Who Actually Manages the Practice? Understanding Practice Management in a Law Firm

Law firms, regardless of their size and revenue, already had basic business teams - accounts and IT and may be administrative. With the increase in awareness about running law firm as a business, the law firms are increasingly taking corporate style avatars with specific business teams managing specific functions. Finance manages finance controls including investments in technology, HR manages people and performances, Business Development and Market Communications managing publications, branding, PR, and Innovation manages technology. Then who is managing Practice? 

Practice Management is not new and certainly doesn't replace these teams or their functions. Practice Management does not generally own client origination. Its contribution to growth is different -  understanding how the practice is performing and providing the operational information that helps Partners steer the law firm's business and make better growth decisions. 

At its broadest definition, law firm Practice Management encompasses the business administration of law firm. Wikipedia defines Practice Management as covering areas including people management, office management, financial management, office management, and marketing with central elements being people, processes, and policies. The American Bar Association's  Law Firm Management Guide for Scalable Growth illustrates how broad that management challenge can be in daily operations. The framework of management covers measurable goals, KPIs, marketing, cash flow, standardization, automation, client experience, and analysis of financial and operational performance.  

But in a modern law firm, many of these functions are handled by specialized or specific business team. So where does Practice Management fit? The answer lies when looking at the functions of the existing business team and ascertaining what remains to be understood at the practice level.

Practice management doesn't replace these business teams but rather brings together the inputs from these business teams and turns into operating decisions. It connects the financial performance, people and capacity, workflows, technology, marketing activity at the practice level. 

1. Finance - Measures financial performance.

Practice Management - Interprets the financial performance in the context of how the practice operates.

Finance looks into sales, cost, and profits, and provides information to enable financial decisions on bonuses, pro-bono, litigation, hiring, technology, and so on. Practice Management takes these inputs and analyzes different questions - which practice performed well, which didn't, what operational factors contributed, was it a mix of external conditions and internal conditions such as pricing, volume, capacity, matter mix, workflow, utilization, and so on. For example, declining profit despite increasing volume may reveal rising cost prompting review of pricing and staffing. 

2. HR - Manages people and measures individual performance. 

Practice Management - Connects capacity, people performance, and practice requirements. 

HR looks into the KPIs and KRAs set for the year, compare the results against the KPIs and KPAs, decide on increments based on feedback, and then set KPIs and KRAs for next year based on discussions with responsible partners. Practice Management provides practice level operational  evidence that can inform decisions for setting the KPIs and KRAs bringing together individual performance, team performance, and practice performance. For example, increasing revenue with consistent high utilization may indicate capacity constraint prompt hiring or reviewing of KPIs and KRAs appropriate for practice.

3. Business Development and Market Communications - Develops markets, relationships, visibility, and opportunities. 

Practice Management - Provides context that can guide where attention and resources should go. 

Business Development and Market Communications develops the firm's market presence through client development, pitches, publications, rankings, events, conferences, and other visibility initiatives. Practice Management contributes different input - practice-level information that can help make a decision systematic rather than intuitive by identifying patterns in matters, client, revenue, practice. For example, sustained growth in particular type of work may justify greater market development investment in that work while high-value, low-volume work may present an opportunity to create niche in that area. 

4. Innovation  - Identifies, implements, and supports technology. 

Practice Management - Defines and standardizes underlying processes. 

Innovation looks into technology that improves how the law firm works. Practice Management approaches this from operating side - what are the underlying processes, which processes needs standardizations, what are the bottlenecks, and so on. By defining and documenting, Practice Management helps ensure that systems are built around processes rather than the other way around. For example, repeated delays may just be process that has not been clearly defined rather than need for additional system notifications. 

Smaller or boutique firms may not need dedicated Practice Management functionality and may rather have their specific employees or partners work on these aspects. Every firm needs elements of Practice Management but not every firm needs a dedicated Practice Management role or team. But as scale, complexity, technology, client requirements and growth increase, however, coordinating these elements can itself become a management function. And that's where Practice Management sits at the intersection of Finance, HR, Business Development, Innovation with the practice.