Several commentators have recently published research on the benefits of collaboration in fully maximizing client relationships in law firms. After 40 years of legal practice, 20 of which were spent in the upper management of one of the world’s largest law firms, I have reached some conclusions about forces that can act as a barrier to effectively collaborating to broaden and deepen client relationships, and consequently to maximizing the economic benefit from firm clients. Lest one conclude that I am not following my own advice on the benefits of collaboration, allow me to explain that some of my observations have been informed not only by personal observation but also by leading focus groups of law firm partners and subsequent interviews with the leaders of some of the largest law firms in the world.
I start from the premise that one of the greatest challenges for any law firm is to leverage existing client relationships to cross-sell new resources and talent to solve clients’ problems. Most of us now agree that bringing new clients into a firm is harder than pursuing the low-hanging fruit of obtaining a larger “share of wallet” from existing clients. But experience teaches us that such efforts only sound easy. The legal market is filled with clients who turn to firms for, say, employment or patent litigation, yet will not consider or use the firm for its commercial litigation, real estate, tax, or corporate work. Drilling down on this phenomenon will enable a law firm manager to focus on some of the challenges presented by this common occurrence.
I recognize that some of the barriers I have listed below are intertwined. For example, factors such as trust, compensation incentives, and partner personalities are all related, in some fashion. That being said, I believe that there is value in examining and commenting on the issues individually, as each of the barriers provides a unique aspect of firm culture that should be understood and addressed as part of a process to alter the forces that drive behaviors in the firm. These behavioral/motivational forces are often integral elements of what partners perceive as firm culture and, as such, dictate the way that the institution is run and perceived. A law firm that lacks a collaborative culture will suffer from missed opportunities to expand client relationships and the financial rewards of cross-selling. Perhaps more importantly, the noncollaborative firm culture appears to reward “lone wolf” behaviors, reinforce negative aspects of the partner “star” system, and inhibit recruiting, integration, and talent management. Such a firm is perceived as a bad place to work and develop professionally, and is unable to retain the talent and collegiality needed to flourish and prosper.
I have identified ten barriers that I would contend deserve attention and analysis in preparing a program to expand collaboration in client development:
1. Sophisticated Knowledge of the Firm and Its Resources:
In my position as a managing partner, I often observed that the most sophisticated legal practitioner could be remarkably unsophisticated about the full panoply of legal services and resources that his or her own law firm could provide. This is true despite the ease of access to in-depth information about the scope and nature of the firm’s practices, and areas of strength on the website and in firm publications. In many instances, the partner guiding the relationship is deep in a silo of her own and focused only on the particular group or sector in which she specializes. An increasingly major challenge for every law firm is ensuring that partners get smarter about the breadth and depth of their own law firm’s practice, and more adept at listening to clients and connecting a client’s business problems with a knowledgeable access to the right resources of the firm. There have been many client feedback sessions where a good firm client expresses surprise at the fact that the firm does tax work or handles white-collar investigations. A strong program to inculcate the necessity to know your firm must be a critical part of every new lawyer’s orientation into the firm. There is no more effective barrier to collaboration than ignorance of the firm’s talents and resources.
Another common occurrence is when a partner has a client relationship with someone who is not the decision maker for broader legal engagements. For example, in areas such as employment litigation, the partner may know well and interact regularly with human resource professionals but have no direct access to the general counsel or to the head of litigation. This is even more common in the counseling aspects of law practice. A partner providing advice only in his own area of expertise misses opportunities presented by including other partners in collaborative discussions of the client’s business and industry. In my experience, only by including others with different skills and insights in a collaborative approach to managing the relationship can a law firm effectively increase its ability to break through one client access channel into other areas of the client’s legal staff. New partners operating in different aspects of legal expertise are uniquely able to identify areas of legal need easily overlooked by the relationship partner. For example, where the relationship, as noted above, is primarily with the employment litigator, including a white-collar lawyer on the client team will enable the team to provide timely and focused legal advice when a government investigation is imminent. The white-collar lawyer will understand and be able to advise on managing the risks that are important to the board and GC in such circumstances. It is often the outsider partner brought into the relationship, with new skills and a different knowledge base, who can guide the relationship partner to understand and exploit new opportunities and sell new products and services into different avenues within existing clients.
3. Firm Culture and Partner Personality:
Law firms often operate a so-called star system within their partnership. This kind of system reinforces the marquee branding of a partner or a practice that can be a major obstacle to a collaborative approach. In my experience, it is tougher for the star than lesser mortals in the same firm to bring others into their relationships and share responsibility for clients. The star is convinced that he or she is a superior brand of partner and tends to keep clients walled off from the rest of the firm unless convinced that the new partner is worthy of an introduction by the star. Star partners will exert pressure for special treatment from law firm management and the marketing staff, ranging from expensive advertising to personal publicists. The firm culture that reinforces a star system risks becoming a cult of personality and undermining concerted efforts to make other partners feel comfortable servicing the clients of the stars. The result is limited opportunities to offer clients a broader array of legal services. Likewise, the nonstar partners often suffer from an inability to ask for work outside of their areas of expertise. It takes a certain personality and sense of confidence to fully develop a trusted adviser relationship, and law firm management should ensure that the key clients are entrusted to partners with the right balance of confidence and team-building skills to grow the relationship.
4. Client Ownership:
At present, the elephant in the room in many law firms is created by the dynamics of what I term client ownership issues. There is an underlying fallacy within many partnerships that a client ”belongs” to a particular partner. Teaching partners from the outset that clients are clients of the firm, and not individual possessions of particular partners, is often hard going down and can be strongly resisted. Partners often resist collaboration in client service because of concerns over losing their exclusive grip on the relationship and that, as a result, the client will be institutionalized and not remain “portable.” These concerns tend to increase with the age of a partner. They reflect basic anxieties, which many partners express, that they have no economic value apart from their ability to generate work. In “eat what you kill” law firm compensation systems infused with the business school philosophy of “culling the weak from the herd,” compounded by overcapacity in a shrinking legal market, that anxiety is made more acute by the prospect of having to share credit for a client. Partners are hesitant to forgo the leverage they think they have of threatening to cut and run with “their” clients if the compensation results or the situation no longer suits them—but it’s hard to do that in a system where the legal work and the client credit is shared among partners collaborating to provide legal services across a wide range of sectors and geographies. The more the work is shared across practices and sectors, the less vulnerable a firm is to being held ransom by fears of losing clients taken by departing rogue partners. But unless this approach is stressed from the outset and enforced through compensation policies and management oversight, any law firm will risk being viewed by its own clients as a confederation of practices, not a unified, holistic full-service firm.
5. Fear and Mistrust:
There is another unfortunate but all-too-common comment I heard routinely from some corporate partners with long-standing client relationships centered on trust, or, more accurately, mistrust of introducing new partners to an existing, stable, and deep relationship. The thinking that I heard expressed went along these lines: “I am getting a steady flow of corporate [or tax or real estate] work, the client trusts me, and I can control what I work on. Why would I threaten this steady flow of corporate or tax or real estate work by introducing the risks of litigation into the mix?” Trusting another partner with one of “your” clients is seen by many partners as a leap of faith. There are often war stories shared among partners of disastrous experiences, lost cases, or bad lawyering that reinforce this attitude. The fear of sharing credit, bringing new risky practice areas into the mix, and losing exclusivity of access to the client are legitimate concerns, and they undermine the kind of collaborative culture that ideally will reward teamwork and perceiving clients as firm rather than individual assets.
The fear and mistrust factors discussed above also reinforce the element of greed inherent in an “eat what you kill” compensation system. Collaborating and letting other partners close to “your” client is often viewed as eroding relationship credit for the client. Partners will often see this as a diminishment of their bargaining power in taking credit for client development in the compensation process. A partner with a hitherto exclusive relationship with a client, when faced with the prospect of introducing new partners to collaborate in a relationship, will often view the situation with a jaundiced eye, and rightfully anticipate that credit in the context of the firm’s compensation process for the relationship will erode. The result: less credit and, more importantly, less money at year’s end. There are valid, proven, and successful ways to structure a firm’s partner compensation system, not only to take account of the advantages of collaboration, but to affirmatively reward partners who effectuate collaboration in client and business development and manage to cross-sell new law firm resources.
One of the greatest threats in any law firm is inertia. In my experience, some of the most accomplished law firm partners are juggling many significant client relationships and are simply too busy getting legal work done to focus on expanding those relationships effectively. These partners often typically do not suffer the insecurities of fear or mistrust I outlined above, but are spending so much time organizing and driving practice group teams in their own practice areas that they do not make themselves available to expand the relationship into new product lines and sectors. These partners are usually easy to manage and can be encouraged by their management to bring others into the tent. That does not mean what some consultants call arranging “random acts of lunch.” Rather, the goal should be a concerted, strategic effort to share knowledge of the client and its personnel, challenges, and culture. This can be accomplished by seeking insights from new partners into areas of concern that could be developing in that client’s business or industry that may not be as transparent to lawyers not offering services that go beyond their specialized niches. This is the essence of true collaboration: not just an introduction to a client, but an organized, focused effort to bring together a group of partners who may not do work for a client but, given their particular practice knowledge and the availability of the relationship portal, can identify potential opportunities to expand the relationship in ways that are valuable to the client.
8. Market Forces:
Some of the barriers to effective collaboration that I identified in my tenure as a managing partner were outside of the control of law firms and more a product of forces in the marketplace. For example, while most corporations have cut down their outside legal providers through a process of convergence, there is also a commonly expressed concern that relying too heavily on one or two law firms may present a risk, especially when conflicts arise. As a consequence, some corporations deliberately seek to split work up among law firms so that the company is not too dependent upon one or two firms. The explosion in the use of the RFP process to hire law firms in the last ten years has also changed the way in which clients shop for legal services. In many instances, the purchasing or procurement professionals in corporations are increasingly part of the process of retaining outside legal counsel. While these forces can adversely affect successful cross-selling, the fact remains that most companies have to deal with new regulations, new lawsuits, geographic expansion, and an emerging and ever-changing landscape of legal problems. That means that every day, new opportunities are created for law firms that can effectively staff teams to anticipate and solve their clients’ emerging legal problems.
9. Lack of Incentives:
According to any behavioral psychologist, the best way to influence behaviors is to design an effective method of rewards and disincentives to shape those behaviors. The only effective way to shape behaviors in a law firm is to design a compensation program that will produce results aligned with firm strategy and economic growth. It is a challenge to balance a partner compensation system in such a way as to incentivize aggressive practice development and an unrelenting focus on growing one’s own practice, while at the same time reinforcing the message that collaboration and cross-selling new partners and practices benefit not only the relationship partner but the institution. The best compensation systems make good on the promise that a rising tide will lift all boats. Partner comp processes must reinforce the message that shared client development efforts will increase profits for the institution as well as the individual, by adding to the security, competitiveness, and brand of the law firm. Firms (and their partners) value what they measure, so introducing metrics to measure and reward collaboration must be a significant factor in coming to decisions about base and bonus compensation. Many firms have designed effective compensation systems with integrity and transparency that bind partners together rather than dividing them. Such a system is the cornerstone for effective collaboration.
10. Policing Client Relationships:
Unfortunately, I have saved the most difficult barrier until last. Perhaps the hardest thing for a law firm manager to do is to develop effective means and the courage to really police client relationships. The same inertia that will prevent some partners from opening up a relationship to others can act to restrain law firm managers from intervening when all the measurements, the data, and the feedback conclusively prove that a firm client relationship is in the wrong hands. A fundamental premise under which law firms must operate is that client relationships are firm relationships. When law firm managers believe this, act on it, and enforce processes to effectuate it, the partners will accept it as well. Any hesitancy to “upset the apple cart” and turn a blind eye to situations when a partner’s behavior demands attention and a relationship needs to be saved will be viewed as weakness, and reinforce the behaviors of the obstinate partners who resist collaboration and refuse to cross-sell.
Identifying and tackling these obstacles directly and with candor will enable a law firm to develop compensation systems, client teaming programs, and a marketing approach designed to foster collaboration in all aspects of client development and service. The result will be a law firm culture that rewards teamwork, discourages negative self-interest, and creates a work atmosphere that is both professional and collegial.
Jim, I really enjoyed your article. This is great insight.
Although you mention it in the body of your first point, I would give more prominence to a lack of sophisticated knowledge of the client’s business. I have seen too many relationship partners, great lawyers themselves, not have a full grasp of the client’s business and therefore not be able to “connect the dots” between the client’s needs and the firm’s ability to solve those problems.