“Law firms are remarkably profitable but surprisingly fragile,” writes Randall Kiser in his ABA-published book "American Law Firms in Transition: Trends, Threats and Strategies". And they “become insolvent and collapse at exceptionally high rates.”
He explains, “Although law firms attempt to project an aura of stability consistent with the staid image of the legal profession," he explains, "many law firms are, in reality, only a few months away from a devastating defection of partners, a disappointing revenue report or a rushed merger with a stronger firm.”
The problems facing law firms are “severe, chronic, endemic – and solvable,” Kiser says, and his book offers remedies.
Kiser, a principal analyst at DecisionSet in Palo Alto, Calif., and a scholar-in-residence at the Indiana University Maurer School of Law, practiced law for 20 years before returning to graduate school. He studied under Peter Drucker, the founder of modern management theory, and Mihaly Csikszentmihalyi, the psychologist who discovered the links between productivity, abilities, creativity, control and challenges.
Kiser has integrated Drucker’s humanistic management concepts and Csikszentmihalyi’s optimal performance discoveries into his work with law students, lawyers and law firm leaders. He credits Drucker’s emphasis on facts and Csikszentmihalyi’s reliance on rigorous scientific research for his extensive empirical research on attorney behavior and writing four evidence-based books on attorney and law firm performance.
YourABA contacted him to find out more.
How should law firms conduct a comprehensive assessment of their vulnerabilities?
An assessment starts with the question, “What do you want to measure?” In “American Law Firms in Transition,” I identify five elements of law firm performance that must be measured, evaluated and enhanced. These elements serve as a checklist for conducting a comprehensive law firm assessment:
- Culture (shared objectives, client primacy, accountability, trust and collegiality, continuous learning and improvement and social purpose)
- Character (likeability, humility, engagement, realism, openness and resilience)
- Practices (collaboration, decision-making, readiness, civility and diversity)
- Systems (quality control, feedback and evaluation; attorney compensation; technology and information management; lateral attorney integration; pro bono; succession planning; and attorney wellness)
- Leadership (awareness; vision and strategy; innovation and change management; crisis management; talent development; and execution)
These five elements and 30 constituents can jump-start law firms’ assessments of their vulnerabilities and enable them to monitor and improve their future performance.
What behavior do you advocate law firms abandon “that was debatably successful in the past but is now dangerously maladaptive”?
The first law firms did not begin by asking, “How can we organize and conduct ourselves to deliver the greatest value to clients within the response times and at the cost clients expect?” Instead, law firms were initially designed and managed to accommodate their lawyers in a market that lacked transparency and genuine competition. They have grown incrementally over many decades with an internal emphasis on profitability, prestige and predictability and an income model that presumes that more years in practice warrant higher billing rates, increased compensation and greater autonomy. This model does not withstand scrutiny.
A specific practice that law firms should abandon is hiring “mini-me” attorneys who replicate existing partners. When law firms attempt to recreate their partners, they may overlook other attorneys who will excel in client service or practical problem solving.
Another practice that should be abandoned is the tendency to use other law firms as benchmarks instead of identifying competitors that don’t look, think and function like law firms. This practice follows from the mistaken belief that new strategies and processes would already be adopted by other law firms if they were worthwhile and the misconception that law firms are unique enterprises that cannot learn from other businesses and professions.
In what ways are law firms’ current practices and strategies misaligned with clients’ needs?
Lawyers tend to be risk averse and somewhat suspicious of change and innovation. Legal analysis is precedent-based, and this approach has given us the confidence to drive forward while focused on the rear-view mirror. During the last two decades, however, our aversion to change has resulted in a disconnect between clients’ needs, priorities and expectations and attorneys’ training, preferences and habits.
Attorneys and clients frequently have disparate views of value. Attorneys emphasize subject matter expertise and work product quality while clients emphasize problem-solving abilities, communication and responsiveness. Many attorneys see themselves as professionals in an information business, but their clients expect them to excel as strategists. A quick way of evaluating whether law firms are delivering the services clients expect is to review this ranking of client priorities and ask whether your law firm’s attorneys excel in these dimensions of client service: solutions focus, practicality, responsiveness, judgment, communication, anticipation, outcomes, cost and efficiency.
How should law firms change their hiring strategies to increase their stability?
Law firms have been slow in changing their hiring strategies. They see stability as being based on the continuation of past hiring practices rather than the adoption of more inclusive, incisive practices based on empirical research. That research demonstrates that diverse teams are correlated with higher levels of client satisfaction, increased profitability and better problem-solving methods. The research also indicates that the qualifications traditionally emphasized in attorney hiring (e.g., law school ranking and grades) are less important than personal qualities and relationship skills like attentive listening, promptness, respectfulness, trust and understanding. When law firms orient their hiring practices to emphasize the skills that clients value, their hiring criteria and strategies change.
The medical profession faces a similar dilemma in over-emphasizing students’ academic qualifications and intellectual capacity. “We look at their grades and their test scores, their productivity, like writing papers and doing research,” states Dr. Michael Lawton, chief executive at the Barrow Neurological Institute, “but the reality of being a good surgeon has nothing to do with that.” The skills that matter most, he says, are “how they handle the instruments and what kind of touch they have with tissues, as well as how they react and adapt when under stress in the operating room.” The similarities here are compelling: what matters most with attorneys is how they handle the tools they acquire in law school, the sensitivity and rapport they bring to client relationships and how they react and adapt under stress in law practice.
What should law firm leaders focus on to make their roles better defined?
Despite haphazard leadership development in law school and law firms, many law firm leaders are inspiring, innovative, incorporative and highly successful in achieving their goals. Those leaders stand out in a system that has minimized the importance of leadership training and frequently treats the extensive research on organizational leadership as being irrelevant to law firms.
In the chapter on leadership in “American Law Firms in Transition,” I discuss six minimum requirements for leaders: awareness (external awareness and self-awareness); vision and strategy; innovation and change management; crisis management; talent development; and execution. Vision, arguably, is the most important quality. A law firm leader should be uniquely qualified to develop and articulate the firm’s vision. Many partners usually can match a leader’s operational and organizational skills, but no one should be more qualified than the leader to imagine, define and articulate the firm’s vision.
How can law firms develop the key features of a culture that will help them withstand the current downward trends?
Every law firm has an implicit culture. The first step is to discern that culture and determine whether the employees and partners share common perceptions of that culture. Law firm leaders may believe their culture is collegial, for example, but other attorneys in that firm may view it as highly competitive, critical and hierarchical.
The second step is to decide whether a firm’s actual – not its espoused – culture will produce sustainable behavior and whether new values have to be elevated and inculcated. Many law firms discover that their culture has evolved in a way the leaders never intended, and a culture course correction is required. This correction necessarily centers on six values, attitudes, and principles: client primacy, shared objectives, accountability, trust and collegiality, continuous learning and improvement and social purpose.