayer Brown as a partner in 2014; and Stroock & Stroock & Lavan's ex-managing partner Stuart Coleman, who joined Proskauer Rose as head of its funds practice earlier this year. (I've no doubt overlooked some names here. I'm counting on readers to let me know.)

It has always struck me as strange that there isn't more of a market for lateral management hires.

Look at the way that law firms are traditionally managed: star partners are taken away from what they do best lawyering, winning business and managing client relationships and thrust into a role of which they have little-to-no experience, save perhaps for running a practice area and the now seemingly mandatory six-day Harvard Law School leadership programme.

At the end of what are often relatively short terms, they then stand down and return to practice or retire from the law entirely. And so continues an endless cycle of calculated gambles, steep learning curves, and the ultimate loss of valuable managerial experience.

In the past, that might not have mattered so much. Law firms were smaller and less international, and the market was simpler. Firms could get away with being more lightly managed. (Some might question whether law firms in the not-so-distant past were really even managed at all.)

But Big Law is now big business. The world's largest law firms have grown to become vast, complex, multinational organisations. And in a highly challenging market of low growth, intense competition, severe pressure from clients and widespread uncertainty across core jurisdictions, effective management is more important than ever.

Non-lawyers need apply

Despite this, there is still a degree of stigma attached to management within law firms. Partners, in particular, can be fairly dismissive of leadership roles, often seeing them as a business overhead of questionable importance.

It's worth noting just how many law firm managers retain an active practice of lawyering and running client relationships. In what other industry would running a multimillion-pound organisation not be seen as a full-time job? (The reality is that many law firm management partners just end up effectively working two full-time jobs, but still )

The industry's obsession with the term 'non-lawyer' is also telling, emphasising a distinction between the firm's core business and other specialists such as professional managers. The subtext being that they aren't bringing in revenue and instead represent a cost to the bottom line.

Non-lawyer is an awful term it's almost as if you're a non-person, says former Clifford Chance (CC) managing partner Tony Williams, now at the legal management consultancy Jomati Consultants. Williams has first-hand experience: he left CC to head Andersen Legal, the now defunct legal services arm of former Big Five accounting firm Arthur Andersen. Many lawyers still aren't prepared to recognise the skills of professional managers.

This situation is perhaps best illustrated by the paucity of firms that have brought in non-lawyer managers to run or help run their business. For the few that have, the outcome has been mixed at best.

The argument against bringing in a professional manager from outside the legal industry is that they simply wouldn't understand how to run a law firm. I'd proffer that it has more to do with lawyers being extremely reluctant to take orders from non-lawyers, but it is fair to say that it does represent a difficult transition.

As any law firm leader will attest, lawyers can make for particularly challenging managerial subjects. Lawyers are as a breed generally conservative and not overly fond of risk or change, while partnerships often comprise an unusual and potentially volatile blend of strong-mindedness and deep insecurity.

It goes without saying that successful law firm leaders need to have an intimate understanding of not only their firm's business model, strategy and client base, but also its culture and partnership. That is more challenging for someone who hasn't grown up within a law firm environment, but it isn't impossible. Clyde & Co CEO Peter Hasson is an accountant by trade, yet having joined the specialist insurance law firm in 1997 at the age of 35 has become an integral part of one of the UK's most consistently successful practices.

Market for managers

For managers just moving from one law firm to another, rather than from a different industry, the conversion should surely be less pronounced.

When I've spoken to partners about this, they usually come out with something along the lines of their firm being its own special snowflake that couldn't possibly be managed by anyone from outside the business. Colour me unconvinced. There are important distinctions between firms, of course. But to suggest that these represent insurmountable hurdles to an incoming manager is, in most instances, utterly ridiculous.

Most managing partners will tell you that their firm is genuinely unique that's absolute nonsense, says Nick Shilton, chief executive of legal recruitment firm SSQ. Some firms are more distinctive than others, but overall the similarities greatly outweigh the differences.

Indeed, DLA and DWF are hardly comparable. In fact, that's part of what attracted Knowles to the role: he wanted a new challenge. Knowles accepts that he will have to be sensitive about how he introduces himself to his new firm, however. I can't go in and try to hit sixes straight away, he said. I need to understand the business, its culture and start making a contribution.

Firms would need to adjust their approach to lateral partner hires, which are still generally assessed on the basis of portable business something that clearly doesn't apply to managers.

This all ignores one crucial factor, however: most former law firm leaders simply have zero interest in taking on another frontline management role.

I can't say I blame them: managing a law firm can be a punishing experience. The most successful leaders and therefore the ones who are likely to be of most value to other firms tend to have held office for a decade or more. Why would they want to then go back into what is a highly stressful and demanding role, when they could just take on a few comfortable non-executive directorships in the business world instead? You've got to still have a lot of energy and enthusiasm a lot of leaders would probably never want to see another law firm ever again, Knowles said. I'm not doing this because I need the money; I'm doing it because I really like the sector and I'm excited about what DWF can achieve.

A new approach?

One possible solution might be for law firm leaders to join rival firms as non-executive directors as part of a global management board. The firm could then still be run by 'one of its own' in a CEO-type role, surrounded by experienced non-exec directors and a c-suite of professional managers. It's a similar setup to those seen at the major accounting firms and investment banks. I see little reason why it couldn't be successfully implemented within a law firm.

To be fair, the market has come a long way during the past 15 years. Law firms are on the whole better and more centrally managed, and there is a greater acceptance of professional managers and other specialists, who are becoming increasingly prominent internally. A gradual shift of power away from partnerships towards formalised management bodies has also helped.

It's important to not lose sight of the fact that the market's top law firms are hugely profitable and successful businesses, however. Yes, the legal industry has proved itself extremely resilient and somewhat isolated from market cycles, but firms and their management teams must still be doing something right. And it's not a coincidence that the best-performing firms are often those that retain the strongest partnership ethos. Firms should think extremely carefully before meddling with what has become a tried and tested formula. Partnerships are delicate organisms: it doesn't take much to upset their natural balance.

But it is equally true that the legal market is undergoing a period of transformational, possibly systemic change, at a rate and level that we haven't seen before. As firms adapt their businesses to meet the changing market conditions, it is vitally important that their management functions also continue to evolve.

It will be interesting to see whether law firms will, in time, come to value the experience that former managers like Knowles could bring to their business. Knowles being a success at DWF might help.