Tag Archives: Lateral Partner

Five Tips for Sustaining a Great Law Firm Culture

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Steven Harper wrote a terrific piece on law firm culture in response to the latest Citi Private Bank/Hildebrandt update on the legal market.  Harper is incredulous of Citi/Hildebrandt’s warning that “Law firms discount or ignore firm culture at their peril.”  He makes the point that “consultants have encouraged managing partners to focus myopically on business school-type metrics that maximize short-term profits…what has resulted from that focus: the unpleasant culture of most big firms.”

The reverse does not have to be (in fact often is not) true.  Namely, firms with a strong, collegial culture are not inherently doomed to poor economic performance.  They may not top $3mm a year in profits per equity partner, but everyone working in those firms earns a very good living, they have strong and enduring client relationships, and they enjoy a balanced and rewarding professional life.  Having that kind of positive firm culture requires work and discipline – and, especially, a commitment not to throw away long held values in the face of short term economic challenges.

Our recent survey on best practices in law firm strategic planning confirmed this point.  Namely, the firms experiencing the most successful results from strategic planning are much more likely to have articulated shared values or principles as part of that process.  At the same time, those highly successful firms are much more likely to adopt and track measurable objectives as part of the strategy process.  In other words, the most successful firms balance a strong commitment to long held cultural values with a pragmatic approach to setting objectives (i.e., financial, client relationship, and other measures).

Having had the pleasure and privilege of working with a number of firms over the years that have cultivated and sustained great cultures, here are five suggestions for how you can cultivate, embrace and sustain a set of shared values that define a great law firm culture.

  1. Honor the Founder(s) – When I started my consulting career at Arthur Young (that dates me), John Smock made sure everyone in the practice got a copy of a relatively short book entitled, Arthur Young and the Firm He Founded.  That little book encapsulated many of the core values of the firm – and traced them to the values of the hard working Scotsman who immigrated to America and started the firm.  Whether your firm was founded 20 or 200 years ago, you are likely to find some of the roots your firm’s values and culture in the character of your founder(s).  Honor those roots.
  2. Celebrate a Milestone Year – Round number anniversaries lend themselves to celebrations (10th, 50th, 100th).  So do record years, though they tend to arrive with more frequency and less fanfare.  Take the opportunity of a milestone year to reemphasize the shared values that brought the firm to that point.  Embrace and celebrate your culture and your shared values – not just the anniversary or the record.
  3. Document Your Stories, Your History and Your Culture – I have a number of books in my collection from clients – both law firm and corporate – in which the history of their organization (and its culture and values) is documented and described for posterity.  Sometimes those books are commissioned in conjunction with an anniversary, others mark the passing of great leaders, and still others were done simply to capture the stories before they were lost to memory.  Those stories may be the very best window into truly understanding the firm’s culture and the values – they are a way to connect our rational understanding of the values to our emotional understanding of values (see this brief slideshow for more).  Stories can even be used when you need to drive cultural change (see Peter Bregman’s HBR article on the topic).
  4. Ask Your People to Define the Culture – We have used a technique very successfully over the years to isolate core values and help organizations coalesce around them.  Ask a very simple question, “What three words best describe the values that endure over time in our firm?”  The resulting word-cloud is enlightening and it helps to define (or reinforce) the firm’s shared values.  It can be used in many settings to spark a discussion of shared values and the culture – keeping that culture front and center as other decisions are being made (e.g., employee reviews, partner compensation, lateral hiring, strategic planning, etc.).
  5. Put It In Your Plan – Finally, take a lesson from the firms having the most success with strategic planning and strategy implementation.  Articulate your values as part of your overall strategy.  Include a long term mission as part of your strategic plan and include a concise articulation of your core values in that mission.

While the embrace of firm culture and values may be belated for some, it is welcome nonetheless.  Whether your firm is large, mid-sized or small, sustaining a positive firm culture is a critically important element in a genuinely successful law firm strategy.  Who knows, it might even land your firm at the top of the Vault.com rankings for best firms to work for.

 

Top Insights from 2012 Strategy Questions of the Month

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Throughout the course of 2012, Sterling Strategies conducted monthly mini-surveys, each focused on a single strategy topic.  The intent was to develop some empirical data on what works and what does not work relative to a variety of strategic management challenges.

We certainly learned something every month.  Often the findings and insights were entirely new (if not entirely counter-intuitive).  Occasionally, the findings confirmed something we believed, but lacked the data to support.

Before setting our sights on advancing the state of strategic management in 2013, we thought readers might enjoy a highlight reel of sorts of the most significant findings from the 2012 strategy question of the month series.  The list is presented as a “top ten,” but the insights are ordered for readability and flow.

  1. Grow your own – When developing a strategy for generational succession, it is best to develop people yourself (rather than seeking to hire future leaders laterally).  Our November 2012 survey found that “high lifer” firms (i.e., firms with higher percentages of people who were hired at the entry-level and stayed) have dramatically higher confidence that future leaders exist within every experience level of their firm.
  2. Confront the elephant under the rug – The August 2012 survey focused on what approaches to managing under performing partners actually work and which do not.  What we found was that under performance rarely improves without frank discussion and accountability.  More importantly, confronting under performance actually has a reasonable success rate.
  3. Show me (more than just) the money – What characteristics make up a “model partner?”  That was our question in July 2012 and what we found was that, while originations and billings are very important characteristics in a model partner, subjective factors (e.g., training associates, bringing legal acumen to the table, being a good corporate citizen) comprise nearly 50% of the mix of characteristics firms want from the hypothetical ideal partner.
  4. See no evil, hear no evil, speak no evil (at least when it comes to partner compensation) – Our inaugural survey in January 2012 examined the question of what approaches to setting partner compensation lead to the highest levels of satisfaction.  It turns out, objective (i.e., formula) systems correlate with the highest levels of satisfaction.  And, so-called “closed systems” in which compensation and other data are not published are also closely correlated with higher satisfaction.
  5. The “vision thing” is a key to effective strategic planning – We took an objective look at what tools and approaches lead to more effective strategic planning in law firms (beyond, obviously, hiring Sterling Strategies) in June 2012.  The firms with the most effective strategic planning processes are much more likely to have articulated a vision for the future, a set of shared values, and measurable objectives to track progress toward achieving major goals and strategies.
  6. Focus practice group leaders on things that make a real difference in group performance – Firms with the most effective practice group management experiences are much more likely to ask practice groups to focus on cross-marketing, on profit drivers for their respective group, and on aligning practice strategy with firm-level strategy.  Meanwhile, the least effective groups get bogged down in administrivia.
  7. Better budgeting practices – Firms with the most effective budgeting processes are more likely to plan for growth (in addition to looking for cost savings).  And, the more effective budgeting processes are considerably more likely to involve practice group leaders in the budget development process.
  8. 2012 profit growth was driven by production and realization improvements – The bloom was clearly off the rose relative to using rate increases to drive profit growth (unlike the decade before the financial crisis).  Bonus question – is leverage dead?  On the surface the answer would appear to be ‘yes,’ but the reality is that leverage is wearing new disguises (e.g., more income partners, larger top-to-bottom compensation differentials, growing use of contract attorneys, etc.).
  9. Data, data, data (if you hope to be successful with AFAs) – Alternative fee arrangements are growing across a number of categories.  Law firm leaders were emphatic in noting that the key to success with AFAs is well analyzed data (both cost data and historical work load data).
  10. Practice portfolios are driving domestic law firm mergers – Allowing for alignment of fundamentals (e.g., firm cultures and economic compatibility), the most important driver of mergers these days is finding a merger partner with complimentary practice area strengths.

As a bonus (since many may have missed it with the crush of year-end collections and the holidays), see our December 2012 findings regarding the use of objective measures and scorecards in law firms.  Short summary – firms are universally good or excellent at measuring financial objectives and results, but do a poor job measuring the strength of client relationships, people development, or much of anything else related to their operations.

We are immensely grateful to the many, many law firm leaders who completed the short (usually two-minute) strategy surveys throughout 2012.  That input enabled us to build a nice body of empirical data regarding a number of important strategic management topics.  It was helpful for law firm managers – and to us as strategy consultants.  We intend to take a slightly different approach in 2013 (shooting for five-minute surveys on a quarterly basis).  That will reduce the number of times we have to pester you all for input over the course of the year.  In place of some of the monthly surveys, we will share insights and proven approaches gained directly via other channels.

Best wishes for a very healthy and prosperous 2013.

Partner Development Strategy – November 2012 Strategy Question of the Month – Survey Results

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Our strategy topic for the November 2012 focused on where the future leaders of law firms will be coming from.   There is a simple industry wide issue relative to generational demographics.  A very large cohort of baby boomer partners will be retiring over the next 20 years.  In fact, by 2020 (eight years from now) half of the boomer cohort will be 65 or older.  If you look at the broader demographics, the generational cohorts create something akin to a roller coaster.
 
 
  • Baby Boomers are a large cohort of over 80 million people
  • Generation Xers  are a smaller cohort of roughly 60 million people
  • Millennials are a large cohort of over 80 million (similar in size to the boomer generation – with many still in high school)
So, how do you overcome the overall industry (and societal) demographics to ensure you have strong people across all generational cohorts?  Our findings point emphatically to the value of hiring and developing ‘lifers’ (i.e., people who stay with the firm they join at the entry level).  In other words, the best path to ensuring you have great people across the generations is to hire and develop your own!  To quote a  couple of respondents:
 

  • “We are blessed with strength throughout the demographic ranks, as well as a culture that is attracting like minded star/potential star laterals. We highly value having high quality lawyers at all levels (including entry level), training and mentoring, and making it such that all who work here can, if they do their parts, make a career at our firm.”
  • “(Our future leaders are) most likely from “lifers”.  We have a good group of them.”
Firms who reported that 50% of more of their current attorneys are ‘lifers’ (let’s call those firms ‘high lifers’) are dramatically more confident in the future prospects of their young people.  Asked the importance of various generational cohorts in future succession (i.e., who are most likely to produce business developers and leaders over the next 10 years):
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  • ‘High lifers’ are three times as likely to consider their current associates to be a very or critically important source of future leaders (compared to ‘fewer lifer’ firms).
  • Similarly, ‘high lifers’ are 3.5 times as likely to have confidence in associates that they ‘plan to hire and train in the next ten years.’
  • ‘Fewer lifers’ on the other hand only truly have confidence in their mid-career (over 45) and younger equity partners.
 
More broadly, no one expresses much confidence in the ability of future lateral hires to be key players in 10 years.   However, there were firms anecdotally expressing great confidence in their laterals.
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  • “We have grown over the last 10 years 200%, mainly from lateral hires. It is from this group that we see our future leaders.”
  • “(Our future leaders will be) highly successful laterals that subscribe to our business philosophies and firm culture.”
In addition, there is not much confidence in the future prospects of younger (under 45) non-equity partners.  While not entirely surprising, the lack of confidence in non-equity partners raises enough questions about their long term role(s) to fill its own blog post.

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Hiring at the entry level has been consistently lower across the industry – as compared to pre-recession levels.  The following pie chart explains why that condition persists quite clearly.
 
Finally, a couple of respondents looked into the proverbial crystal ball and offered predictions about where the future generation of law firm leaders will emerge.
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  • “They will come from the middle tier of law schools, they will have worked their way thru college and law school, they will have started working early in their teens and understand how to make a dollar.  They will display a high level of emotional intelligence and a majority will be women.”
  • “From those who have a business/entrepreneurial bent as opposed to simply applying a legal analysis to a set of facts.”
As always we thank those who took the time to share their insights with peers and colleagues.  Comments are open and we welcome your emails and phone calls as well.
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Partner Development Strategy – November 2012 Strategy Question of the Month

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The demographics of the legal industry are clear – a very large cohort of baby boomer partners will be retiring over the next 20 years. In fact, by 2020 (eight years from now) half of the boomer cohort will be 65 or older. While it is certainly true that productive people work beyond age 65, there will clearly be a need for a new generation of highly capable partners to develop and manage client relationships, to train and mentor future partners, and to lead their firms and practices.

If you look at the broader demographics, the generational cohorts create something akin to a roller coaster.

  • Baby Boomers are a large cohort of over 80 million people
  • Generation X  are a smaller cohort of roughly 60 million people
  • Millennials are a large cohort of over 80 million (similar in size to the boomer generation)
There are clearly cultural differences between (and within) each generational cohort – something demographers have studied and documented.  However, simply looking at the size of the cohorts underscores the challenge facing law firms over the next 10-20 years. A large generational cohort has begun to retire and will continue to retire over the next 20 years.  Meanwhile, the generational cohort behind them is smaller (and we see many firms with fewer equity partners from this generation).  The Millennial generation represents a new, large cohort (boding well for the long run), but the oldest Millennial is still an associate today – and many are not even out of high school yet.

The question then is, “where will law firms’ future leaders come from?”

The very short survey below should only take two or three minutes to complete.  Your individual responses will remain anonymous and confidential – collective input will be published here at the end of the month.  Please complete the survey by the close of business (PST) on November 28, 2012.  If for some reason you do not see the survey in the box below, click this link and you will be taken directly to the survey.

As always, thank you for your willingness to share your experiences with your peers in the legal industry.

Managing Under Productive Partners

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The August 2012 law firm strategy question of the month focused on managing under productive partners – what approaches firms take to the issue; what works and what does not; and how the process plays out over time. In a very practical sense, this topic is the counter point to the July 2012 question of the month – what characteristics comprise a ‘model’ partner?

The term “under productive partner” implies that ‘problem’ partners are primarily an economic issue. Certainly, persistently weak revenue production  is the most common reason for frustration with partner performance. However, a number of law firm leaders noted in open-ended comments that “citizenship issues” and other qualitative factors regarding professional demeanor can also lead to a firm insisting a partner work to turn his or her performance around.

A Daunting Task, But Not Hopeless

Asked how often under productive partners manage to turn it around, over 95% of law firm leaders agreed that fewer than half of all ‘problem’ partners manage to have a “career renaissance.” In fact, over 50% of law firm leaders have found that fewer than 10% of partners manage to make an effective turn around. The silver lining – not a single law firm leader has found the well to be completely dry – everyone has seen a successful turnaround within their own firm.

Patience is a Virtue…

Firms are generally, but not universally, patient with regard to under performance. Many leaders noted that partner performance statistics are averaged over multiple years, so it takes time before performance issues are considered a persistent problem. Over two-thirds of the leaders responding to this survey noted that it takes at least two years of weak performance before the issue is addressed at all.

What Are Firms Doing to Address the Issue?

Asked to share which approaches they have tried and how well they have worked, law firm leaders were candid. The most commonly used approaches to address partner under performance:

  • Every firm has tried reducing compensation and holding one-on-one meetings with ‘problem’ partners.
  • Nearly everyone has tried “doing nothing and hoping things improve” (NOTE: It does not work – 90% report it “never works”).
  • Over 90% of law firm leaders have tried threatening compensation reductions and 90% have tried individual partner plans.

Conversely, a few approaches have not been as widely adopted, though some (as will become evident below) are actually reasonably successful in their own ways. Less frequently tried approaches include:

  • Only about half the firms indicated that they have tried to actively outplace partners (i.e., at client organizations, on the bench, etc.).
  • Slightly more than half of all firms have tried using a professional coach with under productive partners.
  • About 60% have tried “group interventions” (i.e., more than just a one-on-one meeting).

Now, it is absolutely true that actively outplacing someone is not really a turnaround per se – at least within the confines of the firm. However, for many partners, leaving (and landing well) is a tremendous career turn around. And, as it turns out, it is by far considered to be the most successful approach (by those who have tried it).

Blunt Tools

The other more successful approaches included actively cutting compensation; holding one-on-one discussions with under performers; and requiring individual plans. As one managing partner noted, compensation is a blunt tool and one you only get to use once a year (at most). In fact, these are all fairly blunt tools. However, a combination of one-on-one discussions along with individual turnaround plans has the direct benefit of creating accountability and a path forward for the partner in question.

Ultimately, the clear take-away messages:

  • Doing nothing and hoping it gets better never works;
  • Confronting the issue, creating a path forward, and holding people accountable has a reasonable success rate; and
  • Actively out placing those who cannot or will not turn it around is remarkably successful.

We welcome and encourage your comments below and your emails to John Sterling – jsterling@sterlingstrat.com .

 

Managing Under Productive Partners – August 2012 Strategy Question of the Month

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Last month’s law firm strategy question of the month asked law firm leaders to create a ‘model partner’ (i.e., a partner with the optimal balance of positive characteristics).  The ‘model partner’ results can be found in the July 2012 archives here.

Obviously, few partners actually deliver the perfect balance – but, the right balance is achieved across the partnership.  Unfortunately, some partners’ contribution to the firm erodes – sometimes dramatically – over time.  That may be the most vexing challenge for managing partners – turning around the performance of an under productive partner.

So, this month’s quick strategy survey will help us put some data around the question – what works and what does not work in helping under productive partners turn their performance around?  The quick 5 minute (or less) survey is embedded in the window below.  If for some reason you do not see it, click this link and you will be taken directly to the survey.

Deadline for responding is the end of business PDT on Wednesday, August 29, 2012.  Individual responses will remain confidential (as always).  Results will be published on this blog at the end of the month.  Thanks you for your insights and participation.

 

SURVEY RESULTS – Creating the ‘Model Partner’ – July 2012 Law Firm Strategy Question

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Our July law firm strategy question of the month focused on the characteristics that comprise a “model partner.” While crafting the balance of behaviors and traits of an ideal partner is a bit more fun (and bit less strategic) than previous months’ questions, the results (and the thought process) are useful. In particular, in an era of increased partner mobility and a tighter reign on entry into partnerships, it is very important to understand what your firm expects and needs from its partners (or at least its hypothetical “model partners”).

As some were quick to note in the open-ended comments section, few partners are actually a perfect balance of the positive characteristics highlighted in the survey question. In the real world, partners’ individual strengths and limitations tend to balance each other out across the firm. Thus, some are much stronger business originators, while others are extraordinarily creative lawyers and problem solvers. Some are exceptional relationship managers and some are truly gifted in their ability to bring people together and to develop the talents of their peers and subordinates.

The “model partner” question was structured as an exercise in balance. Survey participants divided 100 points across a range of positive characteristics good partners exhibit. Thus, the overall result produces a pie chart that visually depicts the “ideal” balance of positive traits we want in our partners. Note that in the pie chart, we have grouped multiple characteristics into larger themes (for instance, training, professional development and mentoring were grouped together into people development).

The idea of balancing a range of positive characteristics is undoubtedly the most productive way to think about what constitutes a “model partner.” But, the characteristics can also be view through the prism of a simple list as well. In that context, business origination was clearly the most important characteristic (over one-third of the aggregate weighting was given to origination). Working attorney receipts and the set of qualitative factors that make-up a “good citizen” of the firm were roughly tied as the second most important factors (both slightly under 20% of the weighting). People development, outstanding legal acumen, and participation in the management of the firm each received slightly less than 10% of the weighting.

As noted above, the survey provided an open-ended question to allow for further comments and/or additions to the list. As is virtually always the case with these “question of the month” surveys, the open-ended responses were thoughtful and added important ideas to the conversation. Several characteristics not specifically noted in the “divide 100 points” options were mentioned by multiple respondents including:

  • Positive attitude, upbeat, optimism in the face of challenges;
  • An ownership mentality;
  • A team player, willingness to help others;
  • Client focused.

In addition, a number of other terms offered in the open-ended response help to define some of the more qualitative aspects of good partners including loyalty, integrity, responsiveness, self-directed, and “servant leadership” (a term coined by Robert Greenleaf in a 1970 essay).

Finally, for those who completed the full survey exercise and are interested in the detailed responses, you will find those in the chart below. Note that the weightings do not add to 100 in this chart, since they represent average weightings regardless of the number of responses given to that characteristic. In that sense, it gives added weight to the lower rated items (which were given de facto ‘zeros’ by some respondents).

As always, we welcome your comments below or off-line via email at jsterling@sterlingstrat.com. Thank you for reading and for participating in the July 2012 strategy question of the month.