Feature

posted 1 Nov 2002 in Volume 5 Issue 6

Managing your workforce: effective leadership in a people business

Who runs your business? At one time, the automatic response of many senior managers would have been a resolute: “I do”. After all, strong leadership of an organisation, whatever its business, is indispensable to success. Managers must be wary, however, of forgetting the role of the team in making a successful business and a good leader will work hard to guide and develop the skills and successes of his people. Anders M. Hansen, managing partner of Osborne Clarke, Denmark, looks at the new responsibilities of managers to their people and examines the criteria on which their performance should be judged.

“Nothing is, everything is becoming”

The Greek philosopher Heraclitus wrestled with the contradictions in the world. His quote above describes how nothing is constant because everything, everywhere is changing at every moment.

Those that have the ultimate responsibility of managing a business might understand the reference more than most. In the US and Europe, the rights and responsibilities of those that lead businesses are under scrutiny, and if their role isn’t being redefined through legislation, it is being well and truly tested by the markets. Despite the uncertainty, however, management today is what it has always been about – creating results. It is your role as manager to determine the strategy that will take your business into the future and enable it to compete where it needs to.

In a people business, it follows that people must also be at the heart of the management equation for a number of reasons. As any seasoned manager knows, financial reporting is always ‘old numbers’, which means that forecasting can only be based on historical know-how. This might work – quite well – most of the time, but times of great change in markets and/or business structures will expose its shortcomings. It certainly isn’t a platform for determining your business development. In this climate, a firm’s ability to sustain its overall target is down to just one thing: the performance of its people.

Successful businesses have long recognised that recruiting, retaining and motivating their people is a highly strategic business and, accordingly, take considerable care to match individual skills and market specialisations with their own business objectives. For successful ‘people businesses’, however, the relationship with their employees goes even deeper. Here, people are more than just a strategic investment. They are a firm’s competitive advantage: the only one it has.

In the battle for market share and talent, a firm’s most effective weapon is its core values – those principles by which a business lives and breathes. Many businesses have them. The challenge lies in putting them into practice. Simply drafting a set of values and putting them on a website achieves nothing. It is management’s role to ensure they are not just widely communicated – but also understood, endorsed and, importantly, lived to the letter.

For some, the natural extension of this is branding. “In fact”, as Larry Smith puts it in his book Inside/Outside, “one might question the fundamental integrity of branding in professional services.” For instance, ‘living the brand’ is a strategic marketing concept whereby employees’ behaviour is thought to endorse the values of the business – and by implication those of its products or services. This sounds great in theory. However, in a law firm, or any other people business, the rigid conventions of branding simply won’t work. You want to brand according to a market specialisation? Markets change, as technology-focused firms have discovered. You want to specialise according to a service line? The market also drives these and, of course, clients will always demand new solutions to the commercial challenges that face their own business.

There are then your people to consider. Where people represent your competitive edge, your chances of getting all of them to behave in exactly the same way, time after time, are slim to say the least. Good advisers, such as lawyers, are all brilliant in different ways and not one of them wants to operate to a given formula, however unique. The good news is that our clients don’t want them to.

It is the ability of professional advisers, such as lawyers, to fashion a solution to the most complex challenges that marks the best from the rest. For anyone who thinks this advocates a return to the bad old days of maverick rule, let me assure you that it doesn’t. In a successful business, professional freedom must – and this really is non-negotiable – go hand in hand with a uniformly excellent approach to client care. No one person – not the firm’s leader, its key business developer or its most profitable partner – is more important than the firm itself.

It might sound simple, but it possibly presents the most demanding challenge for all professional-service-firm managers: that is, the need to balance the needs and ambitions of the business with those of the individual.

As in all relationships, this is largely a matter of trust. Clients should expect the unexpected from their adviser, but they must also be absolutely certain that they will receive the same superlative level of service – wherever they encounter the firm. In the same way, management must trust the professional skill of its people (specifically its partners) to advise a firm’s most valuable clients, and it must also trust their ability to deliver its business objectives and targets. Not because it needs to keep the mavericks on side, but because, when markets fluctuate or conditions change, those closest to them are best placed to devise the best solutions. All they need from you – as management – is a clear idea of what the firm expects them to achieve, and how it proposes to help them to achieve it.

In this way, trust brings a further dimension to the recruitment of and general investment in your people. If the role of leaders is to create results – by allowing the people in the firm to manage the business – then clearly they require the best people in place, from the top down. With the emphasis on corporate integrity, trust and transparency are now the benchmarks of management. In this new climate, what qualities should a professional services firm be looking for in its leader?

The will to create growth

I am of the firm opinion that in business, organic growth is just another term for recession. Either you grow and go forward or you shut up shop. Standing still is not an alternative.

Management’s most important contribution to this process is in creating common values through a corporate culture that supports independent analysis and decision making. It is this emphasis on the joy of responsibility, rather than the comfort zone of habitual, static thinking, that keeps a business vital, alert to opportunity and profitable.

In recent times, the folly of focusing on growth for all the wrong reasons has been widely – and graphically – documented. However, these calamities might have been prevented had those businesses exercised a key management principle: the ability to be constructively critical, above all of itself.

As ever, the power of hindsight confers great insight. The swift pace of change in recent years, with its spate of mergers, new commercial requirements and technologies, was a key factor. But there are psychological aspects as well.

Where the pace of change is swift, the fear of being overtaken by developments often prompts a business to appoint a dynamic leader to guide it through uncertain times or unknown territory. As events have shown, this type of leader is often a larger-than-life personality who, through sheer force of character, defuses all resistance and leads the company quickly into a stage of growth and expansion. Such leaders are typically risk takers, entrepreneurial by nature and, on the surface, appear an attractive proposition for investors and the business itself. However, their tenure often brings about great change – usually at the expense of stability. Their enthusiasm might make them popular, but their combative approach – taken to neutralise the opposition, both internally and externally – invariably results in a power struggle.

In this environment, objectivity does not exist and the pattern of growth and expansion, often for its own sake, continues unchecked. Eventually, the personality of this style of leader becomes the entire basis for management – and ultimately (and disastrously), for the organisation itself. The challenge for any business in this situation is to exercise constructive criticism before it is too late and move on.

The Chinese philosopher Lao Tzu already acknowledged this in the Tao Ching or the Book of Change, where he wrote: “When the great Tao ceased to be observed, benevolence and righteousness came into fashion. Then wisdom and cleverness appeared, and hypocrisy followed at their heels. When harmony no longer prevailed among kin, loyal sons first appeared; when states fell into disorder, loyal ministers appeared.”

This egocentric style of management is now synonymous with corporate collapse and in an age where trust and transparency are management benchmarks, a new style of leader with a different set of qualities is needed. For a law firm, this will be someone who can manage the firm’s well being in terms of financial growth and sustain those values that will attract and retain the best people. They will have integrity, a balanced judgement and be more concerned with the overall welfare of the firm and its people than with their own ambitions. Crucially, they will be able to handle resistance, stimulate constructive criticism, listen and question, and, when necessary, act as devil’s advocate.

Importantly, too, there will be continuity and connection between what these types of leaders say and what they do. They must be able to make unpopular decisions – by putting the firm’s interests first. However, a firm’s stakeholders must be able to anticipate these decisions as they must be founded in the objectives, tasks and values communicated.

The ability to distinguish between these two types of manager is a critical one for any business going forward. People are drawn to an organisation for a number of reasons: its high profile, its attractive rewards and good working conditions are qualities that, presumably, attracted people to Enron and Worldcom. With the emphasis now on compliance and corporate integrity, these benefits are no longer enough. People also want to know what your business believes in and how it puts these values into action: whether it stands and lives by what it says.

You can break our rules – but not our values

Co-ordination and co-operation are fundamental operating principles of any business. In a law firm, with its inevitable drift towards individual targets and practices, this can be difficult to manage. You must first ensure that all your people and partners agree on your firm’s core business principles and values.

The key to this is a clear line of communication. The firm’s mission should be known and understood by everybody engaged in helping to achieve its purpose. Vital to the process is management’s ability to identify and communicate values and objectives.

It must also provide a route map to achieving them. Tasks should be clearly defined and easily measurable and, in some instances, given with guidance as to how they can be reached. A lack of clarity will only lead to misunderstanding and lack of direction. The way you communicate is important too. People will view the way in which their objectives are communicated, as well as the objectives themselves, as an integral part of your firm’s values. Thus the medium, as well as the message, is important to the process.

As ever in law firm management, this is not always straightforward. Inevitably, some situations will demand a solution other than the one prescribed to ensure the firm achieves its overall goal. It might be a shift in the market, a change in a specific client relationship or a competitor development. Whatever the circumstance, bar those that threaten the business itself, it is down to those at the coal face to determine how it should be dealt with. They must decide whether a new course of action is required and whether it will enhance the firm’s chances of success. Of course, communication is a two-way street and any major change in direction must, in turn, be communicated back to management, as it will have a bearing on profitability. However, entrusting people with making decisions that impact on the firm’s bottom line can, if handled right, only enhance its chances of success. It also demands trust and can only be achieved by decentralising the management process.

The key issue here is transparency. Management must ensure that everybody within the organisation is kept fully informed of its plans and that while they are regularly reviewed, they are not constantly changed without reason. This requires clear, honest, accurate and consistent communication – in both directions. However, information in itself is not enough. Management must also ensure that the balance in the firm is not one of all care and no responsibility – on either side. In securing sustained participation by everyone in the firm, responsibility becomes a joy and not a burden.

Going forward with your chosen strategy will demand the enthusiasm of all your people and particularly your partners, both in good times and in bad. Too often, however, the management spotlight tends to fall on individual performance – be it good or bad. This is a skewed perspective. Just as individuals must co-operate with the firm, so management must understand that focus on individuals, instead of on the bigger strategic and financial picture, can be a stumbling block in the firm’s strategic evolution. Unless an individual focus is absolutely critical to safeguard the firm’s overall target, individual performances should be viewed as an ‘investment’ made to sustain and to underpin the firm’s development. Exceptional cases aside, people are a long-term investment on which you shouldn’t expect to see any return in the immediate future.

This means that rainmakers and top billers, whose contribution might be perceived to be more valuable than others, must be viewed within the context of the firm as a whole. Their importance to the firm is no greater than anybody else’s and, significant as their input might be, they can’t make it on their own. They need many of the firm’s resources, human and otherwise, as a platform and support for their performance. In a law firm, as in any business, no one person or team should operate independently.

Only by leveraging its key strengths will a firm exploit its competitive edge. The firm’s key ‘stakeholders’, its partners, are its obvious strength. But they must be encouraged to understand that their behaviour is one of the key factors in ensuring that its values are lived to the letter. If he or she does not – or will not – do so, then however successful their practice might be, the likelihood is that the firm would be better off without them.

The number one criteria for success in business: trust The key to achieving firm-wide acceptance of both your business objectives and your values is trust. By trust,

I mean a mutual recognition, by all parties, that there should be no surprises in the way they conduct their business or their relationships with clients - or indeed

with any of the firm’s stakeholders. Acceptance of your values and objectives is dependent on your ability to communicate them clearly and to show that you mean what you say. People dislike sudden change and place great value in knowing what to expect. One of the important benchmarks you will be measured against is whether personal performance truly is judged as a track record over time, on a consistent and transparent manner.

Trust goes both ways too. In evaluating your people’s importance to the firm, you must also understand why they might go about their business in a manner different from the one you might adopt. That doesn’t mean that they can be allowed to behave badly – just that they can be afforded some flexibility in the way that they manage their practice. No one has the ability to foresee all the factors of change – particularly when market forces are beyond their control – and providing people do their utmost to fulfil the shared expectations of the firm, you should trust in the fact that they are working in its best interests.

This strategic focus on people means that implementing strategy becomes a firm-wide responsibility. It is not just partners who need to understand how their performance contributes to the success of the firm, but everybody who works there. In this way, the entire firm, and not just senior management, becomes strategically focused. This has a bearing on your reporting systems: what gets measured is what gets managed.

In the quest for the competitive edge that will take a business into the future, management must take an holistic approach to its appraisal of people and their skills. Talent, commitment and flexibility are still desirable characteristics, but they function in isolation, they will not create the strategic asset that will set your firm apart. It is up to you, as management, to align your management systems and the behaviour of your partners and your people in order for them to support your firm’s strategy, thereby turning them into a secret and invisible asset.

Kaplan and Norton invented the balanced scorecard, but acknowledged back in 1996 that progress on developing measures for the strategic contribution by the people in an organisation had not been made.Only by encouraging its senior management and people to share responsibility and accountability for the firm’s performance will a firm develop the intangible asset that will fully realise its strategic potential.

Full circle

If the prime function of management is to secure success, then it must show leadership in hard times. The old adage still holds: when the going gets tough, the tough get going. Except that now, if a firm’s management doesn’t deliver, its best people might get going as well. Only by optimising profitability through clearly-expressed values – addressed to all its stakeholders – and by sharing responsibility and accountability for delivering these values, will your firm create a genuine mission: the starting point in redefining itself to its clients and people

Dictating a way forward that abandons all the values that your firm has held up to its people, partners and clients is not an alternative – not even in difficult times. If a business takes such an approach, the prognosis is clear: it might be a profitable, expanding business, but its management will still have failed. Only by showing leadership with all your values intact will you ensure that you recruit and keep those people who will sustain and continue the evolution of your firm in an environment of constant change.

Anders M. Hansen is the managing partner at Osborne Clarke, Denmark. He can be contacted at: anders.hansen@osborneclarke.dk.