The Key to More Profitable Practices in the 21st Century

The challenges confronting legal businesses today—shrinking demand, underperformance, high attrition, climbing healthcare, and malpractice costs—are taking a toll on profits. Both Wells Fargo in its latest assessment and over 60% of recently polled law firm leaders believe the trend of eroding demand is permanent.

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Well-documented research and decades of practical experience in other industries indicate that a skill can be deployed to drive law practices to greater success. Is our industry willing to embrace it?

That skill is emotional intelligence (EI or EQ—emotional quotient). Emotional intelligence is the ability to recognize, understand and regulate our own and others’ emotions in order to reach our goals. Law firms and law departments can benefit from raising EI in four ways:

1. More Effective Leadership

Leadership is the single greatest determinant of business success, and as years of research and the experience of successful leaders worldwide all attest, emotional intelligence is more important to leadership effectiveness than any other skill. The author of Great People Decisions notes that, in a world that is “increasingly complex—uncertain and volatile, global and diverse… emotional intelligence-based competencies… differentiate stars from average performers at the top.”

Alliances, personal and organizational, are initiated, built and sustained; clients are gained and retained; warring partners are reconciled; messy, independent-minded groups of lawyers are led to reach a consensus on difficult decisions, and then follow through; all through the exercise of a leader’s emotional intelligence skills.

Yet given the low levels of emotional intelligence among lawyers generally compared to other professionals, coupled with the tendency of leaders everywhere to get less than candid feedback, low emotional intelligence among our lawyer leaders is all too common.

2. More Productive Cultures

One of the reasons emotional intelligence is so pivotal in effective leadership is the decisive role leaders play in shaping the culture of their workplaces, whether by intention or not. A leader’s EI sets an example and is projected throughout the workplace. High EI leadership helps build and sustain the kind of emotionally supportive culture that produces, among other things, lower attrition, reduced conflict, better teamwork, and greater personal well-being.

Lower Attrition. A more emotionally intelligent workforce dramatically lowers attrition rates. For example, annual turnover in recruiters at the US Air Force dropped from 35% to 5% after hiring for EI. High EI employees stay longer, enjoy greater career success and more often meet employers’ goals. They also have greater resilience after setbacks and more persistence through difficult times, all of which promotes productivity and personal satisfaction.

Reduced Conflict. Dealing with destructive, entrenched conflict is one of the steepest challenges for law practices, according to survey after survey of managing partners. Lawyers are typically weaker than the general population and other professionals in the skill of perceiving emotions, and misperceived emotion is a common driver of conflict. Studies have concluded that higher personal and organizational EI reduces conflict and improves conflict management. Simply focusing on emotions rather than the details of a conflict increases the likelihood of a resolution.

Better Teamwork. Team effort produces more comprehensive expertise and greater innovation through the cross-fertilization of minds. It also makes it more likely someone will connect with the client on a personal level, resulting in greater client satisfaction and loyalty. High EI has been repeatedly linked with superior team performance: average team EI alone has been found to predict a client’s satisfaction.

Greater Personal Well-Being. As workplace EI rises, there is a corresponding increase in personal well-being. That translates into higher retention, fewer illnesses, and less depression and other indications of distress—in short, greater productivity. Even cognitive analysis improves: doctors in a good mood reach the right diagnosis 19% faster than their unhappy colleagues. On the other hand, law practices with “high emotional toxicity” suffer significant damage to profitability.

3. Lower Professional Liability Costs

The incidence, costs and sizes of malpractice claims, as well as the number of complaints and disciplinary actions, have been rising dramatically nationwide. As a Louisiana judge, holding an assistant district attorney in contempt, proclaimed: “your emotional intelligence needs strengthening.”

Emotional intelligence can’t compensate for willful misconduct, but for those workplaces promoting ethical behavior, raising emotional intelligence may well reduce liability costs. An attorney whose practice is devoted entirely to defending disciplinary actions confirms that unmanaged emotions like anger and frustration, and the habit of avoiding dealing with those emotions, are what put lawyers most at risk for not only a single disciplinary procedure but for multiple ones.

The emotionally intelligent act more ethically for several reasons: they more accurately assess the risks involved, better understand which ethical standards are appropriate in the situation, recognize when and how others are making ethical decisions, and deal better with the emotional fallout from their own ethical choices, especially when they are ignoring or acting against personal values, which lawyers may do in advocating for clients. Most importantly, emotionally intelligent lawyers, like emotionally intelligent doctors, communicate better, avoiding the number one reason for disciplinary and malpractice claims in the US and Canada.

4. Higher Profits

Because emotionally intelligent law practices benefit from more effective leadership, are more productive, and also incur lower expenses for attrition, mental and physical distress, and liability, they enjoy higher profits. Further, high-EI firms enjoy the decided advantage of competing against so many practices low in EI.

Study after study confirms that individuals and organizations with higher EI are more likely to be profitable. High-EI senior executives in a large, multinational professional services firm, for example, produced profits almost five times greater than their lower-EI colleagues. The author of Nice Companies Finish First: Why Cutthroat Management Is Over—And Collaboration Is In acknowledges companies like Jet Blue, Zappos, Apple, Amex, Pepsi, and Patagonia, which have harnessed EI traits to build more collaborative, productive workplaces that benefit the bottom line.

Closer to home, Baker McKenzie managers attributed years of double-digit growth in profitability at least in part to a professional development program for its lawyers grounded in emotional intelligence. Further, in “the first empirical confirmation,” Harvard Law Professor Heidi Gardner found that partners in a global law firm who were able to collaborate produced greater personal revenue, and the whole firm also realized greater profits.

Unfortunately, law practices too often remain the habitat of siloed lone wolves whose interactions are largely virtual because of lawyer personal attributes, the ease and pervasiveness of technological interaction, and the typical organizational structure and culture.

A concerted effort to raise emotional intelligence in our lawyers and our legal organizations can make a difference in elevating leadership, productivity, collaboration, well-being. and ultimately profitability.

As Michael Mills, co-founder and president of Neonta Logic, Inc., and formerly a partner at Mayer Brown, has said in reviewing Beyond Smart: Lawyering with Emotional Intelligence: “In the face of challenges to law firms… emotional intelligence is needed to assure success, indeed to assure survival.”

About the Author

Ronda Muir is the principal and founder of Law People Management, LLC, and the author of Beyond Smart: Lawyering with Emotional Intelligence, recently released by the American Bar Association. Connect with her on LinkedIn.

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