Integration Or Disintegration, That Is The QuestionLeon Sacks
The objective here is not to be alarmist or suggest that there is a binary choice between life or death, as in Shakespeare’s allusion. It is, however, meant to draw attention to the need for continuous focus on what keeps a professional services firm, and more particularly a partnership, ticking and successful, namely the integration and collective behavior of its partners.
Integration means that partners are working in the same direction towards a shared goal, that that they are aligned in managing their teams and representing the firm and that their capabilities, knowledge, experience and relationships complement each other.
Disintegration is a danger when there are conflicting priorities amongst the partners and divergent opinions about the way business should be conducted and individualistic rather than collective behavior becomes prevalent. The partners or groups of partners become isolated and unhappy and the firm may become a composite of fiefdoms rather than a homogenous unit.
The current reality of disruption with rapid changes in demand and supply chains is challenging leaders and management in the corporate world. In a partnership such challenges are often magnified by the fact that partners consider themselves co-owners of the business, desire to have a say in how business is conducted and wish to share the benefits.
While overseeing the quality of work, client relations, finances, talent, business development and efficient operations, management needs to be attuned to the concerns, motivation and behavior of partners that, untreated, might be detrimental to the achievement of goals in all those areas. Just as a relationship of a married couple needs to be managed so does a partnership, except that in the latter case the marriage counsellor has to deal with multiple people!
Clearly management deals with partner issues on a daily basis and often this means putting out fires and/or spending a great deal of time in managing people’s expectations or explaining why a certain decision makes sense. Issues will always arise but would it not be more efficient to have integration as a permanent item on the agenda knowing that it will require continuous action as the firm grows and changes and as its partners’ careers advance and ambitions change?
Conditions that might indicate the need for greater integration efforts include:
- partner grievances or departures
- extensive partner discussions on strategy, structure or processes
- incompatibility between partners
- doubts raised by partners about contributions of others
- reduced partner performance or motivation
- unsuccessful lateral integration
- reduced retention rates of attorneys
- individual v institutional behavior
- offices or practice groups working autonomously
- different approaches to service delivery and client management
- little or no sharing of information
- “my clients” attitude prevails rather than “our clients”
- partner compensation system not perceived as fair
- complaints of excessive centralization or lack of flexibility
- inconsistent quality of service perceived by clients
These conditions might not have been a common trait but as a firm grows, the partner ranks grow, the number of offices/practices grow and the firm adapts to market conditions, they may develop quickly. If they are not isolated and become a pattern, management needs to evaluate the causes and adopt a remedial action plan.
As suggested earlier, it is preferable that this be done on an ongoing basis taking the temperature of the organization and the status of the partnership on a regular basis and adjusting accordingly – what we might call the integration “agenda”.
The integration agenda should aim to ensure:
a) Partners are “supporting sponsors”
The alignment of partners with the vision and strategy of the firm and their consistent adherence to common and agreed-upon principles is key to leading the firm in the right direction. They should all be supporting sponsors of the firm’s direction and communicate a consistent message in that regard. Partners are largely the face of the firm to clients and its professionals and their behavior weighs heavily on the way the firm is perceived.
b) Strategy drives structure
Whatever the message for integration, if a firm’s structure drives behaviors that are not aligned to that strategy, it will not succeed. As the Harvard Business Review once stated “leaders can no longer afford to follow the common practice of letting structure drive strategy”.
A crude example: if two offices of a firm are organized as two business units with their own local management and the partners in each office are compensated largely based on the results of their own office, a strategy of sharing resources and cross-selling might be prejudiced or, at a minimum, not incentivized.
c) A collaborative environment
Collaboration generates internal synergies (e.g. sharing talent and knowledge) and external benefits (e.g. client development) while allowing partners to feel more connected to each other, reduce their levels of stress (hopefully!) and enjoy more work freedom. Incentives and support for collaboration that reflects a more institutional approach to conducting business are to be encouraged. This is by no means inconsistent with an entrepreneurial approach to business or rewarding individuals for extraordinary performance.
It is not uncommon to find firms consisting of different groups or individuals that are somewhat autonomous, take different approaches to service delivery and client development and work largely in isolation from others (the “composite of fiefdoms” mentioned earlier). This is rarely a pre-meditated or deliberate action but rather derives from different cultures and work habits (resulting from previous experience in other organizations) and behaviors driven by the firm’s governance and partner compensation system (i.e. what is my decision-making authority and how is my compensation determined).
To be an “integrated” firm, a firm that is effective in providing solutions for clients and is efficient in its use of resources, it is imperative to create a unified culture and adopt governance and compensation models that motivate a one firm approach. Consequently, principles that typically underpin integration may be summarized under three headings:
- the governance and decision-making structure be clear and understandable
- the management structure reflects diversity of practices and offices, but with all decisions aligned to the firm’s strategy and to the best interests of the firm as a whole
- the governance structure reflects the importance of practice and industry groups as natural integrators across offices and jurisdictions
- authority and policies for decision-making be delegated as appropriate to avoid shackling the organization while allowing for risk mitigation
- Committees and task forces with appropriate partner representation deal with ongoing issues (e.g. Compensation Committee, Talent Management) and specific projects (e.g. Strategy Review, Remote Working), respectively
- a partner communication structure that allows partners to be continually informed and feel they are being consulted on issues of relevance to the business
- the compensation system provides clarity on expectations of contributions from partners and aligns compensation with such contributions
- adopt the right mix of compensation criteria to motivate and reward both behavior that drives the firm strategy (revenues, originations) as well as collaborative behavior that encourages teamwork and partner investment in the growth of the pie, rather than a struggle for a larger share (cross-selling, training initiatives)
- couple the collection of objective data with subjective inquiries to adequately measure partner contributions and allow for appropriate discretion in applying compensation criteria to promote fair and equitable results
- consistent partner feedback process
- build and support a culture with a shared mission, joint long-term goals and shared risks and rewards
- align structure to strategy, clarify roles and responsibilities and enforce accountability
- promote transparency and open communication and be inclusive
- build trust and confidence facilitating interaction between partners and creating a healthy dose of interdependence amongst them
Firms can easily lose the focus on integration, an intangible asset, while they are busy dealing with the tangible issues of day to day operations, developing business, serving clients and controlling finances. It is better to manage integration than recover from disintegration.
Managing and Growing a Law Firm, Part 3Yarman J. Vachha
In this final article in the series of three, I highlight the legal scene in Asia, the changes to the legal industry, and the different resources available to law firms for expansion. I also take a look to the future, and share key leadership qualities.
I have previously discussed why firms need to look to the future, as they cannot live in the past and will soon become irrelevant in this fast-paced, tech-savvy environment. Disruptors are already well established and eating away the market share of many firms. Artificial Intelligence (AI) is here to stay and will become more and more sophisticated. For example, standard contracts are now easily available from the internet and there are other solutions in the market to make the “bread and butter” legal services no longer the “black art”, which at one time nobody understood. And then there is the growth of the “in-house” legal departments eroding business lines.
Leadership for the Future
To future-proof themselves, law firm managing partners need to “lead” and not “manage”. I have encountered many managing partners who manage (and at times micro-manage) rather than lead. Some are good at managing but many miss the critical role of a managing partner, which is to lead, have a vision and to inspire and drive the partners to achieve that vision. Then there are those who are poor managers, the ones that micro-manage or those who are indecisive and are too involved with the detail to see the bigger picture, or simply do not have time to manage. All these recognisable conditions lead to inefficiencies and mismanagement, creating potential financial, retention and reputational risks for the business.
As I shared in the first article, I believe that the day-to-day management of a law firm should be left to business professionals who have the necessary skills and experience. Hiring people with this skill set at an appropriate level for the firm is key. Firms need to hire business professionals at the right level and not under-hire. I would caution that hiring at an inappropriate level (too junior or too senior) will lead to additional issues and may be a wasted investment.
In the commercial world, all well-led and well-managed corporates will have a chief financial officer, chief information officer, chief marketing officer, etc. These are professionals in their own rights, and contribute to the success of the business. Why then do law firms think that partners can run such functions in which they have no real expertise or experience? Part of this stems from a “cost” rather than an “investment” mentality. I think what is not appreciated is that partners are being taken away from their core competencies and thrust into something that they are not trained for. What is not accounted for in the Profit & Loss Account is these lost partner hours that could be better utilised in marketing and discharging work which ultimately adds to the bottom line.
In addition to having a sound professional support infrastructure, it is important for leaders of law firms to interact within the industry, attend relevant conferences, keep up-to-date with major changes in the market, and respond promptly to the changes that are taking place in the industry. Keeping up with the legal press is also a must.
Law firm leaders need to have a strategy and a “laser-like focus” on what they want to achieve, and have a formalised succession plan to ensure there is an ongoing legacy for future generations.
The key to relevancy is a vision, a stated purpose, an evolving strategy to move with the times, a laser-like focus on the ultimate goal, investment in a sound and professional support infrastructure. Bringing all these together requires a strong and decisive leader with an innovative and flexible mindset.
To achieve these goals, it is very important for the management of the firm to be inclusive and to seek the opinions and insights of the lawyers and the business professionals who can help shape the present and future of the firm. Having a sharing and open culture is also important, so that all employees know what the firm’s vision is, and what they are striving to achieve.
At the end of the day, the management of a firm is in a stewardship role. The priority of these stewards should be to lead the firm and make it better than it was when they were put in the leadership position. Having this mindset will help shape and create a legacy for future generations. I would also encourage management not to take a short-term view on all matters. In particular, longer-term investment strategies are required in this competitive environment, as the firms that take a short-term view are unlikely to survive.
We live in a new age of millennials who are entrepreneurs at heart and are very much plugged into the ‘gig economy’, Much like all of us in this new age, they want instant gratification. This group of young lawyers comprise the engine room of the 21st century law firm, and very much the future of the business. This is where I believe a disconnect occurs. The current leaders and managers in law firms are most likely middle-aged and “Gen X,” brought up in a different age and with different values which included working hard, being in the office 9 am to 9 pm, and coming up through the ranks with the ultimate goal of being a partner in a firm.
This is not necessarily the mindset of the modern lawyer, who has many more life and work choices than the previous generations. Law-firm management has to listen carefully to younger lawyers and take heed of their needs to make them productive and engaged, and to retain them in the business long-term. Opportunities to work flexibly and remotely are high on their list. This could mean flexible working parameters and strong and secure IT systems to ensure effective and productive remote working. If this is what it takes to make this generation more productive and create an attractive long-term career path for them, then firms need to respond appropriately to this changing world with both action and rewards.
Women of Law
Firms also need to address the ongoing issue of women leaving the profession. Law firms lose many talented women in which much investment has been made when they decide to have a family. Sadly, this talent is often lost for good. Firms should do a much better job of providing flexibility and alternative career paths, thus giving these women an opportunity to look after their families while also adding value to the business.
Let’s not forget that 20 years down the line, the millennials group will be leaders of the firm, and they will have a different set of issues to deal with which we can’t even begin to imagine. I think if the current leaders can forge a blueprint for flexibility, succession, and legacy, this will be ingrained in the DNA of the young lawyers and will bode well for future generations.
In conclusion, my three top tips:
- Have a clear vision and purpose, set accountable milestones for these to be achieved, and be inclusive of all in the firm
- Managing partners need to “lead” not “manage”. Leave the management and the execution of strategies to the business professionals
- Build a firm for the future with innovation, the millennials, and women in mind.
Gerry Riskin’s Immutable Laws of Law Firm SuccessGerry Riskin
When Edge International was formed, I was optimistic that by this century, we could all make the following statement – and it would be true:
Dateline 21st Century: Most professional firms today and their practice groups are led by individuals who have not only mastered practice skills but are equally adept in organizational behaviour. They understand group dynamics and the art of facilitation. They conduct highly effective meetings, coach individuals to achieve their personal best performances, and create an environment in which professionals thrive. Managing partners are masters at “managing the managers” by ensuring that they are working toward relevant, well-defined and achievable goals. That is why most firms are highly profitable, achieve very high levels of internal satisfaction, and give exemplary client service. Turnover has dropped to nearly zero and clients are extremely loyal, thinking it absurd to even consider switching firms.
“Dream on” you say. Well, yes, I do dream on and as a perennial optimist I believe that what I have described is still very much achievable. The major ingredient missing in 99% of today’s professional firms is simply “The Will to Manage.”
The following 12 immutable laws represent my assessment of the most critically important components of successful firm management.
Law #1. The Managing Partner Must Be Willing to Manage: The managing partner must assist the partnership in achieving a clear vision complete with a describable, quantifiable destination. Firms cannot succeed with managing partners who were selected for their uncanny ability to ruffle no feathers and who discern the predominant direction of the firm and then run out in front to give the appearance of leadership. Management requires courage.
Law #2. Leaders Need Power: Most leaders are chosen because of their seniority, rainmaking prowess, and book of business. How does such a leader get influence over others who may outrank them on any one of those attributes? The power comes from understanding what the members of the group aspire to, and then helping them achieve it. This requires “asking” and “listening” — not “telling.”
Law #3. Leaders Must Coach: The art of coaching is to strike the right balance between being supportive and continually demanding. Talented, rich and famous athletes accept coaching, and when they see the benefits, your partners will also.
Law #4. Managing Must Yield a Financial Return: Unless a leader understands the mathematics of the return on investment that is realized as a result of the managing effort, the role may be seen as honourary and not critically important.
Law #5. Leaders Must Motivate: The only way to change a practice group is one person at a time, and the only way to motivate an individual is to find out what they want and help them get it.
Law #6. A Group Requires Shared Ambition to Function: You cannot move forward until you’ve got some sense of where you want to go together. Each individual needs to answer the question: “What can I accomplish in this group that I cannot accomplish alone?”
Law #7. Teamwork Requires Enforceable Rules: Your strategy is not what you aspire to; your strategy is what you are prepared to enforce. To have a strategy you have to decide: “What sensible rules are we prepared to establish for our club?”
Law #8. Profitability Comes From “Smarter,” Not “Harder”: If the way you are making more money is by working harder, you should take that as a sign of personal failure, not success. Profits come from being ever more valuable, not from working eight days a week.
Law #9. Build Skills and Foster the Sharing of Knowledge: Intellectual capital walks out the door each night. Too much of it is a heartbeat away from being lost to the firm forever. By ensuring that appropriate skill dissemination and knowledge sharing is occurring, a firm can create tremendous additional value and an insurmountable competitive advantage.
Law #10. Give Recognition and Celebrate Successes: Brilliant leaders have a knack of setting goals that are sufficiently stretching to be worthwhile — but achievable — and then fueling the behaviour by fostering encouragement and celebrating successes.
Law #11. Encourage Innovation and Remove Obstacles: The essence of having a competitive advantage is not waiting for others to pioneer the way, but to constantly ask: “What are other people not yet doing that we have a suspicion clients might like?”
Law #12. Differentiate With Perpetual Action: When virtually every firm has essentially the same strategic plan, the real competition is not about having a better idea; victory goes to those who are better at execution. Effective leaders help individuals break their objectives down into bite-sized incremental bits and then relentlessly follow up to ensure that progress is continuous.
Estée Lauder, the business titan, said in a television interview many years ago, “I am not famous for my ideas but rather for what I have done” (italics mine). Therefore the management game is ensconced in what I call Law #13: Get to your war room and start creating your action plan. What is your first small step… and then… and then…? Only by doing will you join the ranks of the greatest achievers and, like Michael Jordan, Tiger Woods, Estée Lauder and whomever else you regard as heroes. People will wonder how you did it — or think you were just lucky. But we’ll know differently, won’t we?
What will you do to breathe life into these laws in your firm?
Note: Those of you familiar with the work of David Maister will see his profound influence on my thinking in this article…. I am forever grateful to him as a mentor and as a friend.
The More Things Change…Sean Larkan
Observations on 30 years in the legal profession
As I enjoyed a break in the New England mountains of Australia last week, kayaking and fishing for the magnificent native Murray cod, I realised I had been closely associated with leadership and management of law firms for close on thirty years – about twenty in managing partner roles in three jurisdictions, and ten in consulting to the legal and corporate world, with the benefit of working with firms from various parts of the world.
In thinking about this time, I realised that while a lot has changed (technology, areas of practice, social media, etc.), much seems to remain the same, and it’s not all good! A few thoughts on the latter, which I hope will be helpful to readers:
- Law firms still fail to appreciate the value of brand and the importance of developing an understanding of it in its three forms – organisational, individual and employment;
- When things appear to be going really well (and they do sometimes!), the biggest mistake one can make is to relax or take collective eyes off the ball. Things change quickly;
- While some firms have strategies of sorts, very few attend to the “pre-strategy essentials,” take the partners along for the ride, or achieve implementation or results from it;
- Quite a few firms have agreed values and cultural attributes. Unfortunately, these are seldom observed or enforced. Sometimes it is because people are confused about what they mean, or they may sound similar to every other law firm, or – in many cases – a number of high-profile partners ignore them and so set a bad example. It is for this reason that I advocate going down the path of Guiding Principles and making them enforceable;
- Very few partners, still, build or leave in their firm on departure what I call “capital fabric” – those many things which contribute to the long-term, fundamental, foundational strength and well-being of the organisation long after they have gone;
- In similar vein to the last point, it is seldom part of the DNA of the firm for partners to build succession. When they leave, the cupboard is bare;
- What is missing in many firms is a structural and philosophical “engine” whereby the things that are discussed and agreed at partner meetings or by leadership are naturally, as part of the firm’s DNA, applied throughout every section of the firm, both legal and support services;
- Firms still fail to appreciate the power of ensuring that a genuine interest is taken by senior individuals, both legal and management, in the personal well-being and professional development and success of people for whom they are responsible. This has implications for staff turnover, recruitment costs, engagement levels and the strength of a firm’s employment brand;
- For any young people coming into law firms three things remain extremely powerful – reliability, a true sense of responsibility and accessibility;
- Speaking of young people, they have opportunities to venture into new fields in legal practice like never before, in particular in relation to industry sector specialties. We always encouraged our young lawyers to develop these interests at an early age and know their industry of interest better than the clients in it;
- When thinking of appointing a new person or partner, firms often fail to apply a simple but effective test such as ensuring the candidate is “high calibre, committed and a team player”: they need to tick the box on each of those to get across the line;
- Whether the legal profession or some consultants (in particular) like it or not, there will always be a place for time–based billing as one of various bases for billing; the reason? Many clients like the clarity of the option;
- The power of team work and teams, whether in a hierarchical sense (e.g., between a partner and his/her lawyers) or between groups (a property practice group teaming with a town planning practice group) is underestimated and undervalued;
- The effective use of the salaried or fixed-share partner/director is a massive missed opportunity for many firms. Properly structured and managed and supported by the right philosophy, it can become the economic powerhouse of a firm;
- Most firms have pockets of high-level expertise within them. Few convert this into true thought leadership and the individual and organisational brand value and power that go with it. The missing link is effective communication;
- When one considers styles of thinking, behaviour and interaction within law firms, one of the standout styles on the part of both partners/directors and firms would be avoidance, in the sense of not taking tough decisions, putting off dealing with underperforming or misbehaving partners, etc.
- As the support service “manager” regime has taken hold in small to large firms, so more and more power is often devolved to them. Unfortunately, few seem to exhibit creativity and too often act subtly as blockers to change, particularly when it may impact their turf or role. Properly led, with the right calibre of manager, these individuals can easily contribute as much if not more than partners; and
- Somewhat in summary of the above, every firm I have ever worked with, no matter how ‘good’ or not so good or big or small, has had loads of potential and unrealised opportunity, very often right under their noses. To take advantage often takes consistency, persistency, strong leadership and team-work, not rocket science.