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Law Firms Functioning “More Like A Business”

Posted by Bill M. Wednesday, March 20, 2013 Leave a comment

Every law firm, although unique, is in some way experiencing the economic and client pressures presently affecting the entire legal industry. The common response to these pressures often begins, and sometimes ends, with a broad comment that your firm needs to “function more like a business.” This article will briefly discuss how we see this phrase commonly perceived, the unique difficulties it creates within the legal environment, and the challenge law firm leaders must face if they want to thrive during these challenging times.

Two Perspectives

“Function more like a business.” While everyone will have their own unique definition of this phrase, I see them fall into two general perspectives.

The first is by those who have experience in industries other than legal or have formal business training or education. These individuals envision efficient and profitable operations where performance metrics are routinely developed and utilized almost exclusively as their basis for major decisions affecting the business. I call this the “innovator” perspective.

The second is by those whose experience is nearly exclusive to the legal industry. While these individuals also desire profitability, they envision many business practices as restrictive or as a distraction from the regal nature of the practice of law and the profound impact it has on our society and nation as a whole. I call this the “traditionalist” perspective.

The Leadership Challenge

Anyone who observes the legal industry knows that economic and client pressures presently have momentum on the side of the innovators. However, those in law firm leadership who try to implement innovative change continue to experience the traditionalist’s significant ability to resist that change. But change they must. In fact, despite reluctance, the last several years have brought dramatic changes to the legal industry.

Consequently, if change and resistance are both inevitable, the challenge presented to law firm leaders is to find balance by seeking ways to implement innovative change while simultaneously working to preserve the cultural aspects of the practice that make it unique among professional services.

Proactive vs. Reactive

Much of the change law firms have experienced in recent years happened as the result of internal reactions to external pressures. Because external pressures are often unexpected, the resulting internal reactions occur with little time for management to research and plan for the change effectively. As a result, the change can often have unintended, and certainly unexpected, consequences.

As a result, when we talk about law firms functioning “more like a business,” an excellent place to start can be summarized as follows…

“Working proactively to minimize the unintended consequences
of changes we need or desire to implement.”


So, with this objective in mind, how do we begin? What can we do proactively to improve all future changes, irrespective of what those changes may be?

We need to start by accepting a simple truth... that any change we make is fundamentally influenced by our present understanding of what we are changing. Therefore, if our goal is to better manage the changes we need to make to our practice or operation, we need to begin by improving our understanding of our practice or operation.

Perception vs. Reality

Throughout my career, I have encountered a phenomenon where law firm management, at every level, possesses insufficient knowledge of the practice or operation they are managing. This occurs for a variety of reasons, but they often feel they either know, don’t need to know, or are not held accountable for what is occurring. As a result, efforts to analyze the practice or operation are suppressed because they are viewed as an unnecessary distraction.

Some will deny the existence of this phenomenon. The reasons for this denial is a topic for another day, but allow me to respond to two common defenses…

“We have undertaken multiple efforts to gather information about our organization.”

You have, and I do not mean to imply that those efforts were not successful (common examples include interviews, focus groups and surveys). While these efforts likely accomplished their intended purpose, they are often too narrow in scope or lack sufficient detail for their results to be useful for larger purposes.

“Our management team has a firm grasp on our internal operation.”

Yes, senior leaders and departmental managers, each focusing on their area of responsibility, have a general understanding of what activities individuals in their respective departments perform. However, systems are often not in place for this information to be gathered and compiled allowing it to be effectively referenced during their decision making processes. Additionally, where individual departments collect performance data, systems do not exist that correlate and compile the data with data from other departments providing management with a holistic view of the firm’s operation.

Allow me to illustrate using common examples…

Attorneys: “We establish an understanding of an attorney’s role by practicing with them and reviewing their time sheets.”

While observations, conversations and reviewing time sheets can certainly provide a view of an attorney’s client-chargeable activity, it is not a complete picture. What about the rest of the attorney’s time? An average attorney can spend a significant amount of time (commonly between 15%-25% of their total work day) performing non-chargeable activities. Because these do not generate revenue, they are often overlooked. Wouldn’t a better understanding of this time improve our understanding of the attorney's true work habits and productivity? Consider the following:

  • How much do we know about their non-chargeable time?
  • What specific support activities are they performing?
  • How many hours are they spending on each?
  • Can any of those activities be done by support staff?
  • What is the likely effect of making more or less support available?
  • What skills would staff require in order to assume these activities?

Secretaries: “We establish an understanding of a legal secretary’s role by obtaining an assessment from those they support and in some cases a dedicated supervisor.”

Establishing an assessment of a secretary’s performance by compiling fragmented information from multiple sources is the best most firms can accomplish. While satisfactory, this commonly produces an incomplete picture of what is actually a highly diverse and specialized role. Wouldn’t a better understanding of a secretary's time improve our understanding of their true work habits and productivity? Consider the following:

  • What specific support activities are they performing?
  • How many hours are they spending on each?
  • How are we managing the diverse requirements of this position?
  • How do the activities of legal secretaries intersect/overlap with other support departments or personnel?
The Challenge

While these two examples illustrate how a firm may have what many would describe as an "adequate" understanding of these positions, a deeper level of understanding would significantly improve business decisions affecting their performance and value and simultaneously give them the insight needed to minimize any adverse effects of those decisions.

Meeting this challenge begins with the recognition that our present understanding of our operation is insufficient. Many long-standing traditions and practices restrict our ability to move firms forward, but with patience and respect for history, I believe significant progress is possible.

Please contact me to share your thoughts on this article and to learn more about how ofPartner can help your firm meet this challenge.

William D. Mech, Principal
ofPartner Consulting Services
+1 312.720.6145
wmech@ofpartner.com
www.ofpartnerocs.com

©2013 ofPartner LLC

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