A blog by Joel Barolsky of Barolsky Advisors

The challenges keep rising for overburdened partners

In Articles, Commentary on 13 May 2022 at 7:18 pm

The full unedited text of my opinion piece first published in the Australian Financial Review on 12 May 2022.

The partner role in law firms has always been a ‘stretch’ job – complex, demanding and business-critical. It’s also extremely well paid and prized by many. Most equity partners in Australia’s top 25 firms will earn over $1 million in 2022.

Looking ahead the partner role is only going to get tougher.

It started with Covid

The step-change in the role of partner can be traced to the start of the pandemic. 

A decade’s worth of pre-Covid records analysed by Thomson Reuters Peer Monitor showed that associates had around 10 more billable hours per month on average than partners in the same firm. However, in April and May 2020, this long-term trend reversed and partners recorded more billable hours than associates. 

The reasons cited for this shift were that clients demanded more direct access to partners to address their most pressing issues and remote working made delegation more clunky.

Two years on and the data suggests both partner and associate billable hours have gone up. Partners are still recording more hours than their associates, although the gap has narrowed.

What’s clear is that the supply side of the legal market is really stretched and a lot of the burden is falling on partners’ shoulders.

Rising expectations

Looking ahead we see client demand remaining strong. While there’s uncertainty as a result of the war in Ukraine, inflation and supply chain issues, the predominant mood is still bullish. 

At the coalface this means most partners will have to do more with the resources they have, at least in the short-term. As one partner recently commented, “when that urgent client matter arrives on my desk after a busy week, I find it really hard to ask my exhausted associates to work on it. What typically happens is that I take it home and do it all myself.”

A high demand market has put pressure on salaries and people are transitioning more frequently. One inevitability of high staff turnover is that partners spend more of their scarce time in recruitment interviews, onboarding and in ‘stay’ conversations. 

One of the solutions to address high turnover is for partners to develop deeper relationships with their team members.  They are expected to engage with team members more meaningfully regardless of where and how they work.

Leading a flexible team also brings new operational challenges. One partner I’m aware of spends around an additional 30 minutes a week configuring workload, arranging desk space, meetings and collaboration events. 

Team of the future

Over the next decade partners will not only need to become better people people but also better tech people. In the first half of 2021 over $US1.4 billion was invested by venture capital firms in legal technology. Most of this investment is in new tools to assist lawyers in doing their work and to provide better client service and value. 

Partners will have to be digitally literate to stay competitive. This means being aware of latest software most relevant to their practice, and when and how to deploy it most effectively.

Allied to the advances in technology is the growth in diversity of legal teams in terms of age, identity and ethnicity. One partner I spoke with recently commented on the challenges of leading a team of five generations: “The Boomers, Gen Xs, Ys and Zs in my team have each have their own expectations and idiosyncrasies. Tailoring the messaging and engagement approach can be exhausting and I often get it wrong.”

Create the capacity

The most obvious strategies for firms to deal with increased role complexity is to provide their partners with better support, coaching and training. 

I think this response will only get firms part of the way. 

A more profound examination of the role, and in particular the financial expectations of partners as producers, will create the capacity for them to be [1] healthier, and [2] better leaders and managers. 

The partner role is a stretch job, but stretch it too far and it might break.

Will Danny Gilbert’s succession be a train wreck or triumph?

In Articles, Commentary on 1 April 2022 at 2:42 pm

The full text of my opinion piece first published in the Australian Financial Review on 31 March 2022. It was #2 most viewed article on afr.com’s Companies section on that day.

For law firms, a leader stepping down can be a moment of vulnerability. Most partners know succession done badly can have significant cultural and financial consequences.

So, it’s no wonder the announcement at Gilbert + Tobin that managing partner Danny Gilbert is stepping down is being closely watched across the legal industry.

I suspect the interest is less about the welfare of Gilbert and more about watching a potential train wreck in slow motion. Or, perhaps learning from a best-practice study in leadership transition.

Succession management in law firms is different to major public companies or government agencies.

It’s usually partners at large, not the board, who vote for their preferred leadership candidate. They can also fire them at any time.

The candidate pool for managing partner is usually much smaller, with a strong preference for those in the existing partnership.

‘Home-grown’

Only two of the top 30 firms in the latest Australian Financial Review Law Partnership Survey don’t have “home-grown” leaders. The country’s largest law firm, Minter Ellison, are again in that boat after having two external CEOs from the large consulting firms.

In larger firms, the candidates may have to give up practising law and take on a new career with poor employment prospects after their tenure ends.

In my view, law firms run into succession issues when there is a major power imbalance across the partnership.

Power in a firm is about:

  • Decision-making: who can make or significantly contribute to key decisions such as setting direction, allocating resources, recruiting new staff, resolving conflicts and setting reward and remuneration;
  • Information: who has access to what information and when they receive it; and
  • Relationships: who has sway with key clients and figures inside the firm.

It is usually concentrated in three areas: directed power from the office of the managing partner or executive leadership team; individual power held by specific partners and practice team leaders; and collective power which is held by the broader partnership operating as a whole.

Shared power

To work effectively over time, a firm needs to ensure a sense of shared power.

In other words, the partnership needs to be directed with an agreed strategy led from the top; individual partners need to feel empowered and have the autonomy to build their practices; and at the same time, the partnership feels part of one firm and involved collectively in making critical decisions.

Problems arise when there is a major power imbalance.

When a firm has too much directed power, it may succeed while the “dictator” is in control. However, their departure can result in a massive power vacuum characterised by infighting and wheel-spinning.

Firms with too much collective power become paralysed democracies. Endless meetings to resolve trivial issues mean less partner time on the things that really matter – clients and people. Most collectives also seem to do poorly in building a pipeline of future leaders.

Fly or fail

When partners have too much autonomy, sub-cultures or silos can emerge. If each partner is only looking after themselves, the firm merely becomes a shared office or a hotel for lawyers.

The construct of shared power can be a useful lens to analyse why some firms fly or fail.

From the outside looking in, Gilbert + Tobin appears to be addressing the potential succession risks with an extended process of selection and baton passing.

To avoid this issue repeating, Gilbert + Tobin would be well served by ensuring it has the right power and governance model rather than looking for Danny Gilbert mark II.

The managing partner’s decision to step down after 33 years is being closely watched across the legal industry.

Law firms have a big problem, and the answer is inside their offices

In Articles, Commentary on 15 March 2022 at 12:14 pm

The full text of my opinion piece first published in the Australian Financial Review on 10 March 2022. The article was the #1 most viewed piece in the Companies Section of afr.com on the day of publication.

Lou Gerstner, the former CEO of IBM, famously stated that “an organisation is nothing more than the collective capacity of its people to create value”.

“Culture isn’t just one aspect of the game,” he said. “It is the game.”

So, it is with law firms.

Despite many thriving during the pandemic, there is a deep concern that connections people have with the firm and with each other are getting weaker, not stronger.

As one managing partner put it to me recently, “I worry that the logo on our lawyers’ screens becomes the only real difference between working for us and for another firm.”

There are three main reasons underpinning these perceived threats to firm culture:

  • Remote working: The move to a hybrid operating model may result in people experiencing a working life that has fewer meaningful interactions with fewer people. With weaker emotional bonds, the ties that bind loosen. Most lovers know that long-distance relationships seldom work out.
  • Fatigue: Thomson Reuters Peer Monitor data suggests the past 18 months have been particularly busy. Many senior practitioners are exhausted from heavy workloads as well the stress of living through a major public health crisis. The energy required to rebuild culture and restore relationships is simply not there. Most people at the brink of burnout will seek to lean out rather than lean in.
  • New faces: The war for top legal talent in Australia is hot and will remain so for the foreseeable future. Some firms are now experiencing staff turnover rates of more than 25 per cent. With every departure there is a loss of institutional memory as well as personal loss and disconnection. With every replacement, there is a new set of standards and expectations to shape and fresh relationships to form. The cumulative impact of one in four new faces each year is potentially massive

No quick fix

Unfortunately, there is no quick and easy fix. 

Most firms are looking to enhance the work experience of each employee, with the strategies that include:

  • Ensuring every associate has at least one strong mentoring relationships with a senior practitioner;
  • Enhancing partners’ and supervising associates’ skills in giving and receiving feedback;
  • Having an effective workload monitoring system to ensure sustainable work patterns across the team; and
  • Organising one-on-one “stay interviews” that focus on career opportunities and reasons to stay.

All these efforts are commendable, but they can inadvertently exacerbate the cultural atrophy problem.

Sub-cultures

In building stronger vertical relationships within practice teams, there is an increased risk of distance and disconnection with other teams. This could lead to less of a one-firm mindset and the emergence of stronger sub-cultures.

Firms need to work both vertically and horizontally to preserve their culture. The latter means amplifying the role, status and skills of “lateral leaders” who work across the firm connecting people from different practices to address a specific opportunity.

These roles typically include client relationship partners, sector leaders, major matter leads, business service heads and strategic pursuit leads.

Lateral leaders

Effective lateral leadership is largely about facilitating deep cross-practice collaboration. From a culture perspective it enhances understanding, widens networks and creates a stronger identity with the firm and its strategy.

If firms are serious about reducing attrition and preserving culture, they need to create the capacity for partners to be more effective in their leadership roles. It takes time to be a mentor, to supervise and to influence without authority.

Otherwise, the only option is to increase the logo size on the screen and hope for the best.

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