A law firm’s chief financial officer (CFO) plays a markedly different role than just a decade ago. Far from being a narrow-minded number cruncher, CFOs are now expected to engage with business-wide challenges using a diverse skillset. As the role expands, so will the influence that CFOs hold in the C-suite.
New business models, with a focus on expanding into new markets and providing customers with alternative fee arrangements, necessitates a rethink of the skills required by the entire C‑suite. An uncertain worldwide economic outlook, driven by a volatile stock market and falling global growth forecasts, is causing law firms to formulate contingency plans for an array of potential challenges. The input provided by CFOs to help identify growth areas will therefore be vital in helping provide customers with the services they need, at the right times.
“Against the backdrop of instability, our clients are often looking to have one trusted adviser for multiple needs. Being able to cut through that noise, and offer a safe pair of hands and calm guidance is invaluable,” says Kevin Gold, managing partner at Mishcon de Reya. “Clients seek the security of an expert or a team of experts that understands them and their business, appreciates the privilege of being their clients’ lawyers and will fiercely guard their interests.”
CFOs will need to be part of this expert team and ensure they are fully prepared for the rapidly changing business environment, establishing creative methods to improve cash-flow levels and enter into profitable new markets.
Of course, traditional responsibilities around financial modelling, processing transactions and budgeting remain an integral part of the job description for any legal CFO. New regulatory barriers and accounting responsibilities are also adding another layer of complexity to the work of finance teams, leaving CFOs with more processes than ever to monitor.
Leading CFOs can become change agents within their firms by championing the implementation of transformative technologies
The application of advanced technologies, primarily automation and big data, have the potential to reduce costs and improve business processes significantly. Automation can help decrease the number of time-intensive procedures during the provision of legal services, so CFOs will need to understand these technologies and how they can be used in the firm.
At a time when tightening margins across the legal industry are leading to a renewed focus being placed on ensuring profitability, top-tier CFOs are expected to look for proactive solutions. This more hands-on approach can help educate lawyers and ensure they clearly understand financial considerations, when making more business-focused decisions.
For example, there would traditionally be little overlap between the finance function and tech operations. But forward-thinking CFOs see the value of investing in technologies that can address long-standing operational inefficiencies, as well as trimming unnecessary costs. Leading CFOs can become change agents within their firms by championing the implementation of transformative technologies. This is no small feat, as according to PwC’s 2018 Annual Law Firms’ Survey, all of the top ten firms identified technology as “the key challenge to growth in the next two years”.
Mishcon de Reya, a law firm with offices in London and New York, is looking for new ways to automate mundane tasks and simplify internal processes. Their CFO is a key stakeholder in these conversations, actively collaborating with other C‑suite executives on the vision for the firm’s future.
It is more important than ever that CFOs are in sync with everything that is happening within the business and outside it
— Kevin Gold, managing partner, Mishcon de Reya
“CFOs and the finance function must be open to the radical technological changes that are afoot. These changes must be navigated while remaining grounded in a firm’s DNA – in our case, our core values – to preserve the culture of the organisation. Those that can adapt and embrace the benefits that technology can bring, while retaining what works well, will come out on top,” says Mr Gold.
The expectations placed on CFOs as law firms move to a more corporate management structure will be substantial, but the chance to expand their scope of influence during this transition is an opportunity that should not be missed.
“It is more important than ever that CFOs are in sync with everything that is happening within the business and outside it,” explains Mr Gold. “They must have an intimate understanding of the business priorities and its vision for the future, and use their experience to shape decisions, reflecting on what has worked before and what hasn’t.”
The relationship between CFOs and managing partners will continue to change, as CFOs are increasingly expected to provide input beyond their traditional remit, including external factors, such as political and regulatory impacts on the business.
“CFOs will need freedom to articulate whatever opportunities and threats they identify, and must work in ever-closer consultation with the board and wider business. The already vital role of the CFO is no doubt expanding, acquiring additional responsibilities and importance,” says Mr Gold.
As the role becomes increasingly complex, progressive CFOs can become truly strategic partners at their firms by taking the lead on how technology can better meet pressing financial challenges and remove costly inefficiencies.
The CFOs who will excel are those focusing on expanding skillsets beyond their core responsibilities of financial modelling and budgeting to play a more prominent leadership position, bringing about tangible changes throughout their firm.
Download The Legal CFO now and find out:
- Why technology is bridging the lawyer vs non-lawyer divide
- Why your firm must adapt its business model to stay relevant
- How CFOs are key to creating a “one-stop shop” firm
- How to overcome internal resistance to innovation