Walker Clark Worldview

A managing partner of a reputable and reasonably successful midsize law firm recently told me, “We look for partners who are just like us, who we know will fit in.”

This is not the first time that my colleagues and I have heard about this “unwritten trump card,” as a senior partner in another firm describe it.  ”If we have two candidates who are roughly equal, we will usually give the nod to the lawyer who has the better chemistry with us,” a partner from yet another law firm once told me.

Especially in the traditional context of a law firm partnership, it is natural to want partners with whom one feels comfortable, with common backgrounds and points of view to one’s own.  We are more likely to trust and feel confident about people who are more like ourselves.

Is is perfectly natural.

It is also potentially lethal to any business, but especially law firms.

Our firm’s experience working closely with law firm partnerships and practice groups demonstrates that a group of professionals is better able to make hard decisions, manage change, and get the best results from innovations if it has people with diverse backgrounds, experiences, personalities, and points of view.

Such groups are usually better able to:

• See through unproductive business paradigms that most law firms continue to accept blindly as immutable truths.
• Apply a lively intellectual rigor and critical thinking to proposed innovations and, as a result, usually obtain a better return on their investment in them.
• Spot new opportunities before their competitors notice them and build competitive advantages that will be difficult for competitors to overcome.

By contrast, partnerships that are not diverse, where everyone is “just like us,” are usually more likely to:

• Cling to old business assumptions, habits, and “values,” even then they clearly do not produce desired results.
• Dismiss fundamental changes in the legal market as “fads.”
• Worry that recruiting and promoting women and ethnic minorities might “compromise our standards.”
• Fail to implement new strategies or management changes, even when the partners agree that they are needed.
• Avoid differences of opinion as being “damaging to our partnership culture.”
• Consider honest questions or doubts to be disloyal to the firm.

Which of these partnerships is more likely to grow?  Which is more likely to be in business 30 years from now?

Diversity is not just good social policy or a way to check a box on a client’s checklist of selection criteria. It is good business. Rather than look for “people just like us” when we select new partners in our law firms, we need to look for people who challenge us intellectually and who call on us to look at our firms and our profession in new ways.

Norman Clark

This is the final posting in a series about the characteristics of successful quality assurance programs in law firms.

How does one measure the success of a quality assurance program? When Walker Clark advises a law firm, we tell the partners to look for these indicators:

• Improved productivity by fee earners — because they can spend more time on billable work and less time fixing mistakes and responding to client complaints
• Higher collections realization rates — because the firm now manages the major reasons for fee write-downs and write-offs
• Higher levels of client satisfaction – because the firm meets or exceeds client expectations and gets things done right the first time
• Competitive advantage – because the firm can demonstrate quality, rather than just mumble slogans about it

As the previous parts of this series suggest, serious quality management is a challenge for most law firms.  People have to discard bad habits.  They have to sharpen their thinking about the routine work that they do every day.  In some instances, lawyers need to change some of their long-held, fundamental ideas about what constitutes quality in a legal service.

Quality management often involves a set of discrete journeys that a law firm must make…

• From considering errors and mistakes as failures to be hidden — to viewing them as data-rich opportunities to reduce or eliminate them in the future
• From assigning blame — to finding solutions
• From viewing quality in legal services as something that only a lawyer can define — to understanding quality in terms of the client’s needs, expectations, and perceptions

Each of these requires a profound cultural change for most law firms. It is a necessary change, as well; because law firms that are unable to manage serious cultural change are doomed to declining competitive performance and, eventually, irrelevance in the fast-changing, highly competitive legal markets of the 2010s.

The “quality assurance” culture also requires a seriousness of purpose and an ongoing commitment to the procedures and methods. Partners must be highly visible in their support for, and compliance, with the quality assurance program. They must reinforce among junior members of the firm that quality assurance is everyone’s job and is important to the business success of the firm.

Like most worthwhile investments, quality assurance sometimes is not easy, especially because of the cultural changes that it sometimes requires. But that effort produces profound and positive results that are:

• Long-term and sustainable
• Beneficial to almost every aspect of law firm operations
• Measurable in terms of dramatic improvements to profitability and financial performance.

Norman Clark

Thomas Friedman published an important column in today’s New York Times:  “The Fat Lady Has Sung.” I highly recommend it to readers of this blog outside the United States who seek insight and understanding about the leadership dynamics and current dysfunctionality in the American political system.

It is also required reading for the managing partner of any law firm anywhere.

Friedman is critical of both President Obama and the Republican Party.  Put your own personal political views aside as you read the column.  It discusses some basic truths that apply to law firms going through times of challenge and change, whether in the United States or anywhere else in the world.

Courage in a crisis

While consensus, trust, and common goals are essential elements of long-term success, times of challenge frequently require clear, directive leadership. I have seen a number of law firms fail to achieve goals and capitalize on opportunities. Why did they fail to implement what appears to have been obvious? In most instances, there were two reasons. They both relate to failures of courage.

I will state each one in plain but honest terms.

• Personal cowardice. No one is willing to step forward and assume the risks of taking charge. Crisis is not a time for “summits” and consensus building. Those can come later.  Clarity, direction, commitment, and resolve are what are needed now.

This does not imply dictatorship. The two greatest American presidents in my opinion, Franklin Roosevelt and Abraham Lincoln, did not seek or assume dictatorial powers, despite the criticisms of their opponents. (Some of Lincoln’s and FDR’s political opponents made today’s “Tea Party” movement in the United States look like…well… a tea party.) Instead, their great contributions were to set a direction for a country that, at the time, was adrift politically and whose long-term survival was legitimately in doubt. They consulted their opponents, were not constrained by ideology, and were not afraid of a pragmatic trial-and-error approach with respect to the details.

• Group cowardice. In some law firms, the partners are unwilling to go through the sometimes painful process of resolving internal disputes. Conflict is an essential part of the development of any business group. Without it, there is no hope of developing the genuine trust and common purpose that are essential to becoming a high-performance business team.

Responsible dialogue

Friedman’s article suggests is that “no” is not a responsible position for someone responsible for governing a country.  The same applies to law firms. Irresponsible minorities frequently betray themselves in one or both of two ways:

• The party of “no.” I have seen a few law firms wrecked or almost destroyed by the stubborn refusal of a willful minority of partners to accept any change whatsoever to a failing status quo. “No” is not a negotiating position. Instead, it is the first word in saying “farewell.”

• Taking hostages. Super-majority voting requirements in partnership agreements are usually a wise precaution when making fundamental decisions about the partnership or the business. The minority must use super-majority requirements responsibly, and not to hold the law firm hostage to the minority agenda or to no action at all.

The best way to test the legitimacy of opposition to change, especially in difficult times, is to ask questions.

• Probe the rationale behind the opposition.
• Feed back what you understand the opponents’ position to be.
• Ask them how they would apply their rationale to relevant hypothetical situations.

These techniques will usually expose intellectual dishonesty, if there is any, and allow everyone to focus on any honest issues that need to be discussed.  If all else fails, this truth-seeking strategy will also bolster the courage of the majority to deal with irresponsible factions in the partnership and, if necessary, to remove them before they can sabotage the future of the firm.

Norman Clark

As my colleagues and I advise law firms on governance issues, such as managing the growth of the partnership, partner compensation, or capital requirements, we and our clients sometimes discover that it has been many years since the partnership agreement, partnership deed, by-laws, or other corporate “constitution” has been reviewed.

Although signing the partnership agreement is a time-honored ritual of becoming a partner, we have actually seen partnership agreements that do not bear the signature of any current partner.  In a very few cases, the partners have been unable even to locate any copy of their partnership agreement.

I hasten to point out that these law firms are not bunches of  bumbling incompetents.  Almost all of them are otherwise well-managed and reasonably successful. With all the demands on partners’ time, sometimes the basic foundations of law firm governance are overlooked, assumed by the partners to remain solid despite the passage of time.

This assumption ignores a fundamental risk in business. Past success guarantees nothing in today’s legal markets.  The fact that your law firm has done well in the past does not mean that your governance system will be able to respond appropriately and efficiently to future challenges.

Should your law firm review and update your partnership agreement or other corporate documents? Here is a quick and very reliable diagnostic checklist:

1. Has it been more than 10 years since you wrote or last revised your agreement?
2. Has your partnership grown by more than 30% since then?
3. Are any of your partners over 50 years old?
4. Are your younger partners unhappy with their compensation?
5. Are you thinking about a merger with, or acquisition of, another firm?
6. Is is harder to make decisions now than before?

If you answer “yes” to any of these questions, now is good time to review your partnership agreement to see whether it might need to be updated.

Norman Clark

In its Knowledge@Wharton site yesterday, the Wharton Business School, University of Pennsylvania, posted an interesting abstract about motivating employees: “Putting a Face to a Name: The Art of Motivating Employees.” This should be a quick, but worthwhile, entry on your personal “to read” list.

University of Pennsylvania professor Adam Grant draws several interesting conclusions from his research.  I believe that, although not drawn from observations in the legal profession, they have direct applicability to law firms.

People are motivated by an understanding of the positive impact that their activities have on others.  Here are summaries to two of their studies:

Grant and a team of researchers — Elizabeth Campbell, Grace Chen, David Lapedis and Keenan Cottone from the University of Michigan — arranged for one group of call center workers to interact with scholarship students who were the recipients of the school’s fundraising largess. It wasn’t a long meeting — just a five-minute session where the workers were able to ask the student about his or her studies. But over the next month, that little chat made a big difference. The call center was able to monitor both the amount of time its employees spent on the phone and the amount of donation dollars they brought in. A month later, callers who had interacted with the scholarship student spent more than two times as many minutes on the phone, and brought in vastly more money: a weekly average of $503.22, up from $185.94.

Even reading about the benefits that one’s work produces for other people can produce apparent increases in motivation .

In a follow up study to the one he published in 2007, he focused on lifeguards at a community recreation center. Some of them were given stories to read about cases in which lifeguards had saved lives. A second group was given a different kind of reading material: testimonies from lifeguards about how they had personally benefitted from their work. The results: Those who had been reading about their ability to avert fatalities saw their measure of hours worked shoot up by more than 40%, whereas those who had merely learned that a lifeguard gig could be personally enriching kept working at the same clip.

The Knowledge@Wharton post has links to the papers that Grant and his teams produced.

Some law firms try to minimize face-to-face contact with clients by junior associates and support staff.  Grant’s research suggests that this is a mistake.

Everyone in the firm needs to see the face of the client. In some cases this can be a simple face-to-face encounter, such as a partner taking time to introduce a client to associates and support staff who work on the client’s matter. Even when employees cannot literally see the face of the client, partners should make sure that each member of the team — from senior associates to the crew in the mail room — understands how their efforts ultimately benefit the client.

Norman Clark

Notwithstanding economic uncertainty in many countries (as well as certainty that things are really bad in some economies), there appears to be a remarkable number of new law firms entering the market. Many of these are formed by partners or groups of partners who concluded that they had no prospects of a professionally and financially rewarding future in their old firms.

As the old proverb states:  When times are risky, it is also the best time to take risks.

Leadership is an imperative during the start-up phase of even the smallest firms. Without it, even the most talented lawyers cannot realistically expect to achieve more than mediocre financial performance long term.

Moreover, a substantial investment by the owners of the new law firm in leadership skills will produce measurable business results. The new firm needs quickly to become a law firm of leaders, not just a law firm with a leader. My experience advising new law firms suggests that law firms of leaders, even new ones, demonstrate at least these three advantages:

• First, they appear to anticipate better the stress that rapid growth can place on the firm’s capital, staff resources, and service delivery capabilities. They also appear to respond to unexpected growth – either faster or slower than originally planned –more cost effectively.

• Second, they deal more easily and effectively with the many minor, but highly stressful, problems that seem to arise almost every day during the start-up phase. Morale appears to be higher. People work hard, but seem to be less exhausted at the end of the day.

• Third, communications, both within the firm and to the legal market, are more accurate and timely.  Most importantly, they are consistent and aligned to the business goals of the firm.  Good leadership ensures that everyone in the firm understands short term business priorities and longer range visions, and that they communicate them in a clear, consistent manner both internally and externally. This allows the new firm to establish its presence in the market, and especially among its desired client base quickly, and to achieve a better alignment of the firm’s service delivery functions to the needs of specific clients.

Greater agility, less burn-out, and better communications with the market — all three of these observations seem almost counter-intuitive to the experience of many lawyers, who start new law firms and sweat their way through those challenging first six months to two years.  Yet I are convinced that any new firm, regardless of size, location, or practice specialty, can enjoy these benefits.

For more about the challenges and strategies of start-up leadership in law firms, click on this link: Start-up Leadership to download an article from the Walker Clark Resource Library.

Norman Clark

January is typically a time for law firms to plan their professional development and training program for the year. Unfortunately, many law firms will waste most of their training and development funds on seminars, workshops, conferences, and retreats that provide almost no long-term value.

As my colleagues and I have worked with law firms worldwide to develop custom-tailored professional development programs for them, we have heard persistent complaints about the hundreds of more-or-less generic training programs that are currently being sold to law firms. As one managing partner told me recently:

Last year we spent almost $2,000 per person on a weekend “leadership retreat.”  It was a mix of academic theory and some fun exercises. But it had no relevance to our law firm and what we need to do to achieve our goals. We kept asking ourselves “What are we doing here?” On Monday morning my partners’ leadership abilities were unchanged — except for the worse in a couple of cases.

There are certain things that law firms should look for, and also avoid, when considering a proposal from an external provider of training programs for lawyers. Most of these can be summarized into 8 questions.

1. Is the program designed specifically for law firms? How does it demonstrate that it takes into account the special characteristics and demands of the practice of law? Many programs in the areas of marketing, sales, and leadership present mostly generic principles and academic theories that do not always work in law firms.
2. Will the program include materials that were customized for our firm, our practice specialties, and our client base?  How will the program facilitators do this? This can be particularly challenging in an international multi-cultural law firm.
3. Does the program deliver tools and methods that participants can apply their very next day in the office?
4. Does the program include case studies or exercises that are relevant to our firm and the responsibilities of the participants? They should be based on realistic issues in the firm, its practice areas, and its client base.
5. To what extent is the program tailored to the individual participant to address each person’s background, needs, and roles in the firm. “One size” seldom “fits all” in a law firm.
6. Do the facilitators have experience in law firms and in the actual practice of law? Will our colleagues perceive them as credible experts or clueless academics?
7. What will be the follow up? Will there be ongoing advice, consultation, or support for individuals and groups after the program? Will there be a follow-up session later?
8. How will this program improve business performance? How will we be able to measure the business results? What return on investment can we reasonably expect, and over what period of time?

Leadership development poses some special issues, and will be the subject of a future posting in this blog.

Norman Clark

January typically marks the entry of newly-formed law firms into already competitive markets. Most of them are small in size, frequently based on one or two partners and a small number of clients that they bring with them from other law firms.

Some of these new ventures will fail — usually within 12 to 24 months.

Others will go on to achieve a significant presence in their respective markets.

Still others — perhaps as many as half — will struggle and strive, but never rise above a marginally profitable, month-to-month existence.

What makes the difference? We believe that it is a unique collection of behaviors that we call startup leadership.

The most important asset

Leadership is the most important component in the business success of a new law firm.  It is more important than a business plan, capitalization, or a portable client base.  These three things are needed, to be sure. However, the new firm will not succeed unless its owners can motivate themselves, their staff, their clients, and their external suppliers to make the contributions needed to sustain long-term financial performance.

Leadership from Day One

This is an exciting vision, but how can a new law firm achieve it?

Our experience and research convince us that not only can new law firms achieve effective leadership from Day One; they must do so. Leadership is an imperative during the start-up phase of even the smallest firms. Without it, even the most talented lawyers cannot realistically expect to achieve more than mediocre financial performance long term.

Moreover, a substantial investment by the owners of the new law firm in leadership skills will produce measurable business results. Law firms of leaders, even new ones, demonstrate at least these three advantages.  They might sound somewhat theoretical, but each one can be measured on a law firm’s profit and loss statement.

• First, they appear to anticipate better the stress that rapid growth can place on the firm’s capital, staff resources, and service delivery capabilities. They also appear to respond to unexpected growth – either faster or slower than originally planned –more cost effectively.
• Second, they deal more easily and effectively with the many minor, but highly stressful, problems that seem to arise almost every day during the start-up phase.  Morale appears to be higher. People work hard, but seem to be less exhausted at the end of the day.
• Third, communications, both within the firm and to the legal market, are more effective. Most importantly, they are consistent and aligned to the business goals of the firm. Good leadership ensures that everyone in the firm understands short term business priorities and longer range visions, and that they communicate them in a clear, consistent manner both internally and externally. This allows the new firm to establish its presence in the market, and especially among its desired client base quickly, and to achieve a better alignment of the firm’s service delivery functions to the needs of specific clients.

Greater agility, less burn-out, and better communications with the market — all three of these observations seem almost counter-intuitive to the experience of many lawyers, who start new law firms and sweat their way through those challenging first months in business. But we are convinced that any new firm, regardless of size, location, or practice specialty, can enjoy these benefits.

Norman Clark

Lisa Walker Johnson

My colleagues in Walker Clark, LLC, and I are often engaged by law firms to develop lawyer and staff compensation systems.

The big question always is “How can we motivate our people?”

The truthful answer is that you cannot.

Law firms are populated by people who, on average, are smarter, better educated, and more skeptical than those in almost any other industry. They are not easily fooled by a slick compensation formula and assurances that “All you have to do is work hard and you will get rich.”

This isn’t leadership.  This isn’t motivation.  This approach to motivation is essentially a “snake oil medicine show.”*

Read the next paragraph very carefully.

You cannot motivate professional people to do a good job.  That motivation comes from within. External factors, such as the compensation scheme, can contribute to building an “internal business case” for motivation for each person. But no single factor is enough.

For a professional person in a law firm to feel motivated, there are usually several things present:

• A fair and reasonable compensation system that rewards the behaviors that the firm needs for business success. Compensation is not enough by itself, but it is an essential ingredient.
• Management systems and support. You cannot expect lawyers to bill fees, take care of clients, and market the firm if you fail to provide the basic administrative and clerical support that they need.
• Skills and opportunities. If your compensation system heavily rewards origination of new clients, but you do not provide training in marketing and sales skills, you cannot expect a significant improvement. Few things are as demotivating as setting expectations that people cannot meet because they lack the basic skills. Likewise, you cannot expect associates magically to originate new instructions if you do not allow them opportunities to meet and work with clients directly.

This is why so many law firms — especially small ones — are frustrated by the performance of their compensations systems. You can have the most inspiring and most clever compensation scheme in the entire legal profession. But it will fail miserably if you fail to provide the support and skills development that people need to succeed.

Norman Clark

* Note:  In the American west in the 19th century, a “snake oil” was a term commonly applied to liquids with supposedly magic formulas (often claimed to be of Native American origins) that were nothing more than alcohol.  A “medicine show” was a traveling sales team that traveled from town to town, often only one or two steps ahead of the police, selling such magical cures to the uninformed and gullible.

How do you lead people in a law firm from an employee mentality to a performance mentality?

In my experience, the only way to do this is through goal achievement and teamwork.

Of course, groups don’t develop into high-performance teams unless they have a shared sense of purpose, which is why communicating the firm’s business strategy – at all levels – is so vital to getting results.

This is more than just setting goals.  Goals don’t work unless they are SMART: Specific, Measurable, Agreed, Realistic and Time-based.

Very simply, this is how I see it. I am using lawyers as an example; however, the same concept can be applied as effectively to staff and management.

The bottom-line question is this: What are the performance expectations and how will they be measured?

People will do what they are paid to do.  Period.

Some law firms look only at productivity for lawyers, i.e., “How much money do we expect each lawyer to bring in?” This is, at best, only a one-dimensional view of productivity in law firms, and, like most one-dimensional views, can be highly misleading. This approach, while simple, is also very short-sighted when used as the only indicator of performance. Productivity is more than working hard.

Other law firms add the origination of new clients and new instructions to the equation, i.e., “What do we expect each lawyer to generate in new business? Winning new work can also help to generate a sense of firm identity and team work, which is usually more productive than relying on one or two “rain makers.”

Another important performance factor is client satisfaction, i.e., “What feedback does each lawyer get from clients?” Of course, without a systematic way of collecting information, such as the Walker Clark Client Service Monitor, a firm must rely on anecdotal feedback, which often is incomplete and inconsistent with respect to the specific elements of client service that it addresses.

The lack of a consistent, systematic approach to client feedback is the principal reason why many law firms avoid using client satisfaction as a significant evaluative factor for lawyer performance. Not surprisingly, this also explains why many firms are surprised when they lose clients.

Sophisticated, progressive law firms set goals that are directed at institutionalizing the cultural values and professional behaviors that differentiate the firm in the market. When all lawyers and staff have goals that focus attention on matters such as quality improvement, effective meeting management, or teamwork, that has a powerful firm-wide impact over a short period of time. Clients notice it.

So the question for every lawyer in the firm is this:

What do you need so that you can perform better and earn more money?

This is what is at the heart of a performance mentality. It moves the individual from merely working for a paycheck to working to make more money through improved professional performance.

This is where the compact between the lawyer and the firm comes in. Improving individual performance in a law firm is more than management telling people to work harder.

If the law firm wants lawyers to achieve their full potential, it needs to be prepared to do at least these three things:

• First, provide at least monthly, if not weekly, feedback on a individual basis. This should include performance measurements, feedback from management, and coaching for improved future performance.
• Second, deliver the resources and training needed to meet performance expectations. Adequate support for individual performance also includes adequate work space, efficient technology, information, and the development of professional and business skills. Without them, most lawyers quickly — and accurately, under the circumstances — discredit performance goals as meaningless.
• Third, demonstrate strategic leadership and communicate the firm’s strategy. Everyone in the firm should know where the firm is headed and how their individual actions aid or undermine achievement of the the firm’s goals.

If you can place that kind of performance management system into operation in your law firm, the momentum and results that it produces will be beyond your expectations.

Many law firm partners like to talk about creating “a sense of ownership” in the firm on the part of associates and staff. This is empty rhetoric unless you have:

• A marketing strategy that is communicated to and understood by everyone in the firm
• A performance management system that links measurable performance with financial rewards
• Leaders who pay attention to what is happening inside the firm, get involved with the people and the work, and generate genuine enthusiasm about a shared future

Lisa M. Walker Johnson