The importance of change management skills in the repertoire of the equity partner

Mark Jones and Julie Harrison, respectively Managing Partner and Organisational Development Director of The Lawyer Law Firm of the Year, Addleshaw Booth & Co, examine the relevance of change management skills to the role of the equity partner.

It has always seemed to us that the RAF's definition of the Avro Shackleton, namely "twenty thousand rivets flying in loose formation" is a reasonably good working definition of a large law firm.

Indeed, the analogy can be developed further. It is the easiest thing in the world to cause the rivets to collide with each other and fall to earth in a useless heap of metal. It is harder by far to keep the rivets in the air and get them to change course without colliding and falling to earth. Lawyers operate in a world of ever increasing client expectations (and therefore increasing need for changes and improvements in service delivery). One of the keys to avoiding a collision between the rivets and instead achieving change is therefore the development, in one's partnership, of change management skills amongst the partners.

When accused of being "lucky", the Australian golfer Greg Norman is reputed to have replied that he found that the more he practised the luckier he got. Equally, changing the shape and service lines of a law firm in order to respond to the needs of its clients becomes less problematic if it is accepted not merely as inevitable but actually as desirable and therefore something to be practised and encouraged. The words of Thomas Musil: "Progress would be wonderful if only it would stop" have no place in the management of a thriving law firm (or, for that matter, any other business), however much it might be thought that law firms are change-averse environments!

Particularly in the three years since the merger that created our business, we have begun to work upon the understanding of, and use of, change management skills both in developing the roles of the partners in the business and in developing the business itself. We have a long way to go - in Greg Norman's words, a lot of practising still to do - but in this article we seek to set out where we have got to, why we have got there and why we - and our clients - believe the journey thus far to have been worthwhile.

Why bother? The life cycle of a law firm product

Yes, product! Heresy to some, no doubt, but within the firm we have, for some time, spoken in terms of the life cycle of a law firm product.

By and large, most legal products start life as high value, high complexity, low volume products with reasonably high margins and low price sensitivity. Over a period of time, most legal products mutate into low value, low complexity, high volume products with reasonably low margins and high price sensitivity. We describe the former as "A" products and the latter as "B" products. In diagrammatic form the mutation path is thus:

At any given time, there is usually more work available which can properly be categorised as "B" than there is work which can properly be categorised as "A". Given that most, if not all, products are also progressing down the path from "A" to "B", change is therefore inherent in the life of a law firm. The skills to manage change are therefore important, as is the need to get better at responding to change.

Sadly, it is an oft repeated mistake on the part of a lawyer to fail to recognise or respond appropriately to the process of transformation of an "A" product into a "B" product. At a training course for newly qualified lawyers which formed part of our training programme a year or two ago we had, as a guest speaker, the Head of Legal Department of one of our larger clients. He chose to speak to our lawyers on the subject of the Management Buy Out (MBO) and his service level requirements of his panel law firms in relation to it. A lively debate ensued in which, at one point, one of our colleagues suggested that the speaker didn't understand the pressures and complexities of providing the service to clients. Back came the response: "No, you don't understand. Once upon a time only a few firms could advise on an MBO and they charged more or less what they liked. Now hundreds of firms are capable of advising and they charge what I'm prepared to pay. The MBO has become a commodity. Either you re-engineer the way you deliver the product and deliver what I want and at the price I'm prepared to pay or you get out of the market." As is so often the case, the client was right! What he was talking about, of course, was the process of transformation from "A" product to "B" product. Recognising and managing change is crucial to the process of adapting to the client's requirements.

More than that, however, it is also crucial to growing one's business, in that once there is the appropriate recognition of the mutation process arguably the real trick is to sell the "A" products to the clients already buying "B" products and the "B" products to clients already buying "A" products. In that way, a virtuous circle can be created which, in diagrammatic form, appears thus:

The law firm then has available to it the option to develop "A" and "B" products, sell each as appropriate and also manage the transition of "A" to "B" within the firm without - unless it chooses to do so - having to "get out of the market". But that's another story.

In order to capitalise profitably upon that option, however, it is necessary first to develop the change management skills of the partners who are the proprietors, developers and managers of the business.

Icing, marzipan or base?

In the mid to late 1980s it was said that individuals were made partners in law firms purely upon the basis of their legal abilities and without reference to any other criteria.

In the mid to late 1990s it was, and is, said that legal abilities are taken as read, and that other skills are necessary in order to achieve partnership.

Whether or not the former statement was ever true, there is little doubt that the latter is, certainly as far as the clients are concerned. If not necessarily taken for granted, legal abilities certainly form only one part of the skill set required of the partner in a law firm, hence our statement that the development of change management skills is crucial to the profitable exploitation of the virtuous circle and consequent development of the business.

In our work upon the development and use of change management skills, we have sought to think in terms of three basic "types" of skills, client skills, technical skills and management skills. In those terms, legal ability falls into the category of technical skills. Again in diagrammatic form, we would seek to portray the three thus:

If high levels of client skills are not as common as would be ideal - and are therefore the icing on the cake - and technical skills are taken as read - and are therefore the base - then management skills are the marzipan layer - linking the icing to the base and without which the cake is in danger of having no shape or structure. The requisite management skills are crucial to the long term success and development not only of the business but also of the individual partner. They hold the business together.

But this is all common sense isn't it? So why does it matter to me?

Indeed it is common sense. But don't you find that the trouble with common sense is that it isn't very common? And it matters because it is fundamental to long term success, both for an individual and for a firm.

Let us take the most basic of all examples: the development of an individual from qualification as a lawyer, through to admission to partnership, and on to developing a position as an established partner. Take, furthermore, the fundamental - but all too often inadequately applied - concept of leverage and its relation to that development process.

Ignoring all other factors, if one assumes, for ease of illustration, that a partner in a large firm behaves as a sole practitioner and has a chargeable hours target of 1,500 hours and a charge out rate of £250 per hour, achieving budget for the year will yield, for that individual, a revenue contribution to the firm of £375,000. The key issue for that partner would be profitability. There are, in addition, a number of assumptions implied in "achievement", not least amongst them being the availability of sufficient "A" work to fill the hours and justify the charge out rate.

If there is not enough "A" work and the partner takes the dangerous but easy option and does "B" work at an "A" work rate of £250 per hour, that partner will quickly acquire rightly dissatisfied clients and thus dissatisfied partners. If, instead, the partner elects to do "B" work at a "B" work rate of - say - £125 per hour, the choice is either working twice as hard to achieve a contribution of £375,000 or - again - dissatisfied partners. And as few of us relish the prospect of 3,000 chargeable hours per annum of work we shouldn't be doing in the first place, the price of satisfying partners would almost inevitably be personal dissatisfaction.

Using leverage, however, if the partner has a personal chargeable hours target of 1,000 hours of genuine "A" work and uses the 500 hours to develop and manage a team of four assistants each of whom delivers 1,500 hours of "B" work, the team generates a revenue contribution of £1,000,000 (i.e. £250 x 1,000 and £125 x 1, 500 x 4). Even allowing for the salary, premises and other associated costs of the assistants the financial picture is far rosier, as is the long term planning position of the firm.

Pausing at that point, amongst many others the skills required to achieve that relatively happy state of affairs include:

the ability to evaluate present behaviour and to change oneself so as to behave differently,
the management - and delegation - of the work (product) from the desk of the partner to that of the assistant as it mutates,
the management and training of the team of assistants,
the management of the client's expectations, if they are not already preaching the management message themselves.
In other words, the management of a constant process of evolution or change both of and around oneself.

When we look beyond that most basic of examples, it actually gets better (from the point of view of the change manager, that is!). Increasingly, technology will have its say. Technology is an enabler. To stay with the leverage example, the appropriate use of case manager technology as an enabler has an equally significant impact upon the position.

A colleague was recently heard to observe that a stunning new piece of software was of no use to him in his practice because he didn't use a keyboard. Now, there are alternatives to keyboard skills - voice recognition technology for example - but there is no doubt that the individual is going to have to adapt - to change - because the environment - and not only the technology - will continue to demand change of the individual.

"When the facts change, I change my mind sir. What do you do?"

George Bernard Shaw, to the point as ever. So, in an ever changing and increasingly demanding world, what are we doing in our business to encourage the development of change management skills amongst the partners? Five initiatives are perhaps more relevant than many.

First, and not necessarily the most obvious, we have started a dialogue with our clients to discover what they want from us. One of the by products of that process was the opening - in November 1998 - of a London office. Another was the development of a case manager based service line delivering to a client a product which it had assumed would not be available from a firm such as ours (notwithstanding that it was necessary to satisfy a need which the client had). By having the dialogue we are telling our clients that we want to change with them.

Second, we have put in place a strategic plan and a business planning process which now yields both yearly, and a rolling three year, business plans. On to the skeleton of that process we have begun to build client, sector and market analysis and product development plans. The plans are monitored and measured. The strategic plan enunciates, inter alia, the core values of the business which are built around an outward facing client focus, a belief in achievement and a mutually supportive environment. All are fundamental to successful change management. The fact that we have a plan with a goal is express confirmation of, or acknowledgement that, we need to change.

Third, where appropriate we have recruited and put in place non lawyer professionals with the status of partners and with crucial roles to play in achieving behavioural change and change management. Currently we have a Finance Director, a Human Resources Director, an IT Director, a Marketing Director and an Organisational Development Director. Each must bring to the party skills in changing the way the business works.

Fourth, we have put in place a 360 degree performance review process for the partners. One salutory piece of feedback was to the effect that the institution of a partner performance review system at least made the partners take staff performance reviews more seriously! In the partner reviews, SMART (specific, measurable, achievable, realistic and timely) objectives for the forthcoming year are agreed and change is a frequent element in the objectives. The process provides an impetus for, and evidence of, change.

Fifth, we have a recognition, within the partnership, of the vital part which training plays in the change management process. Technical training has long been a feature of law firms. Wider skill and behavioural training is equally important. We have begun to define the skills required by the business. One is the ability to manage change.

Taken together, over a period of time those five have helped to foster a recognition that change - and the management of change - is a central part of the future development and prosperity of our business.

Back to the future

There are no two ways about it, the need for management skills to be demonstrated by the partners (and not just the managing partner!!) of a law firm will become ever more important with each year that passes.

In particular, the need to manage change will be vital to the future prosperity of law firms. We have an often stated goal to convert our law firm truly into a business (as distinct from a law firm!). Our future depends upon our success. And to those who say that the legal environment is already changing rapidly we say: you ain't seen nothing yet! And in terms of the response required in that rapidly changing environment, again in the words of George Bernard Shaw:

"Progress is impossible without change, and those who cannot change their minds cannot change anything."

The management of the process of change is rising rapidly up the personal agenda of every law firm partner - whether they yet realise it or not! It is critical that partners develop the skills to change their behaviour and to manage the response of other people to change. It is equally critical that partners both understand and manage clients' changing expectations and needs. This has long been so for other businesses. Law firms are now joining the real world.

Mark Jones and Julie Harrison, of Addleshaw Booth & Co, can be contacted on:
T: +44 (0) 113 209 2000