How ambitious is your firm? Are you happy to perform in line with the benchmarks for your peers; are you aiming higher; or is money in fact not your primary purpose? If not, what motivates you?
An analogy may be instructive. In his book Winning, Clive Woodward explains that there are three “levels” in sport – Recreational, Competitive, and Elite. The same game and often the same innate ability, but very different outlooks, lead to very different results.
More than a Vocation?
I see an equivalent analogy for Law Firms. At one end we have the Vocational – lawyers who espouse a cause or look for intellectual satisfaction in their work. Much social law falls into this category. Success is not measured by money! At the other end of the spectrum is the purely commercial or even “Corporate” firm, for whom money is the only thing that matters. In between we have the traditional Professional, for whom the money matters but it is not the only or even the most important thing. Professional recognition, status in the community and long-standing client relationships may matter equally as much. We can add other categories to fill in the spectrum, such as “lifestyle”.
The crucial point is that the underlying purpose or ethos of each firm drives the decisions it takes – and in particular, how it treats people. This includes staff, clients and even partners. After the crash, rather than lose loyal staff, partners in many of the traditional Professional firms accepted lower profits. This could not happen in the “Corporate” firms. Many traditional professionals look askance at the “corporate” firms as being unpleasant and excessively pressurised. If you can earn five times the national average income (which is the benchmark for 5 to 10 partner firms), is the extra money worth the hassle?
The Advent of ABS
Unfortunately, the Legal Market has moved on. The advent of ABS and the entry of businesses whose sole purpose is to make money has tilted the balance. These firms have said, in effect, “if you can make that much without being money-oriented, just think how much you can make if you really focus on it – way Beyond Benchmarks!”
The competition is not just for clients. It is even more intense for staff, and particularly young qualified solicitors who are so scarce because of the hiatus in recruitment and training following the crash. The highly profitable commercially funded new entrants are using their financial clout to drive up salaries and attract the best staff from traditional firms. They don’t offer partnership, but many Generation X and Y lawyers are not attracted to partnership in any case; they are quite happy with a better salary and growth prospects.
How can you respond and compete? You to have to go beyond the current benchmarks so that you can offer a package of prospects and salary that appeal to the younger solicitors. This means looking closely at the competition, seeing what they do well, and adapting it to your environment and ethos. You certainly do not have to adopt the more unpleasant attitudes, which may produce results in the short term but are not always sustainable.
We have had the pleasure (?) of seeing several of the newcomers at close quarters over the past year and seeing how they achieve their results. We have drawn two main conclusions. Firstly, as David Maister said in Strategy and the Fat Smoker, everybody knows what to do (i.e. chargeable hours, billing and lock-up), but we don’t all do it. The newcomers DO it, their focus is relentless. Secondly, they use a variety of financial management techniques that have been around (and I have been using) for over 20 years, but have not taken root in the legal sector.
The big lesson is that getting results well Beyond Benchmarks does not require brute force or unpleasantness. It does, however, require skill, habit, self-discipline and a mindset that recognises that commercial performance is part of being a professional (the opposite being amateur?). Furthermore, it does mean challenging the way we have always done things. But there are plenty of opportunities! In a recent Beyond Benchmarking Workshop for Managing Partners and Finance Directors we generated over 150 performance improvement ideas in a matter of minutes. Some were implemented the very next day!
One of the impacts of opening up markets is to increase the level of competition – and the only way that markets know how to define success is in monetary terms. As a result, there will be a widening gap between winners and losers (it is already happening). Benchmark performance may mean being left behind. Don’t allow this to happen, aim higher, Beyond Benchmarks!