Why you need a NED as part of your Management Structure
Many Law firms, whatever their size or structure are utilising the skills of a non- exec as part of their management. With the interest from both private equity and the numbers of floated law firms and planned floatation’s it sometimes becomes an enforced necessity to have a non-exec director on the management board. With over 68% of Law firms now limited liability companies the role of the NED can be an invaluable asset to all law firms. The remaining 32% can still take advantage of a virtual NED to guide them through the change management process that all firms need.
The banks are looking very cynically at the way many professional practices are operated and traditional bank funding by overdraft and loans will change dramatically over the next decade. Most Partners/directors of law firms have grown up with this traditional bank lending and find it difficult to understand alternative funding in the future – the NED will understand how this works and guide the business along the right path
What exactly is a non- executive Director?
A Non-exec is a member of a company’s board of directors but is not part of the executive team responsible for the day to day management of the business. There is no legal distinction between executive and non-executive directors and as a consequence, a NED has the same legal duties and potential liabilities as executive directors. In the case of a law firm that is not incorporated the non-exec role is for someone who sits in partner meetings and challenges the strategy, future direction and the decisions of the partners – no difference to that of a formal NED. NED’s are not employees and tend to have a consultant type relationship with the business
What will a NED give your practice?
We are all aware of the challenges facing the legal profession; legislative, fiscal and a succession crisis, by having a NED or virtual NED your vision becomes clearer. Decisions that are made by partners, often ill-equipped or experienced in managing change, can be challenged by someone who is not involved in the day to day running of a busy practice. Business skills can be brought into play making individual departments become more profitable, constantly reviewing working processes and finding new and unusual ways of running a law firm as a business.
Most NED’s or virtual NED’s will improve the law firm’s profitability considerably and help avoid many of the pitfalls that partners will find themselves.
The role will bring a different dimension to law firm management and those firms who have willingly embraced the role have found the advantages far outweigh the cost. The cost of the NED will vary depending on the size of the practice, the time required, and the disciplines involved but would not exceed the day rate of your normal hourly charge.
Many of the banks encourage a non-exec presence within law firm management recognising the value of a non-lawyer helping with the vision, strategy and someone with business acumen reviewing the management of a law firm with non-lawyer eyes. It’s easy to become isolated within legal practice and the focus becomes very internal “working in the practice and not on it”. A NED or virtual NED can also find ways of reviewing the working capital requirements of practice. The banks are looking closely and law firm funding and traditional overdrafts and loans will become the exception rather than the norm. Finding the essential alternative, a type of invoice discounting will become more commonplace and the NED should be able to provide sufficient knowledge and guidance in the right circumstances.
If you would like to explore the benefits of working with a non-executive, at whatever level, then please contact me for an initial informal discussion.