A blog by Joel Barolsky of Barolsky Advisors

Posts Tagged ‘executive leadership team’

Are your practice groups primed to win?

In Articles, Commentary on 26 April 2017 at 8:23 am

If each of your practice groups is primed to win, then there’s a pretty good chance your firm will win as well.

With this in mind, there’s much benefit to be derived by assessing all of your practice groups on two dimensions:

  • A winning strategy – from strong to weak, and
  • Execution capability – from strong to weak.

If most of your practice groups are in the weak-weak quadrant, perhaps it’s time to take that call from the headhunter. If all the groups are strong-strong, don’t change a thing! If you have a mix of everything, it’s time to get to work…

A winning strategy

There is a range of factors to take into consideration to assess whether a practice group has a winning strategy for the next three years:

  • Does the practice have clear aspirations to win? Is there a stretch intent?
  • Are they competing in sizeable, growing and profitable market segments?
  • Does the practice have a compelling value proposition, that is, clear reasons why clients should choose them over others?
  • Does the practice have a profitable and sustainable business model? Bonus points if the model is scalable.
  • Is there a Plan B if non-traditional competitors strengthen?
  • Are there pilots and experiments in place creating options for future growth?
  • Is there a clear implementation roadmap with accountabilities, measures and timing?
  • Is it clear what they say ‘no’ to, and why?

Execution capability

On paper, the practice group might have a world-beating strategy but it may not have the skills, resources and systems to implement it.

a cup of coffee on the wood table.cafe latte with tulip latte art pattern on the wooden background.

Source: fotolia

The first, and most important, the question is whether you have the right practice group leader. Is she a true leader or merely a convenor? Does she lead or just manage? While she might seek to lead, does she have loyal followers? Does she have the ability to inspire and support team members to be their best? Is she strong enough to stand up to the recalcitrants?

Other questions to ask around execution capability:

  • Is the team a real team or just a loose coalition of colleagues?
  • Does the team generally follow-through on their commitments?
  • Does the team own its strategy and take accountability for it?
  • Does the team have the right talent necessary to win, now and in three years time?
  • Does the group have access to the right technology, processes and systems to underpin its business model?
  • Is there sufficient open-mindedness to adapt to new inventions and work methods?
  • Are there mechanisms in place to regularly review progress and tweak their plans?

The portfolio

While it’s important to assess the competitiveness of each practice, there’s also a lot of value in assessing the inter-dependencies, synergies and gaps across the portfolio. Another portfolio overlay is the amount of partner equity allocated to each group and expected ROE (return on equity).

A review of the portfolio should indicate which practices require investment, divestment or just be maintained. Handling the politics of these decisions is a topic for another post, or three.

In conclusion

While a firm is more than just the sum of its parts, the parts play a critical role in sustaining success. Your firm’s strategy needs to reflect firm-wide themes like overall market positioning, culture, brand, strategic clients, talent, R&D, infrastructure and support. It also needs to deep dive into the practice portfolio, making sure each plays its part and leverages the strengths of the whole.

Firm purpose. Seven options.

In Articles, Commentary on 5 April 2017 at 12:45 pm

I’d highly recommend Jordan Furlong‘s new book, “Law is a Buyer’s Market – Building a Client-First Law Firm”.

Furlong argues that firms should answer ‘the why?’ question with a statement around creating client success. He states that this approach is congruent with the pursuit of professionalism and will enable the firm to withstand the challenges of increased competition and rapid technology change. Furlong suggests that firms adopt a client-centric purpose statement, something like, “our firm exists to serve the interests of clients in our chosen markets by addressing their legal challenges and opportunities so that those clients can achieve their objectives”.

Cups of coffee on blue background

Source: fotolia

Last weekend I had the opportunity to road-test Furlong’s recommendations in a client strategy workshop. It became clear quite early on in the workshop that while there was strong resonance with a client-centric purpose, it didn’t tell the full story for this firm. They felt that defining purpose solely on clients risked making them client-compelled in areas like pricing and write-offs, and, interestingly, less likely to innovate. They cited numerous examples of innovative ideas that didn’t come directly from clients expressing their needs, but rather from an intrinsic desire to do better than competitors.

To help things along, I presented SEVEN related, yet distinct, purpose statement option:

  1. Client-centric: our firm exists to make our clients more successful.
  2. Business-centric: our firm exists to maximise returns to shareholders.
  3. People-centric: our firm exists for our partners and staff to practise their craft, earn the respect of their clients and peers, and make a good living. In short, the firm is about fun, fame and fortune.
  4. Community-entric: our firm exists to add value to the communities we serve.
  5. Benefit-centric: our firm exists to reduce and manage risk.
  6. Quality-centric: our firm exists to make all other firms look second-rate.
  7. Innovation-centric: our firm exists to set precedent, break new ground and pioneer new products and processes.

I’m happy to report that we came up with a hybrid version that everyone was very excited about. Sorry, I can’t share it here in this post.

Which one of these options, or combination, best describes YOUR firm’s purpose?

Two-speed firms: the problem and solutions

In Articles, Commentary on 20 November 2016 at 5:22 pm

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“We have a two-speed firm! There’s one group of partners who are ambitious and willing to spend the extra energy necessary to win new business. And then we have another group, who work hard but are broadly happy with the way things are. In reality, they expend far less energy than the first group. The problem is we’re all rowing the same boat. Rowing at different speeds makes us go in circles, not forward.”

Does this sound familiar?

The expectations of partner energy, commitment, speed, fire-in-the-belly, etc. are missed in most strategy discussions. You might have motivational words in your purpose, vision and values statements. Your goals might include stretch revenue and profit targets. But, if you look carefully, there’s nothing there on how much petrol needs to be spent by each individual partner. It is just ASSUMED that every partner will be equally committed and energised.

Five key reasons

I think think there are five main reasons why energy expectations are not adequately discussed:

  1. Remuneration model: the view in some firms is that those willing to invest more will be paid more, and therefore there’s no need to talk about it. The problem is that discretionary reward, on its own, is a very blunt (and lazy) performance management tool. Over time, it entrenches a multi-speed firm.
  2. Measurement: there’s no easy and accurate measure of energy level. Firms may have proxies like billable hours or hours worked, but these measures can be gamed and do not really capture the temperature of belly fire. As firms introduce different business models and new flexible work arrangements these measures become even less relevant.
  3. Confrontation: talking about energy expectations inevitably leads to heated discussions as to whom is contributing more or less. Firm leaders often prefer harmony over harrowing debates around relative commitment.
  4. Autonomy: in many firms partners believe their autonomy is paramount and should not be questioned. As owners, they should be free of “big brother” accountabilities around how and where and how much time they spend.
  5. Outputs over inputs: some people will argue that assessing energy feels like clock-watching – a focus on time spent rather than outcomes achieved.

#1 Focus on partner engagement

The conventional solution to address a two-speed partnership is to shine the light on the “under-performers” and hope that this will shame them into speeding up. This is often coupled with a stern conversation around accountability and the threat of sanctions. In my experience, this approach seldom has enduring success and often ends badly.

An alternative approach is to shine the light on everyone in the spirit of support and development. The idea here is to frequently check-in with the whole partner group on questions like:

  • What’s going well?
  • What’s causing you the most stress at the moment?
  • How’s your team’s strategy implementation going?
  • What support do you need?
  • What are your key priorities over the next period?
  • What things might get in the way of success?

The logic there is that through greater transparency and a more supportive leadership style there will be a positive impact across the board. This approach is aimed at growing the overall pie and reducing dissonance between the fast and the slow.

The reason this approach is seldom attempted, or, if it is, implemented badly, is that it requires the firm leaders to do some serious heavy lifting. It’s practically impossible to do well in medium and large firms.

Until now…

There are a range of new applications, like Jobvibe (an Australian start-up), Wethrive and Culture Amp, that allows for easy frequent check-ins to assess how people are feeling at work, and to identify and resolve issues quickly. The trick is to tailor the questions for professional services and for the partner group in particular, and to run it out of the managing partner’s office, not HR.

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#2 Agree a partner charter

A complementary approach is to agree the social contract between the firm and its partners. As Nick Jarrett-Kerr explains, these partner codes or charters should agree explicit expectations for each partner in regard to :

  1. their dealings with the firm, for example, to accept the spirit and the letter of the firm’s strategy;
  2. their treatment of the firm’s clients, for example, promoting the highest standards of professionalism, truthfulness, integrity and trustworthiness;
  3. their dealings with fellow partners, junior staff members and support staff; and
  4. their personal learning journey and commitment to ongoing development, improvement and innovation.

I’d suggest adding a fifth dimension which describes the expectations around commitment and energy levels.

#3 Team profit contribution

Some firm’s have shifted focus away from individual revenue targets to team profit contribution. Rather than set individual budgets, the core accountability is for the team to deliver a specific profit outcome. Team members need to work through the optimum approach, roles and requisite energy levels. While there are many positives to this approach, it may further entrench silos and factions. It may also hide enduring aberrant behaviour by some individuals.

Call to action

I don’t think there is a magic silver bullet to address the issue of variations in partner contribution. It’s a complex, politically sensitive problem. The key is not to ignore the problem as it festers rage in the fast, and facilitates a victim mindset in the slow. Without active positive leadership, you’re charting course for a circling boat.

Photo sourced from dreamstime.com

5 takeaways from teaching management at the Melbourne Law School

In Articles, Commentary on 31 October 2016 at 7:30 am

“The best way to learn is to teach.”

Cup of hotlatte art coffee on wooden table

Source: fotolia

I had the privilege and pleasure to present the Management for Professionals subject on the Melbourne Law Masters program over this past week. The course covered the foundations of leadership and management within a legal context. Reference material was sourced from Maister, Porter, Kotter, Beaton, Martin, Susskind and Day, amongst many others.

After road-testing all the material in the classroom, my five key takeaways are…

#1 Maister needs an update

David Maister’s famous practice spectrum outlines a range of business models for professional service firms to consider. These include Rocket Scientist, Grey Hair, Procedural and Commodity, which in turn influence the settings on leverage, utilisation, margin and rates.

Maister’s models are still largely relevant in a people-intensive firms, but less so in technology and data-intensive legal businesses. These latter firms clearly price, operate and scale up differently. Perhaps a better business model map – see below – is to have High to Low Complexity on one continuum and People to Tech-Intensity on the other. The top right position is currently vacant, but has a huge number of aspirants.

#2 NewLaw is no longer new

During the course we studied INSEAD’s new case study on Axiom Legal. We had a great presentation from Jarred Hardman, the founder of Crowd & Co, and explored alternative models such as Keypoint, Lexvoco and Bespoke.

It appears that over the past 12 months, many traditional law firms buying-in or are copying the “new” bits of NewLaw to the point that they are no longer really fresh or compelling differentiators. One student commented that many NewLaw models shifted so much business risk to individual lawyers that they would struggle to attract really top talent.

#3 Love the grey

One of the most interesting class discussions centred around a HBR video on the common myths of strategy execution, that is, success will come from aligning goals, better communication and following the plan. The video highlighted that while the latter approaches are worthwhile there are many nuances and subtleties that need to be considered. It appears there are few absolute truths in management and most things are contingent on context, characters and constraints.

#4 Strategy should be for everyone

“I wish I had done a course like this when I started my career. It would have made sense of all the decisions my firm has taken over the years.”

It is common in many firms for discussions around strategy to be treated as secret partner business. In my view there is a strong case to give everyone in the firm a deeper appreciation of how the firm competes and how it makes money. Better understanding of these key concepts will facilitate innovation and execution.

#5 The world is small

From the class discussions, it appears that cats in Santiago, Perth, Beijing, Milan and Jakarta are equally hard to herd. The Melbourne Law Masters program attracts law students from over 40 countries across the globe. Professors, such as Katharine Christopherson (also teaching last week), come from far and wide to present their classes. Being immersed in this global village for one-week was truly an amazing experience.

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I will be presenting the Management for Professionals course again in October 2017. It is available as a single subject study option or as an elective on the Masters and JD programs.

Is your board focused on strategy or operations?

In Articles, Commentary on 22 April 2016 at 7:29 am

“Our board gets preoccupied with operational issues. Important discussion around the firm’s strategy is the exception rather than the rule.”

Sound familiar?

Addressing the firm’s expanded balance sheet is one way to get your board to focus on big-picture strategy. Expanded balance sheets include the intangible assets that are crucial to the firm’s long-term competitiveness and profitability.

While accountants often refer to these intangibles as goodwill, I think there’s much strategic value in disaggregating these intangibles into four separate asset classes*: relationship capital, human capital, brand capital and structural capital.

Variety of cups of coffee and coffee beans on old wooden tableBoards need to make a critical assessment as to whether capital value is growing or slowing? Asking good questions and directing management to address significant strategic issues and opportunities is what the board’s stewardship role is all about.

Relationship Capital

This refers the quantum, strength and stickiness of existing client and referrer relationships.

  • Grow: growth in relationship capital can be assessed by things like major client acquisitions, client commitment/risk indexes, client engagement, Net Promoter Scores, % of sole-sourced work, sales pipeline velocity, bid-win ratios and service mix per client. Some firms track client lifetime value as an indicator of its relationship capital.
  • Slow: relationship capital can be diminished by major client losses (actual and pending), loss of key people with strong networks, structural change in client organisations, and growth in competition, both direct and disruptive.

Human Capital

This refers to the quality and performance of all those that work in the firm.

  • Grow: growth in human capital can be assessed by things like partner and staff retention, engagement, participation and discretionary effort. Culture mapping often reveals amazing strategic insights.  Clear and compelling succession plans for the firm’s key rainmakers and team leaders is good a lead indicator of future capital value.
  • Slow: human capital is often diminished by cultural misfits, major internal disputes and disruptive politics. One indicator of the latter is the percentage of time the firm’s managing partner spends addressing internal matters like performance measurement (i.e. who takes credit), partner remuneration, client ‘ownership’ and resource hoarding/sharing. Power struggles and infighting between divisions, office locations, teams, practices and individual partners are often major distractions and result in sub-par contribution from everyone.

Brand Capital

This refers to the strength of the firm’s brand and reputation in key target markets.

  • Grow: growth in brand capital can be assessed by things like brand awareness, consideration, preference, use, recommendation and social media following. This can be evidenced by awards, rankings and directory listings. Relative price premium is often a useful proxy for brand strength.  The firm’s ability to attract star recruits, at junior, mid and senior levels, is also an indicator of its brand capital.
  • Slow: the firm’s brand can be weakened by major losses, be it clients, projects or people. Recent developments at Slater & Gordon are ample evidence of the negative impact of an externally visible crisis. Clayton Utz took years to fully recover from the infamous BAT case.

Structural Capital

This refers to the value of the firm’s IP, its systems, products, apps, methodologies, technology and platforms.

  • Grow: growth in structural capital can be assessed by things like the firm’s investment in R&D and its innovation portfolio. Quantification of the current and potential revenue from leveraging the firm’s IP may also be useful.
  • Slow: a strategic assessment of structural liabilities might include a systems effectiveness and efficiency review. In one leading law firm, they classified of each of their systems into: [1] value-adding, [2] functional and [3] deadweights. The latter were clunky systems that reduced efficiency, increased user frustration and/or lowered quality. The outcome of this review affirmed the conclusion that the internal user experience was a crucial part of creating a high-performance culture.

In practice

Boards that have adopted the four capital approach, or a variation thereof, usually rotate their agenda and focus on one area per board meeting. Discussions usually revolve, firstly, around the nature, quantum and key trends in the asset class, and secondly, how the assets should be protected, developed and leveraged further.

This approach results in a much clearer delineation in the role and contribution of the board and that of the firm’s management team. It also means that in-depth deliberations around preferred colour of Post-it notes are omitted from the board’s agenda.

* This approach is adapted from the work of Erik Sveiby.

Cultural fit, or do you mean no misfit?

In Articles, Commentary on 25 September 2015 at 7:05 am

I’d love a dollar for every managing partner that says they want to recruit a new person, or acquire a new practice, that has the right cultural fit. What does that really mean? When push come to shove, in most firms cultural fit is a proxy for “no dickheads” (to quote a client or two). It means a person like us who won’t disrupt the status quo. It’s not really cultural fit, but rather no cultural misfit.

I think viewing cultural fit in this way is a missed opportunity and doing a disservice to your firm’s strategic potential.

Your culture club

salons_coffee_art_contest_our_daily_shotsYour firm’s culture club can be divided into three groups: Misfits, Colleagues and Catalysts. Misfits are unmanageable non-team players who have been retained either because they’re major rainmakers and/or the firm’s leadership hasn’t had the guts to have the hard conversation. Misfits are sometimes referred to as cultural terrorists.

Colleagues are those that fit in and play by the tacit and explicit rules. They are solid performers and contributors within the current cultural norms.

Catalyst are those that will help create the firm you want to become. They’re the agents of change that enable the firm to adapt to new client demands and competitive realities. Whilst Catalysts are collegiate and respectful of others, they are disruptive in that they act as symbols and sources of energy for new ways to operate and compete.

Misfits and Catalysts are sometimes confused in they both discordant, and therefore risky and confronting. The critical difference is that Catalysts are willing to put the firm first, their motivation is less about ego and personal power.

During recruitment, most Misfits try their best to present well, however, one can try discern their true colours via a combination of personality profiling, personal references and behavioural-event interviewing.

Strategic potential

A firm with 100% Colleagues, and therefore no Catalysts, will feel like a cosy club but is likely lose ground to competitors over time. In a turbulent environment if you’re not adapting at the same speed or faster than the market you’re going backwards. Catalysts help you adapt but with a level of control and discipline. They enable the firm’s culture to move beyond nice and to develop real cultural differentiation.

Map your firm

When you are about to do your next round of partner appointments or a senior lateral hire, think less about general cultural fit and more about whether you want a Colleague or a Catalyst?

Another worthwhile exercise is to map your current partner cohort into Misfits, Colleagues and Catalysts. It’s probably time to bite the bullet (and load it at the same time!) and address your cultural terrorists. In asking firms if they’ve had any regrets in letting their Misfits go, the universal response has been, “just one – we should have done it ages ago”.

The really tough question is whether you have the right number and type of Catalysts that will create the firm of the future?

Photo source: http://salon.com

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10 reasons why culture eats strategy for breakfast

In Articles, Commentary on 4 September 2015 at 10:53 am

Over the past 12 months I have worked with three professional service firms that have outperformed their peers. Despite operating in flat markets they have consistently recorded double-digit revenue and profit growth. This success has come without superstar rainmakers, with undistinguished brands and with no fancy shmancy disruptive business models.

So what is it that has made them so successful?

To me it’s cultural differentiation. Not market differentiation, but an internal culture that creates value, both internally and externally. It’s a culture that’s eating strategy for breakfast, as famously proclaimed by Peter Drucker.

Based on these three case studies and other research, I posit that there are ten areas where cultural differentiation really counts.

#1 Productive politics

img90In firms with highly politicised cultures, enormous energy is expended addressing internal matters like performance measurement (i.e. who takes credit), partner remuneration, client ‘ownership’ and resource hoarding/sharing. Power struggles and infighting between divisions, office locations, teams, practices and individual partners distract from value creating time with clients and staff. A managing partner of leading law firm once revealed to me that he spent around 40% of his time on an annual basis making, negotiation and justifying partner remuneration decisions.

Politics is inevitable, but firms that effectively balance collective, individual and directed power have a huge competitive advantage.

#2 Collaboration

Recent Harvard Business School research has revealed that when different practice teams are able to collaborate around client needs, there is a massive positive financial impact. In one case study, the average annual revenue per client increased from US$150,000 to US$800,000 by having seven practice groups offering an integrated solution versus cross-selling seven discrete services.

Those firms that have transitioned from a “my client” to “our client” culture usually outperform those where partner autonomy reigns supreme.

#3 Consistent high standards

I recently chaired a panel discussion with three senior buyers of professional services. One of the questions put to the panel was whether there was a difference between top performing firms and the rest? Consistency was the universal response. Top firms were characterised by extremely high technical and service standards delivered consistently by everyone. In other firms they felt it was a bit hit and miss.

There is much evidence to support the proposition that successful firms are those that have cultures that are intolerant of mediocrity and expect and get high standards from everyone.

#4 Discretionary effort

Organisation cultures that are perceived to be genuinely caring, trusting and fair tend to get the best out of people. Staff are more likely to go the extra mile, to act above and beyond the call of duty, or just do that little bit more. Toxic cultures often result in lower productivity, higher absenteeism and substandard output.

#5 Continuity

In their bestselling book, The Service Profit Chain, Heskett, Sasser & Hart referred to research that showed that client satisfaction increased significantly with staff continuity. In situations where a financial services client had five different relationship managers over a two-year period only 40% clients were satisfied or very satisfied. This jumped to over 80% where there had been only one relationship manager. Continuity builds understanding of the client and fosters deeper relationships. These factors are critical in client choice, loyalty and advocacy.

Positive firm cultures facilitate retention and ensure continuity. A stable workforce also reduces the direct costs associated with staff churn.

#6 Alignment

Each of the three case study firms mentioned in the introduction to this blog post are characterised by a lean management structure. All leaders across the firm, but excluding the managing partner, still retain significant practices. In a way each team or cell within the firm has an ethos of self-sufficiency. They don’t see themselves as paralysed subordinates waiting for orders.

Alignment around firm direction, trust in leadership and a strong culture provides the glue that prevents anarchy but at the same time allows individuals and teams to be empowered. Self-management results in a significantly lower investment in planning, control and oversight and therefore more time on winning business and delivering work profitably.

#7 Busyness

In most professional services, busyness begets busyness. There is much evidence to support the notion that smart, highly motivated professionals seek to master their craft by doing good work for good clients. ‘Bring it on’ most say. In my experience the assumption that better work-life balance creates more staff engagement only applies to a minority. Consequently, one can conclude that a positive productive work culture creates more capacity to do even more work (within limits of course).

#8 Agility

If your firm is changing slower than the competitive environment around it, you’re going backwards! Firms with strong market and client-oriented cultures are really good at two things: [1] sensing and predicting trends, and [2] willing and able to make the necessary changes to adapt to different conditions. Agility and adaptability are cultural elements that are the hallmarks of successful firms in turbulent times.

#9 Fire in the belly

Business development is both a relationship game and a numbers game. Without some personal connection it’s very hard for a prospective client to develop enough trust to say yes. Equally, there will be fewer sales opportunities if you don’t show up. In tough times, there is usually a reward for those professionals with some fire in the belly and show up more often than others. The hunger to win is more intense and bears fruit in fuller pipelines and better strike rates.

#10 Execution

The last cultural element is related to all the others but is worthy of a mention on its own. It relates to the efficiency and effectiveness of implementing strategic decisions. It’s the ability to make it happen, to have the discipline and fortitude to overcome obstacles and to follow though on agreed actions. It seems so obvious, but so many firms struggle with this ‘simple’ ability to execute.

In conclusion

It is common for professional service firms describe their cultures as “collegiate”, “respectful” and “friendly”. In these tough times I don’t think just being nice is going to make a difference, to generate real value. Thinking beyond nice is incumbent of every professional service leader. Striving for true cultural differentiation will allow you to have culture for breakfast, strategy for lunch and champagne over dinner…

Photo source: http://nespresso.com

Key takeouts from major new legal market report

In Articles, Commentary on 28 August 2015 at 10:14 am

I’m proud to be lead author of the Thomson Reuters Peer Monitor report on the Australian legal market, prepared in collaboration with the Melbourne Law School. The report received good coverage in the Friday 28 August edition of the Australian Financial Review.

In summary, the report reveals that the Australian legal market bears all the hallmarks of a mature industry: declining demand, increased price-based competition, worktype decomposition, entry of market disruptors, technology substitution, and growth in both consolidators and niche players.  While market conditions are tough, they’re not calamitous. The larger firms generally have shrinking profit pools but have kept their heavy-hitters happy by de-equisiting other partners and cutting headcount. The contention that a firm cannot cut their way to greatness probably doesn’t hold true if one looks at how the larger firms have performed in recent years. However, the point when cutting comprises the underlying business model of scale, range and reach cannot be far off.

Coffee art AUIn my view, the biggest structural change in the market has not been NewLaw entrants or even globalisation, it has been the dramatic shift of work in-house and an increase in buyer power and sophistication. This trend has been prevalent in Australia for over a decade but its impact is really being felt in a benign economy and a demoralised political environment.

Some specific takeouts

  • While the long-term trend is negative, the last quarter of F15 saw an increase in demand and the first half of 2015 saw firms rehiring lawyers. It would be great to predict a bottoming out of the market and upside from here on end, but it’s foolish to pick a trend from one data point.
  • It’s been Christmas all year for firms with strong property and construction and M&A practices. It’s been Good Friday all year for firms with big banking and finance practices.
  • In the global versus local scrap, it appears the domestic firms are winning in litigation, IP and general corporate, with the globals making headway in property and M&A. It begs the question whether a global brand puts a firm at a disadvantage in targeting work perceived as domestic or jurisdiction-specific?
  • The data suggests that the firms that have gone down the global route have had a greater drop off in demand but have increased profits per equity partner. Perhaps it is these firms that have had more radical changes in their equity partner ranks and downsizing some practices.
  • In these tough times it appears that technology is the biggest investment area of the larger firms. In other sectors of the economy facing maturity, marketing and BD expenditure tends to increase relative to other areas. The signs are that law firms are banking on technology to make step-change improvements in efficiency and effectiveness.
  • The headhunters and recruitment firms supplying the legal market are popping champagne corks. Expenditure increased over 10% in this area in 2015 versus 2014.

Image sourced from www.theaureview.com

Advancing the retreat

In Articles, Commentary on 21 January 2015 at 8:12 am

Planning to run a partners retreat, off-site or conference later this year? As a facilitator of many retreats I thought you might find these five design principles helpful in crafting your 2015 agenda.

#1 Open Eyes

The retreat needs to go beyond the regular monthly performance update. It should open partner eyes to the true strategic health of the firm – the good, the bad and the ugly. The aim should be to tell the truth in a constructive and considered way. A glossy state of the nation address serves no one’s interests.

As a practical example of this, I was recently engaged to interview 10 clients, 10 competitors and 5 consultants to provide a fresh independent perspective on how a particular firm was positioned to meet the challenges of the Australian legal market. This strategy health check yielded a rich discussion on the firm’s distinctive strengths as well as one or two blind spots.

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#2 Open Minds

Many professionals are trained sceptics. This scepticism, coupled with stellar career success, leads to very conservative thinking and behaviour – what’s worked in the past will be the foundation of success into the future. This mindset is dangerous in a rapidly changing, intensely competitive environment.

Some of the best retreats I’ve been at have included “light-bulb” presentations from outsiders opening partner minds to fresh perspectives and methods. These outsiders have included, in descending order of impact, leaders of successful peer firms, key clients, heavy hitters from industry, respected alumni, market commentators, researchers and content experts.

Another approach I’ve seen work really well is to run live “what-if” simulations. The firm’s P&L is presented and then a series of scenarios presented to demonstrate the long-term impact on partner income. The discussion then opens up and what-if questions are then simulated and the results revealed in real time. This is partly firm economics 101 in disguise, but also it’s a really useful way to show the long-term impact of things like margin erosion, cost containment, staff engagement and strategic investments or divestments.

#3 Open Hearts

“Building relationships with colleagues”, often tops the best things list in post-retreat feedback. As firms grow in both size and footprint it gets harder for partners to partner. They simply do not know their colleagues, what they’re like as people, what they’re really good at and how they might add value to clients.

Structuring (but not over-structuring) social time and activity is critical. It amazes me how often firms will book retreats at expensive resorts with glorious recreational facilities and then spend 95% of the time in meeting rooms observing other guests enjoying them.

#4 Open Questions

Retreats are often good opportunities to work on the business and solicit partner views as owners and stewards of the firm. One constructive way to address this is to ask a few carefully crafted open questions and to structure a debate around these dilemmas. For example, “Australian patent firm Spruson & Ferguson IPO’ed late in 2014 and now has a market cap over $570 million. Should we do the same?” 

These open question sessions can be set up with a presentation of relevant background data and commentary. The key is to let the discussion be open and unstructured while at the same time keeping it insightful, strategic and relevant.

#5 Open Doors

Almost every retreat I’ve attended starts out by welcoming new partners – both internal appointments and lateral hires. Other than a cursory mention of their name not much else is done to truly open the door to those joining the club. I think this is a missed opportunity to get fresh perspectives on the firm and to avoid group think.

One firm I know asks all their lateral hires to do a short presentation comparing their old firm to the new on five dimensions: culture, governance, pricing, work practices and strategy. This is really helpful in three ways: profiling competitors, benchmarking and showcasing their new partners.

In conclusion

While retreats can be a black hole in terms of time and dollars, many successful firms continue to see a return from this type of investment. The trick is not to view it as an extended partners meeting but rather as a major opportunity to build the spirit and the strategy of the partnership.

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