The ownership structure of many law firms can make organisational transformation difficult, writes Margaret Fitzsimons, but change is possible with leadership.While instigating and driving
The ownership structure of many law firms can make organisational transformation difficult, writes Margaret Fitzsimons, but change is possible with leadership.
While instigating and driving change within law firms is essentially the same as in corporate environments, many law firms present additional complexities because of their ownership structure.
In the corporate environment, management, the board and shareholders are normally separate groups. In the traditional law firm partnership, management, board and shareholders are all one and the same. This makes instigating and driving organisational transformation particularly difficult, due to conflicts in the roles of owner, director and manager.
There are two major stages of organisational transformation. The first stage is to instigate the transformation. The second is to drive the transformation. The people and skill sets needed for each phase are usually different.
Instigating transformation is harder than driving transformation. Fear of the unknown is the number one reason why many law firms continue to decline, rather than changing the way the business operates.
I have seen many law firms with declining profits, poor cash flow and an inability to attract quality staff or new quality clients, yet the partners can fail to grasp that the only way to change the situation is to change themselves and their attitude to their business.
How do you instigate change?
Change can only ever be instigated by a compelling argument, by presenting facts and figures which demonstrate why change is necessary. Fear of change can be eroded by clear and logical thought. Quantifiable facts which illustrate the need for change include shrinking profits, decline in partner and staff numbers, reduction of market share, high staff turnover, loss of key clients or reliance on just a couple of clients, high levels of staff or client dissatisfaction and inability to achieve strategic goals.
Other symptoms which may be more difficult to quantify but which are also signs of a firm in decline are an inability to make decisions, division of the practice into silos, reactive rather than proactive decision making, clock watching, low pay, poor culture and political assassinations.
For change to be instigated, one or two partners need to show leadership and be determined not to continue doing business in the same way. If attempts to instigate change result in a stalemate, it may be necessary to bring in a mediator or management consultant to help the board arrive at a decision.
Slowly, slowly or big bang?
Slowly, slowly is better than no change at all, but the process is likely to be undermined because it is done by stealth. Staff are not trained in change behaviours and do not envisage the benefits of what the firm is trying to achieve. They are not inspired by the process because there is no ready communication or clear goal setting. Without a commitment from everyone, change will not take place. If a professional services firm has stagnated or declined, the only truly effective way to change is the big bang.
The driver and the champion
There are two imperative roles in law firms that are required in order to transform the firm - the driver and the champion. The driver is the person with change management and technical experience who makes sure that change actually happens, who formulates the strategy and implements the project plan. This person is both good cop and bad cop. The organisation is likely to have to import this skill set to initiate change. The champion is a partner who is a high performer, is respected by all and has the determination and interpersonal skills to support the driver.
The champion keeps an ear to the ground and acts as a bridge between the partners and the driver. This person is needed when the driver takes on important issues in the partnership and may need to shield the driver during significant periods of instability.
The champion helps to implement the vision of change, prevents the process from being undermined and brings the partnership along on the journey. Just as the driver must be able to rely on the champion at all times for change to be effective, the champion must be careful always to support the driver.
Transformation takes strong leadership. If you don't have strong leaders who are able to tackle the difficulties, don't even bother trying to create change. But for those who are willing to face the initial hurdles, well-managed transformation will always deliver results for your business.
Margaret Fitzsimons is a director of Trans4mation Pty Ltd. She will be presenting at the national summit of the Australian Legal Practice Management Association in Sydney on the 22nd and 23rd of October this year.
STEPS TO CHANGE
- Launch a formal change program.
- Educate everyone on why change is needed, what it will achieve, what to expect and how to manage change.
- Ensure partners and senior management fully support change.
- Make sure partners are trained in wearing their three hats - owner, manager and director.
- Remember communication is key and that to sell change there must be an upside.
- Develop good HR strategies to build a happy culture.
- Try to balance bad news with good news.
- Have some ready quick wins to get momentum going.
- Don't create a blame culture. Everyone makes mistakes.
- Teach partners business skills so that they understand how the work pipeline converts to profit.
- When the firm starts succeeding, celebrate these wins with staff.
- Tie your key staff to the business, be generous with remuneration, be a great place to work.
- Keep the momentum going, keep your staff happy and business will boom.