Effecting change in a law firm
A couple of months ago I wrote an article on the idea of the ‘green field’ law firm, considering how one might set up a law firm from scratch. 1 If I were starting a new law firm it would be very different from the ones that exist now in the way it was structured and the way it delivered its services. Although there are undoubtedly people considering setting up a law firm from scratch in the light of the opportunities presented by the implementation of the Legal Services Act in England and Wales, there are many firms who may see opportunities in working in a different way, but struggle to transform a long-established organisation. This article therefore focuses on why change is so difficult in law firms and the techniques for overcoming those difficulties and achieving sustainable change.
By way of context, the kind of change under consideration here is a change in the way in which legal services are delivered, moving from an approach where every new matter is approached as a blank canvas, to a more structured and systematised approach, focusing on efficiency. Of course law firms are some way down this track already. Very few lawyers nowadays would start with a blank sheet of paper when drafting, say, a Confidentiality Agreement. Over the last two decades the idea of having a starting point which takes into account many of the issues that are likely to come up has been accepted. But this could go much, much further, involving a greater application of standard documents, processes and automation, the delegation of certain tasks to lower cost personnel (who may not have any formal legal qualification), and even potentially the delivery of some parts of the service online without human intervention. In this way the costs of delivering the service can be reduced, enabling law firms to accept client demands for lower fees whilst maintaining (or potentially increasing) profit margins.
This kind of change cannot be brought about without the co-operation and hard work of almost everyone in the organisation. It cannot simply be imposed. Working through the details of what changes should be made will require the input of practitioners in each area and so the first, and potentially most vital part of the change process is convincing people that change is necessary.
But everything is fine….
Many law firms are stunningly successful businesses with profit margins that would be the envy of global industrial giants. Even in firms where profits have declined since the banking crisis, the partners are still taking home incomes which most people would envy. Against this background it is easy for firms to be complacent.
However, firms had become used to the idea of a legal market which would expand steadily year on year. It is easy (and convenient) to see the recent recession as a minor and temporary blip in the upward trajectory of revenues and profits and to hold one’s breath waiting for it all to get back to ‘normal’. No firm wishes to appear to be in trouble, so the temptation will always be to accentuate the positive both in terms of external perceptions and internal morale and to ignore or play down pressures on costs and profitability.
However, there are strong voices that say that the market has changed for good. Clients who have been able to impose downward pressure on prices in the last couple of years are unlikely suddenly to accept a return to pre-recession levels (much less those levels plus a bit more). Nor will their expectations change, that law firms will focus on delivering services efficiently. Further, there are some players who have embraced the new market situation by addressing efficiency (not to mention new entrants) and they will want to capitalize on that effort by maintaining their advantage over less efficient operations.
Some firms like to characterise themselves as eschewing the hard-nosed cut and thrust, profit driven approach in favour of something more gentlemanly and relaxed. And whilst one could hardly say that partner profitability was at crisis point when partners are still earning six figure sums, that is not the point. If the firm cannot attract and retain excellent lawyers it will begin to decline. Inevitably the able and ambitious, however much they love a less aggressive culture, will find themselves thinking about how much more they could earn in another organisation. Some of them will pursue that idea and leave. If this becomes a trickle and then a steady flow, the firm’s morale, reputation and ability to attract new talent will suffer.
Books on leading change (in particular the excellent works of John P Kotter2 ) emphasise the need to create a sense of urgency, which is the opposite of complacency. Given the cynical audience in law firms, who are unlikely to be panicked by the mention of new entrants into the market and, perhaps more significantly, who may struggle to see any other way of delivering their service than the one they are used to, it is hard to create a sense of urgency. An approach we have adopted at 3Kites Consulting is to start with areas of the practice where realisation rates have declined or are noticeably lower than other parts of the business. Taking care to avoid any perception that one practice is being picked on or victimised (and therefore trying to ensure that several practice areas are addressed simultaneously), the conversation can begin on the basis that the figures appear to suggest a problem and can then dig into the causes of the problem and what can be done about it. It can be particularly instructive to look at the reasons given for costs being written off rather than billed to clients – often these will indicate that the work was not carried out efficiently enough to deliver value for money to the client and this is a good starting point for discussion.
Why is change so difficult for lawyers?
A wise but cynical colleague once advised me “if you are trying to change a law firm, you have to think in geological time frames”. This was a helpful warning against believing that change could be effected overnight, although the outside world may not wait this long for law firms to adapt.
Some might take the view that law firms have experienced enormous change over the last decade. In most areas the law has become significantly more complex, there is more information being thrown at us from all sides and technology has required responses to be delivered far more quickly, thus impinging on ‘thinking time’. The bar has been raised in terms of a lawyer’s ability to bring incisive judgement to bear in complex and difficult situations. There are those who would argue that lawyers should not be expected to cope with any more change.
Furthermore, the natural tendency of lawyers to be conservative and to view any proposed change as an implied criticism of the way they have been operating up to now, will exacerbate their resistance to change. Which leads me to the conclusion that the only way in which change will be brought about in a law firm will be if it is set in the context that:
Change is a sensible response to altered market conditions, rather than being driven by a sense of panic.
A change of approach does not indicate that everything that went before was wrong. Times have moved on.
Change provides an opportunity to steal a march on others (provided it is brought about speedily enough), rather than only being a defensive move when a firm is in trouble.
Change is a way of enabling lawyers to deal with the demands imposed on them, rather than being another demand in itself.
It is easy to underestimate the amount of persuasion that will be required. For those deeply involved in the change initiative it may seem that everyone should ‘get it’ when it is explained to them logically. This is far from the truth. It may take several, possibly different approaches over a period to ensure that everyone accepts the logical argument, understands the implications (see below) and overcomes their innate resistance to change.
What does it all mean for me?
Even when a sense of urgency about the need to change has been created, it is often hard for those affected to visualise what change might mean for them. Working ‘differently’ or ‘smarter’ are very abstract concepts. Therefore it is important to set out a more concrete vision of how a new approach might differ from the way people are working now. The devil of course is in the detail, but it will be necessary to provide a vision that people can grasp before they will be prepared to become involved in working out the detail. So there is a need for a vision to be communicated which provides enough flesh that the audience will begin to understand what is expected, but also which does not create so terrifying a prospect that the audience’s natural resistance will be reinforced.
In this context it is often helpful to focus on some of the inefficiencies that the lawyers will recognise as irritations and suggest that these will be a target. When they start to think about it, even the lawyers who believe everything is perfect will quickly identify some issues that they find frustrating. In addition it is helpful to address the client angle, drawing on any existing feedback and, ideally, involving some key clients in the discussion of how the firm could improve its delivery of services. It is sometimes surprising how clients perceive certain activities as costly and delivering little value to them, when the lawyers within the firm may regard those activities as vital. Discussing these differences can provide some valuable food for thought.
It is also helpful if the vision can include some measurable goals in terms of improvements in profitability (perhaps in certain defined areas to begin with).
Management and leadership
There is a temptation to set one’s sights low for fear of failure. Being too ambitious, especially knowing how strongly the odds are stacked against change being effective, could be setting oneself up for a fall. The only way that an ambitious vision is going to succeed, alongside a huge amount of energy and determination, is with wholehearted commitment from the leadership of the firm.
By that I do not mean merely the endorsement of an initiative to encourage ideas from the business, worthy though that may be. I mean a commitment to driving change through and a willingness to create and sustain a culture where failure to embrace agreed changes is simply unacceptable at any level. This will almost certainly mean addressing incentives which act counter to the new approach. Why would an associate want to deliver a service more efficiently if they are rewarded on the basis of hours recorded rather than fees recovered? Many individuals may feel that their entire job is threatened if tasks they previously spent most of their time on are now automated or handled by less qualified people. Unless these factors are addressed head on (which is far from easy, requiring as it does a demonstration of complete confidence that the chosen way forward is correct), change will never succeed.
In addition, I believe that a change programme, even one whose ultimate goals are ambitious and will take time to realise, must demonstrate some quick wins within a few months or credibility will be lost.
It will take the efforts of a large number of people spread right across the firm, and with representation from the top levels, to bring about change. A single person, or even a small team, cannot bring this about on their own. Given the difficulty of the task, it is tempting for the firm’s management to appoint a change manager (or Business Transformation Director) and then consider the task has been dealt with. Not so. These roles need to be actively supported by the firm’s leadership to be effective.
The nitty gritty - reducing the detail to a few mantras
The specifics as to how particular tasks are to be approached in particular practice areas will take a long time and a great deal of work to establish. I do not underestimate how hard this is. As we have delved into the detail with a number of our clients we have uncovered barriers, fears, assumptions, habits and perceived client requirements which can seem impossible to overcome. Add to those the inevitable politics that exist within a law firm and the analysis becomes even harder. One of the reasons why so few law firms have made significant headway in creating more efficient ways of working is because is it incredibly difficult. It takes a huge amount of energy and determination to see the analysis through and many give up after identifying only minor tweaks to the delivery of services. Sometimes an external third party without the baggage of internal politics is in a better position to do this than an internal team.
Once the detail has been worked out, there is a temptation then to dump it on the relevant practice area and expect them to cope with a vast amount of detailed and indigestible change. This is likely to lead to a reversion to old habits, because in the heat of the moment, faced with a demanding client, it will be much easier to do what has always been done than to consult the manual about how it should now be done. Help will also need to be available whenever someone is struggling to apply the new ways of working and it may be necessary to adapt the new processes over time.
Here 3Kites advocates the use of a handful of ‘mantras’. If one can boil down the essential principles of how one wants people to work into five or six clear statements, these will prove to be very useful in helping people to adapt. A handful of mantras can easily be learned, reinforced by posters, intranet messages, mouse mats, flashcards or whatever else. They have to become so ingrained that it is universally considered unacceptable not to follow them, whoever you are. Of course they have to be right, watertight and sufficiently broad to deal with most obvious questions.
The task of developing these mantras is also instructive in terms of assessing whether the change programme that is being implemented is coherent. If the programme is starting to degenerate into a series of disparate initiatives which don’t add up to very much, this will be very apparent when one tries to reduce it to a series of memorable statements.
Never letting the boulder roll back down the hill
Once a few quick wins have been achieved it is very tempting to take one’s foot off the gas and consider that the programme’s objectives have been considered. However, if the quick wins are to be maintained it will be essential to keep the momentum of change going. Otherwise those wins will quickly seem irrelevant and not worth maintaining. However, by this stage, having overcome the difficulties and obstacles stacked against the programme there is a risk that those leading the change will have run out of steam. By the time the first set of changes have bedded in there will undoubtedly be other ideas that can be explored or other areas where the new approach can be applied. As the pace of change in the world around us increases steadily it is unlikely that law firms will be able to ignore the need to manage change on a continuing basis, so there is merit in getting to grips with the art of change management as an ongoing commitment.
Melanie Farquharson, 3Kites Consulting Limited, January 2012
3Kites Consulting is a limited company registered in England and Wales. Registered number: 5644909. Registered office: Chancery House, 30 St John’s Road, Woking, Surrey, GU21 7SA. www.3kites.com
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