Are Law Firms Manageable?

post # 39 — March 29, 2006 — a Managing, Strategy post

In the April issue of THE AMERICAN LAWYER, just about to hit the newsstands, I have an article entitled “Are Law Firms Manageable?”

I’ve been asked not to post the full article on my website until April 6, but here are some highlights. [Update: the full-length version of "Are Law Firms Manageable?” is now also available in the articles section of my website.]

My core argument is that the ways of thinking and behaving that help lawyers excel in their profession may be the very things that limit what they can achieve as firms. Management challenges occur not in spite of lawyers’ intelligence and training, but because of them.

Among the ways that legal training and practice keep lawyers from effectively functioning in groups are (i) problems with trust; (ii) difficulties with ideology, values, and principles; (iii) professional detachment; and (iv) unusual approaches to decision making.

The problem of trust

In addition to fighting vigorously to preserve their autonomy, lawyers are professional skeptics: They are selected, trained, and hired to be pessimistic and to spot flaws. Lawyers carry this view into their dealings with their own partners.

It is hard to unbundle which is the cause and which is the effect, but the combination of a desire for autonomy and high levels of skepticism make most law firms low-trust environments.

A low-trust environment has plenty of unfortunate consequences—and they are readily observable in many law firms:

• Initiatives that depend on teamwork and joint efforts will rarely be implemented well, if at all.
• When a firm’s prevailing atmosphere is one of competition, not collaboration, partners rarely make sacrifices for the good of the firm.
• There is low tolerance for ceding power or influence to practice group or firm leadership. The result is that even in the largest firms, executive authority can be so severely limited as to be meaningless.
• Committees proliferate to address all topics, large and small.
• There is a drive to seemingly objective formula-based compensation systems. These serve only to entice partners into gaming the system through hoarding work and bickering over origination credits in order to look good in the official statistics.
• Most important, absence of trust may be a significant contributing factor to the extremely short-term orientations of many law firms.Investments of time or money that don’t yield immediate results are rarely made.

Skepticism about ideology, values, and principles.

The single biggest source of trust in an organization occurs when everyone can be depended upon to act in accordance with a commonly held, strictly observed set of principles.

When this is the case, less time is wasted in internal negotiations and posturing, strategies are implemented, and true teamwork results. Partners allow others to make decisions on their behalf or refer work to each other across the boundaries of practice groups and location because they can be confident that the other person will make decisions using the same values and principles that they would themselves use.

Law firms appear unable to achieve this level of ideological consistency. They will buy into principles—firms can have very high ideals as long as they remain ideals—but they have difficulty with the concept of enforcement. Firms are seemingly willing to adopt strategies and statements of values and mission, but are usually unwilling to specify what the penalty would be for noncompliance. Not surprisingly, that rarely results in effective implementation.

Most law firms say that the idea of tackling a rainmaker on ‘soft’ issues like teamwork, supervision and adherence to firm values is unrealistic, idealistic, uncommercial, and suicidal. While a majority of firms will vote to proclaim standards, they will usually not vote to enforce them.

Professional detachment.

As many researchers have shown, lawyers score very low in the areas of intimacy skills and sociability. They tend to prefer role-to-role interactions with people, inside and outside the firm, rather than eagerly seeking out person-to-person connections.

This can have unfortunate, if unintended, consequences. Consider this e-mail, which I recently received from Marein Smits, a Dutch lawyer:

‘At your recent seminar you made fun of me because I laughed at the idea of being genuinely interested in the industry and business of the people who are my clients. Rightly so: My laughing was cynical… The first thing you learn when you become a lawyer is not to care. The legally sound judgment, the intellectual sparkle, that is what counts. The personal, the emotional, what is right: Throw it away, because it will taint your professionalism. ‘Do not get involved’ is the credo.’

This lack of intimacy eaffects not only marketing and client relations, but also the way in which partners deal with each other and how firms are managed.

Rather than describing a highly interpersonal approach to coaching and helping each other succeed, the term ‘management’ has come in many firms to mean a cold, detached, analytical approach to business. Financial scorecards are put in place, and everyone is told (implicitly or explicitly): ‘Here’s what you will be measured on; see you at the end of the year!’

They are not helped to achieve, merely rewarded if they do, and they live in fear of what might happen if they do not. This can achieve the goal of getting everyone to work harder, but it comes at a significant price in terms of partner morale and cohesion.

Help, teamwork, and mutual support are often absent, since they depend on personal interactions. Instead, there is a system of measures and rewards.

Approaches to decision making.

In a room full of lawyers, any idea, no matter how brilliant, will be instantly attacked. Lawyers are expert loophole finders, trained to find counterexamples of or exceptions to any proposition. Accordingly, within a short time, most ideas, no matter who initiates them, will be destroyed, dismissed, or postponed for future examination.

Frequently, this leads managing partners, committee chairs, and practice group leaders to substantially overinvest in decision making.

They want to be armed in advance with a lengthy memo about every decision, so they can dump it in the lap of the complainer as part of fending off the attack.

Another common management strategy is to keep all proposals ambiguous, so that there is nothing specific to be attacked.

As a result, law firms have a remarkable propensity for half measures, launching poorly specified programs with minimal chances of success.

When lawyers reason with each other, the primary objectives are not necessarily logic, consistency, reasonableness, or fairness.

In their professional practice, whether in trial or deal-making, many lawyers are more frequently rewarded for persuasiveness, rhetoric, verbal agility, and point scoring. These habits of a professional lifetime readily spill over into internal firm discussions.

Lawyers also have a strange view of the concept of risk. In any other business, an idea that was likely to work much of the time would be eagerly explored. This is not necessarily the case with lawyers. A lawyer would say ‘Maybe, but I can construct a hypothetical scenario where it will fail to work. That makes it risky.’ Probabilities do not seem to influence the discussion, only possibilities.

There is no greater condemnation in legal discourse than to describe something as risky. Contracts, deals, and court cases must be bulletproof, not risky.

In other businesses, innovative thinking and action are considered a primary requirement for success. Companies eagerly search for strategic ideas and initiatives that their competitors have not discovered.

Lawyers are usually different. Presented with a new business idea, the first thing they ask is, ‘Which other law firms are doing this?’ Unless it can be shown that the idea has been implemented by other law firms, lawyers are skeptical about whether the idea applies to their world. If everyone has these problems, they can’t be so bad, the thinking goes. As long as we are no worse than anyone else, we don’t need to change! It’s hardly a recipe for a strategic advantage.

What can be done?

If lawyers deal with each other so poorly, why do they do so well financially? My answer is only partly humorous: The greatest advantage lawyers have is that they compete only with other lawyers. If everyone else does things equally poorly, and clients and recruits find little variation between firms, even the most egregious behavior will not lead to a competitive disadvantage.

If firms are to deliver on the visions they have set for themselves, they must address such issues as what behavior partners have a right to expect from each other, what the real minimum standards and values are, and how common values and standards can actually be attained, not just preached.

One of the central things we know about trust and collaboration is that they come mostly from repeated interactions between people who have not only a history together, but also the certainty of a future together.

Trust comes from relationships, and the expectation of continuing relationships. Over time, as they interact with each other, they as partners, practice groups, and offices may actually come to trust each other.

Unfortunately, in many of today’s firms that have been cobbled together from lateral hires and newly merged practices, the personal history that forms the basis of trust is often missing, as is the confidence that everyone will be practicing together for a long time.

In many firms, even solidly successful partners live in fear that they will be among the next group of partners to be ‘let go.’

In such an environment, the natural evolution of trust may be difficult, if not impossible. Instead, what firms need, literally, is a constitutional convention where their lawyers draft the explicit, basic law that is going to govern their firms—the precise behaviors, rules, and principles that will determine what partners have a right to expect from each other.

When thought of as aspirations (which is usually the case), firms’ values are usually explicitly articulated and remarkably similar.

However, if a value is seen as a minimum standard of behavior that all members agree to live by, then the true values remain ambiguous in most firms and vary immensely among firms.

What then will be the force that might create the need for change? Most likely, it will be client pressure on firms to act as firms—delivering seamless service, practice areas that have depth (and not just a collection of individualistic stars), and true, cross-boundary teamwork.

Many firms have collections of great lawyers. The time may be coming when clients will expect them to go beyond this and become effective organizations. Without a prior, explicit agreement on minimum standards, and the resolve to enforce them, many law firms will not function well as firms, but will remain what they are today: bands of warlords, each with his or her followers, ruling over a group of cowed citizens and acting in temporary alliance—until a better opportunity comes along.

For the full article on which this blog post is based, see this month’s AMERICAN LAWYER. [Update: the full-length version of "Are Law Firms Manageable?” is now also available in the articles section of my website.]