Full text of my opinion piece first published in the Australian Financial Review on 9 October 2020.
Establishing non-legal businesses seems to be back in favour among Australia’s larger law firms.
Minter Ellison was an early mover with acquisitions of an IT consultancy firm and an executive remuneration practice in 2017. Others include Corrs Cyber (data breach and crisis management), G+T (Gilbert + Tobin) Innovate (in-house legal transformation), Ashurst Consulting (board risk and governance), TG (Thomson Geer) Endeavour (public affairs), McCullough Robertson’s Allegiant (insurance broking) and Hall & Wilcox’s Global Mobility Services (migration, tax and relocation).
The rationale for these new non-law ventures is mostly centred on strengthening or defending the core business and making significant client relationships stickier. Some firms pursue these adjacencies to deliver new sources of profitable growth or to provide a hedge in the event of industry disruption.
To increase the chances of success of these new ventures and others seeking adjacent opportunities, there are four key strategies to consider.
#Reinforce the core
Many adjacency failures can be put down to firms straying too far from their core business.
Woolworths’ foray into the retail hardware sector via its Masters business was an unmitigated failure. Masters did not reinforce Woolworths’ core grocery business or leverage existing customer and supplier relationships. While its retailing and property management capabilities were strong, they couldn’t outmuscle a formidable incumbent (Bunnings).
Success comes from investing in areas where there are substantial, measurable and mutually reinforcing economies between the current and the new.
#2 Align financial expectations
One of the main reasons law firms have not persisted with non-law businesses in the past is that they have simply not made enough money.
Well-run premium law firms are very profitable. Despite intense competition, the market price for specialised legal advice has increased significantly over the past 20 years.
Many of the new ventures compete in market segments where the price point for partner-level advice is 30 per cent to 40 per cent lower than law firms. Others are pitched at the ‘brain-surgery’ end of the market with relatively low leverage and utilisation.
The upshot is there is a significant risk regarding profit expectations. My advice is to ensure everyone is 100 per cent on the same page early on – and if there are irreconcilable gaps, walk away!
#3 Pre-empt cultural clashes
While great strides have been made in recent years on using the talents of those without legal qualifications, the lawyers still market – and see – themselves as the smartest people in the room.
So, it is vital that your cultural due diligence cover over things like common aspirations, values and standards. When it comes to adding advisors from non-law disciplines, there is an added risk of professional arrogance.
One of the keys to success is to pre-empt and address any cultural differences between the lawyers and those other idiots. Only joking!
#4 Ensure a founder’s mentality
Why is profitable growth so hard to achieve and sustain?
Chris Zook from Bain & Company researched this question and found that when firms fail to achieve their growth targets, 90 per cent of the time the root causes are internal and not market related.
He also found that firms experience a set of predictable internal crises, at predictable stages, as they grow.
Zook suggests that managing these choke points requires a “founder’s mentality”— someone with fire in the belly who is relentless in pursuing the business’ mission, adept at leading others through change and imbuing the firm with a strong client focus.
So, in summary, all it takes to succeed is to have a driven intrapreneur leading a new venture that is deeply connected to the core business – from a market, financial and cultural perspective.
It sounds easy. Until you try.
culture, key account management, Leadership capacity, professional service firms, Sales management, strategy management
Why Harvard is wrong on law firm management
In Articles, Commentary on 11 November 2020 at 10:17 amFull 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.
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