Leading with purpose: how long can a rudderless law firm survive in the face of change?
Leadership is in crisis. Everywhere we turn, we see evidence of this. From Facebook’s recent data revelations to the political polarisation of states; from uncovering the gender pay gap in some of the most well-known corporations and law firms to unearthing the abuses of power that led to the rise of the #MeToo movement – people have lost their faith in leaders, institutions and ideas. In turn, institutions and corporations have been grappling with how to contain the disaffection as they aim to realign their corporate strategy with socially-empowering values. But for those stuck in the ‘grappling’ phase, the question is: how long can a rudderless organisation survive in the face of change?
Survival and the market anomaly
In the corporate world, leadership has long been considered crucial to a company’s survival. The reason is simple – leadership is required in times of crisis, uncertainty and disruption. Note how we elevate game-changers who have successfully navigated increasingly volatile markets to lead their organisations to greater profitability (Steve Jobs, Jack Welch and Anne Mulcahy, to name just a few). Yet this type of organizational examination has all but excluded law firms from view.
For years, law firms have benefitted from being somewhat of a market anomaly. While certain practice areas have been susceptible to economic and political fluctuations, firms in the pre-2012 era traditionally thrived. In essence, they were able to prosper through a unique business model that was directly linked to the rarity of their expertise. But in recent years, the industry has been increasingly disrupted by the greatest equaliser of all – the Internet, making what was once rare readily available to the masses.
With the advent of online services, people have access to information and choice, thereby forcing businesses to make services affordable in order to remain relevant and competitive. Beyond this, in-house legal departments have developed their teams as well as their knowledge management and expertise, resulting in more sophisticated clients with enhanced budgetary concerns and value expectations.
Management experience and the lawyer personality
So where does this leave law firms? In uncharted waters, it would seem, simply because those traits that make for an exceptional lawyer are in direct conflict with those required for effective leadership and management. According to research by the Hildebrandt Institute/Thomson Reuters, lawyers in particular tend to score highly in the following areas: risk aversion; scepticism; introversion; self-determination; impatience; and reactivity. It does not take much reflection to note that such traits put lawyers at a disadvantage when faced with leading a team through times of stress, change and innovation. Moreover, with traditional compensation schemes (such as lockstep, the monarch approach, and eat what you kill) prioritising seniority and individual revenue generation, managing partners tend to emerge from the shadows with relatively little, if any, management experience.
Thus, some of the common complaints and issues that frequently arise in discussions about law firm management are:
a lack of clear communication;
the drawbacks of championing seniority over merit;
not investing in the right people or resources;
hiring experts but not listening to them;
focusing on billing over client relationship-building;
individualism at the expense of the collective;
dismissing business services teams as support staff;
viewing disparate but linked functions as interchangeable: business development, marketing and communications;
a lack of identifiable KPIs.
The list above is not exhaustive, but the themes that emerge link back to those ‘lawyerly’ traits that typically run counter-productive to managing a business effectively.
By championing seniority over merit, partnerships can easily become top-heavy, littered with partners who are just not profitable. Not only is this a concern in terms of profit, but it could lead to dissatisfied quality partners. Depending on the compensation structure, resentment may abound from partners who feel more deserving of a bigger slice of the pie. In terms of gender diversity, this approach may also end up negatively impacting women depending on the type of programme a firm has in place to provide paths to partnership for women.
By cultivating a culture of individualism, firms may end up allowing practices to become fiefdoms. This presents a number of challenges. Firstly, collaboration is key to succeeding in today’s legal industry. Legal work is becoming more specialised and lawyers will frequently be required to work across multiple practices or on multidisciplinary teams. Secondly, in such an environment, communication and harmonisation suffer. With individual practices running under the same roof as separate entities, embarrassing and counterproductive incidents can damage a firm’s reputation. This can lead to a situation where two partners on the same team in the same firm end up bidding – unbeknownst to each other – on the same work or send out individual and different memos on the same legal development – unbeknownst to each other – to the same client. (Note that ‘unbeknownst’ is the operative term here).
By being dismissive of non-legal expert advice, firms potentially miss out on opportunities for enhanced profitability, brand development and streamlined functional organisation. This is not to say that all firms are reactively rebellious towards internal and external non-legal experts, but inherent scepticism and risk aversion do play their part in keeping firms stuck. Nowhere is this more evident than in the way a firm views and values its business services team. Business services are often considered a support function, which gives the impression that its activity is secondary. In reality, the disciplines that fall within this function (such as business development, marketing and communications) are fundamental to a business’ survival – they are not secondary at all, but primary. Thus, they should be staffed accordingly with the right type of experts and empowered to work with the management of the firm in aligning firm-wide objectives and delivering value to clients as well as to internal members of the firm.
The negative impact of ineffectual leadership
The impact of ineffectual leadership and management cannot be underestimated. Strategy and direction are key to any business’ survival and law firms are no exception. At worst, a lack of such orientation can negatively affect client relationships, reputation, market positioning and firm-wide morale. All of which directly impact profitability. Like a poison, it infects the water first and then everyone and everything that comes into contact with it. If this sounds dramatic, take note of Dewey & LeBoeuf, Enron, Lehman Brothers and King & Wood Mallesons, to name just a few examples of unproductive (and in some cases, destructive) leadership.
What firms are really selling
It is also worth noting how much movement is happening within the industry. Top-earning partners are not only making regular lateral moves, some are walking away from BigLaw and Magic Circle firms completely to set up their own boutique practices. At the same time, some firms are ramping up their associate salaries to attract the best of what the future has to offer – not better lawyers, just lawyers with better survival skills (see Milbank, Tweed, Hadley & McCloy, which announced in June 2018 that it was substantially increasing its associate salaries across the board).
All of these developments point to a shift in industry consciousness as to what firms are really selling. It is time for firms to acknowledge that the most compelling asset they have to sell is not their legal expertise, it’s their people. Yet many law firms are not currently structured around this reality. Instead, remuneration, promotion and accolades are built around billing and client catches without consideration of how those relationships will be cultivated to create long-term collaborations as opposed to fly-by-night affairs.
Leading with meaning
In an increasingly competitive landscape, firms must develop a competitive edge. Understand what that edge is and implement a firm-wide strategy that communicates and disseminates that message clearly and widely, both internally and externally.
Communication is key and systems need to be in place that encourage a communicative culture. This includes the transparency of work allocation and the annual review process, as well as internal processing of RFPs and managing client contact, etc. Communication as a topic is a theme unto itself, but for the purposes of this article, the main takeaway is that streamlined communication is essential to maintaining a competitive edge, in part due to the simple fact that many firms are lacking in this area. Two quick examples of just how detrimental an uncommunicative environment can be to the bottom line: (i) quality people get frustrated and leave; (ii) big clients go elsewhere if no one has maintained contact with them for an extended period of time simply because they didn’t have any significant matters that needed tending to.
Every interaction you (and members of your firm have) is about creating brand value. It is not just about the next case or the next big client – it’s about what the name of your firm means when people hear it, when they recommend you and when corporate clients review their panel of firms. You are the architect of your brand value, but it has no meaning other than the power given to it in the minds of those you serve – internally and externally.
In today’s industry, firms should be wary of placing too much importance on individual rainmakers. Instead, investments should be made in ‘best market practice’ skills that allow firms to make it rain at any time of year. This involves training programmes and opportunities, development of key skills (such as business development), knowledge management and the type of experts you task with overseeing all of the aforementioned.
Stress and change go hand in hand, so firm leaders must be in a position to effectively manage both. This is another area where trusting in your advisors can reap vast rewards. Leadership should be lean and flexible, so don’t shy away from embracing innovation and change. Instead, work with your team to be an early adopter of technology and pilot programmes. This builds trust and confidence – two assets that are key to ‘influencing’.
Surviving in today’s legal industry requires strong leadership and organisational skills to navigate the turbulent landscape. If you want to be seen as a market leader instead of a market follower, your firm needs to be seen as an ‘influencer’ to your clients’ organisations. In the corporate world, there has been much written about whether leadership is inherent or learned. Academics debate the boundary lines around terms like transactional, transformational, servant, participative, laissez-faire, destructive, autocratic and charismatic, and prominent leaders are held up as beacons of resilience or cautionary tales. While it’s important to think about the leader you are, it’s paramount to your firm’s survival to become the leader your firm needs. Will you be a beacon of resilience? Or a cautionary tale?
About the Author Reign Lee is the Founding Director of Lee & Associates, a London-based legal consultancy that specialises in advising top-tier law firms on strategy and management. She provides strategic advice to law firms on a wide range of issues, including but not limited to business development, leadership development, PR, CSR and diversity policy implementation, market positioning and practice-specific content development.
She has a wealth of experience working with independent and global law firms – as a BD and marketing adviser, communications specialist, and as a training partner. Reign is also the Conference Director of the GC Futures Summit in London, an event that brings together General Counsel, Chief Legal Officers and leaders in private practice. She is a member of the International Bar Association (IBA).