Are law firms manageable? David Maister, a former Harvard Business School professor, prolific author, and consultant to professional service firms, famously concluded in an article that law firms are not manageable. The main reason, he said, is that law firms are made up of lawyers, and lawyers have some unique personality traits. They are distrustful, argumentative, risk averse, change averse… in short, the antithesis of the traits necessary to manage a successful business enterprise effectively.
After 46 years of practicing law, including my tenure as managing shareholder of a large law firm, I must admit that I see a lot of merit in Maister’s observation. Lawyers have strong opinions about how law firms should operate, even though most of the lawyers have no foundation at all in finance or marketing or management—the components of operating a business. To make matters worse, very few attorneys in any given firm actually know all of the facts affecting the operation of their own or any law firm.
Having said that, I do not completely agree with Maister’s conclusion that law firms cannot be managed. While law firms are difficult—though not impossible—to manage, they are more difficult to lead than other businesses. There is a difference. The key to running a successful and enduring law firm lies in sound leadership. Leadership, while a “soft skill,” is nonetheless a skill that can be learned and practiced.
Although management and leadership are often confused for the same thing, there are important differences. Harvard Business School Professor John Kotter, generally considered the nation’s foremost authority on leadership, has described the difference in this way: “Management is about coping with complexity… leadership is about coping with change.” Anyone who has witnessed the commoditization of the law business, the advent of technologies applied to the law business, and the personnel issues of a law business will understand how important it is to manage well through these complexities. However, we also must recognize that the industry is changing. Law firms that do not adapt are destined to become extinct. Competent management and solid leadership are necessary for a law firm to survive and thrive.
What Kotter was saying is this: management involves planning and budgeting, organizing and staffing, controlling and solving problems. Leadership involves setting direction, aligning people, and providing motivation. In law firms, management is difficult. Leadership trumps management in the difficult department. Both functions generally fall to the same person, the managing partner.
Firms must ask: who should lead the firm? The mantle of leadership should not necessarily be borne by the best lawyer. Or the most friendly. Or the most charismatic. Or the most senior. It is not necessarily the smartest person in the firm or the best business originator or the individual most adept at budgets and balance sheets. So what are the qualities of a good leader? For that, we need to borrow from the business world.
Jim Collins, author of Good to Great and Great By Choice as well as other business books, recognizes what his research identifies as the qualities of an ideal business leader, what he calls a “level 5 leader.” He describes a level 5 leader as having a paradoxical combination of deep personal humility and intense professional will. The former is characterized by someone who is willing to subordinate their own ego, give credit for successes, and assume blame for failures. The latter is a leader who first and foremost, cares about and believes in the firm; one who is concerned about strategy, but puts people first.
This means figuring out who the right people are, hiring those people, and being willing to let go of the wrong people. It means a leader who deals with the brutal facts while simultaneously maintaining absolute faith that the firm will prevail. Such leaders do not tolerate mediocrity; they demand excellence, select excellent successors, and they take pride in the successes of the firm and passionately want to see it become even more successful in the future. I have heard business luminaries such Jack Welch and Lou Gerstner say that finding a successor is the number one priority of a great CEO.
Is leadership innate or can it be taught and learned? Certainly some individuals are blessed with innate qualities of leadership, and for the many who were not born with them, the fundamentals can be learned and practiced.
We have a program at our firm devoted to developing future leaders. Each year, the management committee selects four attorneys from among the non-equity shareholders and senior attorneys. This is a voluntary program, so all attorneys interested in participating must apply, which includes answering questions concerning what they have done as a member of the firm to build their skills and reputation, what they have done to engage as a member of the community, what they consider the strengths of the firm, and areas where they think the firm might improve.
The leadership class embarks upon a two-year program led by our professional development director, in which they visit all of our offices (to meet the people and learn what is done and how it is done in each office). They spend a day with each of our department heads (HR, IT, marketing, finance, professional development) to get an in-depth explanation of each department’s responsibilities, and they travel to the World Business Forum in New York to hear some of the world’s best opinion leaders on topics ranging from management to marketing to governing. In addition, the leadership group selects three videos from the Stanford Business School library, which they view together, and then lead a discussion before our management committee. (They also view one additional video each and report back to their group as well as to the program alumni.) Finally, we ask them to choose a problem they think the firm is facing, offer solutions for improvement, and present that verbally to the management committee and the practice group leaders.
At the end of the program, the participants have learned far more than is taught in most law schools about the business of running a law firm. The value of this program is in exposing lawyers to the information, attitudes, and skills they will need to succeed in leading a law firm one day. The leadership program also allows senior management to see these participants in action. There are always surprises. Sometimes people perform far better than anyone would have anticipated, demonstrating leadership qualities and potential that might otherwise have gone undeveloped and unnoticed; in other instances, people fall below expectations and disappoint. That is okay, too. It helps the current leadership identify the best candidates for the next generation of firm leaders.
Aside from identifying and training potential leaders, it is critical to maintain a culture that lends itself to good leadership and, in turn, sound management. Essential leadership traits include:
The law sets limits. The bar sets standards. The firm sets core values. So why is the concept of integrity so difficult for so many in our profession? Is it the pressure to land the client, win the case, or move up the partnership ladder? Whatever it is, nothing is more important to the health of a firm than an unbending expectation of integrity. This expectation should apply in dealings with courts, with opposing counsel, with clients, and with colleagues.
Barring some earth-shattering error that threatens the firm or a demonstration of lack of competence, firms should not fire lawyers for making a mistake. Lawyers are human. All humans make mistakes. Therefore, lawyers make mistakes. However, and this is where integrity also comes into play, failure to disclose a mistake or any effort to cover up a mistake should result in instant termination. Firm leadership must be clear that lying and cheating will not be tolerated. A culture that tolerates deviation from those standards may enjoy short-term financial success but is ultimately doomed.
Firms must make expectations clear. Most firms set billing requirements, but should not stop there. Practice group leaders should meet with individual lawyers to help them develop their own goals, which include billing, of course, but also educational enhancement, community and organizational involvement, origination goals, firm management participation, etc. Once the lawyer agrees to a set of goals that they help establish, that is the yardstick upon which success for the year (i.e.: bonuses and compensation) is based. Lockstep is not advised.
Lawyers must also be accountable for behavior. Part of behavior is integrity, as discussed above, and that is non-negotiable. Expectations for civility, collegiality, and teamwork also are important. Too often, firms overlook bad behavior where the individual is a big originator or a big biller. Inevitably, the cost of keeping such individuals in a firm, whatever their personal productivity, will not be worth it. Address it sooner than later, and the firm will be much stronger, and much more successful.
Firms are sounder when they benefit from individuals from different backgrounds and experiences. This should be obvious but if it is not, then do it because it is good business.
Many business success coaches would counsel to welcome failures as they are the foundation of success. Winston Churchill said, “Success is the ability to go from failure to failure with no loss of enthusiasm.”
No one in any sport bats 1.000 or sinks 100% of his shots, but the best athletes know that they will score more if they are not afraid to swing or take the shot. When he retired, Babe Ruth held Major League Baseball’s home run record—and also the record for the most strikeouts (in fact, both records stood for decades). Yet lawyers are uniquely intolerant of failure, which makes the rank and file afraid to try new things or take risks to advance themselves or the firm. Innovation is critical to success in this rapidly changing legal industry environment, and leadership should encourage and not dampen innovation.
New ideas are praised and well compensated… if they work. Too often, however, (almost always) firms will penalize attorneys if the idea does not succeed, and succeed quickly! This is very short-sighted. If there is a steep price to pay for innovation efforts that come up short, then there will be no innovation. Lawyers simply will not take the risk.
Encourage people to experiment with implementation of well-reasoned ideas. Three years ago, we devised the idea of a dedicated practice devoted to public-private partnerships (P3). We already had strong practices devoted to construction law, government relations, real estate, and finance and felt that this was the right fusion at the right time. One of the partners, a very productive construction lawyer, took the lead. He wrote the statute, which the state passed, began an industry trade association, wrote articles, gave speeches, and devoted a lot of uncompensated time. Billing lagged a little but did not take a big dip because high achievers know that they can always work a little harder when there is something special to be achieved through added effort. Had it not worked, there was never a question that his internal stature would decline. He had the freedom and firm support to take the risk. It did succeed. Because we have a culture that encourages innovation, we don’t hesitate to try new things and to be agents of change.
What makes for the best lawyers? Are they the hardest workers? The smartest? Graduates of the best law schools? All of those things are important, but none explain why certain lawyers not only bill more than others and originate more clients than others, but also have lower accounts receivable and fewer complaints. The secret is simple: the best lawyers are the lawyers who care. And the lawyers who project that caring to the clients. Caring is perhaps not something teachable, but certainly is something that can be demonstrated by example. If the top brass is consistently leading by example, the others will catch on, and it will stick.
“If you build it, they will come.” Most of us know that famous line from the movies. J. Edwards Deming applied that to business. He felt that if the focus is on quality above all else, the business will follow. Largely ignored in the U.S., though now revered, Deming taught his method to the post-war Japanese, helping to drive a sea change in their methodology and make them world leaders in quality manufacturing. This must be emphasized to billing-obsessed lawyers; if they worry more about the quality of work than the billing hours, the hours will increase automatically. Clients will want more of that lawyer’s service. The clients will refer other clients. The reputation of the lawyer and the firm will grow and so will the firm’s business. It is likewise the obligation of firm management to make clear that quality comes first.
Service is not something taught in law school. In reality, it is basic communication and interaction. Clients want to be heard. Clients can walk down the street to another firm to get a pleading, motion, or contract drafted. The differentiator is the service.
So how hard is law firm leadership? The formula for effective law firm leadership is simple enough: the right hiring, the right training, the right culture. In combination, they will provide the background for a well managed and sustainable law firm.
About the Author
Alan S. Becker is the founding shareholder of the law firm of Becker & Poliakoff, a frequent lecturer on the business of law and leadership, and is the vice chairman of Enterprise Florida—the state’s official economic development organization. He can be reached at firstname.lastname@example.org.