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Looking in the Mirror
Law-firm leaders must learn how to assess their firms objectively in order to effectively guide them into the future.
by Ed Wesemann
One of the most deadly faults a law firm leader can have is to make decisions based on their own misperceptions about their firm. Whether it is the reveling in past glories or simply believing their own public, law firm partners and leaders alike seem to often have a distorted view of their firms. Unfortunately, this inability to accurately understand their firm's image, practice, client base and capabilities can lead to some dangerous and expensive mistakes.
The most common of these misconceptions is an inflated view of the sophistication of work being performed by the firm's lawyers. There is a natural reaction of lawyers to talk about their most interesting and challenging cases and it is easy for leaders to believe what they hear in hallway conversations. A second equally common misconception is the makeup of their client base. A quick look at a firm's "Representative Client" list in comparison to their revenues by client provides an example of firms' desire to show off their Fortune 500 client base even though the work they do for those clients may be minor. Another area of leaders' misunderstanding relates to the capability of their lawyers. While it is important to be proud of your partners, leaders often boast about lawyers' experiences in areas where they have not done substantive work in years.
The good news is that maintaining an accurate unvarnished view of their law firm does not involve much effort for leaders. A couple of hours of review each year will help give them a clearer understanding of the firm they lead. Here are three things that leaders, at a minimum, should be looking at:
1. The firm's client list in descending order of billings (or collected revenues) for the past year. It's great if you can get this in an Excel spreadsheet so you can look at the median revenue per client. Scanning the list gives a fast idea of which clients you depend on to keep the doors open, how much of your revenues are dependent on singular transactions or litigation matters compared to ongoing clients, and how much of your practice is dependent upon small clients paying small amounts of fees.
2. If your time and billing system can provide it, obtaining a breakout of what your firm does for each client is particularly interesting. In addition to demonstrating how good your firm is (or is not) at cross-selling, the list sometimes provides surprising insights into the sophistication of the work. Firms often find that prized relationships with major clients can deteriorate into commoditized work, or see how quickly a full-service client relationship can be winnowed into a few limited areas of work.
3. For getting an understanding of what partners actually do, nothing beats sitting down with them for a candid review of an annual list of the matters where they charged time. Oftentimes, the partners themselves are surprised to see how the chase for billable hours has lead them to do work below their skill level.
The simple fact is that leaders who clearly understand the details of their firms' strengths and weaknesses are going to do a better job of guiding and directing its future. In the process, they may find some surprising hidden crown jewels from which the firm can benefit.
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Stop Making Partners
Four questions to ask yourself before conferring equity partner status on anyone else.
My colleague Ed Wesemann recently published a must-read article titled "A Five Year Survival Plan for Mid-sized Firms." Ed's first piece of advice to the leaders of these firms is: "Stop making partners." I think that's absolutely correct, and I'd like to expand on it.
Annual partner promotions are so ingrained in most law firms that they've become almost ritualistic: many firms feel they "have to" make partners on a regular basis. Breaking this habit is hard, but it's also essential: the disciplined application of a fact-based strategy for law firm equity ownership is critical for any firm that wants to control its destiny.
Here are four questions you should ask yourself before pressing the "Admit" button on an equity-partner candidate.
1. Is this partner an outstanding business generator or truly exceptional manager? If the answer is no, do not promote. And hold yourself to those high standards: "promising" or "above-average" aren't good enough. Equity partners should reliably bring in overflowing amounts of profitable work, or should be simply masterful at client, people, or project management. Don't "settle" when it comes to your ownership ranks.
2. Is this a lateral candidate with a big book of business at another firm? If so, do you know how much profit this partner actually generates on all that frothy revenue? Do you know how many of those clients will stay behind when he joins your firm? Are you buying past performance or future productivity? You'd better have ironclad answers to all these questions, because someone will be asking them of you in two years' time.
3. Do you already have "under-performing" partners in your ranks? Granted, the term is pejorative and often misleading; the answer nonetheless is invariably "yes." If so, then halt the promotion process and deal with it. Get your house in order before adding new rooms - especially if the profile of the current candidate is alarmingly similar to those of the "under-performers" back when they were first up for the role.
4. Are we promoting this lawyer to partner because we don't know what else to do with him? If you're being honest, this is likely the case about half the time. Reclassifying an associate as a non-equity or equity partner doesn't magically change who he is or erase his deficiencies. Partner promotion is a lousy alternative to openly and frankly assessing whether a lawyer provides your firm any real value beyond leveraged production. No one is entitled to become an equity partner. It's not a "Long Service" award. Create clear, rational, exacting standards for equity partner admission, tied to the firm's strategy and purpose, and apply them diligently and consistently.
Contact the author, Jordan Furlong
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Embracing the Product Imperative
Why and how law firms can and should consider the "product" approach.
by Michael J. White
" How often do we hear commands like "Innovate or die!" outside of the legal industry? Product companies and even other professional-services firms are asked -- perhaps even required -- to "innovate," largely in deference to the healthy paranoia they recognize drives all great businesses to higher levels of success. The legal industry, however, is in the very early innings of experimenting with innovation. Professional-services firms in general hate to invest ahead of revenue as compared with their product-company brethren -- and to the extent that real innovation necessitates what are viewed to be distracting allocations of capital, law firms have been loathe to do much of it. We can also point to the DNA of lawyers themselves: they are risk-averse and typically want to see proof of concept before experimenting with any new business practices. Given the unique realities and history of the legal business, why is it now that we are seeing firms experiment with their business and operating practices? More importantly, how can later-adopter firms do their own form of innovation without operating on the bleeding edge? Law firms are currently innovating across multiple dimensions of their business -- product, internal processes, incentive structures, communication, etc. The below example areas are but a few faces of noteworthy law-firm innovation: Practice Group Organization/Positioning/Definition Law firms are great at projecting a marketplace identity that reflects their internal managerial priorities rather than the external realities of the markets and businesses they want to serve. Do businesses really think of themselves as "anti-trust businesses" or "complex commercial litigation businesses"? Of course not. As a general proposition, companies want to work with lawyers who are business peers as much as legal specialists; a law firm's org chart should reflect this intersection. Firms that present an array of cross-disciplinary capability focused on particular industry sub-sectors resonate in the market place. A great example of this is the web site description of the Duane Morris "Franchise & Distribution Law Practice" which basically states loud and clear, "If you're a business with any kind of complex supply or distribution chain, we 'get' you . . ." Duane Morris has put together a cross-disciplinary team to focus on this business demographic, including anti-trust, RE, corporate, and other regulatory practitioners. Cross Disciplinary Products/Capabilities While there's nothing really groundbreaking in firms that hold out an integrated cross-practice capability to the market, there is relatively little promotion of cross-disciplinary capabilities between law firms and other business-services providers/consultants. Law firms should look for opportunities to partner with industry-specific resources in executive recruiting, strategy consulting, accounting, commercial insurance broking, lending, and other areas. Firms might consider doing business with these providers by creating jointly developed and integrated "products" and assessments, and teaming up on some promotional activity to establish relationships with prospect businesses. Become a Front-End Resource Why should strategy consultants, risk management consultants, commercial insurance brokers, investment bankers, and other business advisers have a monopoly on the C Suite's ear during the corporate planning process? Business people believe that legal issues are but symptoms of underlying (and more important) business issues -- in many respects, legal issues don't have freestanding importance to many clients. Lawyers should try to spend more time understanding the core activities of a business across all functional pieces of the business; i.e., ask for and review the business plans for each of these functional areas. Exhibiting an interest in this information is "attention getting" in and of itself, but law firms can do much more here in the form of risk prevention measures, compliance regimes, audit processes, and training. Another great example of a law firm focusing on the "business front end" is the M&A practitioner who becomes the quarterback of a post-acquisition integration process once the client has closed on a business acquisition. Normally the lawyer would leave the closing table and move on to the next dragon, thereby leaving the client to rely on the Bains and Accentures of the world to quarterback the post-acquisition integration process. This is a real opportunity for the lawyer to lead and maintain client relevance. One Word: Products! Many of the world's most sophisticated non-law firm providers of professional services develop and promote productized versions of their wisdom to their market. Few could argue about the situation-specific, complex, and sophisticated nature of McKinsey's work with Global 1000 executive management, yet even McKinsey markets some products to its prospect population. Like other high level business-services providers, law firms should embrace the product imperative for a number of reasons, namely: - Pricing usually takes the form of a single one-time fee; clients like the certainty
- Products = lots of reusable knowledge in the minds of clients. "If a law firm is willing to move away from the open-ended billable hour to support a fixed-price product, then it must be very facile with the legal substance and confident in its own understanding of the scope of this project"
- There may be no better way to signal a firm's expertise in a particular area than by creating a product that speaks to such area. The existence of a product is a form of self-validating (and perhaps transcendent) expertise in an area
- Products speak to the presumed needs of a particular market, and therefore express a deeper understanding of discrete industries and company types.
So Product Up!
Contact the author, Mike White
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At The Podium: Upcoming Appearances by Edge Partners
JUNE 2014Gerry Riskin June 12
Keynote Presentation,
P3 (Practice Innovation) Conference
Legal Marketing Association
Chicago, IL Jordan Furlong June 27
Keynote Presentation,
Vision 2016 President's Showcase State Bar of Florida Annual Conference
Orlando, FL OCTOBER 2014Gerry Riskin Oct 17
Keynote Presentation, Annual Futures Conference
College of Law Practice Management
Boston, Massachusetts
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