Changing the lawyer assessment system

Every two months, I publish a short e-newsletter called “Dispatch” that’s sent to about 2,700 subscribers. (To sign up, email me at jordan@law21.ca). Each edition contains exclusive content for subscribers, which I sometimes share with my wider readership here at Law21 after a few months. In this post, I’d like to reproduce an item from a previous newsletter as well as some follow-up content inspired by a reader response.

The June 2017 edition of “Dispatch” led off with this item:

Check out what Linklaters, a Magic Circle firm widely regarded as among the global elite, announced several weeks ago: it’s going to “abandon individual partner targets in favour of focusing more on team performance,” as reported by Legal Business. Partner assessments will now “give added weight to practice performance, as well as client-winning, business development, training and innovation.”

The previous individualistic system, according to the article, “encouraged defensive gaming of the metrics, and a focus on narrow utilization and billing benchmarks rather than broader business goals.” In future, says managing partner Gideon Moore, “We won’t have individual partner metrics for billings and other measures.”

“There’s no ‘i’ in ‘team,’ d’Artaganan.” “Yeah, but there is one in ‘équipe.'”

Upon what basis does your firm assess the value and productivity of its equity partners? If it’s like most firms, the main criteria are business generated and hours billed — important features, obviously, but also very much based on individual effort, not firm performance or client deliverables. This is how lawyers have always been trained to think and act, of course, from the first day of law school to the last day of practice: how have you performed, when compared to everyone around you? But firms that value their lawyers only for their individual efforts inevitably wind up as loose affiliations of individual lawyer businesses under one roof, and rarely for the better.

Linklaters has a different idea: treat lawyers as members of an enterprise, a team gathered together to deliver the universal goal of solutions to client problems. Reward them not (just) for their personal achievements, but also for those of the team(s) and the firm to which they belong. You could go a step further and add “client outcomes” to the assessment criteria — your clients, I’m pretty sure, would appreciate it.

One of the world’s top law firms believes that partners should be assessed based on team performance and cooperative activity, rather than individual efforts and billings. Your firm might want to think seriously about that.

Several readers did. One was the managing partner of an office of an international law firm, who sent the following response:

[Y]ou articulate what really amounts to a rhetorical question on the merits of more effectively measuring and incentivizing team behaviour. Most all of us in leadership positions see the need. The problem is transitioning from a culture of personal performance metrics. What advice do you have on overcoming the enormous obstacles to transitioning to the promised land?

This is, essentially, a change management question, which we all know is the trickiest challenge in law firm leadership. And to be clear, what this challenge requires is a full-scale change management and implementation program, one that’s been painstakingly planned and is professionally rolled out. I’m not proposing to describe such a program here — there are myriad resources and consultants to help law firms with this kind of thing. But speaking generally, and based in part on my response to my correspondent, here are some ideas along these lines for you to consider.

1.   This is the hardest thing you’ll ever try to do in a law firm. You’re attempting to implement changes that will directly affect how lawyers are assessed and valued within their firms — and, in all likelihood, how they make their money. This week’s bestowal of the Nobel Prize on a behavioural economist who helped identify the power of “the endowment effect” is a timely reminder that people tend to perceive any change in their status quo as a threat to their interests. That goes double for lawyers and triple for equity partners.

2.   Law firms tend to be low-trust environments. That’s a problem, because lack of trust within an organization exacerbates the friction generated by change efforts of any kind. You can’t just flip a switch and transform your firm into a high-trust workplace overnight; but you can be transparent and upfront about what you’re intending to do, and you can communicate it clearly, repeatedly, and personally. “Change management by walking around,” talking to people and actively listening to their responses, can at least help reduce the automatic resistance your plans will generate.

3.   Initial and ongoing communication of your plans is critical. Start with an all-hands, carefully planned, clearly explained call to action by the firm’s leaders that the firm is undertaking a change in how it measures lawyer performance, and especially why it’s making this change. Reinforce the call to action with outside experts, market data, and even client testimonials, as appropriate. But don’t stop there: Maintain ongoing communication, to ensure people don’t “forget” about this change, which is what they’d prefer to do. Keep talking and keep listening. Make clear that this isn’t going away.

4.   Start with “in addition to,” not “instead of.” Initiate your lawyer assessment changes as a kind of “parallel track” that encourages people to engage more often in certain activities, but doesn’t punish anyone for failing to engage in them. Start by incentivizing new team-oriented behaviours with bonuses, whether financial or reputational or both. But also be clear that the plan is to eventually transition these desired behaviours from “pilot project” status into the standard assessment system — and yes, into compensation calculations. Don’t mislead anyone about the ultimate goal.

5.   Don’t try to do it all at once. Choose a small, manageable number of team-oriented behaviours that you most want to encourage, so that people can focus their attention more easily. “Do these three things and you’ll get more praise and make more money” is a good way to grab lawyers’ attention. When you do transition these behaviours to the overall assessment and compensation systems, start with an amount or percentage small enough not to incite panic, but large enough to represent a noticeable enticement. (This part is obviously much more art than science.)

6.   Choose how you’re going to measure success. Will it be client satisfaction levels, on the theory that solutions-based assessment should produce better outcomes and happier clients? Survey your clients’ current satisfaction levels. Will it be more collaborative lawyers, on the theory that group-performance assessment will focus lawyers on working together to get the results the client asked for? Survey your current lawyer collaboration levels. Will it be more hours spent by senior lawyers mentoring juniors? Figure out where things stand now. Choose the benchmarks against which you can eventually show progress.

Seriously, Gimli, we’re not counting “orc necks hewn” anymore. Team goals, bud.

7.   Measure your progress and circulate the results throughout the firm. Congratulate those lawyers and groups that ticked the most boxes on your list of desired behaviours. Publicize a list of the lawyers and groups that earned “collaboration bonuses” over the previous period. If your culture would support it, list all practice groups is descending order of compliance, to trigger lawyers’ natural competitiveness. Publicly, repeatedly, and positively reinforce the behaviours you want to see, until the idea starts to really sink in.

8.   Be ready to absorb pushback from your lawyers, even up to the point of partner departures. Many firms lose their nerve at the prospect that some key business-driving personnel could walk out over these changes. But you need to have the right people on the bus to make this work, and you need to be prepared for some people to jump off. Before you launch this effort, have an honest internal conversation about who’s likely to leave, and whether that’s a price the firm is willing to pay to make this change happen. This is the gauntlet your leaders must be ready to run.

This process will take a long time and will not be painless for anyone, especially for the firm’s leaders. Immense patience will be required while the firm’s culture slowly reorients itself to the new behavioural priorities you’re encouraging. Resilience and fortitude will also be needed if or when your biggest rainmaker threatens to quit. Prepare thoroughly beforehand. Communicate at the start and throughout. Measure and update and reward progress continuously. This is the hard slog of real-world change, and it’s not going to be much fun, at least at the start.

But I also think it’s necessary. Individual performance metrics inherently drive me-first behaviours that can undermine attempts to build a firm-wide culture of performance geared towards the client’s interests. Hours- and origination-based compensation systems encourage lawyers only to bill hours and bring in business; these are certainly necessary, but they are no longer sufficient, conditions for a successful law firm in this market. Lawyers are deeply accustomed to being valued and rewarded for their individual efforts, and it will take time and effort to re-accustom them. Like I said, it’s the biggest challenge you can undertake.

But if you can pull it off, you’ll have well begun the transformation of your law firm from a 20th-century “hotel for lawyers” to a 21st-century legal solutions enterprise. And that’s where we need to go.

How to bring about change in law firms

(Note to readers: Pursuant to the terms of the New Author Self-Promotion Act of 2006, please be advised the statutory maximum of three (3) plugs for my new book will appear in this post. Thank you.)

Everyone’s gotten the memo by now. The legal market has experienced fundamental change, and law firms need to respond in equal measure. If your firm’s leadership doesn’t know or accept this, then with great respect, I think your firm needs new leadership. Ignorantia mutatio non excusat, to muddle a phrase.

Nor should any law firm leader be allowed to say, “I don’t know what we can do.” There’s now a wealth of practical, reliable information about how firms can change their operations and run themselves more effectively and profitably. This information is widely and easily accessible in countless articles, blog posts, and books, such as the brand-new and well-reviewed Law Is a Buyer’s Market: Building A Client-First Law Firm(1)

So we know what we need to do. What we don’t yet know, for the most part, is how to do it. Bringing about change in a law firm remains extraordinarily difficult, and the more fundamental the change, the greater the difficulty. That’s a problem, because we need to start implementing all these great ideas and putting them into practice at our earliest opportunity. Owning the tools won’t help us if we don’t take them out of the toolbox and start using them.

I couldn’t embed the video, so here’s the 45 cover.

These were some of the thoughts on my mind when I addressed the annual meeting of the Association of Legal Administrators in Denver earlier this month. I felt confident that this audience of law firm leaders and managers understood, more so than most, the steep challenges looming over law firms today. I also hoped — correctly, as it turned out — that they would be able to share some success stories about how they had overcome the incredible resistance within law firms to doing things differently.

In this post, I’m going to lead off with some of my observations about why change in law firms is so hard, and follow that up with suggestions and examples, drawn from the ALA conference and elsewhere, about how firms can nonetheless bring change about.

Why it’s hard to change law firms

Change in law firms is hard mostly because change is hard, period. People hate change. I mean, they love it in the abstract, and they’re happy to tell other people in great detail why they should change, but they don’t want to actually do it themselves. This is human nature, and unless you plan to automate your entire law firm (which I do not think you should do), you’re stuck with it.

I go into more detail about this in Chapter 14 of my new book, Law is A Buyer’s Marke(2), but there’s extensive psychological research documenting people’s resistance to change. Two behavioural patterns in particular, the status quo bias and the endowment effect, show that people naturally prefer things as they are, fear a loss more than they desire an equivalent gain, and place a higher value on an item simply because they already own it. Change represents a loss of the known and familiar, and people will fight that, no matter how attractively you sell the replacement.

But of course, lawyers fight change more aggressively and successfully than other people. Partly this is because we’re wired to be more conservative and trained to be more risk-averse than the general population, and partly because we’re skilled at arguing our way around and past an unpleasant or inconvenient fact. And since law firms are the concentrated commercial expression of lawyer culture, they are especially change-recalcitrant places. For better and more detailed analysis of lawyers’ resistance to change, read this excellent article by Anne Collier and review this slide deck by Ron Friedmann and Jim Tuvell.

So it’s worth keeping in mind, before we proceed to possible solutions, the nature of the problem. Lawyers aren’t fighting your change efforts simply to be difficult. They’re fighting it because everyone fights change; the fact that they’re lawyers just makes them especially good at it.

How to change law firms

The first thing to recognize is that there’s no single right answer. Experience has shown that facilitating change, especially in law firms, requires the use of more than one tactic or even several, sometimes applied in sequence, sometimes simultaneously. This complicates the process, of course, but it might also be a relief to know that there’s no magic bullet out there to which other firms have access and you don’t.

The second thing to recognize is that you are not going to accomplish change by working against your own people. No matter how frustrating you may find their resistance, they are not your enemy. They perceive their own interests very clearly and will fight to protect them, as would you in their place. Strive to understand those interests. You shouldn’t place those interests ahead of the firm’s, but you do need to know them and clearly acknowledge them.

All that having been said, here are five approaches that I’ve seen and heard about that have had some success advancing change in law firms

1. Build trust through transparency. This is my preferred tactic, and it received a lot of support from the ALA audience. Leaders of law firms in difficult circumstances opened up the books inside the firm, showed everyone the nature of the challenge, and asked people to help overcome it. They personally visited lawyers and staff, answered questions as best they could, and tried to defuse any suspicion of a hidden agenda. Call it “change management by walking around.” If you prove yourself trustworthy, you’ll gain trust, and thereby cooperation. I’ve written on this subject before, and I’ll re-up this quote from that post: “Every change requires effort, and the decision to make that effort is a social process.”

2. Give people control. People’s feelings of powerlessness in the face of change fuels much of their resistance to it. You can’t give people the power to reject or excuse themselves from change, but you can give them the power over how to adapt to it. One ALA attendee described how her firm wanted to help improve people’s physical and mental health, but couldn’t settle on a program to achieve it. So they gave everyone a $1,000 voucher to spend on any wellness-improving activity they liked. The diversity was amazing — gym memberships, yoga lessons, vacations, etc. — but so was the massive, firm-wide improvement in morale and productivity. People chose how they wanted to adapt to a new firm directive, and that improved buy-in tremendously.

3. Make it a game. Much has been written on gamification in the law, and possibly it’s been oversold a little at this point. But for lawyers, who like competing and love winning, gamification has a lot of potential to help facilitate change. Another ALA attendee described how her firm struggled to get lawyers to turn in their dockets on time. So they made it a competition, offering incentives to file dockets by a certain time every week and publicizing within the firm which departments and groups led the firm in hitting their deadlines. Cash prizes were also offered to the monthly and annual leaders. Docket compliance, which had been limping along in the 40% range, roared to the mid-90% level. Lawyers love winning.

4. Occasionally, apply the hammer. Carrots are fun and attractive incentives, but sometimes, you just need the stick. There are limits to the volume and intensity of punitive measures you can apply in law firms, especially to lawyers; but on a short-term basis, backed by strong leadership, it’s highly effective. A number of law firms, including one ALA attendee’s, have withheld a partner’s payouts until that partner turned in his or her dockets. This measure was strengthened by its logical argument: we can’t pay you if you don’t bill your work. The bonus here, to my mind, is the quiet, morale-boosting delight junior lawyers and staff take in seeing consequences applied to powerful rule-breakers; it makes them likelier to follow the rules themselves, too.

5. Await new conditions. This can be phrased, less charitably, as “Wait for the difficult people to leave or die.” I included this on my list at the ALA partly as a joke, but it did get a few hands raised here and there. Sometimes there’s a small number of influential people who are blocking a change initiative because they feel it would hurt their personal or financial interests. Pressure from respected peers can often lessen this resistance, but not always. I once advised a legal organization facing this kind of problem. I said, “If you can’t change the landscape, change the weather.” My client introduced a fleet of minor innovations and talked repeatedly about how the future would bring more change. Soon enough, some resisters began to move on, partly because they could tell the climate was changing and it wasn’t going to suit them as well.

Bowie would have been way too obvious.

We talked about other approaches at the ALA event, such as alarming everyone with dire warnings, or selling the benefits of change in detail, but these were generally held to be less effective. “Scared straight” has a checkered history of success as a change tactic, and as mentioned previously, people are usually not persuaded to give up present conditions by the promise of future benefits. I also added my own recommendation that whatever change you want to accomplish in your firm, enlist your clients in the effort. It’s easy to ignore what some consultant or even the managing partner says; it’s harder to ignore what the person behind your origination credits says.

I’d love to hear your own thoughts and success stories about change in law firms in the comments below. But it’s worth emphasizing, again, that the most effective change management processes will combine several of these and other approaches and will be careful to administer the right medicine to the right people.

What matters above all is knowing your firm, knowing your people, listening to their concerns, showing you’ve heard them, and continuously enhancing the level and quality of trust between the firm’s leadership and the people they’re leading. Change isn’t something you do to people. Change is something you help people go through. Make that the mantra of your firm’s change management efforts.

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Here’s what the business intelligence director of an AmLaw 100 firm wrote me about my new book, Law is A Buyer’s Market: Building A Client-First Law Firm: “You offer an exceptionally clear diagnosis of many law firm ills and concrete recommendations on changes law firms should make in order to thrive in the buyer’s market. It is a very practical book … I hope more lawyers and law firm decision-makers read this book and take appropriate actions.” Law is A Buyer’s Market is available here. (3, right under the wire)