A New Leadership Model Is Needed

Even though there are signs that the economy is starting to recover, this recession will have a far great impact on the legal profession than any previous recession in the last 70 years.

With each of the prior recessions (which occurred every 10-15 years) the profession continued pretty much unchanged. Clients raised few, if any, issues and firms continued to operate, more or less, as they had before. Business ' and the practice of law ' returned to “normal.”

The situation is far different this time. Whether or not the law firm “business model” ' whatever that is ' is actually broken (as many legal pundits including Richard Susskind declare), there are developments and trends that are raising challenges in the management of law firms. Furthermore, these are challenges firm leaders have not faced before and for which there are few, if any, precedents. This means new approaches are needed. Certainly the historic models for financial planning, firm structure, operations and client service, to name just a few, need to be re-examined. But it is the models for management and leadership that need a major tune-up if not replacement.

Where to Begin?

Before firms can address the changes they need to make in their management and leadership, they must identify and understand the trends and issues that have developed, and the challenges they are creating. The list is extensive. It includes reduced profitability, oversupply of lawyers, commoditization of certain work, and globalization. But what must be recognized is that this is the first recession in which clients have been so outspoken and persistent in raising issues and making demands on their law firms. Therefore, the place to start is with clients. Every other issue must be addressed from the perspective of successfully serving clients. This is, after all, the objective of any successful business or organization ' to successfully serve its customers or clients and to organize its management and operations to accomplish that objective.

In the case of law firms, this is not just a matter of reducing fees or developing alternatives to the billable hour. It goes much deeper than that. For the first time clients are demanding “value” for their legal dollar. The Association of Corporate Counsel addressed this issue when it developed its Value Challenge in 2008. However, each client may still have a different definition of value other than “more bang for the legal buck.” Notwithstanding that, there are certain things that every client wants its law firm to do:

• Ask for feedback and an evaluation of the firm's work, service and personnel.
• Learn and understand the client's business, industry, operations and business plans.
• Help the client be successful and achieve its goals. Be business counselors, not just legal counselors or service providers.
• Tell the client what it can do and how to do it, not just what it can't do.

The only way to obtain feedback and learn the client's business is by a client audit of each the firm's most important clients, conducted either by someone with the firm or by a qualified third party. Most partners in the majority of firms still oppose asking the client for this feedback and information, In the firms that have instituted and implemented this program, their leaders adopted a new approach to leadership ' an approach which then became the model for addressing other challenges that need to be met.

The New Leadership Model

In today's world, the responsibility of firm leaders is to get their partners to do what they don't want to do on their own. The effective leaders do not wait for consensus to develop. That takes too long ' and may never happen anyway. Nor do they announce a new program or strategic initiative and then just encourage it. They recognize that, when leading lawyers, it is not enough to simply state what is expected of them.

These leaders do a number of things that leaders in other firms have not yet done. They lead by example. They provide active and aggressive support to the stated objectives and do not allow passive support and implementation to prevent change. They articulate the reasons for the change and how it will benefit, not only the firm as a whole, but also the individual lawyers. They provide skills training if it is needed i.e., in how to conduct a client audit or how to manage a practice group or client team. They introduce and implement systems, such as compensation or recognition or both, to reward success or positive results. They may also implement penalties for negative results. And they take prudent risks.

What are some of the characteristics of these leaders who have adopted the new model? The major ones are:

• They have vision.
• They are businessmen and women as well as good lawyers.
• They are supreme but also prudent risk takers.
• They ask questions and are skilled listeners.
• They are excellent communicators, within and outside the firm.
• They delegate both responsibility and authority.
• They have commitment ' the catalyst that makes all other leadership qualities a reality.

The New Management Model

Although listening to clients is the first step in addressing the challenges that must be met, the process does not end there. Once the needs and demands of the firm's important clients are identified, there must be a well-crafted system that reviews them and then establishes other strategic programs in order to keep and successfully serve these clients. This will require identifying the trends, issues and challenges that must be addressed. The list may be long and will often include:

• More effective use of technology in both practice and serving clients.
• Lack of loyalty by partners and associates to their firms.
• The need for sufficient capital (most law firms are under-capitalized).
• Tort reform in many jurisdictions.
• Outsourcing and off-shoring.
• Increased use of contract lawyers.
• Legal services being provided by other than law firms.

To address these challenges will require most firms, even mid-size and smaller, to adopt certain changes in their management model including:

• Developing a job description for the Managing Partner or CEO that focuses on strategic planning, setting the future direction of the firm and cultivating a relationship with major clients.
• Delegating responsibility and authority for managing the non-legal, business operations to a strong Chief Operating Officer or Executive Director who heads a team of non-lawyer, business professionals.
• Raising the position of practice group head to the senior management level and selecting leaders who have the ability and are given the authority to manage their groups.
• In larger firms, de-centralizing management.
• Giving the members of senior management ' Managing Partner, Executive Committee, Practice Group Leaders ' sufficient non-billable time to effectively fulfill their management responsibilities.
• Compensating the members of senior management for the time they must devote to management and for the results they achieve.

Conclusion

Managing any entity is a challenge. Managing and leading a law firm today is a major challenge ' some experts would even say it is an impossible one. When approaching these daunting tasks, it may be best to remember the words a young President spoke at his inauguration 48 years ago ' “Let us begin.”

Robert Denney, a member of this newsletter's Board of Editors, is President of Robert Denney Associates, Inc., a firm that provides strategic management and marketing counsel to law firms and legal organizations throughout the United States and parts of Canada. He has written five books on the management and marketing of professional firms, two of which were published by the American Bar Association. The firm's Web site is www.robertdenney.com. Mr. Denney can be reached at 610-644-7020 or bob@robertdenney.com.

Even though there are signs that the economy is starting to recover, this recession will have a far great impact on the legal profession than any previous recession in the last 70 years.

With each of the prior recessions (which occurred every 10-15 years) the profession continued pretty much unchanged. Clients raised few, if any, issues and firms continued to operate, more or less, as they had before. Business ' and the practice of law ' returned to “normal.”

The situation is far different this time. Whether or not the law firm “business model” ' whatever that is ' is actually broken (as many legal pundits including Richard Susskind declare), there are developments and trends that are raising challenges in the management of law firms. Furthermore, these are challenges firm leaders have not faced before and for which there are few, if any, precedents. This means new approaches are needed. Certainly the historic models for financial planning, firm structure, operations and client service, to name just a few, need to be re-examined. But it is the models for management and leadership that need a major tune-up if not replacement.

Where to Begin?

Before firms can address the changes they need to make in their management and leadership, they must identify and understand the trends and issues that have developed, and the challenges they are creating. The list is extensive. It includes reduced profitability, oversupply of lawyers, commoditization of certain work, and globalization. But what must be recognized is that this is the first recession in which clients have been so outspoken and persistent in raising issues and making demands on their law firms. Therefore, the place to start is with clients. Every other issue must be addressed from the perspective of successfully serving clients. This is, after all, the objective of any successful business or organization ' to successfully serve its customers or clients and to organize its management and operations to accomplish that objective.

In the case of law firms, this is not just a matter of reducing fees or developing alternatives to the billable hour. It goes much deeper than that. For the first time clients are demanding “value” for their legal dollar. The Association of Corporate Counsel addressed this issue when it developed its Value Challenge in 2008. However, each client may still have a different definition of value other than “more bang for the legal buck.” Notwithstanding that, there are certain things that every client wants its law firm to do:

• Ask for feedback and an evaluation of the firm's work, service and personnel.
• Learn and understand the client's business, industry, operations and business plans.
• Help the client be successful and achieve its goals. Be business counselors, not just legal counselors or service providers.
• Tell the client what it can do and how to do it, not just what it can't do.

The only way to obtain feedback and learn the client's business is by a client audit of each the firm's most important clients, conducted either by someone with the firm or by a qualified third party. Most partners in the majority of firms still oppose asking the client for this feedback and information, In the firms that have instituted and implemented this program, their leaders adopted a new approach to leadership ' an approach which then became the model for addressing other challenges that need to be met.

The New Leadership Model

In today's world, the responsibility of firm leaders is to get their partners to do what they don't want to do on their own. The effective leaders do not wait for consensus to develop. That takes too long ' and may never happen anyway. Nor do they announce a new program or strategic initiative and then just encourage it. They recognize that, when leading lawyers, it is not enough to simply state what is expected of them.

These leaders do a number of things that leaders in other firms have not yet done. They lead by example. They provide active and aggressive support to the stated objectives and do not allow passive support and implementation to prevent change. They articulate the reasons for the change and how it will benefit, not only the firm as a whole, but also the individual lawyers. They provide skills training if it is needed i.e., in how to conduct a client audit or how to manage a practice group or client team. They introduce and implement systems, such as compensation or recognition or both, to reward success or positive results. They may also implement penalties for negative results. And they take prudent risks.

What are some of the characteristics of these leaders who have adopted the new model? The major ones are:

• They have vision.
• They are businessmen and women as well as good lawyers.
• They are supreme but also prudent risk takers.
• They ask questions and are skilled listeners.
• They are excellent communicators, within and outside the firm.
• They delegate both responsibility and authority.
• They have commitment ' the catalyst that makes all other leadership qualities a reality.

The New Management Model

Although listening to clients is the first step in addressing the challenges that must be met, the process does not end there. Once the needs and demands of the firm's important clients are identified, there must be a well-crafted system that reviews them and then establishes other strategic programs in order to keep and successfully serve these clients. This will require identifying the trends, issues and challenges that must be addressed. The list may be long and will often include:

• More effective use of technology in both practice and serving clients.
• Lack of loyalty by partners and associates to their firms.
• The need for sufficient capital (most law firms are under-capitalized).
• Tort reform in many jurisdictions.
• Outsourcing and off-shoring.
• Increased use of contract lawyers.
• Legal services being provided by other than law firms.

To address these challenges will require most firms, even mid-size and smaller, to adopt certain changes in their management model including:

• Developing a job description for the Managing Partner or CEO that focuses on strategic planning, setting the future direction of the firm and cultivating a relationship with major clients.
• Delegating responsibility and authority for managing the non-legal, business operations to a strong Chief Operating Officer or Executive Director who heads a team of non-lawyer, business professionals.
• Raising the position of practice group head to the senior management level and selecting leaders who have the ability and are given the authority to manage their groups.
• In larger firms, de-centralizing management.
• Giving the members of senior management ' Managing Partner, Executive Committee, Practice Group Leaders ' sufficient non-billable time to effectively fulfill their management responsibilities.
• Compensating the members of senior management for the time they must devote to management and for the results they achieve.

Conclusion

Managing any entity is a challenge. Managing and leading a law firm today is a major challenge ' some experts would even say it is an impossible one. When approaching these daunting tasks, it may be best to remember the words a young President spoke at his inauguration 48 years ago ' “Let us begin.”

Robert Denney, a member of this newsletter's Board of Editors, is President of Robert Denney Associates, Inc., a firm that provides strategic management and marketing counsel to law firms and legal organizations throughout the United States and parts of Canada. He has written five books on the management and marketing of professional firms, two of which were published by the American Bar Association. The firm's Web site is www.robertdenney.com. Mr. Denney can be reached at 610-644-7020 or bob@robertdenney.com.