The Strategic Advantages of Appointing a Law Firm CEO

In July, law firms across the U.S. found themselves grappling with an unexpected challenge: a widespread outage of CrowdStrike, a popular cybersecurity tool. This incident threw a wrench into the operations of numerous law firms, causing delays and disruptions that rippled beyond the firms to their clients and the courts.

While the impact varied regionally, with West Coast firms experiencing more significant setbacks, the event served as a stark reminder of the complex, interconnected nature of modern legal practice, and of the risks that all businesses face.

The CrowdStrike outage wasn’t just a technical hiccup. It’s a prime example of the multifaceted challenges that today’s law firms must navigate. The incident underscores a critical point: The business of law is no longer confined to providing supplemental support for the actual practice of law.

This evolution is exposing how important it is for those serving in key law firm leadership positions to demonstrate a spectrum of business skills, expertise and experience.

Twenty years ago, most law firms operated under a legacy leadership structure: a part-time managing partner who still maintained a full client load, supported by various partners or committees of partners, all of whom were also full-time practitioners.

Over time, the legacy structure evolved. Managing partners focused less on client work and more on the business of law, and firms hired senior business professionals to lead domain areas such as finance, talent, IT and marketing.

The part-time managing partner-led model sufficed when the primary management drivers were recruiting and training associates, the occasional lateral partner, timely billing and collections, and delivering quality legal services. However, today’s law firm leaders must navigate a dizzying array of additional challenges:

• The impact of artificial intelligence;[1]
• The transformation to a paperless business;
• Remote work logistics;
• Diversity, equity and inclusion, and related workplace cultural implications;
• Cybersecurity threats;
• Businesses increasing their national and global reach;
• New and aggressive nontraditional competition for legal services; and
• Evolving client expectations.

These challenges demand decisive, adaptive and often specialized responses from full-time leaders and managers. In response, some firms have followed a different path for leadership succession: the dedicated, full-time CEO.

The executives who excel in this role generally have leadership experience from outside the legal industry. While larger firms are among the early adopters, smaller regional and local law firms have followed suit.

Selecting a dedicated CEO to replace a part-time managing partner, or even a full-time managing partner, represents a seismic shift for leadership succession in a law firm. Historically, most firms have sourced top leadership talent from within their own organizations.

Being a successful attorney — a business originator, practice builder and hard worker with legal expertise — has been the defining credential for leading a law firm. Candidates without this credential, whatever their strengths, have rarely been considered.

The problem with this approach is that it severely limits the available pool of talent for a role that is fundamentally different — and much more demanding — than the traditional managing partner, and it makes the process of leadership succession more challenging than it has to be. The appointment of a managing partner from within the firm also takes a successful legal practitioner out of circulation, depriving the law firm of current and future benefits.

Evidence for this is highlighted in a landmark 2019 cross-industry study, by the consulting firm McKinsey & Co. Inc.[2] This research notes the immense complexity and multifaceted nature of the CEO role, which demands a diverse skill set extending well beyond the confines of any single industry, including law firms.

The study emphasizes that successful CEOs must excel in various domains such as strategic direction, organizational performance and innovation, while also embodying key mindsets like resilience, adaptability and a commitment to long-term value creation.

Furthermore, the study highlights the significant advantage of bringing in external perspectives — noting that CEOs who have experience across different industries are often better equipped to challenge the status quo and drive innovation.

Drawing from the McKinsey research, it would seem that limiting the role of law firm CEO to candidates from inside the legal industry could hinder a firm’s ability to navigate the complexities and dynamic challenges of the modern business environment.

A track record of success in building a substantial legal practice does not necessarily qualify a candidate for the CEO role, which requires deeper skills and a diverse, cross-functional background. Rare indeed is the law firm partner who is equipped with the full range of competencies necessary to succeed as a law firm CEO.

Of course, for many law firms, the idea of CEO leadership is a bridge too far. The legal profession’s roots in a partnership model where the partners lead and manage, as well own, the firm, often makes it difficult for attorneys to cede authority to an outsider — regardless of that outsider’s breadth of skills.

The partnership model, while valuable in many respects, can also hinder progress due to its culture of consensus, which may slow the adoption of new management structures. Additionally, lawyers often worry that adopting more businesslike approaches could compromise the professional nature of law practice.

However, these objections can be overcome, as the benefits of a leadership structure led by a qualified, experienced CEO are too significant to ignore.

First, a CEO brings a fresh perspective that can challenge entrenched ways of thinking and drive innovation, which is essential in an increasingly competitive and rapidly changing legal market. They are more likely to introduce best practices from other industries, fostering a culture of continuous improvement and adaptation.

Second, a CEO typically possesses a broader range of skills in strategic management, financial oversight and organizational leadership, which are critical for steering the firm toward long-term growth and sustainability. By contrast, leaders from within the firm, while deeply knowledgeable about the legal profession, might lack the broader business acumen necessary to navigate the complexities of managing a large, multidisciplinary organization.

Lastly, a CEO can help break down silos within the firm, encouraging collaboration across practice areas, and ensuring that the firm’s strategic vision aligns with its operational practices. This holistic approach can lead to improved client service, better resource allocation and, ultimately, greater profitability.

Conclusion

As the legal industry continues to evolve, law firms must adapt their leadership structures to remain competitive. While change can be challenging, especially in a profession steeped in tradition, the benefits of a CEO-led structure are substantial.

Ultimately, the firms that successfully modernize their management structures will be best equipped to navigate the challenges and opportunities of the modern legal landscape.

[1] See Five predictions: How AI, data privacy and cyber security could transform legal practices, KPMG, 2024, https://kpmg.com/xx/en/home/insights/2024/04/legal-predictions-on-data-privacy-cyber-security.html.

[2] McKinsey, The Mindsets and Practices of Excellent CEOs, 2019, https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/the-mindsets-and-practices-of-excellent-ceos.