The full text of my opinion piece first published in the Australian Financial Review on 12 August 2021.
The start of a new financial year often coincides with law firm partners updating their budget and doing a strategy health check.
Targets are usually set around revenue, margins and headcount, as well as qualitative indicators such as client service and staff engagement.
This is great, but there is one critical thing missing.
Practice shape is one of the most important drivers of success but seldom gets a mention. By shape, I mean the number, type and roles of practitioners at different levels within a practice team.
David Maister, in his seminal work, Managing the Professional Services Firm, stated, “many factors play a role in bringing goals [of client service, staff satisfaction and financial success] into harmony, but one has a pre-eminent position: the ratio of junior, middle-level, and senior staff.”
Getting it wrong
Poor practice design can be a handbrake on practice performance.
Being too ‘top heavy’ can result in mid-level lawyers leaving to join other firms with better promotion prospects. It could also lead to deep discounting so as to match competitors with more appropriate leverage.
A ‘bottom-heavy’ practice runs the risk of producing lower quality work and creating burnout and stress for those left to carry the load. (Bottom-heavy is also a good description of me after 18 months of intermittent Covid-19 lockdowns 😀).
A ‘missing middle’ often leads to practice stagnation and major financial opportunity costs. Interestingly, many premium firms are facing this issue right now partly as a result of reduced graduate intake in the mid-2010s.
Bad design can also contribute to systemic under-delegation. Partners who hog all the work make their practice far less competitive over time, not to mention sapping the morale of their people.
Succession is also a whole lot easier when the next generation is there trained, ready and waiting.
New shapes
The world has changed since David Maister first published his book in 1993. New technologies, providers, channels and delivery platforms have created new design opportunities beyond the traditional pyramid.
With the rocket model, the left and right corners of the pyramid are cut out and most low-level process work is done using a combination of legal technology, paralegals and law @ scale outsource providers. Rocket practice teams generally have fewer entry-level lawyer positions and more legal operations roles.
The hub and spoke model has a partner at the centre of a network that brings in a range of different resources and modular solutions to solve a specific client problem. These resources may include full-time lawyers in their firm as well as advisors from other professional service firms, the bar, data analysts, client resources and third-party software platforms.
The agency shape splits a practice into specialist groups focused on what they’re best at. A great example of this is the award-winning ad agency, Thinkerbell.
Thinkerbell has two groups: Thinkers and Tinkers. To quote their website, Thinkers are “a cross between strategy-types and suity-types, they ask a lot of questions and listen very carefully for the answers. They’re problem-solvers.”
It says Tinkers are “creativey-types and producery-types who pull things apart and put them back together again. They hit things with hammers and fiddle with knobs and buttons. They experiment, and play and build.”
Revisit your design
So, returning to annual budgets and strategic plans, practice leaders need to ask themselves a few critical questions about their current practice shape:
- does it help or hinder career advancement and learning opportunities?
- does it fit with the mix and complexity of the work?
- does it optimise the business model i.e. how the team makes money?
- what should the shape look like in three years, and in seven years?
- what alternatives could be considered?
The agency model might not be a realistic alternative at this time, but it’s essential that leaders keep thinking and tinking when it comes to practice shape.
culture, growth, innovation, planning, professional service firms, strategy management, war for talent
The empire strikes back
In Articles, Commentary, Legal Technology on 8 October 2021 at 11:20 amThe 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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