Obstacles to change in law firms: How to navigate them

Obstacles to change in law firms is a very welcome contribution to Dialogue by Nick Jarrett-Kerr. I  value Nick’s practical perspectives for two reasons: [1] they are grounded in his astute observations based on decades of hands-on experience of working in and with law firms, and [2] in using How in the subtitle for Remaking Law Firms: Why & How, Imme Kaschner and I focused on the practicalities of what needs to change in the BigLaw business model. 

In many cases, firms have developed faster than the ability of some of their partners to keep up. Skills that were perfectly attuned for firms with smaller clients and less complex engagements are no longer adequate or relevant for more sophisticated clients and more demanding client engagements. Equally, some partners have found it difficult to adapt to a legal world which has steadily become more demanding and price sensitive, and which requires partners to work harder, more efficiently and more cost effectively. With increasing pressure on margins, performance standards, compliance, and the internal working regime have all hardened – more hours, more rules, fewer secretaries and greater technological demands to process work digitally. Whilst most partners still pine for the old golden days of law practice, a sense of realism and the urge for survival has enabled most law firms to keep their heads above water. Some partners have, however, drowned. Furthermore, as legal services commoditise still further, the amount of partner-level work has continued to reduce. Thus the role of the partner skews more and more towards the managerial skills – particularly work-getting, client-caring, work supervising and team managing – and away from the role of the partner as a technical legal expert. Recently a further challenge has hit the traditional business model – the old model in which partners were expected to build increasingly large teams of trained lawyers working below partner level and to leverage work down to them, at high charge out rates. This leverage model enabled the firm to make substantial profit but for some time been under challenge from new methods of getting work done such as Legal Process Outsourcing (LPO), the arrival of alternative service providers such dispersed law firms and firms deploying innovative ways of providing legal services.  It is clear that large corporations through their legal departments and procurement departments have found the substantially lower rates offered by alternative service providers to be extremely attractive. Taken to its logical extreme, these challenges present a huge threat to the whole of the leverage model employed by the larger law firms because fewer staff lawyers are needed and the opportunity to make profit via people leverage becomes more limited.   

 In some ways lawyers are lucky that change has been slow to happen – many law firms have not had to be very pro-active until recently in facing up to change.

After all, experts have been saying for some years that the pace of change affecting the legal profession continues to increase; that these changes are inexorably affecting every market, every working practice, and every process. 

But if you stop to analyse what is changing, both in society and the legal profession, some comfort can be drawn. Take the clothes you are wearing as an example, or what you carry with you. Wool, cotton and silk have been around for centuries and polyester for a number of decades. Buttons and zips have been in use for many years. The point is that, whilst clothing styles may have changed, the basics of much of our clothing have altered little. A similar point can be made about your working environment. You may have had a mobile phone for less than ten years, and the pc on your desk at the Office for a similar time, but many other factors have broadly remained the same. The basic laws which underscore our whole legal system are still in operation.  And this is likely to be the case for many years to come. 

The point is that what tends to change is style not substance, how law is practised (and by whom) rather than necessarily the substance of the law itself.  This is mainly brought about because there is an inexorable pressure by clients to be able to obtain their solutions and out-comes quicker, cheaper and more efficiently than ever before. In addition, our society is changing too and this means amongst other things greater people-power by non partners and the costs of labour going up faster than our ability to raise fees at the same rate. 

In face of this, the biggest change currently being faced by law firms is changes to their working practices being forced on the profession by the competitive pressures from both inside and outside the industry.

The good news is that, in being creative and innovative about future working practices, we do not need to throw out all that we have learnt and all the benefits of our experience and start again from scratch. In fact, innovation and creativity is not like that at all. In the words of Arthur Koestler (The Act of Creation)

“The creative act is not an act of creation in the sense of the Old Testament. It does not create something out of nothing; it uncovers, selects, re-shuffles, combines, synthesises already existing facts, ideas, faculties, skills. The more familiar the parts, the more striking the new whole.”

Innovation, therefore, entails finding new patterns and methods of working, evaluating them, and then putting in place an implementation strategy. This is easier to say than to achieve. But every practitioner in every practice area ought to be asking himself or herself “How could we do this differently?” 

Obstacles to change in law firms

Law firm partners and leaders ought to have some plans to cope with some of the obstacles to their projects and the implementation of them which could occur along the way. Anticipating such barriers can often lead to them being headed off. 

Here are five of the issues which can quickly turn into obstacles, with some suggestions to navigate each of them

 Issue one: the dangers of multi-faceted change

Impending changes to partner profit sharing and compensation systems form a classic example of a situation in which the issues of personal change and organisational change overlap. Additionally, most firms are encountering a period of transition and change brought about by market conditions and the economic climate. It has been shown that people tend to resist change the most when personal change, organisational change and macro change – political, economic, social and technological change – are all taking place at the same time and overlap.  In the context of changes to the compensation system, partners will inevitably be concerned about the possible impact of the changes on them, and even if conceptually supportive in organisational terms, may quickly become obstructive or silent objectors if they feel personally threatened. Thus it is almost always easier to change systems during a benign economic period or during a firm’s growth period when the possible impact of some of the overlapping issues is at its lowest.

 Possible Solutions to this issue include

  • Considering incremental change to ease resistance. Change projects carried out just a little bit at a time tend to incur less resistance
  • Communication with partners at all times is critical – to maintain focus and to keep people informed
  • The leaders should paint a clear and compelling vision for the future
  • In appropriate cases, the leaders should point to the dire consequences which are likely to happen if the change does not happy – as has sometimes been pointed out, people will usually only change to the extent they are forced to.

Issue Two: The tendency of law firm partners to bury themselves in client work

Professionals will often bury themselves in work and simply abstain from involvement in internal initiatives or even refuse to engage in dialogue. 

Law firms are people businesses. On the whole this is a very good thing, but it can also mean, for example, that the ability of the management team to get initiatives completed is constrained. Any major change project, in order to succeed, will need participation or co-operation from the project team and the partners generally. And if this is not forthcoming, then the initiative will fail. This has become a real problem for some firms, where it has quickly become apparent who are the movers and shakers, who can be always relied on. This in turn results in the movers and shakers always taking on more than their fair share of projects. So what is to be done about those who are not pulling their weight? It is important not to under-estimate the degree of resentment felt by the achievers, if they feel that they are taking on unfair burdens and that those on the sidelines are extracting unfair advantages. There can be an element of self fulfilling prophecy here. The over-achievers and high performers are usually recognised by the firm and are already pretty well rewarded. They often will resist changing a system that is already working for them. As has been argued before, it is often the underperformers that law firms fail to involve or rely on. 

This issue can seriously affect project teams as initiatives often stall if a poor process is followed or promises and commitments are not followed up or followed through. In my view it is part of the job of both the project team and the firm’s leadership team to create an effective and realistic timetable and stick to it. 

 Possible solutions to this issue include

  • Forming a guiding group or loyal allies who will share the burden of the project
  • Identifying early on the people who are likely to oppose the changes and taking time to discuss their fears, uncertainties and doubts at an early stage
  • Making sure that you have the firm’s opinion formers onside at all times
  • Spending time in partner workshops and one-to-one to increase buy-in and decrease apathy
  • Make it clear how determined the leadership group is to seeing the change through

 Issue Three: How different personalities view change

It is important to recognise that different personalities have different attitudes to change – from those who love change to those who positively hate it. 

People might agree with both the need to change the profit-sharing mechanisms and the proposal, but still resist for a number of reasons – because they are risk averse or because they are concerned it may affect their status in the firm. Alternatively, they may be worried about their ability to survive in a new world. Worst of all are those who say nothing but are silent dissenters.

It is vital to understand your partners and to identify how they might react in the face of proposals to alter compensation or profit sharing, particularly if a major shift is envisaged.

 Some law firm partners are heavily analytical people who have a tendency towards perfectionism. They are used to dealing in facts, data, logic and details. They are sometimes slow to make decisions because they want to be sure before taking action. As a result they may appear cautious and risk averse. On the other hand, as details people, the decisions and information they provide are usually accurate and well thought through. Some analytical partners are very resistant to change. Their need for analysis can lead to paralysis and certainly gets in the way of fast moving projects which are not firmly rooted in science and data. For these people, the dangers of multi-faceted change will be very high. 

 All firms contain their fair share of partners who are social creatures, likeable and charming and inclined to attach a lot of importance to the building of relationships. Such partners prefer to leave involvement in projects – such as the design of a compensation system – to others. Their strengths are usually in areas like recruitment and the juggling of multiple tasks without getting stressed. They may be just as arrogant or opinionated as any other partner but are often inclined to keep to themselves what is on their mind. Such partners are disinclined by nature to enjoy change and can retreat into a shell when a change programme is under way.

Many of the firm’s leading partners – and those who are very ambitious – will be highly driven personalities. All firms have partners who are pushy and demanding and seem to be the strong, decisive, results-oriented types.  They can appear to be unfairly aggressive at times and, although good delegators, are equally demanding of themselves and of others. They will usually try to keep their emotions to themselves, but will occasionally explode. They are however highly self-critical, and resent those who waste their time with idle chit-chat and non-business oriented gossip. Drivers tend cheerfully to embrace the new and untested; there is little by way of change which they will seriously resist.

 There are also a few highly creative partners, although the legal profession does not always attract those whose core strengths are a fertile imagination and an innovative attitude. These creative and expressive partners love to have a good time, are highly enthusiastic and creative, and operate primarily by intuition. Such partners can be easily bored and creative, and therefore keeping them focused on a task is sometimes difficult.  However, they often seem only to function at their best during a time of change and their tendency to explore new ideas and projects makes them eager for change. 

 Possible solutions to this issue include

  • Taking time to understand those who are risk averse and spending time to give them facts and data which will help them analyse through the changes
  • Identifying those who are frightened or embarrassed to put their heads above the parapet and spend time talking to them to establish their real fears
  • Partner workshops help to build esprit de corps and to create both a momentum and feel-good factor
  • Appeal to those who are either creative or results-orientated to help with the project

Issue Four: How people’s perceptions alter during a period of change

During a period of change, individual partners will go through a cycle of emotional phases as they react to and attempt to handle the transition. This often follows some form of transition curve, the intensity and speed of which will vary between partners depending on their personal attitudes to change, their position in the firm, their perception of the level of threat presented to them by the proposed change, and their level of confidence in their own abilities to survive and prosper.

The first reaction to proposed change often starts with some very mixed feelings. Excitement over something new can be tinged with a strong feeling of anxiety, and in some cases anger sets in. Often a period of numbness and denial then sets in, when partners often rationalise the impending changes as either not likely to happen or not likely to affect them personally. At this stage, partners tend to retreat back into the safety of client work, feeling that if they keep their heads down, the danger will soon pass. They will remember any failed internal initiatives and will rationalise that this latest management idea will soon fade. At this phase, the leaders need to ensure the changes are fully understood and reinforce their resolve to see the project through.

 At some stage, it becomes clear to partners that the threatened change is very likely to become a reality, and the realisation of this can cause confusion, anxiety and even depression.   It is at this stage that such partners may start to engage in the project and even allow themselves to be helped, coached and supported though the process. They may however remain extremely concerned how the proposed change might affect them.  There then starts to be a resigned acceptance of the reality of the new situation along with a dawning recognition that new skills, behaviours and attitudes may be required. This is the real low point on the transition curve and can be a time when partners either give up and leave, or wallow in an introspective pool of regret and resentment at the passing of the old order. It is also, critically, a time when partner performance may be affected and partners may enter a period of underperformance. At this point, the firm leaders need to watch out for any partners who feel under threat and are suffering some form of internal personal crisis. The threatened partners must be encouraged to let go of the past and helped through a period of acceptance, transition and preparedness to try new ideas and adopt new ways of working. 

 Possible solutions include

  • Watching for signs of stress and changes in mood as people work through the changes
  • Coaching of and support for those who appear to be finding the changes really difficult
  • Communicate, communicate, communicate

 Issue Five – failure to face the future

Law firm partners tend in my experience not to look very far ahead. In their minds, short term results trump long-term planning every time. The three main long-term issues that partners do their best to avoid are succession planning, client defections and attrition and the decreasing effectiveness of their current business and pricing models. 

First, I encounter quite a few firms where there are no obvious replacements to the current leadership team or where the expected retirement of, say, 10% of the partners over the next five years has not been planned for. Second, with notable exceptions, I see many key client relationships taken for granted with little or no effort being made to build relationships that will survive a change of a key contact. It is often said that all relationships atrophy over time, and yet many law firms still tend to take their best clients for granted. Third, the traditional business models and pricing structure are under heavy strain right now, but law firms tend to tweak their models in response instead of considering how competitive changes and the impact of innovations such as AI might impact in the longer term.

Possible solutions include (with a view to gaining enthusiasm and buy-in for relevant strategic projects)

  • Away days with a futurist theme
  • One-to-one sessions with key partners to help build a long term view
  • Planning for leadership and client succession
  • Reinvigorated client relationship programmes
  • Research and development initiatives into legal process improvement, the use of technology and alternative career structures

Implementation summary

 There are at least seven implementation steps which should be applied in any internal project to maintain project enthusiasm and avoid partner cynicism

Understand and engage partners, taking care to ensure their agreement and involvement and to allay any fears. It is helpful to identify how some partners might react in the face of new proposals particularly if a major shift is envisaged.

  1. Empower people and avoid heavy controls. A punitive and aggressive implementation process is more likely to generate an atmosphere of fear or cynicism than one of motivation and enthusiasm.
  2. Focus on clear and measurable goals. Many plans are vague and unrealistic with the result that discouragingly little progress is made at the cost of morale and commitment. To avoid this, make sure that the project plan is understood in some detail and that the milestones are carefully set and adhered to. 
  3. Avoid Short term thinking. This is usually exemplified by a focus on fees and hours and practically nothing else to the detriment of long term investment. The focus of any change programme should be oriented to the long term health and strategic success of the firm. At the same time, if some shorter term successes can be created, this helps to keep up the momentum of the change project
  4. Make sure you follow through. Lack of careful review can give the impression that the leaders do not take the project seriously. 
  5. Improve communications. Managers often fail to communicate adequately, consistently or even at all.   It is vital to keep people informed and to stimulate enquiry at all stages. 
  6. Prioritise important projects. Managing partners can get bogged down in trivial administration and miss out on the important task of inter-acting with their people. Heads of departments are often as bad; by spending a disproportionately large amount of time on client work, they succeed in losing precious management impetus and risk devaluation of the management currency.

Strategy Consultant to Law Firms, and Business-Critical Advice to Law Firm Leaders.

Nick first published this post on Obstacles to change in law firms on LinkedIn. I am grateful for Nick’s permission to re-post on Dialogue.

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