American law firms are threatened by acute needs and limited capabilities in three domains: leadership, meaning, and service.
Media attention shifts rapidly from law firm profitability to gender bias and from technology to new lateral partners. Yet, if we pull back to conduct a deeper analysis, what we observe is a law firm sector grappling with three interrelated threats that are seldom the focus of sustained attention: insufficient leadership, attorneys’ lack of meaning and purpose in their work, and client service. As shown in the above graphic, these three domains are the linchpins of law firm performance and sustainability.
In this post, I focus on leadership because the other domains (service and meaning) hinge on effective law firm leadership. Absent leadership that serves as a model of service and purpose, law firms frequently stumble in meeting client service standards and instilling the sense of meaning, dedication, and direction that distinguishes superb law firms. This post consists of edited excerpts from Chapter 9 of American Law Firms in Transition: Trends, Threats and Strategies, highlighting four elements of effective leadership: (1) Vision and Strategy, (2) Innovation and Change Management, (3) Talent Development, (4) Execution.
1. Vision and Strategy
Vision and strategy are closely aligned in healthy organizations. In the simplest sense, vision is the concept, and strategy is the implementation of that concept. When organizations flounder, they usually have disconnected vision from strategy and subordinated strategy to pedestrian planning and budgeting tools. They lose sight of their organization’s overarching values, principles, and ambitions and define success as any incremental increase over the prior year’s financial performance.
Vision has become an overused, ambiguous term in leadership. Its meaning can range from the articulation of a minor organizational goal to the unveiling of a preposterous financial target; its scope can range from the next quarter’s earnings to the next century’s business model. Stripped of contemporary jargon, vision is an optimistic perception of an organization and its members that crystallizes their highest purpose and their greatest value. Vision reflects the most imaginative extension of an organization’s present capabilities, the most expansive deployment of its members’ skills, and the most meaningful impact it can have on its members and customers.
Barrie Conchie, the co-author of Strengths Based Leadership (2008), finds that vision is an essential part of leadership. He describes how vision distinguishes exceptional leaders from ordinary leaders:
Successful executive leaders are able to look out, across, and beyond the organization. They have a talent for seeing and creating the future. They use highly visual language that paints pictures of the future for those they lead. As a result, they seem to attain bigger goals because they create a collective mindset that propels people to help them make their vision a reality.
These leaders also recognize that through visioning, they showcase their values and core beliefs. By highlighting what is important about work, great leaders make clear what is important to them in life. They clarify how their own values—particularly a concern for people—relate to their work. They also communicate a sense of personal integrity and a commitment to act based on their values.
Conchie, “The Demands of Executive Leadership,” Gallup Bus. J., May 13, 2004. Conchie seeks answers to three questions when he determines whether an organization is encouraging its leaders to develop and express a vision: Who contributes to, controls, or communicates the “big picture”? Are leaders encouraged to “paint pictures” of the future? What opportunities do leaders have to talk about and shape the future? Id.
For law firm leaders, vision is, arguably, their most important responsibility. If law firms are selecting leaders for the right reasons, their leaders should be uniquely qualified to develop and articulate the firm’s vision. Many partners usually can match a leader’s operational and organizational skills, but no one should be more qualified than the leader to imagine, define, and articulate its vision.
Strategy, unfortunately, has become intertwined with planning and has lost its identity in “strategic planning” and “strategic plans.” Despite contemporary perceptions, a strategy should not be the same thing as a plan, and developing a strategy should be considerably more complex than preparing a plan. Roger Martin, the former dean at the University of Toronto’s Rotman School of Management, finds that “mistaking planning for strategy is a common trap.” Roger L. Martin, “The Big Lie of Strategic Planning,” Harv. Bus. Rev. (Jan/Feb 2014). He describes how planning differs from strategy: “Planning typically isn’t explicit about what the organization chooses not to do and why. It does not question assumptions. And its dominant logic is affordability; the plan consists of whichever initiatives fit the company’s resources.” Id.
Planning in most organizations is focused on leveraging existing resources (human, financial, technical). In a planning exercise, the analysis of marketplace competitors also centers on competitors’ existing resources. This approach is dangerous because tomorrow’s competitors do not look like today’s competitors; and competitors that eventually dominated their markets “invariably began with ambitions that were out of all proportion to their resources and capabilities.” Gary Hamel & C.K. Prahalad, “Strategic Intent,” Harv. Bus. Rev. (Jul/Aug 2005). When organizations substitute planning for strategy, they lose the peripheral vision necessary to detect trends and competitors before they are overtaken by them.
Devising strategy is harder work than making plans. Strategy demands a higher level of analysis and risk taking because it necessitates larger, bolder assumptions about the future. Planning, in contrast, usually evades strategic thinking as it centers on incremental revenue increases and presumes the continuation of existing products and services. Expanding an existing law firm practice area by hiring more lateral partners, for instance, is generally depicted as a strategy, but it more closely resembles a plan.
Plans are generally much easier for law firms because they usually contain variations of actions already taken, they are more easily understood, accepted, and implemented than strategies. Plans also foster the illusion that organizations have strategies when, in fact, they have practiced “consensual neglect” in avoiding major strategic decisions. Frank Vermeulen & Niro Sivanathan, “Stop Doubling Down on your Failing Strategy,” Harv. Bus. Rev. (Nov/Dec 2017).
Law firms’ strategies and plans frequently suffer from a lack of imagination and peripheral vision. They typically reflect a firm’s responses to three questions: Where are we now? Where do we want to be? How will we get there? To answer these questions, law firms are encouraged to assess their current market position, determine their current practice strengths, set “realistic” goals, and prepare an implementation plan.
These questions may be suitable for a short road trip, but they do not address the types of issues that already have disrupted and financially damaged law firms. These questions also give law firms an illusion of control, indicating that they can direct their future in an otherwise static world. They encourage law firms to build yesterday’s law firms with today’s ambitions.
To develop viable strategies, law firms need to recognize that they are already behind other industries and professions in anticipating changes and adapting to market demands. Law firms must rapidly ascertain:
- What services clients will expect in the future?
- How those services will be performed, delivered, evaluated, and compensated when clients, not law firms, determine their necessity and value?
- Which presently neglected markets can be serviced with new, profitable business models?
- What technological capabilities must they develop to serve their clients?
- How they will attract, compensate, and retain lawyers and allied professionals as the definitions of competence and proficiency evolve throughout their careers?
- What incentives, training, and oversight will be necessary to promote professional ethics when technology and other innovations present ethical dilemmas not squarely circumscribed by existing rules?
Law firms also need to decide how they will respond to Millennial generation attorneys who are more persistent than Baby Boomer generation attorneys in expecting meaningful work, regular feedback, a healthy work/life balance, and flexibility in work hours and office presence. See M.P. McQueen, “Here Come the Big Law Millennials,” Am. Law., Feb 29, 2016; Meghan Tribe, “How Big Law Firms Are Adapting to Meet Millennials’ Needs and Why That’s Good for Clients,” Am. Law., Aug. 28, 2017.
If law firms continue to build their plans and strategies by extrapolating from current competitive advantages and market conditions, they will remain in a reactive role. They will be continually surprised by external changes as they lose market share to corporate legal departments, alternative legal service providers, software vendors, and new waves of tech-savvy, entrepreneurial competitors. By comparing themselves to other law firms and assuming that strong practice groups will only get stronger, law firms ignore their actual competitors and overlook exogenous threats to their business models.
In summary, the conventional practice of measuring law firm performance relative to other law firms may provide no guidance or advantage when changing conditions and new competitors are redefining the practice of law, including relevant performance metrics. Cf. Post 088 (Liam Brown discussing Elevate’s use of net promoter (for clients) and pulse check (for employees)); Posts 094 & 095 (showing connection between Glassdoor ratings and law firm performance).
2. Innovation and Change Management
Patrick McKenna, a law firm consultant, posed this question in 2009 to more than 500 members of LinkedIn’s Legal Innovation Group: “Is there a law firm anywhere, with a culture that consistently encourages innovation?”
The responses were tellingly quiescent. “As I fully expected, thus far there has not been one single response,” states McKenna. See “Post #391 — Is Innovation in BigLaw An Oxymoron?,” Firm Leadership, Apr. 21, 2009. Consistent with McKenna’s experience and personality assessments showing that lawyers generally are reluctant to innovate, only 11 percent of surveyed law firm leaders select “innovation” as one of their competitive advantages. See Cathy Lazare, Thinking Like Your Client: Strategic Planning in Law Firms at 28 (ALM 2012). And these leaders may be exaggerating their innovation bona fides because only four percent of corporate counsel report that they have seen any significant innovation from law firms within the last three years. See Closing the Innovation Gap (Thompson Hine 2018).
McKenna’s frustration with law firms’ lack of innovation is not unique. Stephen Poor, the Chair Emeritus of Seyfarth Shaw, encountered similar problems in his efforts to change legal service delivery. His conclusion: “Never underestimate the resistance to change from lawyers. Even more likely, never underestimate the ability of lawyers to describe virtual status quo efforts as revolutionary change.” J. Stephen Poor, “Re-Engineering the Business of Law,” NYT Dealbook, May 7, 2012.
Poor discovered that law firm attorneys were not the only obstacles to innovation; corporate counsel also adamantly resisted innovation. “What we did not anticipate,” Poor relates, “was the resistance from other crucial stakeholders – especially clients.” Id. This resistance stemmed from the fact that “our clients are lawyers, too, and many of them are the products of the culture of their own business.” Id.
To mitigate attorneys’ resistance to change and successfully implement innovations, law firm leaders may benefit from these four basic strategies:
- Linkage to firm culture and clients. Attorneys’ resistance to innovation decreases when they can see that a change reflects concepts, values, and principles derived from the firm’s culture, history, and client service standards. In explaining why some innovations were more readily accepted by Seyfarth Shaw attorneys, Poor states, “We consciously developed methodologies that linked to the history and culture of our firm or used client voices to support and build the business case for change. As we were able to demonstrate success on smaller scales, we were able to build agents for change that effectively permeated the firm.” Id.
- Clear goals and support from firm leaders. Innovations fail when leaders are unclear about their goals and ambivalent about achieving them. To effectuate durable innovations, leaders must persuasively communicate the reasons for and benefits of the innovation; express their unequivocal commitment to it; demonstrate that the innovation is important to them; allocate sufficient resources to implement it; and identify the specific goals and deadlines that will indicate the innovation has been successful. Robert H. Schaffer, “Four Mistakes Leaders Keep Making,” Harv. Bus. Rev. (Sept 2010); Robert H. Miles, “Accelerating Corporate Transformations (Don’t Lose Your Nerve!),” Harv. Bus. Rev. (Jan/Feb 2010); Harold L. Sirkin, Perry Keenan, & Alan Jackson, Alan, “The Hard Side of Change Management,” Harv. Bus. Rev. (Oct. 2005).
- Early communication with resisters. Leaders often ignore or avoid people who object to their ideas. To be an effective innovator, however, law firm leaders must identify likely resisters and attempt to obtain their support at the earliest opportunity. Instead of following the instinct to marginalize people who object to innovative ideas, adroit leaders are solicitous and respectful of resisters. This “puts you in a better position for people to be sympathetic to your idea, to listen to you, to move toward you emotionally as opposed to away.” Jeff Kehoe, “Managing Yourself: How to Save Your Good Ideas,” Harv. Bus. Rev. (Oct 2010).
- Monitoring and recognition of incremental achievements. Innovation initiatives are fragile; they usually fail. Because their success is imperiled, innovation initiatives must be monitored regularly, and small achievements must be recognized, publicized, and celebrated. Complex, long-term innovation projects should be reviewed every two weeks, and relatively straightforward innovation projects should be evaluated every six weeks. See Sirkin et al., “Hard Side of Change Management,” supra. Although leaders tend to assume that long-term projects are at greater risk of failure, research indicates that “a long project reviewed frequently stands a better chance of succeeding than a short project reviewed infrequently. Problems can be identified at the first sign of trouble, allowing prompt corrective action.” Id.
- Eliciting new ideas from future leaders. The partners currently serving on firms’ executive committees are unlikely to generate the major innovations that will determine their firm’s success within the next 10 – 20 years. Those innovations are more likely to emerge from attorneys who are senior associates or junior partners. For that reason, law firm leaders should form innovation committees comprised of attorneys who will serve in the next generation of firm leaders. Those attorneys have the largest investment in the firm’s future and tend to be most knowledgeable about technology. To ensure that the innovation committee incorporates the most recent developments in technology and other fields, its members should be replaced regularly with more junior attorneys. See N. Anand & Jean-Louis, “What Everyone Gets Wrong About Change Management,” Harv. Bus. Rev. (Nov/Dec 2017); Roy Strom, “A Case For Letting Associates Drive Technology Advances in Law Firms,” Am. Law., Aug. 31, 2017.
3. Talent Development
Law firm leaders faithfully repeat the professional services mantra, “Our assets go down in the elevator every night.” But they don’t necessarily internalize the implications of leading an organization whose assets are neither stationary nor fungible.
One implication of leading a mobile professional workforce is that lawyers will leave firms that are not committed to their professional development and achievement. Another implication is that rainmaker partners in particular must move to other firms if the quality of their current attorney team is inadequate to service their clients. Both of these implications reflect the importance of talent development and demonstrate that talent development is a major challenge and obligation for law firms. Law firm leaders may perceive themselves as being responsible for a firm’s financial success, but they can achieve that success only by dedicating themselves first to talent development.
Since law firms are selling professional services rather than manufactured products, they are entirely dependent on their attorneys’ skills and commitment. If firms do not match those skills and commitment with professional development opportunities, high performance standards, and state-of-the-art resources, their best attorneys will find a more suitable context to support their success. Law firm leaders, therefore, must be committed to talent development, as the best-selling business author Tom Peters declares:
If you’re a leader, your whole reason for living is to help human beings develop – to really develop people and make work a place that’s energetic and exciting and a growth opportunity, whether you’re running a Housekeeping Department or Google. I mean, this is not rocket science.
It’s not even a shadow of rocket science. You’re in the people-development business. If you take a leadership job, you do people. Period. It’s what you do. It’s what you’re paid to do. People, period. Should you have a great strategy? Yes, you should. How do you get a great strategy? By finding the world’s greatest strategist, not by being the world’s greatest strategist. You do people. … And if you don’t get off on it, do the world a favor and get the hell out before dawn, preferably without a gilded parachute.
“Tom Peters on Leading the 21st-Century Organization,” McKinsey Quarterly (Sept 2014) (interview of Tom Peters). Although Peters may be speaking with an evangelist’s fervor, his core message remains accurate: whether leading a business or a professional services organization, all leaders must be committed to talent development.
Talent recruitment, selection, development, and retention always have been law firms’ competitive advantage. Despite the importance of talent development, law firms traditionally devote a small fraction of their revenue to formal talent development programs. Their mentorship efforts, moreover, are highly variable. Although law firm leaders claim to be operating their firms more like businesses, author Lauren Stiller Rikleen notes that they “fail to adopt many of the basic talent management principles upon which excellent institutions are built.” Lauren Stiller Rikleen, “Law Firms Need to Take Care of Their Talent,” Harv. Bus. Rev., July 10, 2012.
If law firms were deeply committed to talent development, that commitment would be evident in at least four spheres:
- Increases in talent development budgets
- Improvements in associate attorneys’ understanding of partnership admission criteria
- Expansion of leadership development programs, and
- Higher levels of attorney efficiency and client satisfaction.
But profession-wide progress in these spheres cannot be discerned. Many law firms have reduced their talent development budgets; associate attorneys continue to be confused about partnership admission criteria; most firms do not provide formal leadership development programs; and clients generally perceive little or no improvement in their attorneys’ efficiency and overall performance. See Marcia Pennington Shannon, “Strategic Talent Management: Top Issues and To-Dos for Firms,” Law Practice (Nov/Dec 2010).
As Terri Mottershead, the former Director of Professional Development at DLA Piper, notes, “law firms have not connected the dots between [how] they manage their talent and their ability to achieve their business performance goals. Firms have properly focused on their pipeline of client work but not as much on building the pipeline of talent to deliver that work.” Id. (quoting Mottershead).
The success of strategies is dependent on their execution. As Larry Bossidy writes in Execution: The Discipline of Getting Things Done, “No company can deliver on its commitments or adapt well to change unless all leaders practice the discipline of execution at all levels. Execution has to be a part of a company’s strategy and its goals. It is the missing link between aspirations and results.” Bossidy & Charan, Execution at 19 (2002).
Execution is sometimes considered the crucible of leadership. If execution is indeed the crucible, many law firm leaders might prefer a more charitable test of their performance. When law firm leaders are asked, “How much of your last strategic plan has been implemented?” only 3.2 percent of them respond, “almost all of the plan.” David Parnell, “Law Firm Strategic Planning and Deployment: A Report on the State of the Art,” Forbes, Jun 9, 2017. When asked to evaluate how well their firms have implemented their strategic plans, only 10 percent of law firm leaders respond, “Excellent.” Managing Partner Forum, Re-Envisioning the Law Firm (2016) (slides in appendix).
The major obstacle to law firms’ execution of their strategic plans is the absence of a link between objectives and actions. The results of ALM Legal Intelligence’s survey of law firm leaders are illustrative:
- “Growing the firm’s revenue” is the highest priority for law firms. But only 56 percent of firms have a “plan in place to build, track and measure client loyalty and satisfaction.” Only 21 percent of leaders would like to “provide higher service levels,” and only 9 percent would like to “institute client satisfaction surveys/interviews.” Increasing revenue without tracking and improving client service strikes business people outside of law as incongruous and unrealistic.
- “Talent acquisition and retention” is the second highest priority for law firms. Nearly every firm (96 percent) intends to emphasize lateral partner acquisitions. Seventy-six percent of law firms report that they are “aggressively pursuing” lateral partners. But only 28 percent of firms state that their lateral strategy has been “very effective” during the last five years.
- “Improving firm profitability” is law firms’ third highest priority. But only five percent of firms regard “improving realization rates” as a high priority, and only 15 percent have taken steps recently to de-equitize partners. When asked, “How do alternative fee arrangements affect firm profitability?” 65 percent of firms respond, “too soon to tell” or “don’t know/can’t say.” If firms do not know whether their alternative fee arrangements are profitable, their efforts to improve firm profitability may be futile.
Thinking Like Your Client, supra, at 9-33. When objectives are isolated from actions and outcomes, as occurs in many law firms, it is virtually impossible to effectuate strategies and enforce priorities. Execution is dependent on a clear and persuasive statement of objectives, action items tied to timetables, and rigorous systems for monitoring and enforcing timely completion of the action items.
Unfortunately, attorneys resist these incursions into their autonomy and state that their greatest source of dissatisfaction with strategic plans is “implementation with designated responsibility and time lines.” Parnell, “Law Firm Strategic Planning and Deployment,” supra. Many law firms, consequently, avoid attorneys’ resistance by not presenting specific action plans in the first place. If specific action plans are presented, attorney pushback is often averted by not requiring compliance. Suffice to say, this is like going on a diet without goals, records, or scales.
Law firm leadership requires a distinct skill set that respects attorney autonomy but convinces attorneys that yielding some of their autonomy will increase their financial security, afford a broader range of professional opportunities, and enhance their reputation and status.
Attorneys’ insistence on autonomy and their aversion to ambitious, powerful leaders sometimes result in “stealth” leaders who spend most of their time trying to build consensus, mollify their partners, and underplay their own ideas and aspirations. Management professor Laura Empson describes these leaders as being capable of “interacting politically while appearing apolitical.” Laura Empson, “Leadership, Power and Politics in Law Firms,” in Leadership for Lawyers 98 (Rebecca Normand-Hochman ed. 2015). Very few firm leaders meet these job requirements, and even fewer would want the position under these conditions. As Empson observes, “it is not easy to find lawyers who are happy to identify themselves as followers. Furthermore, finding lawyers who are happy to put themselves forward as leaders is even harder.” Id. at 89.