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The Business Case for Smart Collaboration in Today’s Law Firms

March 8, 2017

 

The Business Case for Smart Collaboration in Today’s Law Firms

Professional service firms face a serious conundrum.  Their clients increasingly need them to solve complex problems – everything from regulatory compliance to cybersecurity – that only teams of multidisciplinary experts can tackle.  Yet, most firms have carved up their highly specialized, professional experts into narrowly defined practice areas, and collaborating across these siloes is often messy, risky, and costly.  Even as partners recognize the need for greater collaboration in their firm to drive revenues and growth, their intellectual buy-in doesn’t translate to behavioral change.  Unless you know why you’re collaborating and how to do it effectively, it may not be smart at all.

 

But before we move on, let’s clear up some confusion.  One reason that smart lawyers might resist collaborating is that they are getting mixed messages.  Firm leaders are often pushing partners to “cross-sell,” but clients hate to be cross-sold.  Specifically, they hate when their lawyer who handles one domain “offers” introductions to other partners in the firm who can provide service in their own narrow domain. It’s the legal equivalent of “Do you want fries with that?” 

My research shows that when firms get collaboration right – that is, do complex work for clients that spans practices and offices within the firm – they earn higher margins, inspire greater client loyalty, gain access to more lucrative clients, and attract more cutting-edge work.  This form of integrated client service that often crosses practice groups and other siloes is what I mean by “smart collaboration,” and it’s the kind of client service that leads to the benefits detailed in this article.

 

The Benefits of Collaboration

 

More Revenue and Stickier Clients

Just like Managing Partners predict, the financial benefits of multi-practice collaboration are clear: the more practices that serve a client, the more revenue the client generates for the firm each year.  As the figure below shows, moving from one to two practices serving a client triples that client’s revenues, and the addition of each subsequent practice continues to grow fees.  Clearly, if 1 + 1 = 3, then the lawyers who are involved in cross-practice service are doing more than just referring their colleagues to provide their own siloed work.

 

 

Cross-practice collaboration allows lawyers to gain access to senior executives who have broader responsibilities, larger budgets, and more sophisticated needs.  This complex work commands higher margins, revenues, and hourly rates, as one partner said: “The clients are much more generous on fees because if it’s so big, the deal’s got to get done, and they cannot waste time negotiating or nit-picking.”  While single-specialty is often viewed as a commodity awarded to the lowest bidder, cross practice work is less subject to price-based competition.

 

Done right, cross-practice collaboration makes clients stickier in the long run by creating switching barriers. As the general counsel of a Fortune 100 company explained, “Despite what they think, most individual lawyers are actually quite replaceable.  I mean, I could find a decent tax lawyer in most firms.  But when that lawyer teamed up with colleagues from IP, regulatory, and ultimately litigation, I couldn’t find a whole-team substitute in another firm.”

 

Rewards for Rainmakers

The far more difficult and prized task for an established rainmaker involves integrating others’ specialized expertise into one’s own client work – for example, the IP lawyer who identifies an opportunity to work with regulatory, real estate, and tax lawyers on retail client’s mobile commerce issues.  Professionals who work collaboratively benefit significantly: The more colleagues in other practices that a partner involves in his own clients, the more the rainmaker’s origination revenues grow in subsequent years from their existing clients.  Once partners learn how to sell the more complex, multi-expert work, they are better equipped to repeat and enhance their later success.  Plus, as one partner said, “The more brains we have inside the client, the more we can spot opportunities to sell additional work.”

 

Perks for Grinders  

The rewards of building “someone else’s client” might not be obvious, but working as someone else’s “grinder” allows lawyers to become a better “finder,” too.  My data show that working on cross-practice matters significantly predicts a lawyer’s rainmaking in subsequent years: the average attorney grew his book of business with existing clients by tens of thousands of dollars just by working on a couple extra multi-practice matters in a year.  Interviews with partners and clients suggest multidisciplinary projects help lawyers learn how to sell more sophisticated work to their own clients with the confidence that their partners will help them deliver high quality work.  Interestingly, delivering high quality work for others’ clients equates to more colleague-generated, word-of-mouth referrals. On average, one in six partners you work with for the first time will refer you more work in the next year. For example, one lawyer’s high-quality contributions to two extra partners’ deals led to a brand new contact which produced upwards of $40,000 in incremental billed revenue the following year.  Clever partners can boost collaboration’s reputational effects by strategically choosing whom to work with because some partners’ opinions carry a lot more weight than others.

 

The Pushback against Collaboration

 

Considering the sort of value-added, sophisticated collaboration that clients want, why do rational lawyers find it so difficult to see the potential benefits?  As mentioned before, one reason is that lawyers confuse cross-selling with collaboration, and clients hate that approach.  Moreover, many professionals are simply not used to working in teams; most of the lawyers I meet have had far more experience working in competitive, individualistic settings.

Distrust of other partners is another root cause, including concerns that colleagues won’t uphold high enough levels of quality and responsiveness.  Every law firm seems to have some doomsday story like, “I spent decades building a deep client relationship, but the first time I took Joe along he screwed up and we were kicked out for good.”  In some firms, lack of interpersonal trust is even more pressing; some partners worry that a colleague might steal a client when switching firms, deliberately undermine the originating partner’s relationship, or take undue credit for success.

 

Another hurdle is that collaboration takes time. The financial rewards of collaboration, such as referrals from colleagues after working together, accrue slowly over time.  But most of the costs and risks, such as locating an expert and accessing whether she’s trustworthy, available and conflict-free, are borne right away.  Fortunately, as professionals gain more experience with collaboration, the costs tend to fall because people discover how to collaborate more efficiently and effectively as they construct a set of reliable collaborators.  However, many lawyers give up before reaching the point where the investment pays off, which creates a negative feedback loop that reinforces the perception that “collaboration wasn’t worthwhile.” 

 

Action Call for Partners and Leaders

 

How can partners practically establish promote collaboration among colleagues in their firm?

  1. Stop hiring jerks. As long as you compromise on a candidate’s character to get the one with the biggest book of business, you can’t build a firm where people widely trust other partners enough to invite them along on client work.  Even if you hire carefully, rapid growth makes it tough for partners to know, let alone count on, their colleagues.

  2. Build relationships. Coordinate regular face-to-face meetings and events such as partner retreats, family gatherings, and practice group off-sites to allow people to develop interpersonal connections that foster trust and collaboration.  While these community-building activities are expensive, they can more than pay out if done properly.

  3. Manage your talent at all levels. A robust, firm-wide talent management system, particularly for firms grown through mergers and international expansion, gives partners more reliable indicators of expertise and skill, which fosters competence trust across diverse educational backgrounds, degrees, and cultural norms.  Further, secondment programs between offices designed for very senior associates or junior partners are some of the best ways to build bridges and establish networks of trust. Firms need to invest in developing their senior partners, through formal programs and informal coaching, so they can understand their clients’ larger business needs and be able to offer services that go broad and deep.

  4. Showcase collaboration. Distribute “latest wins” to highlight big and little cross-practice success stories via email bursts or stage 20-minute “road show” presentations to allow lawyers to highlight their expertise and potential cross-practice collaborative opportunities.  One firm set up an internal “swat team” of highly experienced rainmakers to accompany other partners on client lunches to help them probe for opportunities, with the understanding that the team members wouldn’t fill the openings they helped to unearth.

 

No Time to Waste

 

Smart collaboration is an investment that takes time to generate returns.  The evidence is now clear that those benefits do accrue for partners, their firms and their clients when specialist lawyers collaborate across silos to tackle sophisticated issues.  What clients want is for their lawyers to understand their issues deeply enough to offer sophisticated advice and to line up the right legal team to deliver it – no matter where in the firm the needed experts reside.

For now, smart collaboration is a clear differentiator between firms: those that provide joined-up advice across disciplinary boundaries to help clients on the highest-value problems are clearly ahead of competitors.  But clients are increasingly demanding.  As one General Counsel told me, “For now, collaboration is a point of distinction.  But I see a time, not long off, when it’ll be mere table stakes.  Lawyers who can’t collaborate simply won’t be tolerated.”  Now is the time to learn smart collaboration—before it’s too late.

 

Professor Heidi K. Gardner, Distinguished Fellow in the Center on the Legal Profession at Harvard Law School, Lecturer on Law and the Faculty Chair of the school’s Accelerated Leadership Program executive course.

This article was also published in eMag no1 2017

 

 

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