Private practice: Management category

“Are we normal?” Law firms are always asking me this question. When I assure them that their organisational and interpersonal challenges are fairly typical of firms in their sector, they seem relieved. But they are missing the point. Being “normal” is not enough. To achieve competitive advantage these firms must aspire to being abnormal – in a good way.

Very few of the submissions in the management category this year could be described as genuinely innovative (click here for rankings). Most clients would be unimpressed if they ever read their law firms’ submissions in this category. What feels radical and innovative to a law firm may seem like standard management practice to their corporate clients.

In this context, any law firm that thinks seriously about management, which devotes time and resources to developing appropriate systems and structures, and challenges long-held cultural beliefs, can be said to be truly innovative. For law firms today, management innovation may simply be good management.

In a highly competitive and overcrowded legal sector, achieving differentiation through legal expertise or client service is becoming exceptionally difficult. In the area of management, however, because most law firms are still relatively unsophisticated in this area, the scope for differentiation is considerable. Innovation in management can help law firms achieve competitive advantage in their two key markets: the market for clients and the market for lawyers (that is, the war for fees and the war for talent).

This is partly about effectiveness. Clients want to see their lawyers working together effectively, drawing upon the full range of their firm’s resources to deliver a high standard of service. At the same time lawyers want their firm’s management structures and systems to help rather than hinder them in the delivery of top quality client service, and they want to work within a culture that supports their personal aspirations.

It is also partly about efficiency. Clients have been fairly ruthless in pursuing cost efficiencies in their own firms in recent years, so why should they pay to support slack management practices in their law firms? Equally, lawyers (not just partners) hate to think that potential profits are being squandered through waste and want to know that a fair proportion will end up in their own pockets.

At the moment the market for legal services is booming and it is relatively easy for law firms to make a lot of money. When the market turns, the firms that survive and thrive will be those which have got to grips with the challenges of effective management, and which have the appropriate strategies, systems, structures and cultures firmly in place to see them through the leaner times. We will see an increasingly bifurcated legal sector in the coming years, with the most effectively managed firms moving rapidly ahead of those who aspire simply to being “normal”.

In the management category this year, Eversheds is a stand-out winner for its Partner Profit Sharing Scheme. The magic circle firms still cling to lockstep – an automatic method of remuneration that is based entirely on seniority – as an article of faith, but individual performance-related pay is becoming an increasingly significant proportion of partner remuneration in many other law firms.

Eversheds has abandoned lockstep altogether but has done so in a particularly creative way. It has used the new method of partner remuneration as an opportunity to define and embed the most valuable elements of the firm’s strategy and the partnership’s ethos. In other performance-­ related pay schemes, an individual partner’s profit share is based entirely on retrospective performance. Eversheds’ scheme also takes account of expected future performance, recognising and rewarding an individual’s commitment to modify or fundamentally change behaviours in support of five defined criteria (of which only one is profit).

The other stand-out winner is Linklaters. Most of the individual components of its Market Leadership Strategy are not particularly innovative. What is creative and rather remarkable is the relentlessly systematic and determinedly comprehensive way in which this strategy has been implemented. Developing a clever strategy can be quite fun. The really tough part is implementing it, getting your partners, lawyers and professional staff to understand it and commit themselves fully to its implementation. It requires sustained energy and clarity of focus. Change management on this scale does not happen very often – to deliver such a far-reaching strategic change initiative within a law firm can be counted as genuinely innovative.

Linklater’s Blue Sky Project, which forms one element of its Market Leadership Strategy, has yielded a second award in the category. This project was designed to encourage the firm’s young lawyers to think creatively about how Linklaters might look in 10 years. Helped by a futurologist, they imagined how they would be working with clients and each other, how their physical and virtual environments would be changing and so on. Their conclusions were fed back into senior management deliberations. It is always difficult for a long-established senior management team to come up with truly innovative ideas, but it can make a fundamental difference by creating an environment in which innovation can flourish.

Also in the highly commended category are Blake Lapthorn and Pannone.

No one could accuse Blake Lapthorn of not taking innovation seriously. It has created a comprehensive management process, covering every element of the innovation cycle, from idea generation through concept definition and validation to development, pilot and launch, with clear metrics in place to monitor success. As Blake Lapthorn says in its submission: “There is now no excuse for partners to say there is no mechanism for making their ideas a reality.”

Pannone is a prime example of a law firm that punches far above its weight in the area of management, reflected in its remarkable achievement of being voted the UK’s third “best company” to work for in the 2006 Sunday Times survey. Its dissemination of detailed financial information to all staff in the firm is indicative of a more general commitment to communication and inclusiveness. This bold approach is also reflected in their substantial investment of time and money in a variety of web-based initiatives over the past few years.

Of the “commended” firms (Allen & Overy, Clifford Chance, and Wragge & Co) the first two have won awards in this category two years in a row. Allen & Overy deserves special mention for abandoning its traditional offsite meeting for corporate partners in favour of a “back to nature” Outward Bound programme. While such bonding rituals may have become common place in the corporate world, it must have taken a lot of courage to persuade corporate partners to forsake the comfort of a five-star hotel for three days in a tent with no running water. Helping corporate lawyers to discover their inner boy scout – now that is innovative.

Laura Empson is professor in the management of professional service firms at Cass Business School, City of London. She is the editor of “Managing the Modern Law Firm: new challenges, new perspectives” (Oxford University Press, 2007)