John W. Olmstead, Jr., MBA, Ph.D, CMC
Law firms are being confronted with problems that product companies faced two decades ago. Many professions such as medicine, law, accounting, and consulting have reached the maturity phase of their life cycles. They are exhibiting the typical traits of a maturing market including: shrinking demand and increasing supply of professional talent, availability of service substitutes, extensive competition, marketing of professional services, downward shift on the value curve toward commodity type service categories, profit squeeze, greater client expectations, more specialization, compensation based upon performance, alternative billing methods, and price pressure and sensitivity.
The good old days of the 80s are over. Clients will no longer tolerate arrogance and mediocre services. Clients are holding law firms to higher service standards just as they are product companies. In order to prosper in the 21st century law firms are going to have to drastically change their models for conducting business. Organizational performance, effectiveness, and leadership must rise to higher standards. General management, problem solving, and action taking skills must be enhanced. This will require that many firms pursue rigorous change programs and completely reinvent their practices.
This will be no easy task. In essence this involves behavioral change and changing many habits and practices employed daily in the law practice. Beliefs, attitudes, values, and the actual structure of the law practice are all involved. Attorneys are a unique breed and management is a difficult process in these firms. It has been said that managing lawyers is like herding cats. Often there is nobody in charge since the firm owners are required to spend their time practicing law. Leadership skills are often in short supply. Lawyers are not trained in law school in competencies related to even processes related to delivering client services and definitely not so trained in skills in managing a business organization. In general lawyers tend to work as individuals, are compensated for individual effort, and do not work in collaborative effort with other lawyers in their firm. Team concepts are foreign to them. Law firms tend to exhibit a true cast system (a hierarchical organizational structure) which solicits little input from lower levels in the firm. Frequently there is little accountability and no sense of direction or vision.
What will the law practice of the 21st century look like? It is safe to say that law firms will look very different than those today. They will have a completely different focus. Law firms will be market orientated, client focused, and dedicated to their people. People, a law firm’s intellectual capital, will be the firm’s most important asset and a key component of the firm’s overall strategy and competitive advantage. Lawyers, other professional service specialists, and staff will come from different career paths and with varied backgrounds and experiences. All firm personnel (attorneys, other professional service specialists, management personnel, and staff) will be considered as key assets and part of the team. Law firm staff will no longer be referred to as “non-lawyers,” or “non-professionals.” This key asset of the firm will be safeguarded, protected, and considered worthy of firm investment. Skill development and training will receive a major share of the firm’s capital investment. The firm’s human capital and knowledge base will be leveraged instead of billable hours. Law firms will begin to focus upon the future instead of immediate gratification and will consider non-billable activities “investment activities.”
Some firms will have a global presence and will compete in global markets. Existing practice barriers will giveaway and many firms will create multidisciplinary practices. These firms will function as multidisciplinary professional service firms and their rosters will include specialists from other professions such as accounting, finance, management consulting, psychology, and counseling. Twenty-first century law firms will have sound focused business strategies and competent leadership. Law firm operations will be managed by professional managers. Some law firms will be owned by non-attorneys.
Reinventing your law practice will not be easy. Instituting a change program will take time and patience. Such a program will involve behavioral change and changing many habits and practices on the part of all personnel. Beliefs, attitudes, values, and the actual structure of the law practice will all be affected. Such an initiative is not a quick fix and it should be considered by all involved to be a long range effort.
Many law firms have experienced the frustrations of not being able to achieve a consensus and make timely decisions on matters of firm policy, strategy, marketing, and management. Missed opportunities and false starts on firm management and marketing projects are often rampant. Law firm members fail to “innovate and think outside of the box.” They simply respond and mimic the actions of other law firms. Twenty-first century law firms will need to know how be creative and be market leaders with creative client solutions as opposed to market followers.
In general, there are three elements that drive human behavior and shape the habits we possess: antecedents, competencies, and consequences.
Antecedents are those things that prompt us to take an action. In a law firm setting these include policies, goals, directives, announcements, training programs, procedures, vision statements, organizational structures, accountabilities, and so forth. They are very important because they provide each person with cues as to what to do in his or her job. They encourage certain actions and they are intended to get people to start doing something by providing them with reasons, plans, skills, or information to do it.
The second element is made up of competencies —the knowledge, skills, and abilities that enable people to perform certain tasks. These are the abilities that enable a behavior to occur. Competencies are developed over time, a product of good antecedents and positive consequences, and the focus for most selection and training strategies.
The third element is consequences. Consequences are those things that happen to a person when certain actions or behaviors are performed. They always occur after a behavior. They may be positive or negative and, depending on their impact, will determine whether a person will repeat an activity. Reward (compensation systems) are the typical consequences employed in law firms. However, a balanced mix of positive and negative consequences is often appropriate. Consequences drive human behavior. All three elements must be addressed in any program designed to produce change. When organizations attempt change, the traditional pattern is to address the first two drivers: antecedents and competencies and little attention is given to consequences. In law firms all three elements are usually given inadequate attention. As a result there is often a lot of debate, talk, and discussion with no subsequent action or change in practices.
Law firms that embrace change programs to reinvent their law practices will need to realize that actual behavior will need to be the center of attention and attention will need to be given to all three of the elements that drive behavioral change.
Many law firms will need to start from the beginning with the primary objective to increase overall firm organizational effectiveness, problem solving and action taking as well and leadership skills. An effective change program will need to be implemented in primary work or practice groups first that are critical to the success of the whole firm. Then a plan is developed to spread the change or improvement effort throughout the entire firm. The following five phases of managing planned change can serve as a roadmap.
Each of these five phases of planned change is a recurring cycle of activity. Movement from one stage to another, should not take place until the earlier stages have been satisfied.
Phase one involves determining whether the firm is ready for the launch of an improvement effort. The firm must be committed to the program and be willing to examine the organization’s full range of barriers to success. Phase two involves developing a deep understanding of the barriers to success which involve the setting, the organization, firm management, the group, the results, and the underlying culture, assumptions and psyches.
If the firm identifies a commitment to change and a desire to proceed the following five stages should be accomplished in the order listed.
The first three stages (culture, management skills, and team building) are designed to adjust the behavioral infrastructure of the firm. The last two stages (strategy structure and compensation systems) adjust the organization’s tangible features.
Initially developing an adaptive inner organization is critical to the success of other improvement efforts. The culture stage builds trust, communication, and willingness to change. The management skills stage provides management with new methods of handling and dealing with organizational problems. The team-building stage infuses the new culture and updated management skills into the organization. The strategy-structure stage results in a new or revised strategic plan for the organization. The compensation – reward system stage establishes a performance-based reward system that reinforces the new culture.
Actual implementation of the stages requires flexibility and feedback. Actual results must be evaluated since planned change is an ongoing process and never complete. Interviews and hard data in the form of bottom line financial results are used to measure whether the organization has achieved intended results.
In the final analysis, a completely integrated planned change program is far superior to programs that only use single approaches to organizational improvement.
While it may take dedication, patience, and tenacity to effect long-lasting behavioral changes, it is the only way to reinvent the law practice for the 21st century. Silver bullets and quick fixes will only result in disappointment and missed opportunities.
Dr. John W. Olmstead, MBA, Ph.D., CMC, is a Certified Management Consultant and the president of Olmstead & Associates, Legal Management Consultants, based in St. Louis, Missouri. The firm helps law and other professional service firms improve the operations and management of their practices and the lives of their practitioners. The firm, founded in 1984 serves clients across the Globe assisting them with implementing change and improving operational and financial performance, management, leadership, client development and marketing.
Dr. Olmstead’s assignments have covered the spectrum of management issues. However, in recent years most of his time is focused on engagements helping firms with: Partner Compensation, Governance, Succession/Exit Planning, Strategy & Competitive Business Models, Profit Improvement programs, and Client Service Programs.
Dr. Olmstead is the Editor-in-Chief of “The Lawyers Competitive Edge: The Journal of Law Office Economics and Management,” published by Thomson West. He is currently serving as Past Chair, Illinois State Bar Association Standing Committee on Law Office Management and Economics and as a member of the Legal Marketing Association (LMA) Research Committee. Dr. Olmstead may be contacted via e-mail at email@example.com.
Additional articles and information is available at the firm’s web site: www.olmsteadassoc.com.
© Olmstead & Associates, 2010. All rights reserved.