A master class – 13 smart lessons that law firm leaders should heed

In our latest article covering the recent World Masters of Law Firm Management seminar in Sydney, we list some of Harvard Law School professor Heidi K. Gardner’s key takeaway messages that law firm leaders should consider. Cameron Cooper reports.

Collaboration is no fad. Clients want simultaneous access to ‘super-specialised experts’ and a broader legal team. They are also increasingly adopting ‘design thinking’ approaches whereby they test multiple ideas and discard the duds.

These lessons – and more – emerged in our last ALMJ article as we outlined insights from Dr Gardner, a Distinguished Fellow at Harvard Law School’s Center on the Legal Profession, courtesy of her World Masters presentation. In this article, we list more thoughts and ideas for law firm leaders to consider and act on.

1. Reap the wide-ranging benefits of collaboration

Research from Gardner and her team reveals the power of smart collaboration, a concept she defines as “the integration of specialised expertise in order to tackle more complicated problems than any experts can do on their own.” The bottom line is that partners can earn up to four times as much revenue when they involve more colleagues in client matters.

Collaboration also tends to inspire greater client loyalty, helps firms attract and retain talent, and produces more innovative work.

“So there’s a business case for what we’re talking about,” says Gardner, author of the acclaimed business management book Smart Collaboration: How Professionals and Their Firms Succeed by Breaking Down Silos. “One plus one plus one doesn’t equal three; it equals five.”

The caveat is that additional practice groups should be brought in to assist clients based on need and because their knowledge and skills can add value. Realise, too, that smart collaboration requires an investment in patience and resources. The benefits will take time to materialise.

2. Understand the compound effect of collaboration

Just as compound interest is a powerful investment tool, the impact on a law firm’s revenue when multiple practice groups engage with a client can be stunning.

Drawing from millions of data records, Gardner et al highlight a powerful correlation between profit and the number of partners working on projects. This impact can be multiplicative or even exponential, with more practice groups serving a client typically resulting in more revenue that is produced over and above what those practice groups could have done operating alone.

So rather than cannibalising one lawyer’s profit from a client, such collaboration can benefit both the firm and the client. “Every additional discipline adds more value than they could have done on their own,” Gardner says. “Far from subtracting or cannibalising, they’re actually better off themselves, and when the third person joins, the first two are better off.”

This is not about fleecing clients – the key is to understand the client better, recognise new opportunities and match lawyers according to their skillsets. Remember, too, that “margins rise with complexity,” Gardner says.

3. Adopt a client-centric culture

Gardner says all firms need to identify skillsets within their teams and consider how they can be deployed to help clients in a meaningful way. The focus should be on understanding what services can be offered and how they can add value.

Too often there are “untapped resources” within a firm. “If you’ve got experts and expertise and connections that you’re not leveraging it’s like having a bank account where you’ve lost your ATM card. You’ve got all the resources sitting there, but you can’t tap into it.”

4. Avoid cross-selling

This brings us to an important warning for law firm leaders. Gardner stresses the point that clients will quickly see through firms which try to involve more practice groups on a project just so the firm can bill more. “Clients hate cross-selling. It’s the legal equivalent of ‘do you want fries with that?’” So if you have lawyers attending a client meeting and neither party understands why they are there or what problem they can solve, get them out of there – fast.

5. Grasp these truths about lawyer compensation

In terms of recruitment and retention of top staff, Gardner urges firms to appreciate that compensation in the form of money is not a panacea. Keep in mind, she says, that relative pay matters more than absolute pay. If two partners sit next to each other, do the same kind of work and bring in similar revenue – but one makes more money than the other – then it inevitably starts to eat away at the lesser-paid employee.

Recognise, too, that metrics drive people’s behaviour at work in a way that remuneration can’t. Gardner observes: “Oftentimes, for example, the effect of a bonus is really only until the next pay cheque, but the metrics that people hit day in, day out keep people’s attention focused on the right kinds of activities.”

Likewise, good leaders appreciate that employees pay more and more attention to remuneration when there is an absence within the firm of other signals of a person’s worth.

“We see this repeatedly in places that have rich cultures, where people are exposed to lots of feedback, they know how well they’re doing, there is a culture of recognition and psycho-social rewards, where people are engaged and love the work they’re doing,” Gardner says. “In those types of environments there tend to be far fewer fights about compensation.”

6. Let leaders lead, let managers manage

Most chief executives and partners now understand that there is a distinction between managers and leaders; the former focus on the nuts and bolts of the business, put structures in place and handle complexity; the latter create a long-term vision and an environment in which innovation and change can flourish. Which is most important? “Both!” Gardner says. She notes, however, that “it’s much harder to delegate the leadership of a firm than it is to delegate the management”.

“The leader should be the snow plough out there clearing the path for others. The leader must understand the politics of the organisation and clear some of the hurdles so people have a clear path. And leaders should be inspiring people to stick to the firm’s plan.”

7. Beware of leaders’ tunnel vision

Through her research into smart collaboration, Gardner studied about 600 professionals, including many who were under pressure because of shrinking and ever more competitive markets. In trying to keep their respective ships afloat, these professionals were at the mercy of adrenaline, testosterone, hormones and stress.

“This really affects the way people think and their capacity to make decisions,” Gardner states. Worryingly, leaders in such circumstances often fall back into old ways of doing things when, in truth, new strategies are required.

“When people are stressed, their vision narrows by about 30 per cent,” she says. “You’ve heard of tunnel vision – that’s a real thing.”

This “adaptive response” often results in leaders limiting their field of possibilities, which can have a debilitating affect on the morale of staff and the performance of the firm. The good news, according to Gardner, is that such human tendencies can be over-ridden if they are identified and challenged.  “That’s something you can plan for and work on.”

8. Know your domain intimately

Specialisation and a need to become “deeper and deeper experts” has never been more important for lawyers, according to Gardner. The complexity of modern business problems demands such a narrowing of roles; the days of generalists moving quickly from one legal dilemma to another are largely over.

“The pace of knowledge is changing so fast right now that in order for anyone to claim to be the expert, you’ve got to be clear about what domain you’re the expert in.”

That may mean having a specialisation within a specialisation, and then collaborating with others to ensure your firm can provide clients with service that covers any perceivable knowledge gaps.

9. Understand what is worrying your clients

As part of the trend towards super-specialisation, Gardner raises the spectre of VUCA, a term with military origins which is short for Volatility, Uncertainty, Complexity and Ambiguity. In short, clients have more worries than ever, and they need a team of lawyers who appreciate their challenges and can work together to find solutions.

“So you’ve got to understand what’s keeping people awake at night,” Gardner says. “Your job as an advisor, as a partner, as a trusted colleague is to help identify what these issues are and who you need to bring on board in order to integrate expertise to tackle these issues in a holistic way.”

Without such collaboration, there is a very real risk of missing the big picture.

10. Think about implementing account-management programs

They work for the Big Four accounting firms, and law firms should also consider the benefits of account-management programs, according to Gardner. Such tools provide a top-down strategy that informs firms about the clients they want to serve – it is not just about targeting current big-spending clients but, rather, getting a clear idea of which ones to align with in the future.

First, Gardner says, firms should identify their key clients; then they should put some “analytic horsepower” behind possible accomplishments with those clients; and follow that up by mapping out how the relationships should unfold in the future.

“It feels almost Machiavellian in some ways to be so transactional in terms of how you develop relationships, but it’s how it works!” Gardner says.

11. Work on your elevator pitch

The ability to tell your career or law-firm story quickly and coherently to potential clients is crucial in highly competitive modern business markets. This means you need to finetune your elevator pitch so you can articulate your experience, strengths and achievements. Tell stories about how you assisted a client. Be compelling. Give them something to remember. Gardner says the human brain is wired to pick up on stories – and lawyers should be able to convey information about a problem they faced, how they handled it, and outline the result.

“If you can tell a story about how you helped a client or contributed to a solution, that’s one of the most powerful ways you can describe your expertise.”

12. Help juniors become better client handlers

Gardner recalls her days as a young consultant at McKinsey, where her boss took her under his wing and invited her to client meetings. Such access taught her valuable lessons about how to deal with clients, how to respond (diplomatically) when they suggested truly silly ideas, and how to comport herself around clients and peers. The cost of such lessons to McKinsey? Zilch. The value to Gardner? Priceless.

She advises law firms to be conscious of similar initiatives to help educate young lawyers and improve their ability to handle clients. “That also creates collaborative capabilities.”

13. Be proactive on succession planning

Increasingly, Gardner states, clients want a voice as to who will continue to serve them when senior partners retire. They don’t necessarily want to accept a replacement the law firm imposes on them.

Partners who “age in place” and become gatekeepers who lock out other potential legal advisors from within a firm are on notice that this is no longer acceptable to many clients. What chief risk officers at companies want from law firms is “laddering” of relationships – that is, the company can engage with a range of lawyers, from those at a senior level to those at a more junior level, on projects to ensure that they gain a range of views and do not suffer from the loss of acquired knowledge if one senior lawyer departs the firm or retires.

“They want to make sure there’s institutional memory,” Gardner says. “And they want to make sure that information is flowing at all those levels.”

The clear upside with such an approach is that the less a client relationship depends on one partner, the more likely a firm is to retain that client.