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)

What leadership really means

I recently had the opportunity to speak with John Kain, managing partner of Kain C + C Lawyers in Adelaide, Australia. John’s company (it’s an incorporated legal practice, not a firm), which specializes in high-end corporate, commercial and M&A work, is one of the more progressive and innovative legal service providers that I’ve come across in a while.

Among the interesting features of Kain C + C Lawyers is a short-form advisory memo that lawyers are sometimes asked to give clients. This memo, which can run no longer than two pages, must contain one of four recommendations concerning the client’s proposed course of action: “Very Good,” “Good,” “Poor,” and “Very Poor.” When John relayed these measures to me, I immediately identified what was obviously missing among the choices, and I’m sure you have as well. And then I realized why it was missing.

John does not offer a middle choice, a “Fair” or an “It Depends” between “Poor” and “Good.” He does not permit his lawyers to be ambivalent in their advice to clients. Either recommend something or recommend against it, strongly if you so choose; but you must take a stand with your advice and you must sign your name to it. Invariably, every new lawyer in the company, when first confronted with this memo, comes to John asking for the middle-way option, and he always refuses. The client, he tells them, is paying us to advise them. So: advise — and be ready to live with the results.

I found this a really interesting practice, because it forces the lawyer to shift from the easier role of “analyst” into the more perilous role of “advisor.” We’re quite comfortable, as lawyers, with analysis: it’s an intellectual exercise that allows us to occupy a safe, low-stakes position. The “reasonable person” that we fetishize in the law is an analytical construct, an imaginary neutral against whom we measure actual human behaviour for fun and profit.

Advice is a different beast. Clients act on advice, making decisions that carry consequences for which we bear at least partial responsibility. It’s the difference between “What does the law say?” and “What should I do now?” There’s a good argument that advanced technology (e.g., expert applications, IBM’s Watson) could provide sound legal analysis; but nobody seriously argues that technology can render trusted counsel, or that any client would act on such counsel even were it offered. To my mind, a lawyer “grows up” the first time she gives actionable advice to a paying client. You’re not just writing a memo anymore; this time, it counts.

Every practicing lawyer can probably recall the thrill of her first real “advisory” moment — and the deep anxiety that accompanied it. Because the flip side of advice is responsibility: the possibility of error, the risk of failure, and the finger of blame pointed at our heart if it all goes wrong.

Everyone suffers from a fear of consequences for a wrong decision, but I sometimes think lawyers are unusually prone to it. We talk about our “risk aversion,” our overabundance of caution and hesitancy. I’ve written before that lawyers are more properly described as “embarrassment-averse” — we hate looking bad in front of clients and colleagues, and nothing looks and feels worse to us than failure.  The nadir of this phenomenon is what you might call “responsibility aversion”: the desire to avoid any action with more than a nominal amount of uncertainty and a corresponding probability of failure.

The antidote to all these aversions is the same: it’s courage. Courage is not simply one of the virtues, as C.S. Lewis has written: it’s “the form of every virtue at the testing point.” I would argue that no characteristic is more important to a good lawyer than courage: it’s what allows us to stand up for our opinions and to stand by our clients as they implement those opinions and change the course of their lives. The best lawyers aren’t just the smartest or hardest-working or the most caring: they’re also the bravest. The worst lawyers, by contrast, are the most timid and the most easily led away from their instincts and standards.

That’s all well and good. As I see it, though, our profession has something of an issue with courage these days. Specifically, I think we need to start showing more of it. Here are four examples of what I mean.

Our advisory role. I’ve only been part of this profession for 20 years, so I can’t give first-hand accounts of the “old days.” But I have the distinct impression that lawyers used to be firmer and more direct when giving advice than we are now. Conditions and reservations seem to be a more common feature of legal advice these days. Clients complain that we frequently default to “No” (if there’s a chance something will go wrong, don’t try it) or hedge our bets (do this, unless any of these seven things are present, in which case don’t). Clients seeking our counsel about what to do often receive advice about what not to do instead.

Our procedural habits. The apocryphal story of the in-house counsel, who asked his law firm for a chair and got a dining room set instead, illustrates our tendency to employ diligence far beyond what’s often necessary. Lawyers are infamous for turning over every stone and tracking down every possibility, which prolongs legal matters and increases costs. We like to say this is because we’re thorough and perfectionist, and we are. But it’s also because we fear the remotest possibility of a bad outcome and seek to eliminate all uncertainty, which is just not practical. There’s a cost-benefit line at which reducing uncertainty any further ceases to pay dividends, but we often lack the courage to stop at that line and say, “Enough. We’ve got what we need.”

Our business practices. We price our services by the hour because we want clients to bear 100% of the risk that something unexpected will happen (as if often does) during the course of a retainer, rather than having the gumption to calculate that risk as best we can and explicitly share it with our clients. We resist changes in our firms’ practices and procedures because we fear the consequences of failed innovations, and so we timidly wait for a dozen other firms to go first and thereby miss our chance. We dwell more on the personal and professional risks of adopting new methodologies and technologies than on the rewards they could provide to our firms and our clients.

Our regulatory approach. Lawyers do not permit competition in legal services from anyone outside our profession, even in the face of the clear failure of our present system to provide affordable legal services to more than a handful of potential clients. You can call that many things — protectionist, paternalistic, callous — but it also comes across as a lack of conviction that we could hold our own against “non-lawyer” providers. If lawyers are so convinced of their superiority, these entities argue, why are they afraid to compete against us in an open market? Where is the courage to take on new comers, or to take a measured risk of liberalization that could improve access to the law?  [do_widget id=”text-7″ title=false]

Please understand: this is not an attack on the moral backbone or personal courage of individual lawyers. This is an expression of growing concern that our professional habits have driven us into a culture of doubt and apprehension, a general meekness and conservatism in how we view our world and act within it. That world is undoubtedly riskier and more perilous than it’s ever been: the mind-boggling complexity of the law, the challenges of sustaining a viable practice, the savagery of competition between lawyers, and the spectre of client retaliation in court for mistaken advice all play a part. How much easier to reduce our exposure, stay the familiar course, adopt defensive postures, and reinforce our strongholds.

But when we bend to these challenges, rather than rising to meet them — when we spend too much time thinking about the worst-case scenario and how to avoid it — we miss out on so many opportunities and we accomplish so much less than we could.

Our ultimate value, to both clients and society generally, lies in our willingness to speak the truth and recommend the right course, regardless of the discomfort or pain that will entail, especially to ourselves. Our professional calling is to assess, manage, and recommend courses of action (and their attendant risks) that serve both our clients’ interests and the greater good, and to gladly accept responsibility for doing so. That’s courage, as manifested in the legal profession — and in all its manifestations, it takes one familiar form: leadership.

This is the time for leadership in the law, and I’m here to tell you that no one is exempt. Every lawyer has both the opportunity and the responsibility to visibly exercise leadership, in our firms and with our clients and in our profession, by acting courageously. Assess risks, accept them, and act accordingly; stand tall for what you believe is correct; look failure in the eye until it blinks; put yourself on the line for what’s right and necessary. We’ve become too passive, reactive, and defensive for anyone’s good, too reliant on what we’ve always done before. We can’t afford any more “it depends” or “wait and see.” It’s time to stiffen our collective professional resolve and show the world what a powerful, confident legal profession can do.

So: advise, and live with the results. Innovate, and stand by your efforts. Speak out, and welcome everyone’s eyes turning to you. Lead, and watch everyone else get out of your way.

Jordan Furlong is a lawyer, consultant, and legal industry analyst who forecasts the impact of the changing legal market on lawyers, clients, and legal organizations. He has delivered dozens of addresses to law firms, state bars, law societies, law schools, judges, and many others throughout the United States and Canada on the evolution of the legal services marketplace.

So you designed a law firm: Your survey results

Previously on Law21 … after discussing the apparent disconnect between what lawyers seem to believe they can accomplish within law firms and what they’re actually empowered to do, I set up a brief survey inviting lawyers to distribute 100 points among 10 features of a hypothetical law firm to create an ideal working environment. First, the results (click on each image to get a larger version):

Question 1: Below are listed 10 features of a law firm. You have been given 100 points to assign to these features. Please assign these 100 points among these features according to how strongly you would prioritize their presence in your law firm. 

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Question 2:

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And Question 3:

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Now, my comments:

1. Law21 readers, and those in their immediate professional circles, are not big questionnaire fans. The post containing the link to the survey received in the range of 1,500 unique page views over the past several days, yet only 82 people completed the survey. In future: free coffee with every survey filled out! Limit one per customer. Not actually redeemable.

2. Not surprising to me, anyway, but Law21 readers aren’t a typical cross-section of the legal profession. “Client Service” finished comfortably in the lead among all 10 options, to be followed by “Good Workplace,” with the pre-race favourite “Partner Profit” barely finishing ahead of “New Lawyer Development” for third place. I think it’s fair to say that few law firms in the physical world actually match that profile. But I’d happily work for the law firm you’ve collectively designed here.

3. Nor am I really surprised to see “Community” and “Diversity” in the lower third of results. But I do think you should all be more concerned about your pension situation than you evidently are.

4. Does it say something that the survey attracted more responses from support staff than from non-equity partners and senior associates combined? At this level of statistical significance, probably not. But it at least suggests that the “non-lawyers” (sic) who work in law firms have a vibrant interest in what their firms could and should be.

Now, given the small response size, I’m reluctant to break down and compare categories against each other. But you may find this interesting: when I isolate the “Equity Partner” responders from the overall group (40 in total), the results are virtually even: that is, out of the 10 responses, no option received more than 11% of the total and no option received less than 9%. The variations in the final overall results are almost entirely the work of non-equity partners, associates, and staffers:

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I want to draw two statistically indefensible but nonetheless interesting conclusions from this.

First: equity partners want their firms to be everything, all the time. They want to be profitable yet collegial, prestigious yet affordable, elite yet community-minded. This, of course, is not possible: when you try to be all things to everyone, you end up being nothing to anyone. My own extrapolation is that this is at the root of many law firms’ problems: the people running these firms can’t prioritize among competing visions and demands, making them vulnerable to those demands that have the shortest time frame and the most severe short-term impact (hello, Partner Profits).

The second statistically indefensible conclusion from this exercise is that when you move outside the equity circle, a law firm’s other stakeholders have a very clear vision of what they want in a firm: one that serves clients above all else, one that provides a positive working environment, and one that yes, makes lots of money for its equity owners  — so long as those first two conditions have been met. You might or might not think that’s a good vision for a law firm. But at least it’s a vision: it’s the result of choices among options that result in a firm with an identifiable personality and profile. The firm designed by equity partners, as described in the results above, might as well have been formed at random.

So my last word on this exercise is to reiterate my message to law firm partners: you can make your law firms into whatever you want them to be. You are not helpless victims, floating like flotsam of the surging tides of commerce — that would more accurately describe your associates and staff, who, as previously noted, have a much clearer idea of what your firms could be. You and no one else are the captains of your ships, and their direction and mission is up to you. Accept your power and embrace the opportunity to make hard choices about the purpose and personality of your law firms — you’ll be rewarded for your courage and determination with praise and recognition of your leadership. We’re all waiting on you — make it happen.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.  

Design your own law firm: A Law21 lawyer survey

Not for the first time, and probably not the last, I find myself reading reports from the legal marketplace and wondering why lawyers are asleep at the switch.

The latest head-scratcher comes courtesy of Altman Weil and its fifth annual Law Firms in Transition Survey of 238 US law firms. Importantly, only one-third of the respondents were within the AmLaw 200 — we’re not talking about the giants here, but about firms whose lawyer complements range from 50 into the hundreds, and whose clients likely include some national companies, a lot of regional businesses, SMEs, and individuals. Here are a few highlights from the Am Law Daily report:

  • 80% of respondents think the move towards non-hourly billing will continue — but only 29% had made significant changes to their own pricing practices.
  • 96% believe the focus on improved practice efficiency has become entrenched — but only 45% had made significant changes to improve efficiency.
  • 67% think smaller annual rate increases are also a permanent change — but between 21% and 40% of all fees at all firms are still simply being discounted.
  • And despite all the foregoing, when asked to cite the greatest challenge they expect to face over the next two years, the #1 response (15.2%) was “increasing revenue.” Coming in at #8 (5.6%) was “delivering value to clients,” while the afore-mentioned “improving efficiency” — which, remember, 96% think is here to stay — finished at #11, with  2.8%.

Near as I can tell, many of these respondents must believe that permanent, radical change in the market is something that’s happening to other people. The disconnect between “This is really happening” and “We’re doing something about it” remains perplexingly wide.

Now here are the results of another survey, one that didn’t get quite so much attention, but whose implications are far more chilling. The UK’s Legal Services Board released the results of an incredibly comprehensive survey of small businesses — an astonishing 9,703 of them, ranging from solo entrepreneurs to companies with up to 50 employees. (Although the countries are different, the two survey populations suggest a high degree of overlap between the law firms and the clients in each.) Here are some of the findings:

  • 38% had experienced a “significant” legal problem in the past year, almost half of which had a tangible financial impact — a total market value of £100 billion when scaled up across all small businesses.
  • 91% of respondents took action to respond to their problems — but most either handled it themselves or got help from family and friends.
  • Of the minority who sought formal advice, only about 40% went to members of the legal profession — the rest sought out accountant, trade associations and the like, especially for tax issues.
  • Bottom line: Legal service providers were involved in just 16% of these matters. That means that roughly £84 billion worth of potential small business legal services are being resolved without the legal profession.

Oh, and here’s the kicker: When asked to assess the statement that “lawyers provide a cost-effective means to resolve legal issues,” only 13% agreed.

So I find myself wondering: faced with reliable, overwhelming, and readily available data that shows a near-complete misalignment between them and their markets, why are law firms doing so little in response? Why are firms, even while openly admitting that many essential marketplace fundamentals have permanently shifted, moving so slowly, it at all, to address these changes? I’ve previously suggested the confidence of the dinosaurs as a culprit, but I think there’s something more at work here.

When I talk with lawyers in law firms about these issues, I’m sometimes struck by the impression of powerlessness that I get. Lawyers, including partners, seem to almost shrug, as if to say, “Yes, but what can I do?” The structure and culture of the firm are presented as an unalterable reality, a mix of good and bad that’s just the way it is. The firm delivers profits, prestige, and security — albeit ever-decreasing amounts of each — but it’s also hidebound, reactionary, and highly vulnerable to change. But what are you gonna do? Priorities have been set and choices have been made, and we have to live with the results.

There are times, when confronting this malaise, that I feel like responding, with some force: “Yes, but you own the firm! It’s yours; you’re the equity owners. Nobody else is in a position to make the firm something different and better than what it is. The associates, the staff, the clients — they might not much like the state of affairs either, but it’s not their show; they consider both the firm’s successes and its shortcomings to be entirely your responsibility. If you’re not in charge, who is?”

What I would really, truly like is for more partners to accept full responsibility for their firms — to recognize the need for decisive action to adjust the firm’s bearings, to take that action, and to fully own the changes that follow. I’d like to see them act as the owners they are, not as the passive sideline observers many of them seem to have become.

To that end, I’ve decided to try introducing a third questionnaire into this mix — my own. I’ve created a very short survey — only three questions — at SurveyMonkey, and I’m making it available to anyone who wants to take it. It’s directed towards lawyers in law firms, and I hope they constitute the majority of respondents, but anyone in the legal industry is invited to take part as well.

The title of the survey is: Design Your Own Law Firm. And that’s exactly what you’re invited to do. The survey provides you with 10 features of a law firm, gives you 100 points to distribute among those 10 features any way you like, and asks you to use those limited resources to design the kind of law firm you want to be part of. Here’s a preview of the 10 features, listed in alphabetical order (they’re randomized in the actual survey):

  • Affordability: The firm’s services are priced for maximum client accessibility.
  • Client Service: Clients reward the firm’s efforts to provide extraordinary service.
  • Community Leadership: The firm is widely praised for its active community efforts.
  • Diverse Workforce: The firm is more race- and gender-diverse than its peers.
  • Elite Reputation: The firm is considered among the very top tier in its market(s).
  • Funded Pensions: The firm ensures post-retirement income for both lawyers and staff.
  • Good Workplace: A positive, collegial atmosphere produces collaboration and referrals.
  • New Lawyer Development: Junior lawyers receive superb training, mentoring and work.
  • Partner Profit: Equity owners derive highest levels of annual revenue from the firm.
  • Prestigious Clientele: High-profile or respected clients frequently retain the firm.

Here’s the link to the survey — it’s open today, May 23, and will stay open for either one week or until I have enough responses to draw some conclusions. Please take the survey — Note: print out your choices before pressing “Done,” so that you retain a copy — and forward it to your friends and colleagues. Be honest with your answers: give the responses you really feel, not the ones you think you “ought to” give.

I’m very interested in finding out how — when given several good options, but only a limited amount of resources — lawyers prioritize the structure and culture of a law firm. And I’m hopeful, maybe even optimistic, that by going through this process, lawyers will realize that they really do have the power to make their firms the way they want them to be.

Here’s your chance to be the architect of your law firm. You’re responsible for its priorities. What will you create?

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.  

 

The stewardship crisis

Over the legal news wire this week came a report of the closure of a US law firm. The full report of the firm’s demise was restricted to those with a premium account that I have no interest in acquiring, and in any event, the details of what happened weren’t relevant to what caught my eye. It was the one-line description leading off the wire report, which looked something like this: “Law firm ABC is closing next month; its name partners will retire and the rest of its lawyers will form smaller boutiques or join bigger firms.”

That’s the capsule story of the end of a law firm. More importantly, though, it’s also a template — the founding partners’ retirement, coupled with a scattering of the remaining lawyers — that I expect to be repeated frequently throughout the legal profession over the coming decade, especially among small and midsize firms. It’s the natural outcome of the widespread inability of law firms to deal successfully with succession issues. And it reflects what can only be described as the failure of hundreds of law firm leaders (by which I mean founders and power brokers more than “managing partners”) to look beyond their own short-term interests to the long-term survival and success of the firms they created.

It’s a given that law firms exist to generate profits for their partners. The addition of leveraged associates, the admission of new partners, the arrangement of origination credits, the expansion of the firm to new regions and new practice areas — all these activities are undertaken in order to maximize partner revenue. Nobody really doubts this or has a serious problem with it.

The difficulty arises when the interests of the founding partners inevitably begin to diverge from the interests of everyone else in the firm, especially lawyers at the start or in the middle of their own careers. These lawyers’ own timelines extend beyond the expected career arcs of the partners who hired them, and they have an interest in seeing the firm continue to develop and thrive after the founders have moved on. This interest is primarily financial, of course — they want their turn occupying the most profitable seats — but it’s often also personal: they like the idea of taking up the mantle of a respected firm and leading it into a new age. I think most people would find these sentiments reasonable.

What has struck me over the past few years — what has shocked me, to be honest — is the number of founding partners and senior lawyers who don’t care all that much what happens to the firm after they leave. I mean, these partners talk a good game about legacy and continuity and a bright and promising future and so forth, and I’m sure that their well-wishing is sincere enough. But ask them to take steps to ensure that future in ways that might compromise their near-term revenue — especially as the economy worsens — and the conversation comes to an abrupt stop.

These partners essentially place their personal interests, even near the end of their careers, ahead of the long-term prospects of the firms they helped found. They do not share clients. They do not delegate work. They do not mentor juniors. And they do not approve compensation system changes that would motivate the next generation of leaders if those changes might also reduce the size of their own slice of pie. They couldn’t make their priorities much clearer. (My Edge International colleague Nick Jarrett-Kerr has written an excellent analysis of law firms’ challenges in this regard.)

This state of affairs creates immense levels of frustration and disillusionment among those members of the firm whose retirement is not in sight, for whom the firm is at the least a steady employer and at the most a stage for their own flourishing careers. These members of younger generations look at their leaders from an older generation and it begins to dawn on them: the founders weren’t creating an institution that could stand the test of time. They were creating a vehicle for their own financial interests, and once those interests draw to a close, so too does the need for the vehicle.

I don’t think it’s an accident that inter-generational tension within law firms has grown over the past several years, in both good times and bad. I don’t think it has much to do with the clichés about Generation Y and its “sense of entitlement,” except to the extent that younger members of the firm felt entitled to inherit some of the prosperity earned by the firm’s founders and leaders, in exchange for their own contributions and loyalty to the institution over the years. They’re now coming to conclude that there never was an institution — just a platform for founder prosperity. I expect them to react accordingly.

There’s a word you hardly ever hear mentioned in discussions of law firm leadership and succession planning these days. That word is “stewardship” — the sense that those who lead an organization have a responsibility to leave it in better shape than they found it, to ensure its future success for no other reason than that future generations will benefit.

Stewardship, among other things, requires the stewards to relinquish at least some of their own powers and priorities near the end of their terms in order to assure a better future. There are some stewards among law firm leaders today. There are not many.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.

Credit crisis: You ain’t seen nothin’ yet

We’re already seeing some dominoes start to wobble in the legal community, as the short- and medium-term impact of the financial crisis becomes clearer. If you’re a law firm CFO or a law student nearing graduation, you probably won’t like what’s coming. But it looks to me like there are much bigger pieces likely to fall very soon.

Let’s start with the dominoes. Here’s an article from the Fulton County Daily Report about the impact of the credit crunch on law firms’ lines of credit, something I mused about last week. Lawyers who traditionally have not made accounts receivable a priority should read this:

Some banks are increasing their scrutiny of law firm loans, attaching more covenants and conditions and looking ahead to how well firms can collect their receivables in the coming year. According to some bankers and consultants who focus on law firm lending, a lag in collection time is pushing firms not just to borrow more money but also to increase holdbacks on partner compensation and, perhaps, decrease overall profit distributions.

Dan DiPietro, client head of the law firm group at Citi Private Bank, said his employer still views lawyers as a good credit risk — despite the crisis coursing through the markets and the collapse or merger of clients that supply billable hours to many of the nation’s law firms. … “What has changed is our focus and discipline on pricing and making sure that we’re pricing with the view that this is not a standalone credit facility but is generating other revenue. … In this market, there’s a huge focus on overall returns.”

Like many banks, Citi looks at firms’ cash flow, receivables and work in progress when assessing their creditworthiness and how much cash to advance on revolving or long-term lines of credit. … Citi is giving existing loans a higher level of scrutiny and is looking more closely at firms on an individual basis to assess how the economic turmoil might affect their receivables.

Then there’s law students, the vast majority of whom wouldn’t be able to meet tuition and living expenses without student loans — loans that are suddenly looking very dicey, according to an article in the National Law Journal: Continue Reading

The culture-driven law firm

The era of the free-agent lawyer, and the law firm lateral hiring frenzy that it spawned, is drawing to a close. The rise of the culture-driven law firm is at hand.

It’s going to take me a while to explain how I got here. I’ll try to do this in two parts.

1. Followership in law firms

This all started when I came across a provocative article called “Leaders need followers: tips for team performance“ by Australasian legal consultancy FMRC Legal. The thrust of the article is that successful law firm management hinges on followership — lawyers’ ability and willingness to align their personal values and goals with those of the firm. I first came across “followership” in the law firm context in a 2005 blog post by Gerry Riskin, which was in turn expanded upon by Patrick J. Lamb shortly thereafter.

Here are some excerpts from these three insightful articles that I think sum up what they’re saying. Continue Reading

Preparing for the storm

The “About” entry in the column over on the right there states my belief that the practice of law is heading into “uncharted territory.” If you’re skeptical about that, or if you’re unconvinced of the reality of imminent upheaval in this profession, here are two items you might want to look at.

The first is the Legal Transformation Study, a co-production of Decision Strategies International (DSI) and Legal Research Center that’s sponsored by, among others, Altman Weil, Jomati Consultants, and Dupont’s Legal Department. Subtitled Your 2020 Vision of the Future, the report makes plain the intensity of the shockwave heading towards the industry and discusses four potential scenarios that could play out in the near future. An executive summary is available for free; the report itself costs rather more. Here’s an excerpt from the preface:

The truth is, we dare not take any aspect of the future for granted. Paradigms shift, and age-old truisms will be reversed. Prudent and prepared legal leaders will be those who extend their minds beyond traditional thinking and anticipate a variety of outcomes and possibilities. …

During the next decade, operating discipline alone (e.g., “how” we work) will not be enough to meet the challenges our corporate clients face. In the more global, volatile, and uncertain future, “what” we work on with our corporate clients will increasingly define the client’s success (or failure). This is not just repositioning Legal’s relationship with our business colleagues. It is a fundamental shift in the nature of our work.

To truly engage our businesses differently — and better — we need to radically rethink our approach to risk, uncertainty and value creation. As our future unfolds, being absolutely right will be far less important than being nimble and adaptive. Studying every aspect of an issue will yield to a new, more rapid style of decision-making where the predominant belief is that even a decision that proves to be wrong is likely to provoke more useful information than could be learned by delaying decisions pending further study. …

Legal must learn to adapt to the speed of business at the speed of business, while continuing to adhere to our company’s core values and our own professional ethical obligations. Continue Reading

Leading by asking

“There go my people,” said 19th-century radical French politician Alexandre Auguste Ledru-Rollin, supposedly on seeing a mob pass by the café where he was seated. “I must find out where they are going, so I can lead them.” You won’t find a more succinct summary of the paradoxical nature of leadership than that: how can you lead people if you don’t know where they want to go? And if all you’re doing is ascertaining the crowd’s direction, how are you leading, exactly?

I thought of M. Ledru-Rollin upon reading an article in today’s edition of the National Law Journal about law firms sending their lawyers on leadership training programs. One of the points it raises is that “leadership” is an elastic concept into which firms like to insert things like team-building or strategy buy-in exercises. I’m not really in favour of that, because leadership is too important a concept to be diluted: the more meaning you pack into that term, the less effective it’s going to be. That, in turn, raises the question of what law firm leadership is fundamentally about.

Well, I sure don’t have the answer. David Maister has said: “I think more rubbish has been written about ‘leadership’ than almost any other business topic. A lot of it is patently false, and even more of it is dangerous,” and I won’t add to the pile. But I will suggest that the collaborative aspects of leadership deserve more attention.

Strength, decisiveness and vision are often wrongly regarded as attributes of a lone, rugged, heroic persona — the brave individual who rallies the troops through the sheer force of being right. That works great in movies but rather less well in complex professional businesses, especially law firms of autonomous partners who will not be dragged anywhere they don’t want to go. Continue Reading

Something’s actually happening

There’s a lot of buzz building about an article in today’s New York Times with the rather odd title “Who’s Cuddly Now? Law Firms.” It summarizes a recent rash of new business models in American law firms, from flextime for lawyers to flat-fee bills for clients to alternative billable-hour schemes and more. It’s the second article the Times has run recently about lawyers seeking satisfaction, and it prompted its rivals at the WSJ’s Law Blog to ask: is there really something happening here?

The WSJ blog’s readers are providing their usual snarky responses: “This new ‘movement’ will dovetail nicely into the massive layoffs that will be coming in the coming months,” says one. “So, you want more time with your family or to pursue your passion for flamenco guitar? Here is 3 months severance.” Nice. So, here’s my answer to the blog’s question: yes. As Judith shouted at Reg in The Life of Brian, “Something’s actually happening!”

I can refer to you any number of articles and links about law firms that are making changes to the way they manage their employees and their work — see the Financial Times‘ law firm innovation report and the Innovaction Awards, for starters. In addition to the firms identified in the Times article, there are others making changes to how they operate in terms of compensation, of partnership, of billable hours, of women in law firms, and even of the entire firm itself. And these are just a few of the ones we hear about — other changes are occurring, quietly and beneath the radar, in areas such as recruitment, retention, training, parental leave, and evaluation.

Law firms are under pressure. They’ve gotten used to a comfortable world where they could set the tone and pace of operations. That comfort zone is evaporating from two directions: externally from clients and internally from lawyers. Clients really are more sophisticated and more demanding, and they’re looking for more than their firms have traditionally been willing to give them. And lawyers really are more inclined to walk away from (or try to change) work conditions that don’t satisfy a wide range of personal needs.

But even that’s not really new — both clients and lawyers are longstanding complainers, and pressure has been brought before, which law firms have ignored. And keep in mind that many, many law firms are continuing to ignore these pressures. What’s really new this time, I think, is not just that law firms are changing the way they do business, but why. I think they’re doing it, voluntarily, to gain a competitive advantage. Continue Reading