Transforming Law Firms – Lessons Learned from Management Consulting (Part II)

By: Mike Lowe

This is Part II of a two-part series by Mike Lowe, a strategy and management consultant whose firm HardingLowe works with law firms to improve their efficiency and profitability.  You can read Part I, on AFAs and other cost and pricing issues, here.

As a twelve-year veteran of the management consulting firm Accenture, I experienced the successful transformation of a professional services firm in response to a changing marketplace.  Now, as I work with top-tier law firms, I am convinced that there are several lessons from management consulting that they can apply as they address their own changing marketplace.  Last week’s article covered lessons learned regarding pricing, cost, risk, and quality.  This week, I focus on people and culture.

Resources need to be strategically sourced and properly assigned

Aspects of legal work are being commoditized. Savvy clients, and your sharpest competitors, are realizing that it doesn’t require a $300-per-hour associate fresh out of Harvard Law School to perform document review or draft a standard contract agreement. The same happened in consulting, as clients became aware that routine system integration work, for example, could be gotten from any number of inexpensive sources. Law firms need to evaluate the work they do and identify the right people to do each type of work. Accenture was one of the first companies to utilize resources from different regions, setting up centers in India, the Philippines, and even San Antonio for government work that needed to be done domestically. While there were certainly growing pains associated with working across time zones and cultures, the benefits were significant.

Note that sourcing work from other regions is not the only option, nor should it be the first. Firms should first analyze their current organizations to identify where they no longer align to the work being performed. A Partner doing the work of an Associate is as inefficient as a U.S.-based worker doing work that an India-based worker could be doing. A review of our work at Accenture led to a reorganization of the company into workforces that are differentiated in cost and scope of work, and that map the right people to the right work at the right cost.

Note also that, as with AFAs, this is not just about cost cutting. A more refined understanding of a firm’s core competency allows it to better identify and articulate the high-value legal work that differentiates it from the competition, and deserves to command a premium. Accenture gained a leg up on the competition because our model allowed us to compete with the lower-cost companies on commoditized work, but also offered high-value consulting that they could not.

Firms must cultivate change-resilience

When I speak to my clients about how to make their projects successful, I am told how difficult it is to get attorneys to change their behaviors. They want to install a system to capture and share matter information, for example, but don’t want to impose upon matter teams to actually enter information into the system. Somehow firms want to transform how they do business without asking attorneys to change how they work. The experience of management consulting for the past decade has been that change is now the norm, and will continue to be the norm. The organizations that are most adept at adapting are best positioned for success.

How do law firms develop change-resiliency? Some keys are:

• The impetus must come from the top – firm leadership must champion the change
• Leadership must identify the “fiefdoms” in the firm that may resist change, and ensure their early support. Transformational change in a law firm will require levels of cooperation that may not have previously existed.
• The firm needs to fully commit to new ways of working, including tying compensation to the newly required behaviors
• It takes practice – if done well, organizations develop change resiliency over time; if poorly, change fatigue

There will be winners and losers

The transformation of the management consulting marketplace in the 2000s produced winners and losers. My former firm emerged stronger, and continues to be a market leader. Other firms did not survive. This will certainly be the case in the legal marketplace as well. The pressures of competition and globalization took a while to reach the legal world, but can no longer be ignored. The good news for law firms is that they can look to the experience of others as they chart their course into this new world. I have no doubt that when we look back ten years hence, the legal market leaders will be the ones who seized this opportunity to become more efficient, more flexible, more global, and more innovative.