Flipping the traditional law firm – the case for a decentralised model

[Australasian Law Management Journal,General Management,Marketing & Business Development,Strategy & Leadership] March 1, 2021

A ‘cluster model’ is a way that law firms can shift from traditional ways of operating to a new and adaptable culture where the emphasis is on the value that employees deliver rather than their length of tenure, writes Demetrio Zema.

For traditional law firms, July 1 often represents the day when promotions and title changes are announced, and every lawyer’s billable hour magically increases overnight. For example, work that was previously charged out at $500 per hour on June 30, 2020, was valued at $600 per hour as of July 1, even though it was being completed by the same person.

While the client will see such an increase reflected in their invoices, do they actually see an increase in the quality or value of the legal service that they receive? At Law Squared, we don’t believe this to be the case and therefore we have decided to adopt a ‘cluster model’ as a way of better managing our people and clients.

What is the cluster model?

Questioning layers of management is not a new concept, and there have been a number of large global businesses that have radically changed how they set up their business based on this single question.

For example, food processing business Morning Star, which is based in California and has roughly 400 employees and an annual revenue of over US$700 million, is often seen as the gold standard in this regard. In short, Morning Star has an organisational vision to create a company in which all team members “will be self-managing professionals, initiating communications and the coordination of their activities with fellow colleagues, customers, suppliers, and fellow industry participants, absent of directives from others”.

In other words:

  • no one has a boss;
  • employees negotiate responsibilities with their peers;
  • everyone can spend the company’s money;
  • each individual is responsible for acquiring the tools needed to do their work;
  • there are no titles and no promotions; and
  • compensation decisions are peer-based.

The above is Morning Star’s take on a cluster model, but in general a cluster model refers to a flat structure whereby employees can write their own progression, there are no hierarchical titles, and salary reflects value, not seniority or length of service.

Why would you want a cluster model in a law firm?

In a traditional law firm, lawyers often are asked to take on management and leadership roles simply because that is the next title on the list. While this can work out for many, it also can result in the wrong people managing others purely because they have been at the firm for ‘long enough’, and non-sensical remuneration bumps.

In short, a title does not necessarily match ability or value.

In a cluster model, these issues can be avoided by:

  • removing all hierarchical titles;
  • placing the emphasis on what you are actually adding to the firm, and not on your length of service;
  • making all employees accountable; and
  • making all employees managers.

This helps take the ego out of the equation to ensure that the firm is doing what is best for both itself and its clients, and avoids the highly competitive environment where lawyers are working against each other – and not with each other.

While the cluster model often sounds like the more complicated option, the benefits – when implemented right – can create a much easier and seamless way of working.

A case study: Law Squared

For some time there had been a mismatch in the philosophy that Law Squared stood for, and the practicality in our way of working. While at all times since inception we have been champions of the NewLaw movement, challenging the status quo of the traditional law model, internally we still curated a hierarchical title structure for ourselves organically, modelled on the traditional law model as an easily understood form of career progression. The two ideals were fundamentally misaligned and as our team grew and our resilience to challenge the traditional law firm model strengthened, we acknowledged that a change needed to occur to ensure our internal way of working accurately reflected our core values and beliefs.

Therefore, at our quarterly strategy session in May 2020, I presented the team with a one-page document about taking the step to remove all hierarchical titles for our lawyers and creating titles that practically reflect the nature of work lawyers do, and create an equal playing field for all lawyers to engage in business development, hold client relationships, deliver legal work and collaborate with each other. While our team already did these things, titles created an unnecessary divide, based on traditional law firm principles.

The team spent about 2.5 hours on a Zoom call discussing the idea and, ultimately, made a team decision to adopt the change. We all agreed that traditional titles were not suitable to our values or culture, but also to how we practically worked as a team at Law Squared.

In our view the traditional hierarchical model needs re-thinking; years of experience as a lawyer does not give a lawyer leadership or decision-making skills. It should not be expected that years of legal experience (and limited client contact) then leads you to become a skilled professional in business development and mentoring/nurturing junior lawyers. In fact, many in the legal profession suffer from resentment attrition and therefore the inevitable vicious cycle ensues.

At Law Squared we believe in a merit-based system, not title based, and we believe that no matter the level of legal experience, everyone has the potential ability to develop leadership and decisions making skills, should they wish to.

On a practical level, Law Squared operates with four legal teams, each which divide up the legal work and client relationships to manage client expectations. Within those teams, everyone has a role. Our operations team, which includes communications, partnerships and finance functions, then supports these teams to achieve the best possible outcomes for our clients.

Professional goals are developed for each individual in the business and reviewed regularly, and these are mechanisms for skill and salary progressions.

The biggest misconception of the cluster model is quality assurance, and we are often asked how we ensure the quality of legal work remains high without the hierarchical structure. Under our way of working, particular skillsets and experiences are highlighted, and lawyers are accountable for seeking advice and clearance from others who are domain experts. One doesn’t need a title of partner or special counsel to approve an advice or piece of legal work.

The difference between the traditional law firm model and at Law Squared is that each lawyer is accountable for collaborating with each other to the benefit of the client, and not because of a title.

What lessons can traditional law firms take from the cluster model?

Our cluster model is not something that all firms should adopt or transition to overnight without working through what would work for them. However, some of the key tips that I would give to law firms (and professional services firms) who might be looking to the cluster model for guidance are:

  • to give your employees the tools to thrive on their own terms, and allow them to forge their own developmental path that is individual to them;
  • to not conflate tenure and seniority with leadership and management skills – it is much more nuanced than this, and may lead to the wrong people managing others;
  • to focus heavily on culture, as it is critical to your long-term success;
  • years of practical legal experience does not give a lawyer the tools and skills in business development, decision-making and/or leadership; and
  • to acknowledge that new ways of working are not very productive if you don’t focus first on recruiting the right people into the business who can live and lead the charge.

By firms taking on these tips to become a more adaptable and agile workplace which is focused on value rather than length of service, they will reap the rewards that cluster model firms like Law Squared have enjoyed already themselves.

But if they fail to take heed of the shortfalls of the traditional way of working, the divide between the traditional law players and the true alternatives will only increase, and lead to the exodus of employees who strive for development, and not titles.

Demetrio Zema is the founder and director of Law Squared, a specialised commercial law and litigation firm focused on working with high-growth businesses and ASX-listed companies.