One often hears partners or legal leaders mention ‘silos’ as an issue in their firm. Mostly, firms struggle to deal with this insidious threat that can, by stealth, undermine much of what is good about a firm and over time, cause extensive damage or block progress.

Also, once they are embedded in the culture and way of doing business of a firm, they are hard to eradicate. Often they arise due to simple failings around fundamental matters such as communication, consultation, trust and respect or lack thereof. Addressing them requires a direct interest and commitment from senior leadership. Failing this, nothing changes.

Silos are insidious; they can develop by stealth both vertically and horizontally and once embedded in your culture and way of doing business, can be difficult to dislodge. Left to mature they can be hugely damaging. The best bet is to recognise the danger, assess your position and start tackling the problem (Sean Larkan graphic – Edge International)

These silos, or what I have termed ‘horizontal’ or ‘vertical’ silos, even rear their heads in the most successful of firms. Only last week while on assignment in New Zealand a senior partner in a blue-chip corporate firm commented in regard to horizontal silos, ‘it is an issue which seems to have crept up on us – too many of our younger lawyers mix and share very well amongst themselves, but mainly within their levels or hierarchies, not above or below. This holds them back and impacts the effectiveness of the group in servicing clients. The problem is that management don’t seem to recognise this and get defensive if it is raised’.

They can even arise in the smallest of firms – I encountered such silos in a highly leveraged and successful south-eastern Asian two-partner firm!

Firstly, Vertical Silos; what do we mean by them? Essentially a body of people within the firm that, notwithstanding position, role or seniority, tend to work somewhat alone and isolated from others. They do their own thing and are characterised by a lack of sharing and communication. This may apply to practice or industry sector groups, partner teams, offices or even floors within offices. We have all seen them and experienced them at some time or another.

Secondly, horizontal silos; these can develop when there is a lack of communication, sharing or interaction between groups defined by role or seniority. The most obvious examples here are when salaried partners say are not treated as ‘partners’ but as ‘glorified employees’ which causes resentment, a lack of sharing, under-performance, lack of recognition and file or client hogging.

In both cases there will be examples that I have not listed or thought of.

What makes vertical and horizontal silos a challenge?
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Like horse’s hooves, partnerships have to deal with different conditions throughout a year. There is a well-known equestrian saying: ‘no foot, no horse‘ which means keep the hooves in order or you don’t have a fit, usable mount.

No foot, no horse – like horses’ hooves, partnerships need maintenance and the fundamental building blocks for success need to be carefully thought through and put in place. One of these is clear performance and contribution criteria.

Similarly, successful law firm partnerships need to get the basics in order and thereafter ensure that they are functioning well. It still surprises me how many firms adopt a fairly laissez faire approach to these things and don’t address some of the basics around key partnership functions. In some cases I suspect it is simply that leadership do not wish to ruffle partner feathers and so allow some of them to slip into the ‘too hard for now’ basket. In other cases the firm is doing well so some of these essentials fall off the radar.

One of these is setting partnership performance criteria. When asked to advise firms on performance and growth one of the first things I ask to see is the criteria or key performance indicators (‘KPIs’) that the partnership uses to guide, encourage and measure partner behaviour, thinking, contributions and performance.

Frequently there isn’t one or it is a hotch-potch of half finished lists which have never been fully debated, agreed and not implemented or communicated in any meaningful way. In other cases, there is a list, but that is all there is. Partners do not react to lists of things to do – it takes a lot more. Sometimes new partners come into a partnership blissfully unaware of their existence. As a result performance and contributions can be variable and overall, not delivering what the firm is after.

What then are some considerations to bear in mind when putting together performance criteria or KPIs?

  • ideally these criteria should not be determined in isolation, but in the context of the firm’s core purpose (vision, values, cultural attributes), strategy and guiding principles. This stands to reason as the criteria should be one of the key ways in which the vision and strategy is achieved;
  • you need to get all partners involved in the debate. Communicate and explain. Ask them for input. Encourage their involvement and thinking. Make a genuine effort to do this. Get to the bottom of what truly makes the partnership tick. Done well, you will find a number of the criteria and other strategic key objectives for the partnership drop out of this process. It will also be owned by the partners which will make implementation that much more effective;
  • you are going to come across some opposition, some of it very subtle, but if you don’t anticipate it and are not prepared it can undo all your good efforts;
  • you usually only get one good shot at this – make it count by getting it right first time – if necessary get experienced external counsel, especially to deal with any ‘curved ball’ queries you may encounter in meetings;
  • be patient. Introducing such processes means a lot of change for a lot of partners and thus can cause fear and demotivation;
  • don’t however be patient at the price of inaction or unnecessary vacillation and delay. It is important to commence the process and maintain momentum. Partners need to know leadership is determined to see this through to a successful conclusion for the long term benefit of the partnership. This is everything;
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This is the final in a three-part series on Thought Leadership (click to see Part One or Two) based around an interview with Think Write Grow author Grant Butler. Himself a thought leader in his field he has provided some invaluable insights – these can be borne in mind as you ponder how to incorporate thought leadership in your next firm or marketing strategy review, or accommodate it in your partner performance management system or key performance indicators.

In this final post:

  • Grant talks about the importance of focusing on thought leadership quality, not quantity – this requires careful management (and some diplomacy!) but the aim must always be to provide material that gets clients and others thinking (and talking).
  • He also touches on the important topic of the resistance some professionals still feel to releasing their thought leadership material to the wider world. His view is unequivocal: be prepared to share more than you traditionally would – it will come back to benefit you.
The message is clear when working up thought leadership material – produce quality not quantity – try to make readers sit up and take note. Also be prepared to share material beyond your traditional comfort zones – it will help you build relationships of trust which will benefit you in a number of roundabout ways.

SL: TWG confirms thought leadership marketing should be a priority for many organisations. In the past thought leadership probably developed in a dynamic, less structured way – people became thought leaders “while they were doing their job” well. Now that thought leadership is becoming part of mainstream marketing and strategy-speak is there a danger it will lose its dynamic character? Will it become buried in marketing/management/consulting clichés, jargon, systems and processes?

GB: The internet has certainly made it both easier and more important to create thought leadership material and yes, there’s a danger of it being lost in the volume. The main defence is to focus on developing high-quality material. I would suggest consider the following points:

  • I’d encourage firms to focus on quality rather than quantity.
  • It’s better to come out less frequently with really succinct and insightful material that makes clients sit up and take notice.
  • This requires strong internal controls to ensure that substandard material is held back.
  • That in turn means making judgments and can be a political problem (try telling a partner their article is not good enough to release…), but it’s vital to remember that every time a firm publishes weak material, the less likely a client is to open their next email or attend their next seminar.
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Despite a period of patchy M&A work, scratchy demanding clients and less ‘sticky’ partners, Australia’s ten largest law firms (Big Law Australia: BLA) have recently reported record gross fees, high equity partner profits coupled with a bullish view of their future world (Alex Boxsell and Samantha Bowers reporting in AFR 16 September 2011). However, they are facing real challenges from abroad and locally; a few thoughts on all these below.

 

On the back of excellent reported results, top Australian law firms are being challenged by foreign firms entering the Australian market, as well as local mid-tier innovators – graphic by Sharon Larkan on iPad (adapted from online image – artist unknown)

Good news for a majority of the top ten Australian law firms:

  • improved gross fee income over the past year with partner teams (equity and fixed share) generating annual fee revenues above $2m
  • tightly managed expenses
  • profit margins averaging 41%
  • average top equity partner earnings in the range $1.8m to $2m

These are outstanding results by any world standards, from some of Australia’s best-run businesses. However, a more in-depth consideration of developments over the past year or two, and the published AFR performance results for Big Law Australia (BLA), seem to indicate they have been (or should be) feeling the heat from both internal and external forces – some obvious and some not so obvious:

  • After (in some cases) years of discussions or negotiations, foreign firms have bypassed BLA firms and entered the market in numbers:
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The profitability index is an important metric in the 2011 Am Law 200 performance reports when comparing top US law firm performance.

However, as the authors state: “Some of this year’s Am Law 200 metrics, such as gross revenue, PPP, and revenue per lawyer, are straightforward. And because they are easy to comprehend in a list, they get a lion’s share of the attention. Other metrics are equally powerful but less-often cited; they lend themselves to a different sort of presentation. Here are four of them: profitability index, leverage, profit margin, and value per lawyer.”

I have always found the profitability index (which we simply called the Am Law Index) very useful (particularly when I ran multi-office firms and wanted to compare performance between them

and against other competitor firms).

The Profitability Index measures a firm’s performance based on the relationship between leverage (lawyers per partner) and the firm’s profit margin (relationship between income and expenses).

Here is a snapshot of a smart interactive bubble graphic reflecting the Profitability Index results for the Am Law 200:

Some of the benefits of the profitability index ratio:

  • the profitability index enables you to validly compare performance between different offices of a firm or different firms in different regions and countries. This in itself makes it enormously powerful and I think unique. It can go some way to reducing defensive arguments from some regional offices or country offices based on ‘special factors’ justifying why they should not be expected to meet certain key performance indicators.
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