By Mari Cruz Taboada and Katie Dignan.
The digital transformation of the legal market has been discussed for years. But is it all about technology? Is there another, more powerful, driver for collaboration and flexibility?
Home working during the pandemic forced everyone, including law firms, to embrace technology. It was the only way to collaborate – whether you were talking to your colleagues and teams, or helping clients cope with the huge regulatory chance and uncertainty.
The expectation was for this momentum to increase. With law firms moving towards more digital, flexible and collaborative working structures.
However, as law firms finalise their 2020 accounts, it has become evident that the legal sector didn’t suffer as much financially as others. And there are signs that firms are simply returning to their old ways.
If law firms continue to be successful, then why should this matter?
Our own recent analysis by Lexington Consultants shows that collaboration pays – good collaboration can help lawyers to improve their turnover up to 20% per client. So firms should be very careful not to lose the new skills they were forced to employ during 2020.
Unfortunately, it appears that technology is racing ahead of firm culture. The new collaborative IT implemented to help with client management, knowledge and information sharing is being used less, now that lawyers in many countries are returning to their offices.
The technology is not proving to be the trampoline to a sharing culture that we hoped. So what is?
We believe the best way to improve your client relationships is to start by reviewing your compensation and reward systems.
Compensation and reward We work with more than 30 law firms a year in Europe, Latin America, Africa and Asia, on their compensation and reward systems. These are so often the key barrier to cultural transformation and collaboration.
In our experience, the majority of law firms operate as a group of separate businesses. We have developed the Lexington 5S model (below) to better understand this.
In our experience, firms only move from silos to significance by developing a bespoke approach to the behaviours they recognise and reward i.e. their very own carrots and sticks.
It’s usually easy to create carrots for financial indicators. For example, Lawyer X increases his turnover and profitability, so he takes home more at the end of the year. And Lawyer Y wins a new client, so is also financially rewarded for origination at the end of the year.
They both get carrots, but Lawyer Z does not hit his financial expectations. What does his metaphorical stick involve? And how do you deal with non-financial expectations?
Firms need to think carefully about how they sanction a partner who refuses to cross-sell, or consistently gets negative feedback about his management style, for example.
We have found, however, that the truly successful firms see “complying with the common interest” to be equally important as hitting financial targets. A lack of partner alignment doesn’t only impact the internal workings of your law firm. It also has a direct link to the effectiveness of your client contact. We help firms improve the quality of their client relationships using a simple pathway.
The silo culture shown in our 5s Model, will be negatively experienced by clients. Partners work in isolation, with a strategy that sells their expertise, but not that of the firm. After a while working in this way, the only thing partners have in common is that they are lawyers working under the same roof.
In our experience, partners at successful firms trust each other. And trust is there because they have all been involved in developing a bespoke reward process. Everyone’s views have been heard and are reflected in their system.
Firms like this share client relationship and information via efficient, centralised knowledge systems and view innovation as exciting and essential, rather than scary and unnecessary.
General Counsel are increasingly expecting their law firms or legal service providers, to mirror their own corporate culture. They want to work with people who collaborate in the same way as they do and who have similar views on teamwork and diversity.
We are seeing increasing numbers of long-term client-adviser relationships end, because of a mismatch in corporate values and principles. For law firms out there needing a “stick”, then they don’t get much bigger than this!
Ending a relationship with a long-standing law firm is difficult and some GCs are not prepared to go that far….yet! However, there is a less combative, but equally problematic, solution being used. GCs are just being much selective when it comes to choosing their external law firms. In other words, to “get on the list” you now need to not only be a good lawyer, but also match up to the corporate values of your target clients.
Large legal departments like those at Santander, GE, Indra, IBM, Nokia, Microsoft, Spotify and Amazon are investing in legal transformation and innovation to improve internal efficiency, business collaboration and diversity for their internal and external legal services. So, if you want to work with businesses like these – your firm needs to be doing something similar.
In summary, the solution to transformation is not revolution, but evolution. It is not necessary to compromise financial gain to achieve a more flexible and collaborative environment. But firms do need to challenge their partners to stop behaving as an individual and start acting as part of a team.
As Henry Ford said: "Coming together is a beginning, keeping together is progress, working together is success.”
About the Authors
Katie Dignan (right) is Partner at Lexington Consultants