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AVOIDING MALPRACTICE – ARE YOU AT RISK?

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Taking the Lead

The Dangers of Dysfunctional Practice Groups

How can you recognize a dysfunctional practice group? Some would say you know one when you see one. Others would say all groups are dysfunctional, it’s simply a matter of degree. But jesting aside, dysfunctional groups attract high costs in actual dollars, management time and resources.

Just as the positive reputation of a top-tier practice group within your firm can positively affect the entire firm, the negative reputation of a dysfunctional group can have new recruits and laterals, not to mention clients, making negative assumptions about the whole firm. Is the result expensive? You bet.

While dysfunctional groups have a variety of traits, let’s discuss three of the more dangerous characteristics here. First, these groups lack a strong social fabric—meaning the members don’t socialize with one another during working hours or beyond the work they do together. Second, their attrition rates are typically higher than in other groups and higher than the firm-wide average. Third, while they may have a strong top line, if you really analyze the factors behind their profitability, they may not be performing as well as other groups. Here’s a closer look at each of those problems.

Lack of Social Fabric

Groups with high dysfunction often have low social fabric. Colleagues are not friends, they rarely socialize as a group, and they have difficulty integrating new people. In addition, the group’s culture will have evolved away from the rest of the firm over time, sometimes as a result of past successes. Groups that have a history of a fairly robust deal stream have perhaps gotten a pass from attending partners meetings, firm socials and staff functions “because they are on a very important transaction.” Over time it becomes accepted if not a badge of honor to be absent from firm events.

A strong social fabric is critical because it builds commitment and trust within the group and it strengthens the group’s culture. The fact is, groups that work hard and play hard have a better sense that membership in the group is worth something. Functional groups are more collaborative, creative and often more profitable.

Unfortunately, the current business model in many private practice firms creates internal competition that feeds dysfunction and mistrust in groups. This author cannot count the number of people who have shared experiences about working through illness because they feared that a colleague would steal their clients. Steal is a strong but common word that exemplifies the situation at a granular level. The culture of mistrust combined with internal competitiveness can be lethal.

Attrition Problems

Excessive performance-related terminations can be signals that a practice group has poor mentoring, training and work-allocation practices. Further evidence of these poor practices is found in groups that rarely promote into the partnership. But to really know if attrition within a group indicates dysfunction, firms should track both planned and unplanned attrition.

Planned associate attrition includes performance-related terminations as well as those associates who become partners. Unplanned attrition tracks members of the group who quit. In particularly dysfunctional groups, you will hear things like “it’s a good thing Ethan left because he never would have made it anyway.” Groups with this type of thinking fail to acknowledge the impacts of their behaviors, or to accept responsibility. Also, unplanned attrition of particular demographic groups (women, minorities or lawyers with red hair) can be evidence of partners who play favorites and who don’t give every lawyer in the group equal opportunities to succeed.

As a consequence, the group may need new leadership. However, a new leader may be difficult to find among those who’ve survived or even flourished in the kind of group culture described earlier. For one such group, we interviewed all of the people who had left the firm in the previous three years, and then held up a mirror with those comments to the remaining group members and worked through a rather difficult conversation. Without acknowledgement of the behavior involved and a shared commitment to change, a group may have to be dissolved and members redeployed to other practice or industry groups.

Profitability Factors

Dysfunctional groups often hide behind top-line success. They may be populated by a few highly competitive overachievers or control freaks. Also, they are very good at the victory lap when they win in court or land a big file. This competitive spirit often creates a decent top line, which members of these dysfunctional groups use as a threat. They threaten to take their practice and walk during negotiations with the compensation committee, or they use their top-line numbers to make sure that new rules implemented by the firm don’t apply to them.

In response, management should look very closely at some key performance indicators—ones that will enable you to understand more clearly the profitability trends of these groups. Percentage of partner hours will tell you if partners are delegating to associates and paralegals. Partners may be hoarding work and associates and may be under-challenged, and attrition will result. Billed value of hours on a file will be an indicator of pressure on rates. Partners with poor work habits will attract high costs that are often not specifically tracked and allocated to them. Even if not allocated for purposes of compensation, consider taking a closer look at the actual profitability before you buckle under threats to walk away.

Do pro forma financials without these individuals or groups in the mix to see what the real impact of their departure could be should it come to that. You might be very surprised at what you learn.

About the Author

Karen MacKay is President of the consultancy Phoenix Legal Inc., focusing her work on leadership and strategy execution for law firms.

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