March 2005
mall businesses and even some law firms across the country are adopting a new—some say revolutionary—approach to management: Open Book Management. Simply defined, an "open book" process requires that every attorney and staff person learns and understands the firm's financial and other pertinent information necessary to track the firm's performance. They know that their jobs require their participation in helping the firm, and that both attorney and staff members have a direct stake in the firm's success.
Open book management, when successfully implemented, teaches people to think as business people, not as hired hands. The impact of this switch in thinking is enormous. Even the Harvard Business Review, the conservative bastion of business thinking, is talking about open book management.
Traditionally, law firms have been reluctant to disclose information to anyone. There has always been an element of fear: fear that if associates know too much, they might steal clients and open up their own firms, or fear that the staff might "sell the firm out" by trading on confidential information with a competitive law firm.
This fear is usually unfounded. In most cases, the associates and staff generally know how a firm is performing even though they may not know the exact financial information. They know whether the firm is successful or is struggling to meet its obligations; they know whether the industry considers the firm a leader in its field or a "me-too" operation; they know whether there is pride and joy in working at the firm's operations. These are not secrets or knowledge requiring an advanced business degree.
In reality, the reluctance on the part of law firm management to open the firm's information banks has created a lack of trust on the part of its employees, and that lack of trust goes full circle so that neither staff nor management trusts the other.
A classic negotiating principle taught to business students is to get the other side to sit shoulder-to-shoulder with them, so that both are on the same side of the table, rather than to be face-to-face in a confrontational style. Thus, in running a law firm like a business, if management can get the associates and staff to look at the firm in the same light as the firm's management, the trust factor will be recreated, and the firm's chances of success will be improved.
The Reality of Opening the Books
In reality, few firms, even the large firms, currently open their books to their partners, let alone their associates or staff. While partners have the legal right to inspect the firm's books, if the management committee chooses not to reveal the information, partners will not normally ask for the information. Associates almost never see the information. However, this is a situation in need of change.
Most lawyers prefer to "practice law." This means that lawyers want to do the research, prepare and conduct the trial, conduct the negotiations, and perform other elements of the practice. Lawyers are typically not enthusiastic about marketing their services or handling any of the other myriad of business activities needed to run a law practice. Why, then, should lawyers be concerned about the financial side of the practice? Why should lawyers care about the open book management theory?
The answer is simple: If more lawyers conducted themselves not just as lawyers, but as business people or as owners of the practice, the law firms would surely experience the same type of success as businesses in other industries.
Focus groups conducted by the State Bar of California and other organizations have highlighted clients' opinions that lawyers are arrogant, that lawyers fail to understand the simplest of business principles in the operation of their own law practices, and that lawyers do not practice the simplest of courtesies required by any successful business—an awareness and appreciation of the consumer's (i.e., client's) concerns and needs. All of these shortcomings are examples of lawyers who are not acting as business people, and opening the firm's management is one good way to turn things around.
How to Open the Firm
Here are some practical suggestions for opening the management of the firm:
Long-lasting improvement can come only from the commitment of everyone in the firm. Having everyone in the firm behave as a business person will have the greatest long-term impact of any management theory. While no one approach can be a panacea for all ills, opening the management of the firm to greater awareness and understanding will go a long way to unifying the law firm, causing more of the firm's personnel to "pull in the same direction," and allowing the firm to reach greater heights of success and prosperity.
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