Law Firm Resilience in a Crisis: Part Two – Operational Resilience

In our paper of April 6, 2020, we introduced this series which is aimed at identifying and addressing topics that are at the top of the agenda for legal leaders during the current crisis. That paper was focused on Financial Resilience. In this paper we turn our focus to Operational Resilience.

Operational Resilience

Operational Resilience Priorities

While the financial impact of a crisis is what immediately grabs the attention, operational adjustments are essential for business continuity and to compete in the new market reality. By “operations,” we mean the organization and support of the workforce to serve internal and external client needs effectively.

The top priority is to ensure that workflows and business processes are not interrupted. Where disruption cannot be avoided, leadership needs to adapt previous processes rapidly and definitively to meet the challenge; we have recently seen this in practice in firms which moved quickly to an entirely virtual and digital operating model.

The second priority is to provide the means and resources to operate efficiently during the crisis. The ranking of executive-agenda issues and items of expenditure will almost certainly need to shift for the duration of the crisis and possibly beyond.

Considering how operations should be restructured to serve the market post-crisis, and planning the investments necessary, is the third goal. These are key to sustained operational resilience.

The goals are achieved through:

• Effective and proactive leadership and streamlined decision-making processes
• Supporting mechanisms for people
• Robust communications – more regular, transparent
• Adapting infrastructure and allocation of resources
• Embracing change with a positive attitude

We elaborate below on five actions that can enable achievement of these goals.

Crisis management team

• Put in place a process for strong and decisive leadership that can set priorities for the organization and take calculated decisions based on information available.
• Assemble a multidisciplinary team of experts (e.g., from Finance, Technology, Operations, Human Resources, Communications) that “meet” more regularly and both provide strong direction and respond very rapidly to developing events and emerging information (the “Crisis Management Team” or “Response Team”).
• Unlike normal circumstances, it is not possible to gather all facts to make a pondered decision in a crisis. The uncertainties do not allow this to occur in an adequate time frame. Certain risks are inevitable to avoid the greater risk of inaction.
• It is incumbent on senior leadership to break from a decision-making model based around iterative consultation and reporting and delegate authority for an accelerated response where appropriate.

Supporting mechanisms

• The safety of your people, both physically and psychologically, is not just a moral responsibility but a key to maintaining stability and productivity. Furthermore, people need assistance and tools to be able to adapt to new realities.
• Provide guidance in a simple straightforward format as to how people can maintain their well-being and continue to perform their functions, especially working remotely and connecting virtually with clients. Issue a list of “go to” people for different subject areas, with their contact details.
• Establish an on-line information hub, or resource centre, including FAQs. This is a repository for the orientation, resources and materials (e.g., “how to” and “what to” questions) that people may consult at any time. These FAQs must be regularly updated to respond to the changing nature of the crisis and how it is being managed.
• Engage with clients to understand their concerns, how they may be supported and how the firm is capacitated to continue serving them during the crisis. (We will comment more on client relationships in Part 3 of this series.)
• Support the best possible performance that can be expected of professionals in the changed scenario (may vary significantly by practice group) and do not insist on pre-crisis goals that may no longer be attainable (e.g., billable hours, fee targets); doing so will always undermine leadership’s credibility amongst professionals. Also, provide orientation on how best to use any “down time” (e.g., on-line training, updating precedents, reconnecting with previous clients and contacts, etc).

Communications

• Communication is leadership’s strongest tool to build confidence and morale and, as a result, assure collaboration across the organization and with clients and other stakeholders.
• Create a plan and stick with it. Communications need to be frequent and consistent, and must address questions and concerns of the audience. Transparency and setting the right tone are key to effective communications; after all, the objective is not only to inform but also to calm fears, generate confidence and sustain morale.

Staffing needs

• Redeploy and make the best use of talent. While rightsizing may be necessary, and we indicated in Part One how cutting of staff needs to be strategic, do not over-prune so that you prejudice the ability to gear up post-crisis. Look for the opportunity to reallocate staff from a practice area with depleted business to one that is busier.
• Similar to reviewing practice-area loads, evaluate geographic spread (where appropriate) and how offices and groups might best share resources or work on a more integrated basis.
• Consider the overall legal staffing mix and opportunities to delegate aggressively to maintain productivity while, of course, assuring that service quality will not suffer.
• Take advantage of the crisis to rethink support-staff needs. This is not only a question of quantities and types/level of experience but also an opportunity to present challenges to promising talent.

Infrastructure and supply chain

• Take the necessary steps (which will depend on the level of preparedness) to enable fluent remote working capability, empowering the technology experts to engage with outside vendors for the essential, appropriate solutions (devices, internet connectivity, collaborative platforms).
• While moving quickly to assure business continuity, there should be enough oversight to determine that key risks such as security of data, business interruption through loss of internet connectivity and compliance with data privacy requirements are managed. This could well entail obtaining a second opinion on the capability of systems and applications to be adopted.
• Develop practical training sessions and resources to enable the use of new technologies and educate all users. Now is the time to focus on providing assistance and tools and not just on procedural matters.
• Engage with suppliers and determine how best to modify service delivery and service terms. Remember that these entities are facing their own challenges and will be keen to either maintain business or promote opportunities.
• Apart from technology service providers, pay attention to logistics (e.g., physical delivery of documents and materials to a more distributed population, travel arrangements) and consider outsourcing options, even if interim, to eliminate bottlenecks.

The Bottom Line

During a crisis period, do utilize the power of the “team” and coherent engagement with all stakeholders (workforce, clients, suppliers). Do not expect the processes, priorities, performance metrics or governance solutions that worked just weeks before, pre-crisis, to see you through this new normal; be agile and prepared to adapt very rapidly across your business.

Whilst responding smartly to the immediate demands of the crisis, never lose sight of your – now altered – roadmap; ensure you consider how to restructure and invest for tomorrow.

Why Operational Reviews in Law Firms Are a Must

Written on the basis of my two decades of work as a manager and consultant with international and local law firms across APAC and the Middle East, this article provides insights into operational reviews (ORs) – explaining what they are, and why all firms should consider embarking on them periodically.

What Is an Operational Review?

An OR is a full scope “audit” of a law firm’s operations and its operational strategy, and an examination of how they interact with the firm’s overall strategy. The purpose of an OR is to determine if a firm’s operations are “fit for purpose” for the existing business, and to provide a stress test to determine if the operations are fit to support future growth – or, in some cases, future contraction.

Why Is It Important to Perform an OR?

An independent and full-scope OR provides a law firm with a “report card” showing where its operations currently stand and what is required in terms of investment and resources to ensure it “future-proofs” itself.

Should the OR Be Performed Internally or Externally?

My answer to this question is that it depends – on the circumstances of the business, and on the motive for performing the OR. The key to an effective OR is independence.

That said, in my view there is much more benefit for the OR to be performed externally, to avoid preconceived notions about the business operations, and to mitigate the influence of underlying politics or individual agendas.

If a firm decides that the OR is to be done internally, the review should be undertaken by someone independent within the business – preferably from another office or region – so that there is an element of independence in the findings and in the recommendations.

The critical factor is that the review be independent and the findings and recommendations reported on are done without fear or fever, so as to achieve the desired effect of assessing the operational health of the firm and recommending practical remedies.

What Are the Most Common Issues in Getting “Buy-In” for an OR to Be Commissioned?

The most common issues surrounding the decision to undertake an OR are: costs; the changes in management and investment that may be required as a result of the review; the risk of pushing people out of their comfort zones or exposing “skeletons in cupboards”; apathy; and the existence of “no burning platform.”

Whilst these are all reasonable and understandable reactions, it is my view that a well-performed OR without limitation of scope is very much like a “health check” of the operations of the business. Unless you perform this health check periodically, a firm can never be sure if its operations are efficient, set up adequately for its existing business, and able to support future growth.

However, it must be noted that ORs are not only beneficial in times of growth or boom markets. They are also very useful when the firm is considering rationalisation or downsizing. An OR under these circumstances will provide the firm with an independent view and strategy as to how best to downsize the business, the potential knock-on effect of this strategy, and how best to mitigate any potential fallout. Without an OR, I have often seen firms experience a “knee-jerk” response to worsening market conditions. In my view this is a dangerous and possible a costly strategy in the long run.

What Are the Most Common Findings Arising out of ORs?

Having performed 25 to 30 ORs internally and externally of firms and offices in many jurisdictions throughout my career, I have found that several common themes emerge

Particularly small firms and small offices within larger firms that have grown rapidly often find that they have invested vast amounts in the revenue side of the business in terms of hiring lawyers. Whilst this is an understandable strategy, there is more often than not an inadequate corresponding investment in support and IT infrastructure and hiring of quality professional support to advise the firm as to how its operations can be made “fit for purpose” and help drive it to the next level. In a majority of cases this investment in infrastructure and people is viewed as an unnecessary cost, rather than as an investment that is much needed to protect the quality of the firm and to sustain growth.

Quite often this lack of investment in operational infrastructure will come to the surface when the firm can no longer manage the growth of the business effectively. The consequence of this is that over time, client service starts to suffer and staff retention and morale deteriorate. In an attempt to rectify this, firms often need to make immediate large-cash-investment decisions to respond to the situation. This puts a strain on the partnership finances and it impacts directly on the pockets of the equity partners. More often than not, the consequence of this pressure is that the required investments are “half baked” and at times, are costly and ineffective. Firms can avoid this situation if they periodically invest in the support infrastructure at the same rate as the growth of the revenue of the business.

I often get my clients to visualise the building of a house, in which a solid roof (revenue) is built before a strong foundation (support infrastructure) has been constructed. Without sufficient investment in infrastructure and support, the house is likely to collapse. Bottom line is that the investment in support infrastructure needs to keep pace with the growth of the business.

What Are Some of the Pitfalls in Implementing the Recommendations of an OR?

The most common challenge in implementing the recommendations of an OR is to find champions to assist in promoting the change that is required, and to deal with the necessary change-management issues.

As we all know, human beings are very averse to change, and this is especially true in law firms. It is therefore important to have a well-designed change-management strategy to implement the changes.

To successfully move forward with the implementation, firms must also differentiate between “cost” and “investment.” Strong arguments need to be made as to the reasons why the investments are required, and how the return on investment is going to be measured. To do this, a roadmap needs to be designed and milestones need to be articulated and measured.

Throughout the process of the OR, it is important that regular, transparent communications are made to the appropriate stakeholders, informing them as to the progress of the review, the resulting recommendations, and how they are to be implemented. Lawyers and staff want to know what the impact of such a review will be on their daily working lives. A lack of open communication is often problematic when it comes to the implementation of recommendations, as it means that many of the staff who will be impacted have been in the dark during the OR. In my view, it is very important to take the affected people on the journey of change to ensure that the change takes place smoothly.

Conclusion

It is never easy to decide when or whether an OR should be conducted. In my estimation, however, firms that do not perform these periodically are missing a trick. No matter how big, small or sophisticated the firms, I would encourage them to review their operations on a periodic basis. The industry and markets continuously change, and it is important that the operational infrastructure changes in step with the business so as to help support it, to mitigate risks and to maximise efficiency and profitability.