Legal Industry Changes: An Opportunity For Good Law Firms To Become Great

July 23, 2014

4541I recently re-read Jim Collins’ “Good To Great.”  For those who have not had the opportunity to read it, Collins and his team of analysts set about studying companies that had experienced exponential growth and performance success within their respective industries. Their intent was to see if they could identify the drivers for this success.  These companies were labeled “good-to-great” and the analysts found consistent variables within these good-to-great companies, some which were surprising and even challenged conventional thought about the practices and execution of high-performing companies.

The legal industry is going through a tremendous transformation and within that one can see law firms jostling for position, particularly in the Large Law firm space I support.  In some of our Peer Monitor analyses coming in to the year, it was noted that about 20 percent of the firm market was breaking away with year-over-year demonstrative growth, while the remaining 80 percent lagged behind with very minimal growth, stagnation or even dreaded decline.  Now, looking inside the 20 percent of the firms that experienced growth, we can see some of the same firms that produced good growth in 2012 also did so in 2011 and are perennial winners in the 20 percent, but you also see a new mix coming in to 2013 with growth that was negative for 2012 and broke in to the top 20 percent for growth.  Indeed, some law firms are beginning to emerge and the landscape is changing.  There are definite opportunities for good law firms to be great.

Now, I hate to disappoint, but I do not intend to bring all the analysis and empirical evidence in to the good-to-great law firm profiles, the way Collins did with companies in his book.  At least, not with this post, because I do have a day job.  What I can do is share a few thoughts about what I suspect are some of the consistent variables of good-to-great law firms from my experience and observations.

I believe high-performing law firms, like good-to-great companies, understand the principle of focusing on the “who” before the “what”.  Collins shares how good-to-great companies realized it was most important to focus on getting the right people in the right positions for success.  He termed this “getting the right people in the right seats on the bus.” Talent, of course, is a law firm’s product, so in many ways this fact makes getting the “who” even more important.  Therefore, emerging high-performance law firms appear to be building on their talent with purpose.  While a law firm’s reputation is important and can be a huge recruiting draw, some of the emerging law firms are building strong recruiting and lateral hire practices, and building rigor in to making sure the lawyers stay and are successful long term.  They are beginning to think about things like diversity, development and succession and executing better to compete for the future.

Then, there is the “what,” or the strategy.  Emerging law firms appear to have a strong grasp of what they want to achieve and what unique client value they provide; they then turn to business, marketing and business-development processes to execute the strategy (along with good practice, client results and excellent service, naturally).  This, in turn, is creating more business roles in law firms.   I am seeing more business intelligence and customer intelligence analysts working within business development and marketing, and the industry as a whole is seeing a trend of some law firms hiring Chief Strategy officers, Pricing Managers or even build business development team members in to execute their strategy.

Lawyers are known for being a little averse to change and some leaders in highly successful firms could be forgiven for thinking they do not need to concern themselves with change, since they are experiencing prosperity at the moment.  However, reading Collins’ book reveals anecdotes of companies that were the leaders of their industries that quickly became tragedies.  These were long-standing companies like grocery retailer A&P or photo and imaging leader Kodak.  These companies did not adapt to changing conditions and sadly kept a “business as usual” perspective even though their markets and competitors were changing quickly around them.  The fact they had been mainstays and even, at one point, pioneers within their industry may have led them to believe they were invincible.  Along this line, some large, respected law firms closed their doors in the last few years.  I do believe the landscape will continue to change for the legal industry. This change represents a tremendous opportunity for good-to-great law firms and also for great law firms that can adapt to volatile change and continue to be great.