I wish I could report that the legal landscape, which is complex, competitive, and the result of significant economic changes over the past 10 years, is finished changing. Unfortunately, that is unlikely. The thought leaders in the business and legal world, who spend their days noticing and analyzing the economic patterns, locally and globally, know that significant changes continue and that most lawyers are not yet prepared to respond strategically and effectively.
The Still Changing Legal Landscape
1995
We are in one of those great historical periods that occur every 200 or 300 years when people don’t understand the world anymore, and the past is not sufficient to explain the future. —Peter Drucker
Lawyers are particularly susceptible to looking toward the past to predict the future. It’s part of our training. Indeed, the best lawyers are particularly adept at using the past to make sense of the present and explain the future. Using this skill for business decisions is a huge mistake. The only way lawyers avoid this trap is by adjusting their thinking in ways that are contrary to the thinking that has largely contributed to their professional success.
2013
We have entered an Age of Disruption. —C. Otto Scharmer and Katrin Kaufer
Changes in statutory and case law usually happen slowly. These changes are never proactive. They respond to a significant need that has been present for a while. They lag behind the needs of society. Responding to a business environment defined by disruption requires being proactive, anticipating possibilities, trying out solutions to see what might work, and adjusting strategies that are implemented iteratively. This type of process is the antithesis of the change paradigm that lawyers have been practicing religiously since law school.
The changes in the business of law are profound, ongoing, and continue to create future scenarios that are difficult to anticipate with the clarity that lawyers crave. The wisest approach is to manage the business with competencies to manage ambiguity and adapt to an unfolding future as it appears.
2015 Report on the State of the Legal Market
- The market for legal services has changed permanently.
- 67 percent of firm leaders say that the pace of change will increase.
- Only 13 percent of these leaders are confident that their firms will keep pace with change. This is a nearly 50 percent drop in confidence from 24 percent in 2011.
- Business demands for litigation dropped off in 2008 and continue to drop.
- Business spending on legal service adjusted for inflation has fallen 25.8 percent over the past ten years.
- Non-traditional competitors in the legal services sector continue to grow with a shift by business clients to non-law firm vendors.
- 63 percent of businesses are in-sourcing legal work.
- In firms where the profits-per-partner measure of firm performance has grown steadily, it is mostly a function of significant cost-cutting. This is not a growth strategy. This is a strategy that creates organizational vulnerability.
When firms employ a growth strategy by acquisition or merger, the expected return on financial investment and time spent nurturing the merger is often not realized because the law firm business model and consequential culture does not support the expansion of business from current clients through cross-selling, and instead encourages lawyers not to share access to their clients and not to spend the time to develop trust and communication with new partners and across practice groups. Coincidentally, the model and culture also drive behaviors contrary to those required to support diversity with inclusion.
Even assuming that the empowered leaders of a law firm want to change their business model and culture, actually doing so is still a significant challenge, demanding external support, development of new competencies, and a well-executed, planned, change strategy.
Responding Effectively and Changing When Change is Hard
When you can’t anticipate the change to come, it’s important to be capable of adapting to the situation that arises. —Edward E. Lawler, III & Christopher G. Worley, Built to Change, 2006
Adapting to change is a process and situational adaptability is a competency that people can learn and master. Law firm leaders are responsible for creating law firms capable of adapting to an unfolding future as it unfolds. Doing so is “extremely difficult because it often requires the development of new core competencies and… changes in structures and [processes]that were built for stability,” Lawler and Worley wrote in their book, Built to Change. However, it is achievable with an understanding of how intentional, strategic change is created.
Organizational changes include:
- Planned culture changes to improve adaptability, communication, leadership, business development and client retention, continuous learning and improvement, innovation, and inclusion.
- Client development, retention, and cross-selling programs and plans.
- Post-merger and acquisition integrations and organizational alignment.
- Succession planning for leadership and clients.
- Talent engagement, development, advancement, and retention programs and plans.
Change is hard, so resistance is common and manifests with myriad symptoms, including complaints about fairness or reasonableness of a situation, concerns about risk and safety related to oneself, one’s group, or the entire organization, and even denial of problems, confusion about what to do, or paralysis. Frequently, change initiatives fall short of creating the intended outcomes or fail altogether.
Call to mind the list of law firms that equated growth with mergers or acquisitions and measures of profit per individual partner instead of creating a culture that would drive organizational profit through expansion of services and legal work for existing clients and client retention through succession planning. Exactly where are they now?
Approximately 75 percent of change initiatives fail, threaten the survival of the organization, create substantial disruptions to the business, or otherwise leave an organization worse off than before the strategy was implemented. Successes, mild or otherwise, seem to hover around 10-15 percent, according to Kim S. Cameron and Robert E. Quinn in Diagnosing and Changing Organizational Culture. Law firm leaders who design growth strategies on a foundation of the four principles of strategic change increase the likelihood of success and minimize substantial threats to their organization.
The four principles of strategic change are:
- Strategic change begins with a clear vision and goals. What is the law firm trying to change and why?
- Strategic organizational change requires leadership. In particular, it needs a leader who is able to communicate, drive vision, goals, engagement, and persuade others take on their part in making the strategy successful.
- Strategic change succeeds when those involved in the planning or implementation and those affected by the changes created have the right competencies. The predominant competencies are the ingredients of the firm’s culture and ability to implement the change strategy.
- Change is difficult and uncomfortable for everyone. It is easy for the process to stall. Leaders must be able to diagnose and address obstacles when they arise.
Principle #1: Strategic Change is Strategic
Strategy is a process of noticing changes in the legal landscape, making an organized series of decisions, and taking action that causes forward movement toward goals and a vision of success. Astute leaders notice changes in the legal landscape, analyze them, and decide the possible and likely opportunities and threats that will unfold in the near future. These key elements include your clients and their business or personal needs, wants, expectations, pain points, and preferences, your vendors, your competitors, and the general economic environment.
They also identify organizational strengths available to access those opportunities and address those threats, and then develop a plan. Today, prescient leaders are routinely discussing with their teams the present situations in their external and internal environments. They discuss their organization’s values, identity, and vision. They evaluate their organizational culture and whether it is aligned with the organizational vision and goals. If not aligned, culture will serve as an extremely strong source of resistance. Given the massive changes in the legal industry, effective responses, and new growth strategies for law firms of any size often requires changes to a law firm’s values, identity, and culture, especially if the culture drives stability over responding to changes in the external environment by intentionally changing.
Principle #2: Strategic Change Requires Leadership
Intentional, strategic, organizational change starts when a leader becomes aware of growth opportunities and threats to continued performance levels, develops ideas about what to do to improve organizational performance, creates a vision, communicates what to do and why, and engages empowered partners to support and participate in the implementation of a strategic plan.
Organizational change is a team process. The law firm managing partner or CEO leads the change leadership team, often composed of office managing partners, executive or policy committee lawyers, practice group leaders, and the partners in charge of talent development or business development. Each member of the change leadership team leads his or her own team in implementation of the change strategy action plan. Change plans are implemented in a cascading fashion from the highest levels of formal authority down.
Principle #3: Those Leading a Change Initiative and Those Affected Must Have the Right Competencies
The most important competencies required of leaders at all levels include:
- Understanding the legal industry, the industries of key clients, and the relevant perspectives that may be global and culturally different, and applying the knowledge to advance organizational strategy and goals.
- The ability to make good and timely decisions that are relevant to moving forward the law firm’s growth strategy and in particular the specific change initiative, even when there is a lot of information that is complex and appears contradictory.
- The ability to anticipate and address the needs of multiple stakeholders with contrary interests and concerns.
- The ability to be action oriented and drive results even under difficult circumstances – to take on difficult challenges with a positive, energetic, and resourceful attitude.
- The ability to manage others with strong communication skills, including giving and receiving feedback effectively, managing conflict, delegating tasks to others clearly, relating with a diverse group of people effectively by adjusting styles when necessary, and holding others accountable.
- The ability to build relationships with others to meet shared objectives and locate and leverage the resources (people, money, time) necessary to support organizational goals.
- Resilience, courage, adaptability, and the ability to instill trust.
Assessments, including 360ᴼ assessments, are valuable to (1) evaluate the ability of the people to lead and respond to change, (2) develop a common language for change and leadership as an early step to a culture change, and (3) design a skill-development plan to create sufficient competency to drive the change forward. Although many assessments are available, I suggest using an assessment backed by a robust model and developmental materials. A law firm has no reason to create its own developmental model from scratch when excellent resources already exist and can be integrated into talent development models. Law firms also can build a robust change leadership team by using a consultant certified and trained to use resources such as the Korn Ferry Leadership Architect and Voices 360.
Principle #4: Change is a Difficult and Uncomfortable Process
Change is hard and filled with discomfort because of the loss of familiar routines and the challenge of learning new skills. It is particularly difficult for people and cultures ingrained with beliefs that change should be slow, risks avoided, stability is best, and the past is a good source of information about how to approach the future. Strategic changes also take more time than is often anticipated. For example, a culture change takes years to achieve. Organizational growth through merger or acquisition depends on a culture that encourages cross-selling. Successfully moving into a new market (geographic, industry, or expertise needed) is a multi-faceted project, requiring adjustments to many parts of the organization’s structures, processes, and the competencies, thinking, and behaviors of the people.
Most people resist change and implement strategies built on familiar ways of doing things. In other words, they try to change the problem situation by using the strategic plans, thinking, and behaviors that it.
Examples:
- A law school with a declining applicant pool, following rising unemployment or underemployment for its graduates, adds new law practice management courses without changing its business model.
- A job hunter has received few interviews and submits more applications without changing where to look for job openings, the types of jobs considered, or the content of a resume and cover letter.
- A law firm hires a consultant to create a strategic plan for organizational growth and then is unable to implement any changes. The leadership group meets regularly to discuss the plan, and every meeting has the same people arguing the same positions and offering the same reasons for the firm’s inability to implement change instead of addressing the group’s inability to communicate effectively and reach decisions they can implement without resistance.
The legal landscape continues to change. Law firm management tactics aimed to maintain stability are not effective. Only those law firms, with leaders prepared to respond intentionally and strategically, will survive and thrive.
Resources:
Bridges, W., Transitions: Making Sense of Life’s Changes (2nd ed. 2004)
Cameron, K.S., & Quinn, R. E., Diagnosing and Changing Organizational Culture (2006)
Denning, S. & Cross, R. The Organization Network Fieldbook 125 (2010)
Heifetz, R. & Grashow, A., The Practice of Adaptive Leadership (2009)
Kahneman, D, Thinking Fast and Slow, (2011)
Lawler, E. & Worley, C., Build to Change (2006)
Marshak, R. J., Organizational Change: Views from the Edge (2009)
About the Author
Susan Letterman White is principal of Letterman White Consulting, a business consulting firm focused on law and accounting firms. Follow Susan on Twitter @SusanLetterman.