Corporatisation in the Australian Legal Sector

On 20 August 2006 Bruce MacEwen carried a short post on Adam Smith Esq entitled How Do Partners Fund Their Capital Contributions?

In that post he reported in part on a story from the "Roll On Friday" UK web site claiming that letters had gone out to all Courdert's former partners informing them that they would not be getting any of their capital back—which could represent a hit of as much as $350,000 for some partners. The earlier story of Courdet's collapse can be found here.

This story illustrates some of the risks associated with partnership structures. I was reminded of it by a discussion today with a colleague who suggested that these risks must inevitably drive the legal sector in Australia towards incorporation and corporatisation, a move facilitated by the development of a uniform national approach allowing for both incorporation and multidisciplinary partnerships. I suspect he is right, although the barriers are greater in law.

The structural challenges now facing the legal sector are in fact similar to those that have been experienced in other professional areas such as medicine and accounting. For that reason, I propose in the next few blog entries to look at the corporatisation experience across a number of professions and the challenge it poses for all professions and professionals.

People Management in Professional Services - Induction

In my last post People Management in Professional Services - Recruitment I provided a simple recruitment check list. I now want to extend this to the next stage in the process by looking at induction.

I am constantly surprised at the number of firms without defined staff induction processes or where induction processes are limited to provision of the most basic information and sometimes just to junior staff. All this ignores two basic realities:

1. The longer term attitudes of staff towards the firm are strongly influenced by their experiences during the recruitment phase and then their first period on the job. It does not matter what you say, it's what you do during this period that is important.
2. It is in the interests of all firms to make new staff as productive as possible as quickly as possible.

Just to illustrate this last point by analogy. Recruitment is expensive, especially if time costs are taken into account. Then people have to be paid regardless of performance. No firm would let a new $100,000 asset sit idle or partially idle accruing costs, yet that is just what some firms do with their new people.

As with the recruitment case, a simple check list follows:

1. If you have followed the recruitment processes I outlined you already know what you expect from your new staff member. You have a feel for that staff member's current attitude, knowledge, skills and judgement.
2. Think through what you expect your new staff member to be able to do at the end of three months. I have selected three months because this is a common end to the probationary period. This step provides a base for both induction action and subsequent performance review.
3. Taking this as a base, look at any gaps that might exist in knowledge, skills etc that might need to be filled via formal or, more likely, on the job training. Work out what you might do to fill those gaps. This should be done in conjunction with the person who will have direct supervisory responsibility.
4. Work out what information the person will need about the firm and its procedures. Decide how the person is to be given that information.
5. Decide where the person is to sit, what things they will need, the most basic housekeeping stuff.
6. Work out how the person is to be welcomed, who they will need to meet. The human elements.
7. Ensure that the initial work the person will do is sufficiently defined so that they have something to start on at once.
8. Develop an overall three month induction plan based on steps 1 through 7. Make sure that the necessary machinery is in place and that other people in the firm are aware of what they have to do. To take a very simple example, if the new staff member is to meet a busy senior person, make certain that there is time in that senior person's diary.
9. Explain the induction plan to the new staff member so that they are clear.

A key thing to remember is to keep it all as simple as possible.

In my post on People management in professional services - a training primer 1, I spoke of the learning curve effect, the time taken for people to learn to do knew things. You want your new people to move along this curve as quickly as possible.

People absorb new things at different rates. Further, all people stop learning once they reach overload. This is especially so for a new staff member who will already be under a degree of emotional pressure.

The key is not to overload. Chunk the induction process so that the staff member has time to get comfortable, to absorb initial information, to reflect. By all means increase the pressure over time, but do so in a realistic way.

People Management in Professional Services - Recruitment

Recruitment can be an expensive business often involving agency charges as well as scarce staff time. Too often, simple failures in recruitment and subsequent induction actions add to these costs while also reducing the chances of a successful outcome. Many firms have well developed recruitment and induction processes, but a surprising number do not. My aim in this post is to provide a simple check list of the things that I have found to be important starting with recruitment.

Recruitment should be seen in part as a marketing exercise. The people taking part are your guests. You want them to go away impressed with your firm so that they will talk to others in positive terms about you. This holds for both support and professional staff appointments.

The check list:

1. If you do not already have one, draw up a simple project plan setting out the recruitment steps. You can revise this at the end of the process and then use it as a template for next time.
2. Define what you want from the position in terms of the core roles of the job, how you are going to measure results from those roles, what knowledge, skills, judgment and attitudes are required to carry out those roles. Specify any obligatory requirements or qualifications that the person must meet/have.
3. Decide what initial information you want from applicants for short-listing purposes. Some organisations require all applicants to fill out extensive documentation. In my view, this is a waste of time. A CV plus short covering letter should be sufficient in the first instance. If you are using an agency, ensure that the agency is properly briefed on your requirements. Not only does this aid efficiency, but if the agency is impressed with your approach, they will do a better job on selling you to key applicants.
4. Decide how many applicants you are going to interview. Five to six is usually sufficient.
5. Establish a short listing process assuming you have the luxury of multiple applicants. This can be done simply by quickly assessing each application against the criteria you have set and against already assessed applications putting applications into a ranked pile. At this stage you are looking to exclude, not include.
6. Define your interview process. Who should participate? You need a standard set of questions so that you can compare like with like. From experience, it helps to put all applicants into a table summarising key features for each candidate against the selection criteria that you have set. It also helps if you get applicants to come to interview a little early and give them a short document to read describing the firm, the key things that you are looking for. This gives them time to think in advance of interview.
7. Define your follow up processes including reference checks, how you will let unsuccessful applicants know, how you will give them feedback, specific appointment processes to be followed for the successful candidate.
8. Set up your interview schedule. In general, 45 minutes is about right for interview time, but you must allow time - at least fifteen minutes - after each interview for review and ranking. Otherwise candidates blur together. This also allows panel members to have a short break. Proper time also needs to be allowed in advance of the first interview for the panel to discuss process. Ensure that reception is properly briefed on people being interviewed and the process.
9. Keep the interviews themselves tight. Too often, interviews run over time limiting subsequent discussion.
10. Then implement the follow up processes as quickly as possible.

I recognise that there is nothing especially profound in these steps. However, it is surprising how often they are breached.

Dilanchian Launches Blog

I mentioned in my post on Accountancy Blogs that one thing I had noticed in trawling was the apparent absence of Australian blogs about professional services, about the different sectors within professional services, or indeed the use of blogs by professional services firms themselves as a marketing device or to communicate with clients.

I also mentioned that I knew of one Australian law firm that was about to trial a blog. This is now on line in test phase.

My old friend Noric Dilanchian is managing partner at Dilanchian Lawyers & Consultants in Sydney. Dilanchian are intellectual property and innovation professionals. As part of his web site upgrade, Noric has created a blog, Lightbulb, to provide a forum for discussion on intellectual property and commercialisation issues. This can be accessed via the site front page.

The Dilanchian blog is still new, but already has some interesting material. I wish Noric and his team all the success with the initiative.

Professional Practice in Regional Australia

On 11 August I went to the first day of the Country Week Expo, a promotion designed to promote opportunities in regional NSW to Sydney people. One of the challenges is to attract professional people in metro areas to consider regional options.

That reminded me of a question that had been asked at the previous year's Expo and my response. The question and my response focused on law, but the response is also applicable to other professional areas.

A young lawyer asked me what opportunities were offered by Regional Australia. My short answer was a lot.

Unlike some metro areas where legal professionals are in over-supply, many regional areas throughout Australia have immediate job vacancies. Further it is much easier to establish your own practice or to acquire a partnership in an existing practice. Adjusted for practice and living costs, profit per partner can be significantly higher than the city suburban average.

However, the starting point in considering these has to be your own needs, aspirations and areas of interest.

Regional Australia involves a hierarchy of communities from small centres through to major regional cities.

Practice in the smaller communities is very different from that generally found in the metro areas.

Lawyers have to be more generalist working across fields including criminal law, family law, conveyancing and local government matters. The relationship with clients is also different in that the lawyer is more likely to be the key source of advice instead of simply one among a range of advisers.

Bigger communities such as major regional cities offer more scope for specialisation in practice simply because the business base is larger. In addition, while regional businesses do use metro solicitors to meet particular needs, their preference for local support creates opportunities in areas such as commercial, corporation and property law. Simply put, competition for supply of services in these areas is less than in the bigger metro centres.

There is also great variation within regional Australia in demographic structures and the type and level of economic activity. This creates significant variations in practice possibilities that need to be individually investigated. Examples include agribusiness and rural law in major farming districts, estate planning in retirement areas, business succession planning, biotechnology in certain areas, different types of employment related law depending upon the dominant industrial base.

Partnership opportunities can be very good. Because many law graduates prefer to work in metro areas, the average age of regional solicitors tends to be higher. Practice succession is an important issue, creating a range of partnership possibilities.

All lawyers need to maintain professional currency. It used to be the case that the tyranny of distance made it more difficult to keep in professional touch. However, the existence of on-line resources as well as professional support mechanisms now places all lawyers on a more even footing regardless of location.

People Management in Professional Services - Maister on Training

I am again grateful to Dave Lee for drawing my attention to a new article by David Maister on training. Dave's comments together with a link to the original article can be found here.

Maister shares three questions he asks potential clients to determine whether he'll take on the challenge of running management training for them:

• did you choose people for managerial roles because they were the type of people who could get their fulfillment and satisfaction out of helping other people shine rather than having the ego-need to shine themselves? (No!)
• did you select them because they had a prior history of being able to give a critique to someone in such a way that the other person says: “wow, that was really helpful, I’m glad you helped me see all that.” (No!)
• do you reward these people for how well their group has done, or do you reward them for their own personal accomplishments in generating business and serving clients? (both, with an emphasis on their personal numbers!)

David Maister then responds as follows: "so, let’s summarize, I say. You’ve chosen people who don’t want to do the job, who haven’t demonstrated any prior aptitude for the job, and you are rewarding them for things other than doing the job? Thanks, but I’ll pass on the wonderful privilege of training them".

Dave Lee made a number of comments on the article. I just want to focus on one issue that I have referred to before, the reward question.

When talking to a prospective client, the most important thing I want to know is how they measure performance. The second is the linkage between this and remuneration. Once I have these answers, I can generally surmise both firm culture and operational performance.

It does not matter what the firm says. If the proposed training or management change is in conflict with performance measurement and remuneration, it simply won't work.

Accountancy Blogs

A short post simply to record some of the blogs I have found relating to the accounting profession:

• Accountancy Matters - a UK perspective blog from Accountancy Age
• accountancy.lowtechblog.net - a relatively new blog focused on management & marketing
• AccMan Pro - Dennis Howlett on innovation for professional accountants
• Accountants At Large - News and views from the wonderful world of accounting. News site rather than blog
• Accounting Ethics - Postings, sometimes humorous, by Art Berkowitz on ethics.

One thing I notice in trawling is the apparent absence of Australian blogs about professional services, about the different sectors within professional services, or indeed the use of blogs by professional services firms themselves as a marketing device or to communicate with clients.

I know that Australian use of blogs - something around 4 per cent of Australians have their own blog - is lower than in the UK or US, but it's still surprising given that blogs and blogging are now becoming a main stream tool.

I do know of one law firm that it about to trial a blog. I will report on this when it comes properly on line.

Patrick McKenna - the first 100 days as Managing Partner

It is taking me longer than expected to create the post on recruitment and induction, the next item in the people management in professional services series. As a consequence it is now quite some time since my last post. So I thought that I should resume posts on matters of more general interest while I am completing material.

I am grateful to Bruce MacEwen for drawing Patrick McKenna's new e-book, The First 100 Days: Transitioning a New Managing Partner, to my attention. The book, available for free download, is short but interesting. The key steps are defined as:

1. Begin Before The Handoff (during the countdown before you officially take office)

• Position yourself as a leader who is eager to listen to the opinions of your peers
• Build a working relationship with the departing Managing Partner
• Create constructive dialogue with key thought leaders and power brokers within your firm
• Tie up loose ends with key clients
• Try to deal with sensitive problems before you take office.

2. Plug Your Gaps

• Figure out what you need to know and learn it as rapidly as you can
• Establish your advice network.

3. Establish Performance Standards

• Negotiate your specific metrics for success.

4. Seize Your Day

• Pay attention to personal habits
• Make symbolic gestures
• Convey basic information.

5. Set Your Agenda

• Identify your one burning imperative
• Get critical partner buy-in
• Develop an action plan to implement your initiative
• Launch a pilot project.

6. Exploit Early Successes

• Identify something that would not have happened had it not been for your burning imperative.

People management in professional services - getting the horse to the training water

In a comment on my post People management in professional services - a training primer 2 , Dave Lee commented:

"The WIIFM (What's in it for me?) has been well entrenched in the US business environment for quite some time now. Employees will often do just about anything to avoid company sponsored training because a perceived lack of value to the individual. I'm a bit surprised that it seems to be, from your post, a new trait amongst Australians."

I did not actually mean to suggest that this was new in Australia, anybody who has tried to get people to actually come to training will know that it has been round for a while, but rather that it had become more pronounced. This links to Dave's second point:

"The solution to employee apathy isn't found in making the training more specific to the individual desires of employees. Rather will be found in demonstrating to employees that the targeted increase in knowledge, skills and/or abilities is vital to the company's strategic goals and thus requisite of their position.

Having an understanding of the relevance of one's work (positive) and potential termination or being overlooked for a promotion (negative) are strong motivators."

While I agree with Dave that the combined carrot/stick approach is important, I think that it is in just this area that change has occurred.

While certain firms have always had an up and out policy, in the past the young professional joining the firm expected to be with that firm for some time, perhaps a whole career. This expectation increased the incentive to participate in firm training (and other firm activities as well) because it was seen as of importance to long term career aspirations within the firm.

Now that people have a shorter term employment focus, less weight is placed on contribution to career within the firm, more on contribution to career after the firm. This shift needs to be taken into account.

In this context, I find it interesting that many of the up and outer firms appear to place more weight on training than other firms and that that training, more precisely the way that the training is sold, places greater weight on life after the firm.

For those that are interested, I have consolidated the training primer material into a single document (here) to make it easier to download and read.

Informal Learning - the end of courseware?

My posts on People management in professional services - a training primer focused in part on the need to get a better return from on-the-job training, to integrate on-the-job training with other types of training.

A debate has just begun on the US Learning Circuits blog on informal learning and its impact on other types of courses and courseware. I have just put up a longish post - Informal Learning - the end of courseware? - on my personal blog on this debate.

I mention it here because it extends some of the points I have been trying to make.

People management in professional services - a training primer 3

This post completes my initial discussion on training process issues.

In my last post People management in professional services - a training primer 2 I suggested suggested that training often failed because it mixed together different things, each requiring a different training approach. I summarised those things as follows, indicating the type of training best suited to each:

• knowledge -how & what to do
• skills - the capacity to do
• judgment - when to do
• and attitude - willingness to do.

A key point I made here was that the acquisition of skills and judgment in particular required practice and that this was a core reason why so much knowledge and skills formation - more than 90 per cent - actually came from doing the job rather than formal training as such.

I then introduced the concept of competency based approaches, suggesting that they provided a critical building block in the training process by providing a bridge between the definition of the need to be met one one side, the training approach to be adopted on the other.

I also suggested that training had to meet various needs, individual as well as organisational, if it was to be successful.

I now want to focus on the on the linkages between training and work.

Need for Realism

I suppose my starting point here has to be the need for realism. You are suddenly not going to turn all your professional staff including partners into effective on-the-job trainers. It's just not going to happen.

But you can aim to improve performance. Starting from the premise that a lot of professionals are just plain bad at the training element in jobs, a small absolute improvement may in fact represent a very large percentage increase! So how to do it?

Immediate Steps

Recognising that performance improvement takes time, I think that there are a few immediate things that you can do:

1. Start by looking at the existing skills and approaches of your more senior people. Do this along two dimensions, their existing approach to people management and development, their technical skills. From experience you are likely to find a range all the way from people who are keen on training and people management (some of these may well be hopeless at it) through to people with great professional competence but with poor people and communication skills.
2. Then look at existing staff demands for training. What does this tell you? Interestingly, my experience has been that there is a direct but inverse correlation between staff demand for training and the standard of management. That is, the worse the manager the more likely there is to be a staff demand for training!
3. Then think about where you think from a firm perspective the greatest needs are.

All this gives you a rough framework. Now at this point I would focus on those people who who have most to offer from your perspective if only you could tap and transfer their knowledge and skills more effectively. How might you do this?

This may sound paradoxical, but one simple device that I have found that works well with the highly competent but busy professional with poor people communications skills is the internal seminar on a topic of relevance to the firm and the professional.

Often these people have thought deeply about what they do at a professional level. Getting them to share some of this through short internal professional development seminars can be a very effective device. It can also build linkages between that professional and other firm members.

The second thing that I would look at is some form of structured but not necessarily formal mentoring program. Again, this has the advantage of establishing links between staff. The program needs to be structured so that those participating know clearly what is expected on both sides. At the same time, there can be real advantages in keeping it relatively informal.

With some firms, this type of program can be a way of tapping knowledge and expertise from senior people who are close to retirement or who may even have retired. This can have advantages on both sides. The senior person feels valued, the firm and the more junior staff member gains.

Integrating Appraisal Systems

In the longer term, training approaches need to be integrated with staff appraisal systems.

This is a large topic in its own right. At this stage, I would only make the point that one measure of an effective appraisal system should be its linkage with and input to the development of training approaches. If there is no linkage, I would query the value in that firm of both training and appraisal.

Performance Measurement

One common problem in professional services firms is the way in which performance measurement systems work against people management.

Yield on time is obviously critical in any professional services business. At the same time, you cannot expect people to put time into training - doing it or participating in it - if the only real perfuming measurement is billable hours. So if you are serious about training, you have to find some way of recognising it.

This finishes the training primer series of posts. In my next post I will continue the people management theme by looking at recruitment and induction from a people management perspective.