denotes premium content | Oct 11 2008 
Feature
posted 27 Jul 2004 in Volume 7 Issue 3
Untapping the potential
Operational efficiency and HR
For many firms, improving their financial or operational performance comes down to cutting costs or pushing the fee earners harder. Alison Denton, director of HR at Pagan Osborne, argues that it is actually HR that could actually make the crucial difference to client service and law-firm profitability.
One of the key issues currently facing law firms of every size is the issue of profitability and effectiveness. As law firms compete against each other in terms of fee size and income, it is essential for practices to find new ways of working, which place the client at the very heart of their operational efficiency and abandon the traditional partner-centric structure that has been synonymous with the legal profession for centuries.
While some may claim that clients are already at the heart of everything they do, when you dig deeper, the reality is that in many firms, client services are shaped around the needs of the partners rather than vice-versa. It is a trend that is perhaps more dominant within small and medium-sized firms, but it is equally clear that the larger the firm, the greater the need to ensure that all staff are engaged and motivated to improve and refine the overall effectiveness and performance of the practice.
Professional-human-resource management (HR) is one of the most effective business tools available. It enables the building of relationships across an organisation and can ensure that a firm’s objectives are met throughout the business. It applies to every form of business, from sole traders up to blue-chip organisations and never has it been more relevant to the legal profession. With reviews currently being taken by Clementi in England and Wales and by the Scottish Executive north of the border, it is clear that the profession as a whole is bracing itself for change.
A strongly held belief in the retail sector is that ‘people buy people first’. Coming from this background it immediately struck me that many law firms had concentrated on improving performance through cutting costs or making increasing demands on fee earners. I saw a huge amount of untapped potential within the profession, which, if it could be unlocked, could make a genuine impact on the profitability of firms of all sizes, and make the legal profession a more rewarding place to work.
This is where HR professionals can add value to legal firms. The importance of staff to an organisation is a line that is commonly quoted by senior business and industry figures. If people truly are a ‘firm’s greatest asset’, then an unmotivated or a disgruntled workforce can clearly be the difference between a company’s success and failure. If we accept that good people can be a great asset, then one of the challenges facing all law firms is the attraction and retention of talented personnel, with skills tailored to meet the needs of the organisation.
In common with many medium-sized law firms based outside the city, one of the key factors limiting the growth of Pagan Osborne was the inability of the firm to attract new recruits. Many trainees are attracted to the bright lights of large firms and the sexy areas of law that they claim to operate in. In terms of providing attractive salary packages and incentives it can be difficult for smaller firms to appeal to the best graduates.
The temptation when faced with these difficulties is to drop standards, which may well happen subconsciously, but results in future problems for the firm, eventually impacting on client service and the reputation of a firm, which in turn makes it more difficult to attract new talent. This may mean rethinking the way that a position is advertised or indeed the actual role in question, but can often be the most beneficial decision in the long-term. What should never be done is accept the best of the bunch, as this can often lead to appointing the wrong individual to the wrong job and can cause all sorts of problems later on. That goes for the appointment of partners too.
At the heart of every firm should be a clear understanding of what the firm is trying to achieve (vision) and why it exists (mission). This is the start of all staff (partners included) understanding how their role can contribute to the overall success of the organisation. Identifying this can be more difficult than it seems – it is not unusual in a partnership for every partner to have a different view of what these goals are. No wonder the rest of the staff are confused. Input from HR can help the partners identify common goals and communicate them clearly to the rest of the firm. There is no doubt that unless the partnership as a whole works together to achieve common goals, then the business and its profitability suffers.
A major difficulty can be overcoming the traditional paternalistic culture, often synonymous with the profession. This might be fine in a firm with just a handful of staff and a couple of partners, operating from one office. But when it comes to larger concerns, such an infrastructure cannot possibly serve the firm effectively.
It is all too easy to build a business around the needs of its partners (a lifestyle firm), but before choosing to go down this route, several key questions have to be addressed. For example, what will this bring to the firm strategically? How does it contribute to achieving the firm’s vision/mission? And, most important, will this add benefit to the firm as a whole?
Without clear goals, it is impossible to agree an effective strategy. Lack of strategic direction creates a vacuum that can result in each partner effectively managing a tiny micro-business, served by its own staff, clients and accountable only to itself. Unfortunately, many firms do not realise the negative implications this can have on the business. Taking time to discuss and agree these clear goals and subsequent strategy are key to ‘unlocking the talent’ within an organisation, but this can only be successful if effectively communicated to the staff.
In my experiences, it is likely that everyone working for a company operating in either the retail or service industry would have an understanding of the overall aims and objectives of the business, yet for many law firms this can be a foreign concept.
In short, while recognising the sensitivities and unique composition of partnerships, there are lessons that can be learnt from the ‘corporate world’. The key is to adopt those practices that can contribute to a firm’s success by improving the effectiveness of the management of the practice.
Of course, it is vital that the client receives competent legal advice from their lawyer, but what about the rest of the team? I believe it is equally crucial that everybody who interacts with the client reinforces that experience – a snippy receptionist or stroppy secretary can be the deciding factor in the overall quality of the client experience.
The level of personal service delivered to clients is something that distinguishes the legal profession from almost every other form of business in the UK and while many lawyers pride themselves on the high level of service offered to clients, can this honestly be said about the way firms are managed?
Corporate culture is not about hiding behind a faceless logo, it is about giving staff clear guidelines as to how the firm expects them to behave (with each other as well as clients) and giving clients a consistent high-quality experience no matter who they are dealing with.
So, how exactly can culture lead to improved profitability? The most effective way of improving what the customer thinks is to improve what the staff think about the organisation. It is a formula that can be applied extremely effectively to the legal profession and can be tailored to law firms of all shapes and sizes.
Without clear standards of behaviour, applied to everybody and modelled by partners, it is extremely easy for staff to ‘do their own thing’ and, in worst case scenarios, internal politics overtake the interests of the clients. Without effective chains and channels of communication, employees become disengaged. This in turn has a negative impact upon the quality of work, which ultimately has a detrimental impact upon client services. It is a downward spiral that can cause huge problems if it isn’t addressed.
HR professionals can deliver practical solutions to allay this problem. This is not a soft ‘touchy feely’ discipline that’s ‘nice to do’, but a killer weapon in the fight for competitive advantage. HR can help tap into the entire workforce, shaping attitudes and opinions across the whole organisation. The money spent on a marketing campaign is wasted if the staff don’t deliver on your promises.
Good HR policies will help to develop a positive attitude among employees, enabling the values of a firm to be reflected through its staff. This can, in turn, have the added bonus of improving business efficiency. After all, a motivated workforce will always be more effective than a lethargic one. When HR is placed in this context, it is not only important for a law firm, it is essential.
Speaking as an HR director who is new to the legal profession, one of the differences I had never expected was the glass wall in place within the profession between legally qualified fee earners and support staff. This is often reinforced in the language of the profession, the reward and recognition processes and definitely in the ‘them and us’ mindset. The negative impact that this two-tier structure can have is something that is slowly being understood by some of the more forward-thinking firms: they understand that the most effective teams exist where the contribution of all members of the team is valued.
At Pagan Osborne, we wanted to make sure that all staff felt valued and involved and understood that their role within the organisation was vital to the overall success of the firm. To achieve this we introduced a number of initiatives to help to meet our objectives.
One of these was to develop an integrated training and development strategy – the Pagan Academy. The firm introduced an employee-development programme that encourages all staff to continually enhance their skills throughout their career. The Pagan Academy was born from a belief that the firm was not getting value for money from its training investment. As much as 90 per cent of the budget was spent on 25 per cent of the staff and this was driven by the need to secure CPD points rather than business objectives. Learning was not shared and again the focus on one particular group of staff was divisive. Through imaginative use of the budget, linked closely to the business objectives, and the introduction of a CPD scheme for all staff in the firm, the same training budget is delivering opportunities for every member of staff. In staff surveys, the opportunity to access quality training and personal development is consistently rated as one of the best things about working at our firm.
I believe this has played a key role in the development of our firm and has had a measurable impact in terms of the reduction in absenteeism and increase in staff retention. Staff seized the opportunity with both hands and have continued to take much more of an interest in the firm, simply because they feel valued and committed. All our staff are involved in the business-planning process through the balanced-scorecard model and this has also helped to create an extremely positive and effective working environment for everybody in the organisation.
In addition to the improved working atmosphere within the firm, the changes had an immediate impact on key aspects of the business, including a marked growth in turnover.
Despite the obvious success that HR has contributed to Pagan Osborne, it is important to recognise that employing an HR professional will not solve all operational issues overnight. In fact, if the leaders of the firm are not fully committed to changing, it can raise expectations for the staff, which, if not delivered, can have a negative impact on the business.
Any HR strategy must be critically examined to ensure it is aligned to the delivery of the firm’s business objectives. In isolation, the best HR strategies in the world cannot deliver a fully committed and engaged workforce – it’s like assembling the best football team in the world, but forgetting to tell the players which end of the pitch is the opposition goal and which is their own.
Without a clear goal, structure and understanding of who is accountable and who is responsible, the organisation ultimately suffers. A poorly defined structure can often mean that staff have difficulty understanding their own and other roles, which can leave unpopular tasks neglected, while popular ones are duplicated.
A crucial step in this process is the alignment of power and responsibilities.
In partnerships, it is not uncommon for staff to be part of a team reporting to a manager. When you take a step back and look at their roles and responsibilities, it is likely to reveal that they are influenced significantly by a particular partner. The partners have often opted out of these management roles to ‘concentrate on client work’. However, this concentration can be easily distracted if a manager wants to introduce or change a system. When we looked at this across our firm, it highlighted the need for clarity – who had the responsibility to make decisions and who did not. Many members of staff had developed extraordinarily good skills of upward delegation – taking selected information to partners who became bogged down with minor decisions that took on a life of their own.
Staff were able to exploit the inherent inefficiencies in the firm’s structure, simply by going to another, more amenable partner. One of the benefits of establishing a clear structure and identifying who is the ‘line manager’ is that you can then delegate the task of establishing clear job roles. By this I mean not just what people do, but what they are responsible for and create some clarity around their job purpose.
At its most basic level, HR can boost operational efficiency by ensuring that staff are aware of what’s required of them and why they need to perform a specific task. Without the ability to put a firm’s mission or vision into context, it becomes very difficult to understand the context within which they are expected to perform.
While there are some businesses that have succeeded in grasping this concept well and implement it with a considerable degree of success, few would disagree that the legal profession has been slow to rise to the challenge.
I believe the 21st Century equity partner needs to develop their skills in three main areas:
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Practice development and business winning for the firm;
- The management of that work through the team to client delivery (including the allocation of work to the right level, providing support and guidance for those who are doing the work (high-level supervision) and ‘adding the magic’ to the piece of work through their technical capability and experience);
- Leadership of their particular team.
In this model, there is no limit to the amount of fees a partner’s team can generate for the firm. It is also a model that has been quickly adopted by the accountancy profession.
Accountancy firms usually comprise a mixture of experienced professionals, who act almost in the capacity of mentors, while trainees, juniors and seniors are responsible for soaking up the bulk of the work. The model has served that profession well. In addition to the well managed team, this enables individual firms to remain competitive in terms of costs and benefits to clients.
Yet the legal profession continues to lag behind. If accountants still used the management model used by many law firms, then either one partner would turn up to complete the whole audit themselves or, worse still, a team of partners would turn up and charge even more.
For Pagan Osborne, this recognition meant fundamental organisational changes. The firm was restructured around clients rather than partners. For the first time in the firm’s history, a managing partner was appointed, along with a senior management team comprising a finance director and HR director, who were both given the status of partner.
The firm’s core areas of specialism were identified and practice-area heads appointed to lead those teams. Everybody in the firm was given a specific role, enabling clear channels of communication to be established. This infrastructure enables information to be delivered from the managing partner, via the management infrastructure coherently and consistently to every single person working in the organisation.
There is no magic formula to improving the performance of a business, whether it’s an ailing family business, blue-chip organisation or legal partnership and it is something that cannot be transformed instantaneously. It is an ongoing process one that may take many months, or even years to see the rewards of the work undertaken. But I believe good HR strategies can make the changes less painful and speed up the whole process.
When it comes to improving the operational efficiency of an organisation, it is crucial to look at problems in the round. Improving the management of a law firm by implementing a good HR policy will not only help to boost staff morale and provide a much more conducive working environment, but it will also make a considerable difference to the profit margin.
Alison Denton is director of HR at Pagan Osborne. She can be contacted at adenton@pagan.co.uk
