The following article is adapted from material presented at a breakfast seminar held in Sydney on 22 November 2018. The speaker James G Perkins (Jim), COO of the San Diego-based firm, Procopio, is in the region presenting to several law firm conferences and took the opportunity to meet with some of our Sydney-based members to speak about the responsibilities of COO’s within the legal profession and what the future holds. Thanks go to Sue-Ella Prodonovich of Prodonovich Advisory for introducing Jim to ALPMA.
‘Hands up’ if you’ve got one of these problems currently in your firm:
- You have poorly performing or badly-behaved partners dragging the firm down, ‘ruining’ the culture and there is nothing you feel can be, or is being, done to deal with the issues.
- The ‘wrong’ things are being recognised and remunerated in your firm.
- Your firm is looking to grow and keeps hiring lateral partners, half of whom leave within two or three years or otherwise stay and exacerbate the other issues already in the firm.
- Your office premises lease is up for renewal in the next 18 or so months.
If you put your ‘hand up’ for any of those four preconditions, then watch out! You and your firm have moved into that space that is driving most of the negative change that has beset the legal profession over the last five years or so.
The problems are not new!
The market for professional legal services is a mature one. Lots of articles have been written about the competitive pressures facing the profession and the changes that the profession has been undergoing over the last decade — and especially over the last three or four years.
These pressures have seen the legal landscape change markedly. Breakout groups from large firms have started boutiques. Smaller firms have merged to become larger ones. And there is an ever-growing number of firms in the middle that are today mere shadows of their former selves, if indeed, they still exist at all.
For all of the change underway in the profession, it is still plagued by issues that have been around for decades. Whilst the focus for some has been turned towards better servicing clients and adopting new technologies, it seems that, for many, the profession’s Achilles-heel remains. And that is, issues centred around partner behaviours and partnership alignment.
What follows is a list of common (non-financial*) issues that face law firms and that lead to the discontinuities that often precipitate failure: [*Financial; issues are a whole other discussion!]
1. An inability to deal with underperforming or badly-behaved partners
Law firms – and especially partnerships — are built around two main forces that maintain the status quo of:
- financial prosperity and a focus on financial performance
- the strength and tenure of personal relationships between partners
So, what happens when one or both of these drivers comes into question? It is the firm’s ability (and often, its inability!) to deal with these matters that leads to internal disruption, high performing partner departures and sometimes (often?), failure.
We’ve all gotten together as partners at one Retreat or another and agreed that we value cultural alignment and good behaviour over, solely, financial results. And yet, every year there is discussion around what to do with the badly-behaved partner who carries a big book of business. These are, understandably, tough issues to deal with in most firms. But they must be dealt with!
And, believe it or not, some firms even struggle to address poor behaviours from partners who are abysmal financial performers. But not to worry! Those firms won’t be around for long enough for those issues to perpetuate.
So, what to do? Agree as a partnership on how you’d like to deal with these issues and then have the courage to take action. You will be surprised at the positive cultural impact and profitability that will come from being brave in this space
2. Compensation plans that drive behaviours which are inconsistent with the firm’s strategy
Or otherwise counter to ensuring that the partnership is fully aligned — if your stated firm strategy is to “reward and recognise strategic and behavioural contributions”, as well as financial performance, then don’t be surprised if all that anyone focuses on is ‘revenue generation’ if that is all that your compensation plan recognises.
Action: Agree on the things that are important to the overall long-term success of the firm and then be brave enough to objectively recognise and reward those things. Even the fluffy things such as behaviour can be measured through various assessment tools or staff surveys. If you truly want to see behavioural and cultural change, then roll those things into your Compensation Plan!
3. Poor lateral hiring decisions leading to an influx of poorly aligned new partners
In the pursuit of revenue growth, it is amazing how little due diligence is sometimes done when assessing new partners for entry into the business. It is this lack of intelligent assessment that is, in part, the reason for such a high failure rate amongst lateral hires. Just as important however, is when firms do not live up to the expectations of the new partners, the firm having been ‘over-sold’ during interviews or otherwise under-stated the issues relative to some of the current behaviours embedded in the firm (i.e. they lied to the interviewee!). Either way, this lack of alignment makes for unhappy outcomes.
For all of the firms that are struggling with these issues, there are others that are surviving, and in some cases, thriving. Those firms have adapted to this new highly competitive environment. They are dealing with these issues. They are using technology and engaging in modern management practices to better serve their clients and, in so doing, they are outmanoeuvring their competitors. In other words, they are dealing with their internal issues before one or more of those issues diminish their ability to do so!
4. If you have a premises lease up for renewal any time soon
Then I refer you to points 1 to 3 above. If you haven’t dealt with those aspects within your firm by the time that premises discussion is upon you, then ‘watch out’ because there is a very high likelihood that you will get to deal with those issues, likely, all at once and in less desirable circumstances.