A blog by Joel Barolsky of Barolsky Advisors

Posts Tagged ‘executive leadership team’

Formula won

In Articles, Commentary on 29 March 2018 at 1:21 pm

 

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Source: Kazuki Yamamoto

Formulas, equations and rules of thumb continue to be a popular way to communicate important principles in leading and managing professional service firms. For your interest, here are the ones I use or refer to most often…

 

CHANGE

David Gleicher: D x V x F > R. D = level of dissatisfaction with the status quo. V = a vision of a future state i.e. clarity of what we’re moving to. F = first steps in a clear action plan. R = level of resistance to change. If R is more than the multiple of the other three, then no change. Click here for more. A graphical variation of this formula:

eqn-for-change

STRATEGY

A.G. Lafley and Roger Martin: Firm strategy = 5 questions – What are our winning aspirations? Where will we play? How will we win? What capabilities do we need? What systems and enablers are required? Click here for more.

Mehrdad Baghai et. al: McKinsey 3 growth horizons – concurrently manage both current and future opportunities for growth. Spend roughly 70% of your time on H1, 20% on H2 and 10% on H3. Click here for more.

George Beaton: Firms that fly = a shared vision + a strong culture based on shared values + shared power across the firm and key stakeholders + strong leadership and management to pull it all together and sustain it. Click here more.

Joel Barolsky: In the past… Firm Success = Ability x Stability (firms succeeded if they were competent practitioners and were able to keep the firm stable and collegiate). Over the past decade with the increase in client power and sophistication… Firm Success = Ability x Stability x Affinity (firms that have close trusting relationships with their clients outperform others). In a VUCA future… Firm Success = Ability x Stability x Affinity x Agility (firms that can make changes that add value quickly and efficiently will outperform others). Click here for more.

BUSINESS MODEL

David Maister: Profit per Partner = Leverage x Utilisation x Realisation x Blended Hourly Rate x Margin. Click here for more.

Ron Baker: Profit = Intellectual Capital x Effectiveness x Value-based Price. “Effectiveness” is a measure of the outcomes achieved for the client, not like the Maister equation which focuses on the cost of the inputs used to create the service. “Intellectual Capital” includes leveraging human capital, structural capital and social capital. Click here for more.

ORGANISATION DESIGN

Dunbar’s Rule: Our brains are only capable of sticking together within a community of around 150. Design organisations, offices, divisions, etc. with this number in mind. Click here for more.

REMUNERATION

J. Stacy Adams: People will trust a remuneration model when they perceive, [1] there is a sense of fairness of their contribution relative to their reward, AND [2] there is a sense of fairness of others’ contribution relative to the reward that others receive. Click here for more.

INDIVIDUAL PERFORMANCE

Mitchell and Porter: Performance = Motivation x Ability x Environment. Click here for more

David McClelland: Match jobs to an individual’s relative needs. People have three core needs, usually with different weights – Need for Achievement, Power and Affiliation. Achievement – the drive to excel, achieve in relation to a set of standards, strive to succeed. Power – the need to make others behave in a way that they would not have behaved otherwise. Affiliation – the desire for friendly and close interpersonal relationships. Click here for more.

Dan Pink: Drive = f(Purpose, Mastery, Autonomy). Click here for more.

STAFF TURNOVER AND PRODUCTIVITY

Mornell: If you make a mistake in hiring, and you recognise and rectify the mistake within six months, the cost of replacing that employee is two and one-half times the person’s annual salary. Put another way, the wrong person earning $50,000 will cost your company $125,000. Click here to read more.

Revenue per employee: In most industries, above-average firms produce revenue per employee that exceeds three times their average employee’s salary. Interestingly at Apple, it exceeds nine times. Click here to read more.

CLIENT RELATIONSHIPS

David Maister and Charlie Green: Trustworthiness = (Credibility + Reliability + Intimacy) / Self-orientation. Click here for more.

Joel Barolsky: Long-Term Relationships = (Understanding + Reliability + Value + Affinity) / Complacency. Click here for more.

Ford Harding: Geometric growth of social networks. With 90 strong connections in your personal network, you can make around 3,500 matches i.e. introduce one person to another for mutual benefit – see chart below. Click here for more.

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SALES

Sales 101: Your Revenue = Number of Opportunities x Average Value x Overall Strike Rate. Click here for more.

Andrew Sobel: Number of Opportunities = Number of initial conversations you have or initiate x % that convert to a proposal. Click here for more.

McKinsey’s 2-4-8: Directors in McKinsey need to be working on 2 major assignments, be the process of proposing for 4 more, and in communication with 8 more prospective clients. Management within McKinsey follows up to ensure that 2-4-8 is a reality. Click here for more.

PRICING

The Discount Matrix: The amount of additional revenue required to make up for the lost profit as a result of a price discount:

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SERVICE EXPERIENCE

Frederick Reichheld: Net Promoter Score = % Promotors (i.e. clients that score 10 or 9) – % Detractors (i.e. clients that score 1 to 6) on the question, “What’s the likelihood of recommending XYZ to a friend or a colleague?” Click here for more.

Customer Effort Score: “Firm XYZ made it easy for me to handle my issue!” (on a Strongly agree / disagree 7-point Likert scale. Click here for more.

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What formulas or rules of thumb do you use? Please share using the comments feature…

Is the demand for legal booming?

In Articles, Commentary on 1 February 2018 at 8:14 am

The Thomson Reuters Peer Monitor report on the state of the Australian legal market indicates that overall market demand for major law firms has declined by around 10% over the past five years.

The IBIS report indicates a legal market declining in real terms – 1.9% nominal annual growth from 2012 to 2017, and 1.4% pa growth predicted for the next five years.

The Australian legal press is filled daily with messages of doom and gloom.

But what if we’ve got this all wrong? What if we’re being misled by inaccurate reporting, or as some might say, “fake news”?

There are five growth areas that I don’t think are accurately reflected in the market data that is reported:

  1. Growth of in-house lawyers
  2. Growth of foreign boutiques
  3. Growth of law companies
  4. Growth of legal imports
  5. Growth of bush lawyering.

By adding this direct and indirect demand to reported data, one might conclude that overall market demand is actually booming. If that is the case, the market is fragmenting even more rapidly than people realise with the large incumbent providers, as a whole, rapidly losing relative market share.

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Source: apartmentlist.com

#1 Growth of in-house lawyers

In June 2017, the NSW Law Society published a report that revealed a 59% increase in corporate in-house lawyers and 34% in government lawyers from 2011 to 2016:

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The increase of 6,222 employed in-house solicitors roughly equates to 1.4 million of production hours per annum. Even if this data is half right, the numbers are staggering.

ACC analysis indicates that some of this demand has been driven by insourcing, but it has also grown from a general increase in regulatory and risk issues as well as commercial, employment, real estate and operational matters. It is worth recalling that Australia holds the world record for the longest period of recession-free growth for a developed country and the outlook is strong.

#2 Growth of foreign boutiques

The revenues of large foreign firms like Allens-Linklaters, KWM, HSF, Ashurst, K&L Gates and Dentons are captured in the traditional metrics because most have involved a merger or an alliance with a large established domestic firm.

What’s missing from market reports like Peer Monitor are the 21 new foreign boutiques now competing mostly at the top-end of the market. These are firms with 30 or fewer partners with a premium focused offering. Examples include Clyde & Co, Jones Day, Squire Patton Boggs, Pinsent Masons, PwC, KPMG and White & Case. Carlyle Kingswood data suggests there are now over 225 partners working in this segment, roughly accounting for $350 million of annual fees.

#3 Growth of law companies

Australia’s Eric Chin is famous for coining the term NewLaw to describe legal startups. This descriptor is evolving into ‘law companies’, as explained by Mark Cohen in his recent post. Firms in this category include Elevate, Axiom, Lawyers on Demand, LexVoco, Keypoint, Unison, LegalVision, Hive, Helix, Nexus, Pangea 3, LawPath and Bespoke.

Data suggests law companies have grown their share of the outsourced corporate legal market from around 3% to 10% over the past five years.

Again, I wonder how much of this spend is include in official indicators tracking legal demand in Australia? Many of these companies have non-traditional employment arrangements, they engage a number of non-lawyers to deliver legal services, and they combine both local and overseas talent.

#4 Growth of legal imports

The chart below breaks down the $A15.4 Billion worth of Chinese investment in Australia by industry in 2016. Interestingly the figure was only $A2.1 Billion in 2007. One could provide similar statistics for the USA, Japan, UK, Germany, Singapore, etc.

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It’s a safe bet to assume that legal advice was necessary on a significant proportion of the transactions that facilitated this investment. I think it’s also a safe bet to say that a lot of this legal advice was not provided by Australian lawyers. In a sense, this is Australian-based demand for legal advice is not accounted for because it’s being provided by offshore advisors, i.e. it is being imported.

#5 Growth of bush lawyering

Australia is becoming more and more regulated. One proxy measure of this is the pages of legislation passed per year. The chart below shows the trend in Canberra. A similar story is evident in all the states.

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Developing systems to comply with these regulations and managing breaches usually requires expert legal advice. My guess is that a significant number of organisations don’t seek this advice but just wing it through a combination of ignorance, ignoring and bush-lawyering.

One could argue that this demand for legal services is actually non-demand. However, this is potential revenue lost by a combination of providers perceived to be expensive and consumer disregard.

What if I’m right

There are some pretty profound implications if we’re being misled by inaccurate reporting and the overall market is actually booming.

For established traditional Australian law firms, some of the takeaways are:

    • There might be more value in collaborating than competing to fight the threat of the newer entrants;
    • They should be making much more of the significant growth in foreign investment and government regulation;
    • They should be exploring new models to service those with atypical legal needs;
    • They might want to hedge their bets by investing in law companies and/or newer growth segments; and
    • Market fragmentation usually means less tolerance for mediocrity. There will be more winners and losers and a greater premium for sound strategic leadership and followership.

 

For industry bodies and professional associations, they need to:

  • Measure their industry more accurately and reliably;
  • Develop strategies to reduce legal imports; and
  • Help transfer latent demand to real demand.

What do you think?

The accountants re-enter legal. Meh!

In Articles, Commentary on 24 November 2017 at 12:17 pm

There are countless articles on the threat of the Big 4 re-entering the legal market. Yes, they’re cashed-up, capable and well connected, but I don’t think it will be as smooth a road for them as many are predicting. A deeper analysis suggests there are five factors that will limit their growth.

#1 The one-stop shop segment is small

The essence of the Big 4 value proposition is one-stop shop: buy all your business advisory services from us and there will be lower transactions costs, a deeper understanding of your needs, more integrated advice, higher levels of service consistency, better coordination and greater convenience.

The problem is many sophisticated legal buyers just don’t buy it!

For operational, run-the company work maybe, but for bet-the-company and reputation-sensitive matters, buyers generally prefer horses for courses. They back themselves in picking out tried and tested specialists, rather than relying on one firm to wheel out all their colleagues. Intuitively, these buyers recognise the benefits of cognitive diversity and are wary of the party line or groupthink. They feel it’s easier to hold a specific firm accountable (and sueable) for their advice when it’s more discrete. Many senior buyers regard the ‘all eggs’ approach as risky and lazy.

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Source: alphacoders.com

#2 Brand limitations

PwC is the most well-known and powerful brand in the global business services market. The other Big 3 are not far behind them. Over the years they’ve leveraged these brands to develop massive global management consulting depth, breadth and reach.

Notwithstanding these advantages, firms like McKinsey, BCG and Bain still are thriving at the top-end of the consulting market. The evidence would suggest that many clients tend to shy away from accountants when it comes to solving their most complex business problems.

After decades of organic investment, PwC had to resort to paying top dollar to buy Booz & Company to make serious inroads into the high-value segment. Interestingly, they resorted to a new brand of Strategy& for their consulting business rather than a brand extension of PwC. It appears that PwC thought their own brand was a net negative in fighting the likes of McKinsey.

All the evidence from graduating MBA students across the globe points to the top students preferring the specialist consulting firms over the Big 4. I can only imagine it will be the same at the premier law schools.

#3 Ring binders

I did a small consulting project for Booz about a year before they sold out to PwC. Yes, it was all my fault :o)

In speaking about competitors, they referred the Big 4 as “ring binder” consultants. What they meant was that the Big 4 consultants were good at following a predefined process documented in a ring-bound manual. What was implied was that the Big 4 consultants couldn’t really think for themselves.

While grossly disparaging, there is an element of truth in these comments. In order to achieve scale and process efficiencies, resource fungibility, accelerated learning and service consistency across all business lines, the Big 4 have sought to codify their approach and have trained their consultants in how to use it. One can only imagine they’ll adopt a similar method in legal to achieve similar benefits.

The standardised approach is brilliant for repeat work but can come unstuck if things vary widely from the norm. Top GCs will run a mile if they feel they’re being ring-bound in handling their complex matters that they feel require bespoke solutions.

#4 Conflicts

I was shown some recent analysis that listed the number of different law firms and freelancers engaged by the ASX50. The list had over 300 names on it. I can’t vouch for the precision of this research but intuitively it feels right.

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

The Big 4 are just that. Four! This will inevitably put major limits on their penetration of the legal market. The threshold test of perceived conflict in legal matters is much higher than say helping competing companies implement an enterprise software system.

The large mid-tier firms like Grant Thornton, BDO, RSM and Pitchers will be loath to enter legal, beyond tax, because of the fear disenfranchising their major referrers of work.

#5 The club

For the Big 4 to make serious inroads into legal, quickly, they will need to poach some heavy hitters from heavy hitting firms. Assuming they can offer better incomes, they’re asking these lawyers to leave their club.

This is what a typical lawyer rainmaker will weigh up in considering the 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 give 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 beancounters.

Nah! I’d rather stay.

6 strategic shifts and implications for HR

In Articles, Commentary on 8 November 2017 at 4:22 pm

By Joel Barolsky and Sue-Ella Prodonovich

If you have HR responsibilities in a professional services firm then you’re working in the epicentre of turbulent times. Changes to our workforce population, participation and productivity are throwing up new challenges while the expectations of firm owners and employees are changing – but not necessarily in sync.

Here are six strategic shifts we’ve observed which we believe will have profound implications for HR.

#1 Shift to the rocket model 

The next five years will see a migration away from the pyramid model towards the rocket model. A typical pyramid structure has a partner at the top supported by one or two senior associates and four or five juniors. In the rocket model, most juniors are substituted by a combination of technology and para-professionals.

For HR this means

  • Partners need a new set of skills and knowledge to manage their rockets and to win and deliver projects, profitably
  • Improvement in digital literacy across the board.
  • The end of the apprenticeship model that involves training juniors on-the-job on low-level process work.
  • New recruitment markets, processes and criteria to include non-technical areas.
  • Measurement and reward systems that reflect non-time-based pricing, innovation and collaboration.
  • Managing a much more diverse culture of professionals, para-professionals, technologists and project managers,

#2 Shift to workforce accordions

Most firms currently operate with a defined cohort of full-time staff. With growing variations in client demand, there is a growing trend towards the accordion model. This model means having a blend of full-time staff plus a pool of pre-selected trained variable cost contractors. Corrs’ Orbit, Minters’ Flex, Pinsent Masons’ Vario, Allen & Overy’s Peerpoint are firm-based accordions. LOD (Lawyers on Demand), LexVoco, Crowd & CoBespoke are examples of specialist providers in this space.

Other variants of the accordion include flexible work arrangements, hot-desking, secondments, reverse secondments and sabbaticals. Maddocks recently reports that over 20% of its partners were working outside the ‘normal’ 8 to 6, five days a week model.

HR complexity increases exponentially as a firm increases the variability and flexibility of its workforce.

#3 Shift to smart collaboration

With the increased competition from in-house providers, boutiques and individual freelancers, most multi-service firms are recognising that their main competitive advantage lies in the collective. If firms continue to be just a collegiate group of individual practitioners, then they will lose share to other competitors with lower costs and/or better-perceived quality.

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Source: uspinjaca.hr

While economic geographers have identified the positive relationship between physical co-location of knowledge workers and firm performance, HR plays the critical part of bringing capable people together. It’s through true cross-practice collaboration that the firm can offer something that others can’t. Bringing a diverse set of expertise and experiences to solve clients’ toughest problems is more profitable, more fun and more valuable to the client. It’s also a lot harder to do.

#4 Shift to supportive intolerance

There is ample evidence that better leadership leads to better performance. Firms with a depth of leadership capacity across all its partners are in a much better position to handle market uncertainties than those with just one or two stars.

Developing leaders doesn’t just happen through a wish and a prayer. It requires a particular style of operating, first coined by David Maister, called ‘supportive intolerance’. The support bit is offering partners personal insight/reflection, coaching and training to help them develop their full leadership potential.

The intolerance bit is making them accountable for their actions and inaction. This means calling-out behaviours inconsistent with firm values, providing constructive, prompt and honest feedback, having full transparency around agreed actions, and if all else fails, reducing reward as a sanction.

HR should be the lead change agent in introducing this style of leadership and operations. Again, it’s really hard without formal authority, but it’s critical to the firm’s long-term sustainability.

#5 Shift to loving the problem (not the solution)

While we try to do more with less and stay up with game-changing ideas, many HR professionals are still expected to solve day to day problems so it’s easy – and tempting – to go into problem-solving mode.  Boudreau and Rice’s caution for HR professionals:  “Embrace too many ideas (from popular talks and articles) or apply them too superficially and you’ll develop a reputation for fad surfing. Dig beneath the surface to the fundamental scientific research and insights and you can set the stage for true impact.” So one thing HR can do to add more value is ‘fall in love with the problem’ – that way you’ll look forward to spending more time on understanding them more deeply.

#6 Shift to ambidexterity

One can think about firm strategy as two parallel streams: one being ‘exploit’ and the other ‘explore’ (based on the work of O’Reilly and Tushman). Exploit refers to efforts to leverage current strengths and capabilities to make the current core business as good as it can be. Explore refers to new exploratory and experimentation efforts that will hopefully bear fruit in the future.

Firms need to become more ambidextrous, that is, change the firm’s culture so that everyone embraces explore and exploit in his or her everyday work and client interactions.

In an environment of rapid change and hyper-competition, every firm needs a healthy portfolio of both exploit and explore initiatives. A genuine commitment to exploring will most likely mean substantial changes to the firm’s dividend policy and capital structure. Firm governance and structural arrangements are also likely to be impacted, as will marketing, pricing, IT, operations and, in particular, HR.

Join us in Melbourne November 21 or Sydney November 22

HRMinds have asked Joel Barolsky and Sue-Ella Prodonovich to help finish their year of seminars with a discussion of major trends and practical ideas for those with an HR remit. These November workshops will be in Melbourne on Tuesday Nov 21 and Sydney Wednesday Nov 22. Details and registration here.

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.

 

Illustration of portfolio map – not real data

 

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-centric: 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.

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