Page 41 - MASTER COPY LEADERS BOOK 9editedJKK (24)_Neat
P. 41
Leaders in Legal Business
In a law firm this challenge is particularly acute: Partners are also owners, and they have a right to assert
their voice in business strategy, so a common result is that partner preference prevails. The single largest waste
of time in a law firm strategic planning process is debating partners on esoteric concepts when neither side has
supporting data and the partners have veto power. The single greatest approach to overcoming uninformed partner
input is to have relevant data on hand that supports a conclusion. To be clear, partners may make decisions that
are not in their economic self-interest, and many do, but these can and should be conscious decisions. For example,
many law firms continue persist in offering practices that contribute little to the firm’s bottom line and provide
minimal cross-sell or upsell potential. While allocating capital to a different practice may generate a better return,
there’s nothing wrong with maintaining a legacy practice that is closely tied to a firm’s history or that occupies a
longtime partner who is nearing retirement. Adopting sound business practices like relying on data to inform
decisions does not mean that all decisions must be based solely on short-term financial benefits.
It is often the role of the consultant to advise leaders when their data infrastructure is lacking… and it
often is. Still, a good strategic planning framework can help both to analyze external and internal forces and to
generate reasonably informed outcomes. But nothing replaces building a data-driven culture where information,
and the processes and tools necessary to capture the information, are not deemed to be costly distractions.
Revisiting Incentives
The challenge of aligning and realigning incentives is greater in law firms than in law departments. A
partner who has learned over time how to maximize the firm’s compensation plan to generate a healthy income
year after year is generally resistant to any change, even one that on paper can be demonstrated to be more
lucrative for the partner. The inherent risk that a change might reduce a partner’s take, even balanced against the
corresponding potential to generate greater rewards, more often than not leads to stasis. A good consultant
understands that when an organization’s compensation plan is in conflict with the firm strategy, the compensation
plan is the firm strategy. Devising a strategy requires an examination of current and potential incentives to
determine where there is alignment and where there is conflict. Conflict must be resolved, and this can be done
most effectively by demonstrating with reliable data the positive outcomes associated with new behaviors.
Law department incentives are also in play, however. In corporations where legal costs are allocated to
the business units, the executives in charge care deeply about the management of legal spend. When these internal
clients participate in some variation of a 360-degree performance evaluation of in-house counsel, their satisfaction
influences compensation. It’s now a fairly common factor in general counsel compensation that adherence to a
budget has financial benefits or consequences. When devising a strategy to better serve internal clients, aligning
the incentives of those managing the effort will help maintain focus.
Sustainability
As with any strategic plan, a law firm or law department must revisit it periodically. However, while
tactics will surely change, and market dynamics may change the emphasis and direction of investments over time,
the fundamental and underlying strategy rarely lurches dramatically in every three- to five-year cycle. A good
consultant can help minimize the impact of short-term concerns and maintain the focus on matching the
organization’s long-term capabilities to the relevant sustainable market opportunities. The secret to effective
strategic planning is not all that elusive. It requires a rigorous process, data to guide decisions, wide stakeholder
participation to help pave the way for implementation, and thorough communication to ensure transparency. A
seasoned consultant can help legal organization leaders adopt this approach and can contribute to the analysis and
recommendations. Done well, the impact of a strategic plan will be meaningful and material. Done poorly,
however, strategic planning can be a costly distraction.
34
In a law firm this challenge is particularly acute: Partners are also owners, and they have a right to assert
their voice in business strategy, so a common result is that partner preference prevails. The single largest waste
of time in a law firm strategic planning process is debating partners on esoteric concepts when neither side has
supporting data and the partners have veto power. The single greatest approach to overcoming uninformed partner
input is to have relevant data on hand that supports a conclusion. To be clear, partners may make decisions that
are not in their economic self-interest, and many do, but these can and should be conscious decisions. For example,
many law firms continue persist in offering practices that contribute little to the firm’s bottom line and provide
minimal cross-sell or upsell potential. While allocating capital to a different practice may generate a better return,
there’s nothing wrong with maintaining a legacy practice that is closely tied to a firm’s history or that occupies a
longtime partner who is nearing retirement. Adopting sound business practices like relying on data to inform
decisions does not mean that all decisions must be based solely on short-term financial benefits.
It is often the role of the consultant to advise leaders when their data infrastructure is lacking… and it
often is. Still, a good strategic planning framework can help both to analyze external and internal forces and to
generate reasonably informed outcomes. But nothing replaces building a data-driven culture where information,
and the processes and tools necessary to capture the information, are not deemed to be costly distractions.
Revisiting Incentives
The challenge of aligning and realigning incentives is greater in law firms than in law departments. A
partner who has learned over time how to maximize the firm’s compensation plan to generate a healthy income
year after year is generally resistant to any change, even one that on paper can be demonstrated to be more
lucrative for the partner. The inherent risk that a change might reduce a partner’s take, even balanced against the
corresponding potential to generate greater rewards, more often than not leads to stasis. A good consultant
understands that when an organization’s compensation plan is in conflict with the firm strategy, the compensation
plan is the firm strategy. Devising a strategy requires an examination of current and potential incentives to
determine where there is alignment and where there is conflict. Conflict must be resolved, and this can be done
most effectively by demonstrating with reliable data the positive outcomes associated with new behaviors.
Law department incentives are also in play, however. In corporations where legal costs are allocated to
the business units, the executives in charge care deeply about the management of legal spend. When these internal
clients participate in some variation of a 360-degree performance evaluation of in-house counsel, their satisfaction
influences compensation. It’s now a fairly common factor in general counsel compensation that adherence to a
budget has financial benefits or consequences. When devising a strategy to better serve internal clients, aligning
the incentives of those managing the effort will help maintain focus.
Sustainability
As with any strategic plan, a law firm or law department must revisit it periodically. However, while
tactics will surely change, and market dynamics may change the emphasis and direction of investments over time,
the fundamental and underlying strategy rarely lurches dramatically in every three- to five-year cycle. A good
consultant can help minimize the impact of short-term concerns and maintain the focus on matching the
organization’s long-term capabilities to the relevant sustainable market opportunities. The secret to effective
strategic planning is not all that elusive. It requires a rigorous process, data to guide decisions, wide stakeholder
participation to help pave the way for implementation, and thorough communication to ensure transparency. A
seasoned consultant can help legal organization leaders adopt this approach and can contribute to the analysis and
recommendations. Done well, the impact of a strategic plan will be meaningful and material. Done poorly,
however, strategic planning can be a costly distraction.
34
