A blog by Joel Barolsky of Barolsky Advisors

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Time to ditch your ‘Batman’ clients

In Articles, Commentary on 12 December 2021 at 9:16 pm

The full text of my opinion piece first published in the Australian Financial Review on 12 December 2021.

“Hello Batman!”

That’s how a top three client of a particular firm insisted that his calls be answered on his dedicated phone line and handset. Unlike the mild-mannered caped crusader, his tone in the conversation that followed was usually aggressive and demeaning.

Little was done to address Batman’s behaviour for several years because he was a very important client. When a new managing partner was appointed, the firm finally plucked up the courage to stop doing his work.

While this is an extreme example, most law firms continue to serve clients who are “wrong” for them.

There has never been a better time to deal with the wrong clients in your firm.

The latest Australian Financial Review Law Partnership Survey points to a year ahead where demand will outstrip supply. The risks of not replacing any lost revenue are much lower than usual, and the opportunity costs of continuing to deal with these clients are much higher.

Wrong clients

There are four broad categories of wrong clients, or sometimes referred to as the four ‘uns’:

  1. Unfair pricing and commercial terms. In some instances, the accumulative impact of deep discounts, scope creep, special favours and free value-adds is such that the firm would be much better off walking away and giving their exhausted lawyers a rest and finding other clients willing to pay a fair price.
  2. Unreasonable service requests. While most clients will have the occasional emergency and request very fast turnarounds, some classify everything as super urgent and demand rapid responses day and night, weekdays and weekends. A subset of this group are clients are those that consistently provide briefs that are incomplete, inaccurate or misleading. 
  3. Unconscionable behaviour. The third category includes the Batman clients of the world who disrespect their service providers. In some instances, it’s not the individual buyers who behave poorly but rather a major misalignment in core values between the firm and the client organisation. For example, firms that are deeply committed to diversity and sustainability are finding it harder to service clients that just pay lip service to these things.
  4. Unprofitable. Some legal practices with a high-cost client acquisition and delivery model would be better off financially without a long tail of very small clients. As practice teams reach full capacity there’s folly in a relentless drive to grow revenue from any type of work from any type of client.  

The task of classifying clients into one or more of the four categories can be a difficult exercise within a law firm partnership. There is often a lot of defensiveness and protection when it comes to labelling a client as ‘wrong’.

In some cases, the source of this resistance is emotional – the classification risks disrupting personal friendships and/or the legacy of long-term relationships.

In other cases, partners see a major risk to their personal practice. Any intervention to make a wrong client right risks a drop in earnings, progression or status if things don’t go to plan.

Taking action

Assuming one can get over the resistance, the next step is to decide on the preferred outcome of the relationship reset for each client. These outcomes usually range from terminal at the one end of a continuum to tweak at the other. 

Tweaking outcomes may include negotiating new commercial terms or seeking a substantive shift in behaviour, or simply taking away Batphones.

In some instances, the firm may elect to take unilateral action like notifying a change in pricing levels or changing the service team or refining scope and terms. In the case of a terminal outcome, the firm may suggest alternative firms the client could consider with an offer to transfer old files and other records.

For more important strategic clients, a 360-degree relationship review might be a gentler way to address the issues. These reviews involve asking all the stakeholders to provide comments on the relationship as a whole, as well as their views on others’ performance and their own. Feedback can be sought on a range of factors like communication, value, trust and quality. This feedback is then shared between the parties and collective action agreed upon. 

The power shift from buyers to sellers in 2022 offers a unique opportunity to reset some poor relationships.

Notwithstanding any financial or other strategic benefits, the impact on staff morale from dealing with fewer Batman clients will be significant.

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Are law firms ready for the Great Transition?

In Articles, Commentary on 5 November 2021 at 4:51 pm

The full text of my opinion piece first published in the Australian Financial Review on 4 November 2021.

Is the Great Resignation mostly hype or an issue of substance?

The evidence suggests that the period ahead will be much less about Australian lawyers seeking alternative careers, and much more about them responding to new opportunities in a tight labour market.

In other words, there is more validity to the idea of the Great Transition rather than the Great Resignation.

The Great Resignation was first coined in the United States just after a record 4 million Americans resigned from their jobs in April.

The theory goes that the COVID-19 experience, including role changes, greater workplace flexibility and more working from home, has led to people rethinking their careers, work-life balance and even their long-term goals.

The question is whether Australia will follow the US as it emerges from lockdowns and border restrictions? The fear is that hordes of workers will walk out the door for greener pastures, whatever they may be.

When it comes to Australian lawyers, the greener pastures won’t be in the Byron Bay hinterland, but for some it will be in other law firms or other legal roles – both here and overseas.

While there’s been more movement between firms in recent months, there are no underlying factors to indicate above-normal migration out of the profession. If anything, the prospects for better incomes and working conditions within legal organisations have never been better.

Golden era

The demand for commercial legal services will continue to be strong for the foreseeable future. Assuming capital remains cheap and abundant, ESG pressures persist and there’s no war with China, this golden era will continue.

What’s special about this cycle is that most sectors and almost all practice areas are predicted to grow.

Within this context, the key career transitions over the next 12 to 18 months will be away from firms/teams that are poorly led, don’t match the market in terms of remuneration and benefits, simply revert to the pre-pandemic operating model, and give lip service to workplace wellbeing and connection.

The transitions will be towards firms that help build their CVs, offer more interesting work, provide better and clearer career opportunities and are known to be happier places to work. Some will also be attracted to the brighter lights of New York and London.

Euphoria

The Great Transition will probably last for a year or so before returning to a more regular cycle. The euphoria of surviving COVID-19 will boost confidence.

This energy – together with the publicity around firms offering 10 per cent pay rises, news of major vacancies and the social proof of others making successful moves – will create momentum of its own.

There may be some regrettable departures that are clearly beyond a firm’s control.

If a high-flying associate wants to leave for a $US250,000 ($330,000) role in a White Shoe firm in New York, there’s probably not a lot that can be done other than staying in touch and welcoming them back (with an offer of three months’ sleep).

Leadership

Going through the list of what is in a firm’s control, the quality of team leadership is probably the most important element to consider.

A strong team leader can provide a sense of direction and connection, monitor workload and wellbeing, progress careers and development, and facilitate a positive work environment.

To make it through the Great Transition, firms need to ensure every team leader is up to the task. Stroking the ego of a powerful senior partner by making them a team leader may not work anymore. Team leaders need to have the time, skills, support and resources to do their job properly.

Putting a different label on the Great Resignation may reduce the concerns about overall labour supply across the market. However, there will be no let-up in the pressure on individual firms to retain their top talent over the next 12 to 18 months.

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The empire strikes back

In Articles, Commentary, Legal Technology on 8 October 2021 at 11:20 am

The full text of my opinion piece first published in the Australian Financial Review on 7 October 2021.

The biggest structural change in the Australian legal market over the past 30 years has been the growth of in-house legal teams.

But while the vast majority of current in-house solicitors received their initial training in private law firms and then moved across to the client side, I predict that the next decade will see a reversal of this trend, particularly at more senior levels.

In comparing the employee value proposition of in-house versus private practice, there are five areas where law firms are fighting back.

Flexibility

In a post-COVID-19 world, very few law firms will return to a work schedule of 9 to 5, five days a week, in the office. They will be far more accommodating of lawyers seeking to work from home for part of the week, or those wanting to work across different time slots in the day or to limit the number of workdays.

Any perceived advantage that in-house roles were more flexible has been eliminated by law firms learning to operate effectively in an anywhere anytime model.

Workload

For many years, the lure of in-house has been roles with more work-life balance, less stress, and no timesheets. 

While no timesheets are still a point of difference, most in-house lawyers are now reportedly working extremely long hours and are stretched thin. The pressure for them to do more with less is incessant, and the demands on their time are likely to grow rather than diminish. 

On the other side of the fence, many law firms are rejigging the workload of graduates and early career lawyers to be far more sustainable. They have also stepped up their programs focused on employee mental health and wellbeing.

Technology

Association of Corporate Counsel research suggests General Counsel are constrained in adopting technology by restrictions on capital expenditure and a lack of time to implement new systems.

Many law firms, in contrast, are ramping up their technology investment and experimentation. The recent Thomson Reuters State of the Legal Market found that law firms spent over $22,000 per lawyer on legal technology in FY21. The same paper revealed that 30 out of the 50 largest law firms in Australia now have an innovation function.

Over time, the technology gap between in-house and private will grow. A career move in-house may become to be seen as a step back in time – a move to a job using old and blunt tools of the trade.

Income

Data from legal recruiters Mahlab suggests in-house teams pay more for 3 to 7-year PQE lawyers, but after that, the differential starts to swing the other way. Equity partners in premium law firms are now earning incomes that far exceed their peers in in-house roles, save for a few GCs of major listed companies that enjoy exceptional incentive arrangements.

Private practice salaries and benefits are estimated to increase by 8 to 10% in the coming years. It will be very hard for in-house to price match given budget constraints and the need for consistency across organisation-wide pay scales. To the chagrin of many CFOs, in-house lawyers are already the most expensive people on their payroll outside the C-suite.

Culture

“It’s a boys’ club”, has been a common refrain of female lawyers leaving private practice. With an industry average of just under one-third of female law firm partners, their complaint may have had just cause, till now.

Most of the top 30 law firms across Australia have fully committed to a 40:40:20 or an equivalent diversity goal at partner level. Significant efforts are being made to address unconscious bias and to eliminate sexist language and behaviour. More senior leadership roles are filled by women. Comprehensive diversity and inclusion programs are now the norm.

The progress is slow, but the prevailing culture across many law firms is shifting on gender issues.

If trends in the five areas described above persist, the employee value proposition of in-house will become less compelling. With increasing demand, in-house teams will have to build their own capacity by hiring more graduates and invest in early-career legal and commercial training.

This is good news for law firms; after years of training young talent only to lose them to in-house roles, the shoe will comfortably fit on the other foot.

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The Big 4 in law – failing again?

In Articles, Commentary on 4 September 2021 at 12:13 pm

The full text of my opinion piece first published in the Australian Financial Review on 3 September 2021.

In 2018, PwC announced that it aimed to be a top 20 law firm in the world within five years. KPMG and EY also stated their intentions to significantly grow their legal teams.

While these ambitions of global domination are noteworthy, the progress of the big four in law has been underwhelming.

On one tangible measure of progress – the number of Australian-based partners – the evidence suggests PwC Legal has gone backwards, KPMG Legal has stalled, EY Law is growing, and Deloitte is still making up their minds.

If one added all the big four law firm partners and made one firm, this new player wouldn’t even make the top 15 in the latest Australian Financial Review Law Partnership Survey.

On other metrics, like lead roles in major M&A transactions, they’re hardly making a splash. They’ve made no attempt to enter the litigation space and recent headlines have been more about departures than new hires.

While the big four have made some inroads in managed service and volume legal solutions, this is mostly impacting in-house legal teams rather taking a lot of work from established law firms.

There are five major reasons why the big four might be struggling in law.

#1 The one-stop-shop

The essence of the big four value proposition is a one-stop-shop: buy all your business advisory services from us and there will be lower transaction costs, more integrated advice and a better client experience.

The problem is many sophisticated clients just don’t buy it. They regard the one-shop as risky and lazy.

These buyers prefer horses for courses and back themselves to pick out tried and tested specialists. They recognise the benefits of cognitive diversity and are wary of groupthink. They feel it’s easier to hold a specific firm accountable for their advice when it’s more discrete.

#2 Brand limitations

In another related market – management consulting – high-end strategy advice firms like McKinsey, BCG and Bain still have the lion’s share of the best work. On the supply side, top MBA graduates generally prefer jobs in these places than the big four.

I think there are similar limitations when it comes to premium legal work. When clients have a bet-the-farm legal matter, the big four are not naturally considered as part of the tier 1 set (tax excepted).

For smaller matters and operational work, the big four are not naturally in the tier 2 consideration set, as they mostly price themselves above it.

#3 Conflicts

The big four are just that. Four! This has inevitably put limits on their penetration of the legal market.

It is estimated that the ASX50 is served by more than 300 law firms, barristers, freelancers and other legal consultants.

One of the key reasons for this fragmentation is conflicts. Most legal clients are particularly sensitive to the same advisers being involved, directly or peripherally, on both sides of a transaction or a dispute.

The threshold test of perceived conflict in legal matters is also much higher than, say, helping competing companies implement an enterprise software system.

#4 Leadership

Tony O’Malley at PwC and Stuart Fuller at KPMG led the way in growing their firms’ legal practices in Australia.

Interestingly, both these leaders were promoted to senior global roles about two years ago.

While it’s hard to quantify the impact of such changes, it seems that some of the drive and energy of the local practice has been lost with these promotions.

#5 The club

For the big four to make serious inroads into legal, quickly, they would have needed to poach some heavy hitters from heavy-hitting firms. Assuming they can match incomes, they would be asking these lawyers to leave their club.

This is how a typical lawyer rainmaker might weigh up a move.

“The new club is a lot, lot bigger and I will have even fewer decision rights. The new club will pander less to my specific needs, given it already has dozens of heavy hitters. The new club will ask me to fit into their service style and product ‘packaging’.

“The new club will be run by bean counters. Nah! I’d rather stay.”

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Karate Kid lesson for law firms

In Articles, Commentary on 12 July 2021 at 11:49 am

There are two broad scenarios for the future of the Australian legal market: Vax On and Vax Off (with apologies to Karate Kid fans).

Vax On describes a scenario of buoyant demand and a growing legal market. Vax Off is the opposite.

Events over the past three weeks have increased the odds of the Vax Off scenario from highly unlikely to a distinct possibility.

The scenarios

Vax On is centred on the idea that Australia will be successful in vaccinating its population relatively quickly and emerge strongly into a post-Covid normal state within six to eight months. Most of the current drivers of legal demand are positive and will continue to be so in a Vax On world.

The Vax-Off scenario is based on slow vaccination rates and conservative health policy settings.

On 2 July 2021, the Morrison Government announced a four-phase plan to return to Covid Normal. If the snail-paced vaccination rates continue as they are, we may only reach Phase 2 in the second quarter of 2022 and Phase 4 in 2023.

Vax Off will mean we stay with closed borders and disruptive lockdowns for quite some time yet. A prolonged period before Phase 4 will have significant implications for the broader economy and law firms.

#1 Brain drain

In the Vax Off scenario, the UK, USA and other legal centres may return to a Covid normal state 12 months ahead of Australia. Many ambitious, talented young Australian lawyers will see major benefits working and living abroad. The pitch is compelling – do great work, earn good money, live without lockdowns, and put your passport to good use.

The current tide of talented ex-pats returning home will shift from a small flow to a major ebb.

This brain drain will hit Australia’s law firms when these resources are needed the most and firms have few viable Plan Bs. A second-order impact might be a significant spike in average salaries and benefits paid to those lawyers that have remained at home. 

#2 A depressed commercial property market

Lockdowns mean full-time work in the office is off the table. Border closures will result in fewer international students, tourists and migrants.

In combination, all these factors point to a significant drop in demand for commercial properties, hotels and high rise residential real estate.

A depressed property market will directly impact real estate lawyers, but it could also affect other related areas like construction, banking, project finance, and funds.

#3 Collapse in travel, tourism and education

Government support packages and insolvency moratoriums since April 2020 have kept most businesses in the travel, tourism and education sectors alive. In a Vax Off world, a vast majority of these businesses are too small to save, and the liquidators will eventually move in.

At one level, that’s good news for law firms’ insolvency practices, but the flow-on impact of significant job losses and the fall of iconic brands will lower consumer confidence and GDP. 

#4 A return of protectionism

Leading economist Saul Eslake recently argued that the long-term economic damage from closed borders might have a similar impact to the trade barriers that lowered Australia’s living standards up until the 1980s.

An extended Vax Off period runs the risk of Australian businesses and law firms becoming less relevant in global markets and losing out on major deals and projects.

#5 Disrupted operations

Almost all of Australia’s Top 30 law firms have some kind of international alliance or connection. Herbert Smith Freehills, for example, is a financially integrated global partnership. Maddocks is a member of ADVOC – a network of independent firms spread across the world.

Most cross-border collaboration is going to be negatively impacted in a Vax Off scenario. There will be no physical meetings and limited joint business development activity. International client and referral relationships that have taken many years to cultivate will weaken.

Scenario planning is often done when there are two or three alternative futures that are possible, uncertain and beyond any party’s direct control. In the case of the Vax On or Vax Off scenarios, our political leaders can have a major influence on which future we have.

Let’s hope they soon find the courage of Karate Kid’s Daniel Laruso and the wisdom of Mr Miyaji.

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Hey partner, do you know where you sit on the career curve?

In Articles, Commentary on 28 June 2021 at 7:59 pm

The full text of my opinion piece first published in the Australian Financial Review on 10 June 2021.

In nature, a seed is planted, begins to sprout, matures, becomes an adult, and then eventually regenerates. While not as unequivocal as the laws of nature, the careers of partners in premium law firms generally go through five distinct phases.

  • Phase one: find my feet. Partners typically work hard to validate the business case for their promotion. They spend time working out how things really work, who calls the shots and what it takes to succeed.
  • Phase two: create backbone. Partners cement their anchor clients and referrers. They build the team and technology necessary for efficient service delivery and a compelling client experience.
  • Phase three: make hay. Partners really hit their straps and use their strong personal brands and honed business development skills to win and deliver an increasing flow of profitable work.
  • Phase four: widen contribution. In addition to growing their own practice, these partners collaborate actively across the firm, expanding existing client relationships, cross-servicing and seeding new opportunities. They share their knowledge and contacts widely and help monetise their IP in new algorithms, products and thought leadership. Some also take on practice and firm leadership roles.
  • Phase five: transition to others. Senior partners in this phase commence the development of designated successors. They start to let go of the reins and lend their social capital to others.

Proactive conversations about a partner’s desired career curve – shape, angle, timing and gaps of the phases – can be of significant benefit to the individual and the firm.

The shape of the arc

The duration of each phase varies significantly from person to person. It is not simply an average 30-year partner tenure divided by five equal phases.

Many partners would have a career that follows a classic “S” curve, with ordered progression through the five phases. There may be a few “J” curves or hockey-sticks that reflect a flat or declining phase one followed by continued rapid growth.

There are partners who have a career arc that looks like a series of angled “Ws”, going from boom to bust to boom, reflecting an innate ability to reinvent themselves.

In more recent times, there are career arcs that have missing chunks as people take extended time out for other commitments.

The early days

In the past, it was common for phase one and two partners to be left alone to sink or swim. It was assumed that, on promotion, the individual became all-knowing and capable.

But many progressive firms now offer tailored training and coaching support to build resilience and keep them on a positive trajectory. Most firms also recognise that these early days often coincide with major changes in partners’ personal lives, like starting a family and taking on more debt. Work-life integration at these early stages is beset with competing demands.

A missed opportunity

A firm filled with phase three “haymakers” sounds wonderful, but recent Harvard research indicates that there is much more to gain if they instead develop a strong collaborative culture with a healthy cohort of phase four partners. These benefits include more valuable client work at higher margins and greater staff engagement.

But going from phase three to four is easier said than done, especially for those individuals who are hard-wired to work autonomously.

Each firm should clarify what the “widen contribution” phase looks and feels like to them and whether there are any practice-area variances. Alignment of measurement and reward to create more phase fours is a good next step, with measurement used to improve not just prove.

Leaving well

Phase five is quite often dealt with too late or superficially. This may be due to a reluctance of a senior partner to let go, the inability of the next generation to step up, the risk of client defections and/or the financial circumstances of the individuals involved.

Like at all other phases, every partner should be asked, and should ask themselves where are they on the career arc, what to prioritise to succeed in the current phase, where next and how?

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Law firm leaders fail on fun, fame and fortune

In Articles, Commentary on 17 May 2021 at 2:54 pm

Full text of my opinion piece first published in the Australian Financial Review on 14 May 2021.

There is a significant leadership deficit in most Australian legal organisations – and your firm is unlikely to be an exception.

The evidence for this claim is strong – mental health problems at three times the levels of the general population; 20 per cent-plus turnover among junior lawyers; slow progress on diversity and inclusion at partner level; and a general predilection to resist, rather than embrace, change.

Less measurable, but probably even more important, is the opportunity cost. Legal firms and teams with effective leaders tend to outperform their peers on the indicators that keep people happy – that is, fun, fame and fortune.

What’s more, they seem to be able to sustain their success regardless of bumps in the road such as a global pandemic, major advances in technology and intense challenges from competitors.

One of the key reasons for the leadership deficit is the emphasis on creating outstanding technical legal advisers, but not great legal leaders.

There is no leadership component in the undergraduate law or juris doctor (JD) curriculum and many continuing legal education (CLE) programs for the first 10 years post-qualification focus on improving legal know-how and functional tasks such as delegation, presentation skills, networking and using social media.

Decisions on who gets promoted and who doesn’t are heavily weighted towards legal competency. Leadership potential may enter the frame, but it’s usually third or fourth on the list of criteria.

Hurry to Harvard

For the past three decades, many law firms sent their senior partners in management roles to the United States to attend Harvard Business School’s Leading Professional Services Firm program.

More recently, some firms have engaged leading business schools and other providers to develop tailored in-house executive educations programs for their partners and business service leaders.

Many firms now offer the assistance of executive coaches to help their senior practitioners in running and building their practice.

While many of these programs and initiatives are worthwhile, it appears the focus is on lawyers on the cusp of partnership, or older. In contrast, leading corporation and government agencies start to identify and develop their future leadership talent among those in the mid-20s – often a full decade earlier.

Brighter futures

Ironically, many of the high-potential or “rising star” programs in corporates are heavily populated with super-smart graduate lawyers who have switched to careers in commerce or policy.

Perhaps this is one reason ambitious young lawyers see brighter futures elsewhere?

In response to the leadership deficit and the other issues noted above, many of the state-based law societies have recently revamped their legal practice management courses (PMCs) to include contemporary leadership topics.

Completion of a PMC program is often a prerequisite for any solicitor seeking to practice as a “principal” or “partner” of a private law practice.

The College of Law launched its Master of Legal Business program in 2018, aimed at enhancing the skills of those in, or aspiring to, leadership and management roles within legal organisations. The course is delivered 100 per cent online with virtual workshops and self-paced course work.

New program

The University of Melbourne Law School (MLS) is about to enter this growing category and will be launching a new Specialist Certificate in Legal Leadership program in mid-May. The subjects will be taught by Anthony Kearns, practice leader consulting at Lander & Rogers, and myself.

The MLS program is aimed at practising mid-career lawyers in law firms, in-house and government, rather than those in current management or leadership roles.

The course will be delivered with a hybrid approach with local students in the classroom (COVID-19 permitting) and those from abroad joining them virtually.

The legal world is crying out for real innovation in the learning and development arena.

We need the right balance between technical legal, leadership and digital skill development. We need concurrent, not consecutive, learning of requisite skills. We need new learning methods that don’t just rely on chalk and talk. We need programs with a manageable cost, both direct and opportunity cost.

It’s time to disrupt the current model. If we don’t, we will be here in 20 years’ time stressing over high turnover, mental health, diversity and productivity issues.

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Where was Minters’ chairman during the Kimmitt crisis?

In Articles, Commentary on 26 March 2021 at 7:28 pm

The full text of my opinion piece first published in the Australian Financial Review on 26 March 2021

“The Minter’s chairman went missing in action. One of the most important jobs of a chair is to resolve major disputes within the partnership without it spilling out to the rest of the firm, and even worse, into client land.”

This quote reflects a sentiment expressed by many law firm leaders I spoke to about the recent saga at MinterEllison.

While I’m not privy to the internal machinations at Minters to say whether this is a fair judgement or not about the firm’s chairman, David O’Brien, it does raise the question as to what should be expected of a chair?

 In my view, the answer lies in the confluence of governance, guidance, and glue.

Governance

The chair of partners usually has an active leadership role in firm governance. As such, his or her job is to ensure that management’s direction is broadly aligned with the interests of equity partners and other stakeholders.

Unlike company structures, partnership governance roles and responsibilities are not stipulated in any statute and are largely ambiguous. All partners are assumed take on all responsibilities concurrently. In this context, the chair and managing partner are expected to carve out a tailored governance framework that balances stewardship, operational efficiency, risk-taking, control, transparency, partner autonomy and accountability.

The chair of partners would usually be expected to facilitate the effective functioning of board and partner meetings, ensure accurate timely and relevant information flow, oversee risk and compliance, manage board composition, and lead the process of reviewing the managing partner’s performance and succession.

In some firms, the chair is actively involved in deciding profit allocation and progression. In other firms, their role is more of an independent arbiter in profit allocation appeals. 

Guidance

While most medium and large firms have adopted a more ‘corporate’ governance model, partners as owner-operators still often want a say when it comes to critical decisions around firm purpose, values, capital allocation and broad strategic direction.

The chair plays a critical role in helping the firm’s executives navigate this decision-making minefield.

Their guidance is critical in deciding which fights to pick, what options are on or off the table, what’s the best approach and forum to raise issues, and where power really lies in and around the partnership.

Chairs often act as cultural barometers – forecasting the mood, energy, and tone of the partnership. Their predictions of an imminent storm, or conversely, a period of calm and confidence can be hugely beneficial.

At a more micro level, firm chairs often act as a sounding board or mentor for the managing partner. In this role, they help talk through tricky issues, provide honest feedback, and offer comfort when exasperation overwhelms.

This mentoring role is particularly important for the induction of new managing partners or an external appointment. In the latter case, the chair needs to lend some of their social capital until the new leader’s position is firmly established. 

Glue

The third role of the chair is to foster partnership cohesion and stability. This doesn’t mean leading the firm cheer squad, but rather putting out spot fires and addressing corrosive politicking.

Spot fires may include a major fallout between two senior partners or where an individual partner has displayed behaviour incongruent with the firm’s values or there is a case of systemic underperformance.

It is quite common for the chair to join the managing partner in having a fireside chat with these problem partners. The chair helps create a sense of deep collective concern. This threat is hoped to be the catalyst necessary to change aberrant behaviour.

Pie-splitting is often a source of ‘corrosive politicking’. For example, in meritocracies choosing a side when there’s a commercial or legal conflict could result in a major differential in individual earnings. In these instances, the chair may get involved in dialling-down the emotions and ensuring that trust in the model is maintained.

Coming back to the MinterEllison situation, I don’t have any first-hand information as to assess whether the firm’s chair did an effective job in governing, guiding, and gluing? As with so many tricky issues in law firm partnerships, that’s ultimately for Mr O’Brien’s partners to decide.

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How law firms can do more with less

In Articles, Commentary, Legal Technology on 5 March 2021 at 6:22 pm

The full text of my opinion piece first published in the Australian Financial Review on 4 March 2021.

Commercial law firms face constant pressure from clients to do more for less.

They can respond in three ways: say it can’t be done and risk losing out to competitors, drop their prices, or make a step change to improve productivity.

Most are pursuing option 3 and are looking to legal operations to make it happen.

What are legal operations?

Legal operations usually include some or all of these disciplines:

  • Business Management – commercial managers focused on improving profitability, increasing revenues and optimising efficiency.
  • Service Design – workflow and client experience specialists that evaluate, accelerate and support legal process improvement projects. They also often assist with new product development and act as incubators for new business ideas.
  • Legal Project Management – project professionals that make legal work tractable, trackable and transparent, for both lawyers and clients.
  • Pricing – pricing experts that help partners to have better client conversations, align price with value, protect margins, and where appropriate, use alternative fee arrangements.
  • Alternative Legal Services – a team of paralegals, legal technologist and lawyers focused on high-volume process work including e-discovery, transactional and dispute support, language editing, document review and IP management.

Australian experience

In Australia, some very large national firms have embraced a centralised approach to legal operations. Others have adopted a more decentralised model with each major practice group acquiring the resources specific to their needs. 

Over time, I would expect most firms will move to a model of centralised governance to avoid duplication and facilitate the sharing of knowledge and applications. At the same time, operational specialists need to work right at the coalface to find smarter ways to deliver more for less.

Innovation roles will be also subsumed into legal operations. Legal secretaries and assistants will still work directly with local lawyers but will be more connected with and directed by legal operations.

In medium-sized and smaller law firms, a new business service function will likely emerge with the status of HR, marketing and finance. It will often start with outsourcing basic IT services – hardware, software and helpdesk – and the insourcing of specialist tech-savvy resources to help lift productivity and client connection in key practice areas. Once this is established, other roles involved in supporting legal service delivery will enter the legal operations orbit.

New career pathways

This emerging area of legal operations is also creating an alternative – and attractive – career path for lawyers.

They benefit from a deep knowledge of the intrinsic needs within a legal workflow, but also enjoy the respect of the various stakeholders involved in migrating to a new way of working.

MinterEllison offers new lawyers the option of entering its Legal Operations Graduate Program. The program gives candidates exposure to lean six sigma, design thinking, change management and agile methodologies. The firm recently graduated its first cohort and is reported to be delighted with the outcomes so far.

The growth of legal operations is not just confined to law firms.

Stuart Fuller, the global head of KPMG Legal Services, recently predicted that “half of the [in-house] legal team will not be lawyers by 2025”.

Fuller says the use of automated solutions, chatbots and other forms of productised legal services will rise, and these will need support from lawyers as well as a more multidisciplinary workforce with different skill sets. As a result, the proportion of legal work done by paralegals, data analysts, operational experts and other specialists might rise to the point where legal professionals become a minority.

The key message is that the path to improved productivity is not pressuring lawyers to bill more time, but rather working smarter with the evolving disciplines of legal operations.

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How law firms can avoid 2021 burnout

In Articles, Commentary on 5 February 2021 at 3:51 pm

The full text of my opinion piece first published in the Australian Financial Review on 4 February 2021.

‘Exhausted.’

That’s how many managing partners described their firm in the last quarter of 2020. The reasons given for this sense of collective fatigue ranged from heavy workloads, endless screen time, social disconnection and pandemic-induced stresses. 

A key 2021 objective in many law firms is to build business resilience and to avoid burnout. Resilient organisations can ride out uncertainty instead of being overpowered by it.

The sense of exhaustion is mostly an indicator of sustained depleted energy. To cope better, firms must get better at understanding and managing energy levels.

Many law firms are rushing toward a flexible hybrid workforce with people working two or three days from home. While this makes sense, a potential trap is having a binary view that that sees work at the office as an energy drainer and home life an energy restorer. The opposite may also be true – activities at home like juggling parenting and family duties may deplete energy, where work-based tasks such as solving a complex client problem may be energising.

Related to this idea, the commute to and from work could be viewed as a restorative activity. If this time is merely replaced with demanding home or client work, the energy bank account stays overdrawn.

Taking a holistic view, working in a hybrid model might be wonderful for a few, but a net energy drain for many. If this is the case in your firm, then you’re on the road (again) to exhaustion.

There are two practical steps that law firms can take to manage energy levels better.

#1 Track the ebb and flow

‘What gets measured gets managed’, is an oft-cited quote from leadership guru Peter Drucker.

 Following his advice, law firms would benefit from developing better indicators or sensors around energy levels. This might range from a few scripted queries in regular staff check-ins to new questions in employee engagement and pulse surveys.

Tel Aviv-based McKinsey partner Gila Vadnai-Tolub defines four types of energy worth measuring: physical, mental, emotional and spiritual.

  • Physical energy defines how tired we feel and how well we feel in our bodies.
  • Mental energy is what we get from analytical and thinking tasks. Long periods of focused concentration are often mentally tiring. We each have mental tasks that seem to drain us or lift us.  
  • Emotional energy derives from connecting with others—from giving and receiving appreciation, or helping a friend or colleague discuss their troubles. In turn, negative emotions such as fear, frustration or anger drain energy and cripple performance. 
  • Spiritual energy is what we get from doing something meaningful to us, something that speaks to our inner core or sense of purpose. We each have experienced working hard and becoming physically and mentally tired, but somehow, we gain the energy to continue because it has fundamental meaning. 

Tracking energy levels over time can help to identify the ‘normal’ range within which energy ebbs and flows in your firm. It can signal the period just before people start running on empty.

Tracking also enables individuals to learn something of their own natural energy rhythms learning to readjust before fatigue sets in. 

#2 Build in replenishment

Elite athletes alternate between high-energy periods of performing and training with resourcing and recovery activities.

Time off on weekends, public holidays and annual leave is often as far as some law firms go in helping their people re-energise.

In recent years, many firms have expanded their health and wellness programs to address this issue. Things like paid gym memberships, cycling clubs, yoga, pilates, guided meditation classes, counselling and nutrition education are becoming more common. The biggest challenge is often to encourage those who are most in need to take advantage of the support that’s offered. 

With the rollout of the hybrid operating model, I suggest firms will need to redouble their efforts to find workable solutions. This will most likely involve conversations with each person to fully understand how they expend and restore energy over a typical day, week, month, and year. Together a tailored program can be developed to keep people productive, energised and, most importantly, resilient.

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