Law Firms Tap Business Acumen in Competitive Market

As law firms seek the right balance in a competitive marketplace, nearly all of the biggest firms rely on help from business professionals. It’s usually a chief operating officer, a non-lawyer, working with the managing partner and executive committee.

But those jobs seldom get outside notice because lawyers own and run their firms. They set the course and choose among themselves who will steer the partnership. Managing partner is considered an honor and the choice can signal whether a firm is changing direction.

When Lowenstein Sandler LLP hired its first COO, Joseph J. Palermo, it issued a press release on choice and importance.

“A seasoned pro with global law experience,” Palermo has “legal acumen and executive instincts set him apart,” said Gary M. Wingens, chairman and managing partner of Lowenstein Sandler. Engaging Palermo “signals a new phase for us in which he will play a huge role in the positioning and growth of our firm in the years to come.”

Palermo’s not a lawyer. He has an MBA from Boston College and worked as COO for a decade at law firm K&L Gates LLP prior to moving to Lowenstein in January. He also had previously served as chief financial officer for two other national law firms.

Palermo will help oversee Lowenstein’s day-to-day operations, and provide input on the firm’s business strategy, focusing on organization and business support.

Lowenstein has about 300 lawyers in New York, Palo Alto, Calif., New Jersey, Utah and Washington. It serves clients in a range of industries but emphasizes investment funds, life sciences and technology.

Lowenstein, like other firms, is facing “demand that firms be more efficient and provide better value,” Palermo said in an interview. “The role of chief operating officer is growing in importance and visibility in the legal industry.”

Some of the largest, most successful firms employ non-lawyer managers.

LeeAnn Black became the chief operating officer of Latham Watkins, in 1999. A business school graduate and a former senior auditor with Arthur Andersen, she oversees the 2,000-lawyer-plus firm’s global operations and its financial management, including accounting, administration and technology.

She’s also a member of the firm’s executive committee, which has the final say in management and governance.

DLA Piper employs Robert Bratt as its chief operating officer. He spent three decades managing commercial and federal legal programs, and held management roles at the Justice Department’s civil rights and criminal divisions. He oversees DLA Piper’s U.S.-based operations and helps to ensure services are delivered uniformly on a global basis.

Black, Bratt, and others have helped steer their firms without a law degree. In past years, a non-lawyer was at a distinct disadvantage at law firms and sometimes accepted only grudgingly. Now, a layer of business expertise is increasingly accepted, according to law firm management experts.

“Twenty years ago, the role was more focused on administration, staffing and facilities,” noted Kent Zimmermann, a consultant with the Zeughauser Group, a law firm consultancy, who organizes an annual Chief Operating Officers roundtable. “But the job has broadened since then into a number of different areas including pricing and knowledge management.”

Firms are also under pressure to develop new ways of attracting and maintaining business, but at a competitive price. And firms scout for business acumen to make shifts to new business development and delivery models.

At Linklaters, a London-based firm with more than 2,300 lawyers around the world, firm leaders designate as many as 130 professionals to serve as project managers. They make sure client matters are done as efficiently as possible, according to a firm spokesman.

The firm is seeking to expand that team and even send lawyers to work within the in-house law department of a client when a matter is big enough to warrant a full-time presence.

At Lowenstein, Wingens said the firm conducted a nearly year-long search to find the combination of background and skills that made the right fit. Their prior administrative manager decided to retire and Wingens said firm leaders committed to exploring different approaches to the firm’s positioning and strategic plan. Palermo was hired as a result.

“We saw a lot of good candidates, but we looked thoroughly because lawyers, like myself, typically have never worked anywhere else,” he told Big Law Business. “I’m a mortgage and structured finance lawyer, who started at the firm as a summer associate in 1987 and have been here ever since.”

One of the firm’s major goals, said Wingens “is to take a new look at areas like fee arrangements and staffing. We decided we wanted a fresh perspective on how to approach things. Law firms are not very good disruptors, but we need new models and Lowenstein is at a size where we can try new approaches.”

One problem confronting Lowenstein – and nearly every firm – is legal technology. Law firms face a slew of choices in areas such as document review, cybersecurity, data analytics and machine learning.

“Our spend on technology has gone through the roof, on cybersecurity as well as other tools to help us deliver services, and we don’t always use it effectively,” Wingens said.

That will be a central concern in his new job, Palermo agreed. “One of my mandates here is to evaluate the tools and make sure lawyers can use them efficiently.”

“The lawyers are focused on the clients, but the lawyers are my clients,” he said.

To contact the reporter on this story: Elizabeth Olson at egolson1@gmail.com.

To contact the editor on this story: Casey Sullivan in New York at csullivan@bloomberglaw.com.