If there are people more difficult to manage than lawyers, professional services management guru David H. Maister has yet to encounter them. “I have spent 20 years trying to say all professions look similar and can learn from each other, but I'm finally prepared to concede that lawyers are different,” Maister writes in the legal blog, “Warlords and Dickensian Factory Owners” (January 23, 2006). Lawyers are different because, well, they're lawyers. Maister points to an observation made by psychologist Martin Seligman in Authentic Happiness: “Lawyers are trained to be aggressive, judgmental, intellectual, analytical and emotionally detached. This produces predictable emotional consequences...he or she will be depressed, anxious and angry a lot of the time.”
“People like that,” writes Maister, “are unlikely to be natural democrats, happy to work in a
collaborative society.” And leading them? Getting 50, 500 or, God forbid, 5,000 of them to function as an efficient, profitable client service machine? When most of them interpret the metaphor “herding cats”—popularized by Altman Weil, Inc.'s Larry Richards—as a compliment?
Ask any managing partner or a member of that new breed known as the law firm chief executive officer—easy, it's not. And here's the conundrum: the bigger a law firm gets, the more challenging it is to manage and the more imperative it is that the firm be well-managed. Canada's 30 largest law firms range from more than 760 lawyers to 110. Virtually all are at that point in their evolution where they recognize that governance can be the competitive advantage that can win the war for talent, not to mention the war for clients. More than half of the top 30 are in the middle of governance review: most of the others are keeping an anxious eye on what competitors are doing, if not pondering launching reviews of their own.
The same thing is happening the world over. In the new age of borderless competition, the top tier of the legal profession is experiencing growing pains and groping for a governance model that will address them. “Canada is right in step with what is happening in Europe, and all over the world. Firms have reached a critical size,” says Karen MacKay, a principal with Edge International Inc.'s global consultancy, and president and founder of Phoenix Legal Inc. “At a certain size, a law firm can't be run by a committee. You can't have 10 partners in a room worrying about parking. The competition is simply too stiff,” she points out. “Having a group of partners worry about the colour of the boardroom walls, we're way beyond that.”
Or, to be more precise, we should be way beyond that. But old habits die hard, even among our larger, hyper-competitive colleagues and competitors down south who hit “critical” mass much earlier than the largest of Canada's top 30. Of the 50 largest US law firms, the largest (Baker & McKenzie LLP, at last count) is more than 3,200 heads strong. Firm number 50 is, at 630 (Wilson Elser Moskowitz Edelman & Dicker LLP) not much smaller than Canada's largest law firm. Their governance models include managing partner as God (the now cross-Atlantic Jones Day), democracy run rampant (at the global Baker & McKenzie), the centralized corporate model (at Washington-outbound Akin Gump Strauss Hauer & Feld LLP) and everything in between.
“When I started practising law here in New York I was with what was considered a large firm at the time with 110 lawyers. Today, that firm would be almost invisible,” notes Bruce MacEwen, New York securities lawyer-cum-consultant and the brain (and mouthpiece) behind Adam Smith, Esq., a blog on the economics of major law firms. “When it's 110 lawyers and basically everybody knows everybody else, you can manage pretty much by the seat of your pants. Conceptually, the business model of a law firm of that size is not that complex.”
When you become California-outbound Latham & Watkins LLP—at last count, an 1,800 lawyer firm with 22 offices in 10 countries—or London-outbound Clifford Chance, now at about 3,300 “fee-earners,” governance matters a great deal, and mistakes can be costly. “We're living through a period when the structure of the legal industry is morphing before our eyes,” MacEwen says. “I think that really, for the first time in the history of the profession, the leadership of law firms is going to distinguish the winners from the losers,” he continues. “For decades, the business model was pretty simple. I suppose you could screw things up, but everybody was basically going to do fine if they didn't do anything stupid.”
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ow, the ante is higher. If you want to survive, you have to do something smart. Trouble is, most lawyers have a very clear opinion about how they want to be governed—somewhere between “not very much” and “not at all.” The decision-makers at Canada's largest law firms came of age in an era where that was possible. Indeed, the size and, until recently, insulated nature of many Canadian marketplaces has allowed law firms that operate under that model not just to survive, but to thrive.
Take Farris, Vaughan, Wills & Murphy LLP. Farris is to the Vancouver market what Torys LLP is to Toronto, Ogilvy Renault LLP is to Montreal, and Bennett Jones LLP is to Calgary—undisputedly a leading firm in every practice area that matters in the city. There, however, the similarities end. Farris has no plans to merge with a New York law firm. It has no pretensions to “national” law firm status.
It doesn't even have a written partnership agreement. Nor, managing partner Keith Mitchell, Q.C., posits, does it have governance issues. “For us, governance is based on a couple of fundamental principles, the first of which is trust,” says Mitchell. “We don't have a written partnership agreement, we distribute our income in a simple, straightforward process that doesn't take a lot of time and is rooted in consensus, we focus to a fault on letting our lawyers service clients and we do not pay too much attention to administration.” The firm has no committees, “not a lot of structure,” and most of its strategic and business decisions are arrived at by selective consensus. As Mitchell puts it, “I can consult the people who care about an issue without having to bother the rest of the people.
“There is broad consensus on what we do and why we do it,” says Mitchell. “Our absolute priority is to provide the highest quality of legal services that we can. Secondly, to enjoy our work, and thirdly, to be well remunerated.” When everyone agrees on those points, “One should manage enough but as little as possible and let the strong personalities of your colleagues play a healthy role.”
If this model sounds like a fairy tale that few large firms can achieve, that's because it is. As Mitchell is quick to point out, Farris is run the way it is because it is a law firm of 80-odd professionals and only about 30 partners. “I stress our approach works in large measure because of our size,” he says. “It is not a model that works for everybody.”
It's certainly not a model that would work for McCarthy Tétrault LLP, Canada's leading contender for title of “largest” law firm (about 760 lawyers according to the last Lexpert survey) and the country's first national law firm. Just as it pushed the envelope when it started establishing its national platform via alliances-cum-mergers in the 1980s, McCarthy Tétrault is leading the vanguard in centralized governance. In 2002, it dramatically overhauled its governance structure, which it described as “embracing a corporate model of governance and management for its partnership.” It is governed by an elected board of directors that appoints the firm's CEO and a national management team. More significantly, the firm reorganized itself along national client-focused practice groups, eschewing traditional departments and even downplaying certain aspects of regional organization.
“Given our platform and the breadth of our practice, we had to instill a culture of team work. Having identified the need to approach our clients with comprehensive solutions ...we needed a structure to implement it,” explains Iain Scott, the firm's chair and CEO since the shake-up. McCarthy Tétrault is now the most centralized, “corporation-like” law firm in Canada. Scott and his partners believe the firm's corporate model is the best way, if not the only way, of delivering top client service at the level at which the firm wants to play. Mitchell and his partners, over at the essentially ungoverned Farris, believe the same of their model.
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rranged on a continuum between Farris and McCarthy Tétrault, most of Canada's “significant player”
law firms fall closer to the latter's model. (There are exceptions, of course, that are totally outside that continuum, such as Calgary energy boutique Thackray Burgess, which consists of shareholders and consultants, and allows the entrepreneurial law firm to operate in an extremely cost-efficient manner. But good luck pitching that model to Bennett Jones.) Burnet, Duckworth & Palmer LLP, which occupies a similarly privileged spot in the Calgary marketplace as Farris does in Vancouver, is perhaps the closest to the Farris model. Not surprisingly, the culture of those two firms have much in common. For many, Farris represents the past from which they have been moving away as they have grown, organically or not. Does McCarthy Tétrault represent the future?
Maybe. It's certainly become the reference point for many ongoing governance reviews. Atlantic Canada's McInnes Cooper is a six-office law firm with a governance structure that “grew willy-nilly as we added another office, another person,” says managing partner Wylie Spicer, Q.C. McInnes Cooper is currently governed by a policy board, managing partner and regional
managing partners, all elected by various segments of the partnership. Its acquisition of the Halifax office of
Patterson Palmer last year necessitated further changes to its governance structure and the firm is in the midst of a serious governance review. “We've determined we have to have a more efficient way to govern ourselves,” says Spicer. “What is being contemplated now is not a McCarthys model, but it is a board of directors that would appoint the managing partner, and beneath that level people who would run various offices.” (Patterson Palmer, rebuilding its Halifax office, also is engaged in a governance debate, as, it seems, is every law firm in Atlantic Canada. Governance governed by an eye to future consolidations? A safe bet, we think.)
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ere's the obvious irony. The larger a firm and the more offices it has, the closer its governance has to be to the centralized and corporate-like McCarthy Tétrault model, and the more its partners sigh for the freestyle anarchy of Farris. Look at the examples of Fraser Milner Casgrain LLP (FMC) and Borden Ladner Gervais LLP (BLG), merger-created national law firms of 521 and 672 lawyers respectively. The governance model of each firm shares a number of features with the McCarthy Tétrault model, yet each downplays these similarities.
“We do not portray ourselves as being as corporate a model as McCarthys,” says FMC's CEO David Fuller. “We see ourselves as being less centralized than McCarthys but compared to other firms across country, more centralized.” FMC's governance structure consists of a chair and CEO, both appointed by a partnership board, national practice groups that report to the CEO, and regional managing partners elected by partners in the respective offices. In 2005, it became the first Canadian law firm to add a general counsel for the firm, Jamie Dunbar. He reports to the CEO and oversees conflict resolution, ethics, professional liability and standardization of the firm's internal practices and procedures—all in the name of “the recognition of the competitive advantage of appointing a single proactive source versus a committee.”
The centralized governance structure, as Fuller sees it, enables the firm to make quick decisions—particularly in that ever-increasing war for talent. “When it comes time to do lateral recruiting, I, together with the board, can agree to make an offer to a lateral without having to go to partners at large,” he says. “If you say you are interested in joining us on Monday, I can tell you by Wednesday if it's a go.” In most traditional law firm governance models, admission to partnership requires a vote—in many cases unanimous—by all partners. “You can imagine the time that would take to orchestrate. Also, for some of the senior laterals, they are uncomfortable with such a scenario, because in our case about 250 people would know they are contemplating a move.”
BLG's governance structure has an extra layer. Its partners elect a 15-member national council, which appoints a national managing partner and regional managing partners, who form the national executive committee. “The executive committee is the senior management team and we report to the national counsel,” says national managing partner Sean Weir.
But there's more. Over the last two years, the firm has implemented a practice group management model and added national department leaders, who also sit on the executive committee. “We need a structure that pulls our lawyers together and gets them working across the country instead of just reporting to their regional managing partners,” says Weir. Following in the footsteps of the McCarthy Tétrault model? Absolutely not. BLG partners are not fans of the corporate model.
“I can think of one other major national firm that has made a big deal about implementing a corporate structure,” says Weir. “It's a good firm and the structure and style may work for them. It may be a good model for their business, but from what we've heard, I don't think our partners would want to go there. Eliminating the light-handed consensual atmosphere for a more efficient business-like corporate structure, I don't think would pay us dividends in the long run.
“There are a lot of law firm consultants around who tell you the law firm has to become more corporate-like, more decision-oriented, partners have to practise law and leave governing to those who are good at it,” Weir continues. “The pitfall for law firms who are examining their governance is listening too hard to these consultants advocating these changes without looking hard at what their culture is. Listen to these things, go down to the US and see what the firms are doing there—they do seem to be more focused on profits and the bottom line and we may have to evolve that way. I hope not.” Centralized or decentralized, corporate or traditional, for a law firm model to work it has to fit in with the law firm's culture and be widely accepted by its partners, says Weir.
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e's right, of course. Lack of buy-in from partners will scuttle the best governance model. McCarthy Tétrault knows something about this, as the first 12 months after the roll-out of its model (and reorganization of its profit pools) was accompanied by a sizeable exodus of dissatisfied partners.
But “Redesigning McCarthy Tétrault” (see Lexpert, June 2002) wasn't really about swapping the title of CEO for managing partner, and board of directors for executive committee. It was about organizing the firm around specific clients and practice lines, something several ambitious US law firms, including Washington, DC-based Akin Gump, have done as well. “In this model, instead of organizing around corporate, litigation, real estate etc., you organize the firm around industries or, at an even more granular level, organize yourself around clients,” says MacEwen, who is an enthusiastic advocate of the “corporate” model, if it's done right.
“It makes the firm appear to the client as if it is organized primarily to serve those clients...which can be a concept that is novel to lawyers,” he says. “I really don't see any pitfalls in the model. I think it could scale up to a firm of almost any size,” he adds. “My attitude at the moment is, if you can show me something wrong with it, I'd be delighted to examine it.” But if partners hate it, they won't collaborate or share information. “Then all bets are off,” MacEwen says.
Even if not sighing for the days when they could be governed like Farris, most leading Canadian law firms are governed according to more traditional models. That's true even when the firms themselves are strategically forward looking. Torys LLP, which remains the only Canadian law firm to execute a cross-border merger, is modestly governed by a managing partner (Les Viner, now in the second year of a second five-year term) and a seven-member executive committee, at least three members of which have to be from New York.
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similar combination of bi-office management committee and office managing partners oversees Davies Ward Phillips & Vineberg LLP. Even this “traditional” governance system required a major paradigm shift on the part of the firm's Montreal partners. Notes Robert Vineberg, whose fellow Montreal partners gave up a consensus-based governance system and lockstep compensation as the price of the merger with Davies: “It was seen that these were steps we had to take to achieve a very much desired result—to merge with a top-tier Toronto firm.
“Is it easy to go from a relatively small partnership of 30 or so to one of over a 100 where there is much less direct input and control? No, but the rewards are so significant in what we achieved in our merger that I don't think anyone, when considering the balance, regrets it.” (Except the small groups of folks who left following the first non-lockstep compensation review.)
Osler, Hoskin & Harcourt LLP and Blake, Cassels & Graydon LLP, both national law firms with greenfielded offices across the country, beacheads in the US, and 413 and 464 lawyers respectively, are also governed by executive committees and managing partners (throw a few chairs into the mix too). But there the similarity ends, amply illustrating how intertwined governance is with a firm's culture.
A defining characteristic of the Osler model is its rotation of management responsibility. At any given time, the firm has two co-managing partners and two co-chairs (the former responsible for internal operations and the latter the “external” face of the firm), who are appointed by a partnership-elected executive committee. “Our governance is largely built on consensus at the management level and it's built on a
rotation of management responsibility, so people in roles of management are never far away from knowing what it is like to be engaged in the parry and thrust of day-to-day practice,” says Steve Sigurdson, one of the current co-managing
partners of the firm. “Sometimes that is a challenge in firms that grow very large and appoint a managing partner for life. Such a person can become a little removed from the day-to-day concerns of practice.”
There is less rotation of responsibility in the Blakes model, comprised of a chair, a national managing partner, an executive committee of eight, a partnership committee of 20, and a few additional “operating” committees. And, of course, regional managing partners. But clearly, James Christie, firm chairmain since 2001 and national managing partner from 1995 to 2001, has been the external face of the firm for more than a decade.
“Over time, our model has obviously become much more centralized,” says Christie. A 2003 governance overhaul “centralized a lot of the decision making responsibility in the hands of the executive committee, and the chair was given more centralized responsibility for career monitoring, development, dealing with personnel and partner terminations and so on,” he says. “Historically, our partners were entitled to vote and had a right of approval with respect to a whole host of things and the partnership committee had responsibility for a whole host of things. Over time, a lot of these things have gotten condensed into the Executive Committee and the 2003 overhaul formalized that.”
Blakes' most recent governance review was done after the McCarthy Tétrault roll-out. “We decided that was not the route we would go in our case,” says Christie. “What we're trying to do is have a governance system that is within the comfort zone of our partners. Governing a law firm is about getting that fine balance between partner participation on one hand and a system that's nimble enough that you can react quickly to circumstances in the marketplace.”
Most law firms think they've nailed that balance—at least some times. Even at McCarthy Tétrault, “The reality is, do I go and consult with my partners on things? Absolutely,” says Scott. “Despite the existence of a corporate model and the fact that if you read my authority on paper, it's pretty daunting.”
The strong value most Canadian law firms, even those that number in the hundreds of partners, place on consultation and consensus may carry a sizeable price tag. A governance structure that is based on consensus is ineffective, says MacKay, unless “leadership has sufficient influence to manage a critical mass of support”—which is really faking consensus, isn't it?
Committees are not much better at making difficult choices. “A governance structure that is populated by
committees is completely ineffective,” says MacKay. Pure democracy? “A governance structure that is based on democracy—50 plus one—can be extremely divisive.” So is there an optimal model? “A good governance structure enables leaders to lead,” says MacKay. But there's a flip side to it: it also enables the partners to follow. “That doesn't mean the partners are sheep. It means that the firm provides a platform for input and healthy debate but it also means that partners respect the colleagues they have elected to a leadership role and that once a decision is taken they will follow.”
And you do that by... genetically engineering lawyers to resemble dogs more than cats? (Wouldn't that be nice, sigh the managing partners.) Not quite. But you do have to tap into what's most important to them. That's not consensus. It's cash. Says Wylie Spicer, “What you have to be able to do is convince partners that the best way for the firm to progress—how you can make more money—is for you to focus on developing your practice, and allow the firm to be managed by a group of people whose job it is to do that.”
Marzena Czarnecka is a Calgary-based Lexpert writer.
“People like that,” writes Maister, “are unlikely to be natural democrats, happy to work in a
collaborative society.” And leading them? Getting 50, 500 or, God forbid, 5,000 of them to function as an efficient, profitable client service machine? When most of them interpret the metaphor “herding cats”—popularized by Altman Weil, Inc.'s Larry Richards—as a compliment?
Ask any managing partner or a member of that new breed known as the law firm chief executive officer—easy, it's not. And here's the conundrum: the bigger a law firm gets, the more challenging it is to manage and the more imperative it is that the firm be well-managed. Canada's 30 largest law firms range from more than 760 lawyers to 110. Virtually all are at that point in their evolution where they recognize that governance can be the competitive advantage that can win the war for talent, not to mention the war for clients. More than half of the top 30 are in the middle of governance review: most of the others are keeping an anxious eye on what competitors are doing, if not pondering launching reviews of their own.
The same thing is happening the world over. In the new age of borderless competition, the top tier of the legal profession is experiencing growing pains and groping for a governance model that will address them. “Canada is right in step with what is happening in Europe, and all over the world. Firms have reached a critical size,” says Karen MacKay, a principal with Edge International Inc.'s global consultancy, and president and founder of Phoenix Legal Inc. “At a certain size, a law firm can't be run by a committee. You can't have 10 partners in a room worrying about parking. The competition is simply too stiff,” she points out. “Having a group of partners worry about the colour of the boardroom walls, we're way beyond that.”
Or, to be more precise, we should be way beyond that. But old habits die hard, even among our larger, hyper-competitive colleagues and competitors down south who hit “critical” mass much earlier than the largest of Canada's top 30. Of the 50 largest US law firms, the largest (Baker & McKenzie LLP, at last count) is more than 3,200 heads strong. Firm number 50 is, at 630 (Wilson Elser Moskowitz Edelman & Dicker LLP) not much smaller than Canada's largest law firm. Their governance models include managing partner as God (the now cross-Atlantic Jones Day), democracy run rampant (at the global Baker & McKenzie), the centralized corporate model (at Washington-outbound Akin Gump Strauss Hauer & Feld LLP) and everything in between.
“When I started practising law here in New York I was with what was considered a large firm at the time with 110 lawyers. Today, that firm would be almost invisible,” notes Bruce MacEwen, New York securities lawyer-cum-consultant and the brain (and mouthpiece) behind Adam Smith, Esq., a blog on the economics of major law firms. “When it's 110 lawyers and basically everybody knows everybody else, you can manage pretty much by the seat of your pants. Conceptually, the business model of a law firm of that size is not that complex.”
When you become California-outbound Latham & Watkins LLP—at last count, an 1,800 lawyer firm with 22 offices in 10 countries—or London-outbound Clifford Chance, now at about 3,300 “fee-earners,” governance matters a great deal, and mistakes can be costly. “We're living through a period when the structure of the legal industry is morphing before our eyes,” MacEwen says. “I think that really, for the first time in the history of the profession, the leadership of law firms is going to distinguish the winners from the losers,” he continues. “For decades, the business model was pretty simple. I suppose you could screw things up, but everybody was basically going to do fine if they didn't do anything stupid.”
N
ow, the ante is higher. If you want to survive, you have to do something smart. Trouble is, most lawyers have a very clear opinion about how they want to be governed—somewhere between “not very much” and “not at all.” The decision-makers at Canada's largest law firms came of age in an era where that was possible. Indeed, the size and, until recently, insulated nature of many Canadian marketplaces has allowed law firms that operate under that model not just to survive, but to thrive.
Take Farris, Vaughan, Wills & Murphy LLP. Farris is to the Vancouver market what Torys LLP is to Toronto, Ogilvy Renault LLP is to Montreal, and Bennett Jones LLP is to Calgary—undisputedly a leading firm in every practice area that matters in the city. There, however, the similarities end. Farris has no plans to merge with a New York law firm. It has no pretensions to “national” law firm status.
It doesn't even have a written partnership agreement. Nor, managing partner Keith Mitchell, Q.C., posits, does it have governance issues. “For us, governance is based on a couple of fundamental principles, the first of which is trust,” says Mitchell. “We don't have a written partnership agreement, we distribute our income in a simple, straightforward process that doesn't take a lot of time and is rooted in consensus, we focus to a fault on letting our lawyers service clients and we do not pay too much attention to administration.” The firm has no committees, “not a lot of structure,” and most of its strategic and business decisions are arrived at by selective consensus. As Mitchell puts it, “I can consult the people who care about an issue without having to bother the rest of the people.
“There is broad consensus on what we do and why we do it,” says Mitchell. “Our absolute priority is to provide the highest quality of legal services that we can. Secondly, to enjoy our work, and thirdly, to be well remunerated.” When everyone agrees on those points, “One should manage enough but as little as possible and let the strong personalities of your colleagues play a healthy role.”
If this model sounds like a fairy tale that few large firms can achieve, that's because it is. As Mitchell is quick to point out, Farris is run the way it is because it is a law firm of 80-odd professionals and only about 30 partners. “I stress our approach works in large measure because of our size,” he says. “It is not a model that works for everybody.”
It's certainly not a model that would work for McCarthy Tétrault LLP, Canada's leading contender for title of “largest” law firm (about 760 lawyers according to the last Lexpert survey) and the country's first national law firm. Just as it pushed the envelope when it started establishing its national platform via alliances-cum-mergers in the 1980s, McCarthy Tétrault is leading the vanguard in centralized governance. In 2002, it dramatically overhauled its governance structure, which it described as “embracing a corporate model of governance and management for its partnership.” It is governed by an elected board of directors that appoints the firm's CEO and a national management team. More significantly, the firm reorganized itself along national client-focused practice groups, eschewing traditional departments and even downplaying certain aspects of regional organization.
“Given our platform and the breadth of our practice, we had to instill a culture of team work. Having identified the need to approach our clients with comprehensive solutions ...we needed a structure to implement it,” explains Iain Scott, the firm's chair and CEO since the shake-up. McCarthy Tétrault is now the most centralized, “corporation-like” law firm in Canada. Scott and his partners believe the firm's corporate model is the best way, if not the only way, of delivering top client service at the level at which the firm wants to play. Mitchell and his partners, over at the essentially ungoverned Farris, believe the same of their model.
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rranged on a continuum between Farris and McCarthy Tétrault, most of Canada's “significant player”
law firms fall closer to the latter's model. (There are exceptions, of course, that are totally outside that continuum, such as Calgary energy boutique Thackray Burgess, which consists of shareholders and consultants, and allows the entrepreneurial law firm to operate in an extremely cost-efficient manner. But good luck pitching that model to Bennett Jones.) Burnet, Duckworth & Palmer LLP, which occupies a similarly privileged spot in the Calgary marketplace as Farris does in Vancouver, is perhaps the closest to the Farris model. Not surprisingly, the culture of those two firms have much in common. For many, Farris represents the past from which they have been moving away as they have grown, organically or not. Does McCarthy Tétrault represent the future?
Maybe. It's certainly become the reference point for many ongoing governance reviews. Atlantic Canada's McInnes Cooper is a six-office law firm with a governance structure that “grew willy-nilly as we added another office, another person,” says managing partner Wylie Spicer, Q.C. McInnes Cooper is currently governed by a policy board, managing partner and regional
managing partners, all elected by various segments of the partnership. Its acquisition of the Halifax office of
Patterson Palmer last year necessitated further changes to its governance structure and the firm is in the midst of a serious governance review. “We've determined we have to have a more efficient way to govern ourselves,” says Spicer. “What is being contemplated now is not a McCarthys model, but it is a board of directors that would appoint the managing partner, and beneath that level people who would run various offices.” (Patterson Palmer, rebuilding its Halifax office, also is engaged in a governance debate, as, it seems, is every law firm in Atlantic Canada. Governance governed by an eye to future consolidations? A safe bet, we think.)
H
ere's the obvious irony. The larger a firm and the more offices it has, the closer its governance has to be to the centralized and corporate-like McCarthy Tétrault model, and the more its partners sigh for the freestyle anarchy of Farris. Look at the examples of Fraser Milner Casgrain LLP (FMC) and Borden Ladner Gervais LLP (BLG), merger-created national law firms of 521 and 672 lawyers respectively. The governance model of each firm shares a number of features with the McCarthy Tétrault model, yet each downplays these similarities.
“We do not portray ourselves as being as corporate a model as McCarthys,” says FMC's CEO David Fuller. “We see ourselves as being less centralized than McCarthys but compared to other firms across country, more centralized.” FMC's governance structure consists of a chair and CEO, both appointed by a partnership board, national practice groups that report to the CEO, and regional managing partners elected by partners in the respective offices. In 2005, it became the first Canadian law firm to add a general counsel for the firm, Jamie Dunbar. He reports to the CEO and oversees conflict resolution, ethics, professional liability and standardization of the firm's internal practices and procedures—all in the name of “the recognition of the competitive advantage of appointing a single proactive source versus a committee.”
The centralized governance structure, as Fuller sees it, enables the firm to make quick decisions—particularly in that ever-increasing war for talent. “When it comes time to do lateral recruiting, I, together with the board, can agree to make an offer to a lateral without having to go to partners at large,” he says. “If you say you are interested in joining us on Monday, I can tell you by Wednesday if it's a go.” In most traditional law firm governance models, admission to partnership requires a vote—in many cases unanimous—by all partners. “You can imagine the time that would take to orchestrate. Also, for some of the senior laterals, they are uncomfortable with such a scenario, because in our case about 250 people would know they are contemplating a move.”
BLG's governance structure has an extra layer. Its partners elect a 15-member national council, which appoints a national managing partner and regional managing partners, who form the national executive committee. “The executive committee is the senior management team and we report to the national counsel,” says national managing partner Sean Weir.
But there's more. Over the last two years, the firm has implemented a practice group management model and added national department leaders, who also sit on the executive committee. “We need a structure that pulls our lawyers together and gets them working across the country instead of just reporting to their regional managing partners,” says Weir. Following in the footsteps of the McCarthy Tétrault model? Absolutely not. BLG partners are not fans of the corporate model.
“I can think of one other major national firm that has made a big deal about implementing a corporate structure,” says Weir. “It's a good firm and the structure and style may work for them. It may be a good model for their business, but from what we've heard, I don't think our partners would want to go there. Eliminating the light-handed consensual atmosphere for a more efficient business-like corporate structure, I don't think would pay us dividends in the long run.
“There are a lot of law firm consultants around who tell you the law firm has to become more corporate-like, more decision-oriented, partners have to practise law and leave governing to those who are good at it,” Weir continues. “The pitfall for law firms who are examining their governance is listening too hard to these consultants advocating these changes without looking hard at what their culture is. Listen to these things, go down to the US and see what the firms are doing there—they do seem to be more focused on profits and the bottom line and we may have to evolve that way. I hope not.” Centralized or decentralized, corporate or traditional, for a law firm model to work it has to fit in with the law firm's culture and be widely accepted by its partners, says Weir.
H
e's right, of course. Lack of buy-in from partners will scuttle the best governance model. McCarthy Tétrault knows something about this, as the first 12 months after the roll-out of its model (and reorganization of its profit pools) was accompanied by a sizeable exodus of dissatisfied partners.
But “Redesigning McCarthy Tétrault” (see Lexpert, June 2002) wasn't really about swapping the title of CEO for managing partner, and board of directors for executive committee. It was about organizing the firm around specific clients and practice lines, something several ambitious US law firms, including Washington, DC-based Akin Gump, have done as well. “In this model, instead of organizing around corporate, litigation, real estate etc., you organize the firm around industries or, at an even more granular level, organize yourself around clients,” says MacEwen, who is an enthusiastic advocate of the “corporate” model, if it's done right.
“It makes the firm appear to the client as if it is organized primarily to serve those clients...which can be a concept that is novel to lawyers,” he says. “I really don't see any pitfalls in the model. I think it could scale up to a firm of almost any size,” he adds. “My attitude at the moment is, if you can show me something wrong with it, I'd be delighted to examine it.” But if partners hate it, they won't collaborate or share information. “Then all bets are off,” MacEwen says.
Even if not sighing for the days when they could be governed like Farris, most leading Canadian law firms are governed according to more traditional models. That's true even when the firms themselves are strategically forward looking. Torys LLP, which remains the only Canadian law firm to execute a cross-border merger, is modestly governed by a managing partner (Les Viner, now in the second year of a second five-year term) and a seven-member executive committee, at least three members of which have to be from New York.
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similar combination of bi-office management committee and office managing partners oversees Davies Ward Phillips & Vineberg LLP. Even this “traditional” governance system required a major paradigm shift on the part of the firm's Montreal partners. Notes Robert Vineberg, whose fellow Montreal partners gave up a consensus-based governance system and lockstep compensation as the price of the merger with Davies: “It was seen that these were steps we had to take to achieve a very much desired result—to merge with a top-tier Toronto firm.
“Is it easy to go from a relatively small partnership of 30 or so to one of over a 100 where there is much less direct input and control? No, but the rewards are so significant in what we achieved in our merger that I don't think anyone, when considering the balance, regrets it.” (Except the small groups of folks who left following the first non-lockstep compensation review.)
Osler, Hoskin & Harcourt LLP and Blake, Cassels & Graydon LLP, both national law firms with greenfielded offices across the country, beacheads in the US, and 413 and 464 lawyers respectively, are also governed by executive committees and managing partners (throw a few chairs into the mix too). But there the similarity ends, amply illustrating how intertwined governance is with a firm's culture.
A defining characteristic of the Osler model is its rotation of management responsibility. At any given time, the firm has two co-managing partners and two co-chairs (the former responsible for internal operations and the latter the “external” face of the firm), who are appointed by a partnership-elected executive committee. “Our governance is largely built on consensus at the management level and it's built on a
rotation of management responsibility, so people in roles of management are never far away from knowing what it is like to be engaged in the parry and thrust of day-to-day practice,” says Steve Sigurdson, one of the current co-managing
partners of the firm. “Sometimes that is a challenge in firms that grow very large and appoint a managing partner for life. Such a person can become a little removed from the day-to-day concerns of practice.”
There is less rotation of responsibility in the Blakes model, comprised of a chair, a national managing partner, an executive committee of eight, a partnership committee of 20, and a few additional “operating” committees. And, of course, regional managing partners. But clearly, James Christie, firm chairmain since 2001 and national managing partner from 1995 to 2001, has been the external face of the firm for more than a decade.
“Over time, our model has obviously become much more centralized,” says Christie. A 2003 governance overhaul “centralized a lot of the decision making responsibility in the hands of the executive committee, and the chair was given more centralized responsibility for career monitoring, development, dealing with personnel and partner terminations and so on,” he says. “Historically, our partners were entitled to vote and had a right of approval with respect to a whole host of things and the partnership committee had responsibility for a whole host of things. Over time, a lot of these things have gotten condensed into the Executive Committee and the 2003 overhaul formalized that.”
Blakes' most recent governance review was done after the McCarthy Tétrault roll-out. “We decided that was not the route we would go in our case,” says Christie. “What we're trying to do is have a governance system that is within the comfort zone of our partners. Governing a law firm is about getting that fine balance between partner participation on one hand and a system that's nimble enough that you can react quickly to circumstances in the marketplace.”
Most law firms think they've nailed that balance—at least some times. Even at McCarthy Tétrault, “The reality is, do I go and consult with my partners on things? Absolutely,” says Scott. “Despite the existence of a corporate model and the fact that if you read my authority on paper, it's pretty daunting.”
The strong value most Canadian law firms, even those that number in the hundreds of partners, place on consultation and consensus may carry a sizeable price tag. A governance structure that is based on consensus is ineffective, says MacKay, unless “leadership has sufficient influence to manage a critical mass of support”—which is really faking consensus, isn't it?
Committees are not much better at making difficult choices. “A governance structure that is populated by
committees is completely ineffective,” says MacKay. Pure democracy? “A governance structure that is based on democracy—50 plus one—can be extremely divisive.” So is there an optimal model? “A good governance structure enables leaders to lead,” says MacKay. But there's a flip side to it: it also enables the partners to follow. “That doesn't mean the partners are sheep. It means that the firm provides a platform for input and healthy debate but it also means that partners respect the colleagues they have elected to a leadership role and that once a decision is taken they will follow.”
And you do that by... genetically engineering lawyers to resemble dogs more than cats? (Wouldn't that be nice, sigh the managing partners.) Not quite. But you do have to tap into what's most important to them. That's not consensus. It's cash. Says Wylie Spicer, “What you have to be able to do is convince partners that the best way for the firm to progress—how you can make more money—is for you to focus on developing your practice, and allow the firm to be managed by a group of people whose job it is to do that.”
Marzena Czarnecka is a Calgary-based Lexpert writer.
Lawyer(s)
David Maister
A. Keith Mitchell
Wylie Spicer
David G. Fuller
James A. S. Dunbar
Les M. Viner
Robert S. Vineberg
Stephen P. Sigurdson
James R. Christie
Firm(s)
Altman Weil, Inc.
AdvantEdge International Inc
Baker & McKenzie LLP
Wilson Elser Moskowitz Edelman & Dicker LLP
Jones Day
Akin Gump Strauss Hauer & Feld LLP
Latham & Watkins LLP
Clifford Chance Rogers & Wells LLP
FARRIS
Torys LLP
Norton Rose Fulbright Canada LLP
Bennett Jones LLP
McCarthy Tétrault LLP
Burnet, Duckworth & Palmer LLP
McInnes Cooper
Dentons Canada LLP
Osler, Hoskin & Harcourt LLP
Blake, Cassels & Graydon LLP