Full text of my opinion piece first published in the Australian Financial Review on 5 November 2020
Bob Andersen is a hands-on, high-billing, star partner at the Cambridge Consulting Group. He also has deteriorating relationships with his fellow partners, his team members and his family.
Anyone who has been through Harvard Business School’s Professional Services Leadership program knows Bob well. The Cambridge case study is used to illustrate the tensions in the role of partner in being both a successful ‘producer’ and busy ‘manager’. The producer builds relationships, wins new business and services clients and the manager internally oversees operations.
The Harvard faculty make much of the producer-manager concept in distinguishing professional services from other types of organisations.
But it’s time for Harvard to update their thinking and refine their language – the role of partner in the modern law firm is much more an adviser–owner–leader.
Business owners
The Harvard model is silent on ownership – a core tenet of the law firm partnership model – yet from day one, most new partners are told they need to think and act as proprietors.
This aspect of the role typically includes taking stewardship of the firm’s assets (including its IP), role modelling its values and brand, building its relationship capital by sharing clients and connections, helping set the overall firm direction and risk profile, and showing public support for agreed firm investments and initiatives.
Adoption of a business owner mindset applies to all partners regardless of financial stake. Both equity and non-equity partners have ‘partner’ on their business card and that means the same thing to all stakeholders outside of the partner group.
More leaders than managers
The Harvard model also seems to emphasise management over leadership.
Leadership is about setting directing, inspiring action and facilitating change. Management focuses on creating order and efficiency. Both are needed, but effective leadership is very often the critical difference in a legal practice going from good to great.
Law firm partners take on roles that include a mix of team, sales, thought, project and client account leader.
Good team leaders facilitate a process of crafting strategy which describes the team’s purpose, objectives, operating standards and where and how the team will compete. Strategy implementation is enabled by the communicating clear expectations, providing support, holding people to account, giving and receiving ongoing honest feedback and removing roadblocks.
As sales leaders, partners must ensure there’s enough revenue coming in the door to cover costs and meet or exceed targets. This means active ongoing prospecting for new work opportunities and converting a healthy share of client proposals into paid work.
A common approach to sustainable revenue generation is for partners to become well-known as an expert or thought leader in a specific area of law and/or client sector. In this role, thought leaders generate valuable content that can be used in marketing communications, events and client pursuits.
Most partners will also have a responsibility to protect and grow key client relationships. For large, multi-practice clients, the job goes beyond good client service. They must act as client account leaders to drive value creation across the board for both the client and the firm.
The adviser-owner-leader construct provides a more comprehensive and accurate description of the modern partner role. Doing it all and doing it all well is probably a stretch for most partners in your firm, but stretch is better than stagnation.
It takes a bit of chutzpah to claim Harvard is out of date. But in this instance, I think I’m right.
#leadership, #strategy, organisation design, professional service firms
Partners or owners: the law firm divide
In Articles, Commentary on 14 December 2020 at 9:40 amThe full text of my opinion piece first published in the Australian Financial Review on 11 December 2020.
One of the most striking statistics from The Australian Financial Review Law Partnership Survey is the wide variation in the ratio of equity to non-equity partners across Australia’s top 50 law firms.
In some firms, like Colin Biggers & Paisley and McCabe Curwood, only 20 per cent of partners have an equity stake.
At the other end of the spectrum, nine firms report that 100 per cent of their partners have equity. However, partners in these firms are often not on an equal footing. Newly minted partners in these firms can earn as little as 25 per cent of a full share. In other firms, individual partner earnings are based more on an assessment of their annual contribution instead of the level of their shareholding.
Further analysis of the survey data suggests there is no discernible factor that determines the equity ratio. Variations can occur within and across tiers, service range and practice area.
The role of non-equity partner was first introduced as a form of trial period to assess whether a candidate should be made an equity partner. The “partner” title would allow the candidate to command the respect of clients, peers and staff necessary to build a successful practice and prove their worth. Being extra cautious in the final step to equity was prudent given the complexities in dealing with bad choices or established equity partners leaving.
In a similar vein, firms used the non-equity partner role as an entry point for new lateral hires on their way to equity partnership.
Over the past decade, the non-equity partner role has evolved into a de facto career position in some firms with the candidate having little chance of being offered an equity stake.
A large non-equity partner cohort can improve profitability – by lifting leverage and average billing rates – help share some risks and distribute the management load.
Challenges
While there are these benefits, a tightly held partnership does come with potential challenges:
A widely held partnership, on the other hand, faces the risk of being too conservative and too slow to promote top talent. A burgeoning bottleneck at the senior associate level can set the scene for a feeding frenzy for aggressive competitors.
To create a sustainable business and a positive culture, it is critical to make all partners, regardless of stake, feel and behave like business owners. They should be guardians of the firm’s assets and values, while embracing the agreed principles and disciplines of partnership.
Financial gain or pain
With senior equity partners, the money does a fair bit of the talking. The prospect of immediate financial gain or pain can help facilitate a proprietorial mindset.
For those with a little or no equity, their voice is often a bit softer, the risk is a bit higher and the task is that much harder.
The determining factor is the quality of leadership.
It means working with each partner to align firm and individual purpose, communicate what’s expected, provide the requisite support, give and get feedback – and hold them to account.
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