Patrick J. McKenna.
In most firms, my observation is that we seriously over-invest in the efficiency (“let’s provide a discount” or “do more for less”) arena and under-invest in having partners working to build their skills – in order to deliver greater recognized value.
As a general rule, firm leadership needs to help partners understand that they are in competition will millions of other professionals all over the world, capable of doing the same work that they can do, and the sad news is that: “nobody owes you a career. To continue to be successful you must continually dedicate yourself to retraining your individual competitive advantage.”
In his 1982 book, Critical Path, futurist and inventor R. Buckminister Fuller estimated that up until 1900 human knowledge doubled approximately every century, but by 1945 it was doubling every 25 years, and by 1982 it was doubling every 12-13 months. Today, in 2021, IBM estimates that human knowledge is doubling . . . every 12 hours! How precise is IBM’s estimate? Hard to tell. But I suspect that you would agree that this trend is incontrovertible. Data and knowledge are increasing at an exponential rate.
This accelerating growth of knowledge in not all we have to contend with. Compounding the challenge is how long that knowledge remains useful – or, how long does it take for your knowledge to become outdated, inaccurate or irrelevant. One measure of this is known as the “half-life” of knowledge, the amount of time it takes for our knowledge to lose half its value. For those in almost any profession from medical and engineering to law and consulting, the half-life of our knowledge is shrinking such that what may have been valuable to know a few years ago, may have very limited value today.
What this obviously means is that the systematic development of legal knowledge and skills, over time, depreciates in value – especially as your competitors acquire and offer similar or equivalent expertise. And with each passing year, the fees that clients willingly pay for that expertise diminishes, such that even your most loyal clients will not value as highly, what you or I do for them the second or third time as they did the first.
Therefore, I strongly believe that firm and group leaders need to pose a few very serious questions to each of their colleagues in one-on-one (virtual) coaching discussions:
“Do you believe you are adding real value or simply passing along legal information to our clients? In other words, my beloved partner, what is it that you can specifically do for clients today, that you could NOT do for them at this same time last year?”
“What do you need to do, in the time that you have available right now, to build your skills and reinforce your opportunities for when we come out of this pandemic so that you can have an even more successful practice?”
“As you see this pandemic continuing to unfold, are you plugged into what is happening around you and inside your client’s industry, such that you can interpret whatever is transpiring and be the source of proactive counsel – before the client has to ask?”
“Are you trying out any new ideas, new techniques, new technologies and I mean personally trying them, not just reading about them? Or, are you waiting for others to figure out how to innovate and re-engineer your practice – (and re-engineer you . . . right out of that practice)?”
I would suggest that a negative answer to any of these four questions is indicative of a condition some astute observers label as “Human Capital Obsolescence” – a poorly understood phenomenon which has crept into many firms trending toward the LOSER end of the spectrum. Human capital obsolescence can be interpreted to mean that there may be some partners who are not performing in accordance with what clients would accept as high value. In other words they are merely a commodity provider; and these individual’s economic contribution to your firm is no longer in keeping with what one might expect from an equity partner. While being labelled an “under performer” may be a symptom of the issue, I would submit that simply having more “junk” work to occupy their billable time does not solve this problem.
I believe that going forward, the most successful firms will be those who rethink the concept of where they encourage and perhaps incentivize partners to invest some portion of their non-billable time. To succeed in today’s environment of rapid change requires continually building your knowledge base, your skills, and learning how to do entirely new things. If our attorneys don’t dedicate the time to building their skills, we end up solving yesterday’s (commoditized) client problems (usually at a hugely discounted fee) instead of tackling tomorrow’s burning issues, before someone else does.
In the long run, superior competitiveness derives from having an ability to build skills faster than competitors, and with the kind of knowledge and skills that germinate entirely new and lucrative practice niches. Knowledge and skills are the engine of new business development.
As an example, if one looks to those firms who landed the top spots for venture capital deals last year, one firm stood out as the clear market leader having executed 20% of all of the deals done by the top 10 law firms. And according to Gunderson Dettmer’s Managing Partner, the firm’s success came “from its laser focus on serving the legal needs of venture-backed technology and life sciences companies.”
Perhaps an even more powerful example of a firm building their skills and specializing in high-value work is Silicon Legal Strategy, a 23-lawyer firm which focuses on advising start-up clients and managed to successfully execute more venture capital deals in 2019 then either Dentons or Latham.
What these two examples should serve to illustrate is that law firm leaders are not managing one homogenous firm but rather a portfolio of very different businesses. Let me be clear, we have got to stop thinking that law firms compete with one another. Dentons and Latham do NOT compete . . . as firms, but rather they may have some selective practices (strategic business units) that do compete. Or, looked at slightly differently, your practice and industry groups are in a race to build the kind of knowledge and skills that determines whether they are able to secure dominance in some targeted and lucrative micro-niche markets.
Unlike the battle for global brand recognition, which is visible in the print media and aims to identify global share of mind, the battle to build competitive dominance in targeted niches is invisible to those who may not be deliberately looking for it. Firm leadership may use Chambers and other ranking metrics to track who comes out as a first-tier player in the most recognized practice areas. BUT, tell me please, who is the leading U.S. law firm in serving Digital Transformation or Augmented Manufacturing clients – both billion-dollar micro niche markets? How many firm executive committees discuss the critical distinction between developing competitive strategy at the (micro) level of the practice or industry, rather than simply thinking that they are being effective by developing some (macro) strategy for their entire firm?
In early 2020, my old friend Dr. George Beaton shared some data from his firm’s research of the Australia and New Zealand markets wherein some 82% of clients will select a more expensive law firm given certain conditions. And what conditions might those be?
Of ten possible selection influencers, the most important to clients was “demonstrated expertise in their area of need”; second, “understanding of their industry” and third, “known for their leading expertise” (thought leadership) – because all of these things are perceived by the client to convey significant value. And interestingly, what Beaton Research found is that these criteria hold true across the professions (management consulting, accounting, IP, engineering) and that his firm has “made the same findings every year for more than 10 years!”
And my research confirms that the same holds true in our North American marketplace.
For me, that raises a couple of strategic questions:
What amount of non-billable time and resources are being invested within your firm to improve your efficiency and try to proffer highly competitive (usually highly discounted) rates to do routine, commoditized legal work? and
What amount of non-billable time and resources are being invested within your firm to build the knowledge and skills of your partners so that they can develop a level of acknowledged expertise, sufficient to win the higher value legal work where clients are willing to pay for leading expertise?
Taking this all one step further, most law firms, if one were to observe their behaviors, do not think about competitiveness in terms of building skills. Firms seem only to judge competitiveness, their own and their competitors, primarily in terms of fee discounts and being lower priced. And I would strongly argue that those same firms are courting the erosion of their partner’s skills. The knowledge and skills necessary to exploit a lucrative micro-niche opportunity requires firm encouragement and support to ensure that partners invest the time to build them.
Are You Fostering a Skill Building Culture?
It is trivial to observe that most new learning happens while professionals are engaged in their various client matters. What is not trivial to point out is that far too many firms (and their groups) fail to capture and disseminate much of that knowledge, such that it never gets leveraged and used to the benefit of outperforming competitors. One advantages that should accrue to any well managed group, is the value that each professional can bring to clients as a result of the accumulated knowledge, wisdom, systems, methodologies, and experiences of the colleagues on their teams.
You should be identifying how your combination of personal assets (skills, strengths, competencies) and aspirations (dreams, values, interests) can create a unique and valued offering.
As a leader, you need to instill a passion and curiosity within each partner to identify a specific skill or special interest, identify what they do not know, and what is new out there that addresses some particular pain-point that more client may soon need to solve. Then, at least once every month, have each partner pull out the list of client work and assignments that they have been working on and examine each. Allow time for each member to make a brief presentation. Because everyone knows this is coming, each is subtly forced to reflect on his or her experiences and is more likely to convert the knowledge gained from those experiences into a shared resource. Invite discussion, ask questions, provide critical feedback and examine how and whether the activities described benefit others in the group.
Start by asking of each partner, in turn, to please identify and explain to the group any particular client matter that:
• exposed you to an entirely new type of client / industry / geography / transaction?
(e.g. involves work undertaken on behalf of an “unusual” client as defined by the nature of this client’s business, geography or matter size.)
• allowed you to successfully deal with a relatively unique client problem?
(the particular client matter that you were handling was completely novel and involved you having to take an unprecedented approach to resolving the client’s issue)
• allowed you to develop new knowledge or refine a skill that you can now market to other clients? (e.g. your team was asked to close a transaction in a compressed period of time, and with that deal you developed a methodology to dramatically speed up the due diligence process.)
• provoked you to document some new checklist, tool, template or process? (e.g. where some client work was becoming somewhat repetitive, you developed a diagnostic checklist to streamline the process and make it more cost efficient.)
• introduced you to an important new market niche? (e.g. you did some work with one of your manufacturing clients that exposed you to the cutting-edge designs that they were doing in 3D printing and some challenges that they were facing.)
• allowed you to work at a more senior C-level within the client’s organization? (e.g. your work with the client culminated in their asking you to do a formal presentation for their entire executive committee on what was learned from this particular litigation matter and how it could be avoided in the future.)
• exposed you to previously unexplored areas within the client’s organization? (e.g. your work with your in-house legal contact introduced you to the executives within the company’s Risk Assessment Department and some of the new issues that the entire industry was having to address.)
• exposed you to technology being used that could be emulated within your firm? (e.g. your legal department client had AI-driven internal knowledge-sharing programs and a virtual-reality system to promote collaborative internal experiences.)
• allowed you to conduct some research or identify some new industry trends?
(e.g. your work with the client involved you in conducting some research with other industry players / regulatory authorities, etc. and identify findings that proffer new trends impacting the industry.)
• provided some insight that can allow you to build your professional thought leadership? (e.g. your work with a client exposed you to fresh knowledge that could be leveraged into an important article and/or seminar presentation on a subject that was both valuable and innovative.)
• enabled you to collaborate with some other multi-discipline specialist to provide a total business solution? (e.g. your work with a client had you working hand-in-hand with a specialist in predictive analytics such that you learned how the combination of your two disciplines delivered enhanced value for the client.)
Simply sharing the knowledge and experiences
acquired while working with clients can be a powerful influence on our learning. It often forces us to relive and re-examine the entire situation and better understand what actually transpired as we were engaged in helping our client deal with their issue. We build confidence in what we accomplished, how we did it, which furthers our perception of what we learned from the experience. And our colleagues may often raise insightful questions than can then shift how we might approach these same client situations in the future.
“Before you are a leader, success is all about growing yourself.
When you become a leader, success is all about growing others.”
Jack Welch, former CEO of General Electric 1981-2001.
Skill development comes in little bits and we need to capture those little bits, especially where some experience might portend an entirely new area of possibility, lucrative micro-niche or emerging practice opportunity. If it might help, encourage one member of your group who has the appropriate interest to serve as your team’s curator of knowledge (I heard first-hand about how this worked well at Skadden). Consider assigning some duties to a support staff person who could help coordinate and assist your team in capturing and disseminating the experiences reported at the meetings.
Being a non-billable activity, skill building can become infinitely postponed, such that any time devoted to capturing and sharing knowledge becomes a “backburner” priority. Therefore, it is important to remember that, in these increasingly competitive times, the issue of continually building marketable skills requires a longer-term focus. Small bites are better than no bites at all.
About the Author
Patrick is an internationally recognized author, lecturer, strategist and seasoned advisor to the leaders of premier law firms; having had the honor of working with at least one of the largest firms in over a dozen different countries.
He is the author/co-author of 11 books most notably his international business best seller, First Among Equals (co-authored with David Maister), currently in its sixth printing and translated into nine languages. His two newest e-books, The Art of Leadership Succession and Strategy Innovation: Getting to The Future First (Legal Business World Publishing)) were released in 2019.
He proudly serves as a non-executive director (NED) or advisory board member with a variety of professional service firms and incorporated companies. His aim is to instigate innovation, provide independent strategic insight drawn from his years of experience, and support effective governance.
His three decades of experience led to his being the subject of a Harvard Law School Case Study entitled: "Innovations in Legal Consulting" and he is the recipient of an honorary fellowship from Leaders Excellence of Harvard Square.