Thoughts on ways to improve the management of professional services firms

Wednesday, August 29, 2007

Tony Karrer - How long should an e-learning course be?

Useful post by Tony Karrer on elearning Technology on the optimum length of an e-learning course. Tony's key point is that it should be as short as you can make it.

This has certainly been my own experience. Most on-line courses that I have seen within organisations focus on providing information. An example might be an induction course. Too often, the developers include a range of material that they think might be useful.

Bear in mind that the old rule of thumb used to be that a web page should contain at maximum 60 per cent of the material on an equivalent printed page simply because web pages are harder to read than the printed equivalent. So prune, prune, prune.

Tuesday, August 28, 2007

Why law firms don't plan - the law firm entrepreneur

Interesting short post from Tom Collins on the morepartnerincome blog, in part quoting Jerry L Mills.

Based on his experience, Tom notes that he frequently encountered first generation firms, often founded by two or three attorneys who bonded together in their prior firm and who broke away to create their own. Usually one of the three is the clear leader. The role of the team in this case is to keep their entrepreneur leader from getting too many big ideas too often.

In these firms, there can be a real reluctance to commit the firm to a clear mission or purpose because this may impede the freedom, the flexibility of the business and especially that of the entrepreneur.

Here Tom quotes Jerry L Mills from his book The Danger Zone. According to Mills, entrepreneur law firm leader thrive on change. They don't want things formalised, but instead draw from a set of core values that they bring to the organisation. These values give the enterprise its characters and unity the law firm. Mills suggests that memorialising those core values has a better chance of improving and focusing the business than traditional planning steps.

I think that Jerry Mills is almost certainly right, and for a very practical reason.

A core challenge in any new business lies in the creation of common values and a common culture that will unify the entity and drive success. These values form in the early days and are remarkably persistent.

If the new organisation is successful, then it usually but not always follows that the values created have met market acceptance. There is, however, a danger that the entrepreneur in his/her desire to do new things will go in too many directions. In these circumstances, memorialising core values can be an effective way of keeping the entrepreneur on track.

Friday, August 24, 2007

The Problem with Performance Agreements - Limiting staff contribution

In my last post in this series, I talked about ways in which performance agreements limited manager freedom - and responsibility. This post looks briefly at the way in which performance agreements can actually act to limit staff contribution.

The problem can be simply stated. You get what you measure. The more precisely you prescribe, the more you limit activities to those things you prescribe.

Two examples to illustrate my point.

Many professional firms use simple performance metrics focused on yield per hour. They then wonder why their staff are not prepared to become involved in, interested in, other activities such as marketing. Why should they? There is no return from such involvement.

In other types of organisations further removed from direct time based charging, performance agreements often focus on specific activities or projects. You will do x by y. That's fine, but do not expect your staff to do z or k, no matter how important z or k may be.

Talking to staff in this type of organisation, I find it interesting that many actually see performance agreements as a protection. If I do what is in my performance agreement as required, then I cannot be criticised. So negotiation of performance agreements becomes a process of working out the minimum that will satisfy given the particular views at the time of manager and management.

This type of limiting or satisficing behaviour can make it very difficult to really improve performance or to do new things.

This need not happen, but avoiding the problem requires a very particular approach to the development and management of performance agreements, an approach that can be difficult to achieve in most organisations.

In my next post in this series I will look at what is involved in this particular approach.

Introductory post. Previous post. Next post.

Wednesday, August 22, 2007

Chris Marston's 4C's of Value Pricing

Rather a good post by Chris Marston on Inside the Firm of the Future, The 4 C's of Value Pricing: Get it or forget it!

Starting with a quote:

Let me start out by explaining that the Price of work in a Value Price model has NOTHING to do with your time. Say it with me now " The Price of work has NOTHING to do with time." Write it on the board 50 times and say it out loud at least 3 times a day. Value Pricing is about Adding Value to the client and Charging for the value you add. . . . It is ENTIRELY based on Value to the client. Yes, I'm going to have to ask you to repeat that to: It is ENTIRELY based on Value to the client.

Now I know that clients, especially Government clients, make this hard by actually demanding precise, visible, time estimates. They do this even though it reduces value to them. I also know that there are contract worlds in which value pricing does not work.

But all this said, I do commend this post to you as a good introduction to value based pricing.

Monday, August 20, 2007

A View on the Slater & Gordon law firm IPO

Back in May I carried a post linked to the Slater & Gordon IPO setting out why I thought that corporatisation made sense in law. Now I see that Bruce MacEwen (Adam Smith Esq) has carried a rather good interview with Andrew Grech, Slater & Gordon's managing partner.

I will not repeat the details, simply refer you to the post. It is worth a read.

Thursday, August 16, 2007

The Problem with Performance Agreements - Limiting manager freedom

In my first post in this series, I talked about some of the problems associated with performance agreements. I now want to extend the argument, focusing on one issue, the way in which performance agreements inevitably limit the freedom of the manager.

The need for good management has never been greater. Yet I sometimes feel that management as such is becoming a lost art, submerged on one side in the current obsession with leadership, on the other in a plethora of limitations.

Management does involve leadership, but leadership is only one element of the manager's core role, getting the best results from the people and other resources at his or her command. It may sound trite, but the real role of the manager is just that, management.

I feel strongly on this one because over the last two decades I have watched a real decline in management roles and skills across a number of different organisation types in both public and private sectors. This may sound extreme, but in some organisations management in the old sense of the word has actually vanished, replaced by a reliance on systems.

The systems based command and control organisation works in the sense that the organisation still operates, but this comes at a cost in both human and business terms.

By its very nature, management is a bit messy. Needs change, priorities shift, crises arise. Further, any manager worth his or her salt generates new ideas while working. Sometimes, often, these are a little outside current ways of working simply because they are new. A good manager tries to test and introduce new things, in so doing working around and through existing systems.

Performance agreements can be used to stop all this type of nonsense by limiting the manager to the specified and the known. Further, in a world of cascading agreements where the manager's staff are also on agreements, those staff agreements have the useful effect of further limiting the manager's capacity to do new things by also limiting staff activity to the agreed and the known.

The command and control approach can sometimes be remarkably efficient in getting specific defined things done. It is much less effective when it comes to doing things or solving problems that fall outside neat pigeon holes, often hopeless when it comes to something new.

A key difficulty from my perspective with the application of performance agreements in a systems based command and control environment is the way it de-skills managers. Management now centres on the management of performance agreements and the performance agreement process. "Managers" who have grown up in this type of environment often lack the basic skills necessary to manage in a broader environment. Worse, they may not even recognise this lack.

Performance agreements need not be like this. It's just that the standard performance agreement process seems to drive them in this way.

Introductory post. Next

Monday, August 13, 2007

US Market for New Law Graduates

In two recent posts I looked at aspects of current Australian professional salaries.

The first post looked at graduate starting salaries across professions within Australia. The second looked at the results of the latest survey on Australian legal salaries.

A short post in the morepartnerincome blog drew may attention to a US NALP survey on the US market for new law graduates, providing some interesting comparative data.

The overall median starting salary for new US law graduates was $US62,000, well above the Australian equivalent of $A42,000. I must say that the size of the gap came as a surprise.

Compared to the overall median starting salary of $62,000, the law firm private practice median was higher — $95,000, an increase of $10,000 over that for the Class of 2005. Medians for jobs in government and as judicial clerks increased modestly but remained considerably lower, at $48,000 and $46,500, respectively. The median for public interest jobs remained at $40,000. The higher median in private practice notwithstanding, for all full-time salaries reported, salaries of $55,000 or less slightly outnumbered salaries of more than $75,000.

Interestingly, given reports of some starting salaries in top tier firms, just 14 per cent of salaries were either $135,000 or $145,000.

Another perspective on US graduate starting salaries can be obtained by comparing them with average salaries in the Australian top-tier firms for those with five year's experience: $A96,000 in Brisbane, $A110,000 in Perth, $A120,000 in Melbourne and $A125,000 in Sydney. Again the comparison draws out the differences in salary levels between the two countries.

All this raises an interesting challenge for Australian firms, one not unique to law. How, in an increasingly globalised market for professional staff, do you retain your best people when they can earn more elsewhere?

This is not a small issue. According to a 2005 Australian Senate inquiry, there are now more than 750,000 Australians living outside the country, many highly educated.

An Australian Bureau of Statistics study found that the number of long-term and permanent departures of Australian residents had increased considerably over the 20 years to 2005.

In the 12 months to December 2005, there were 158,000 departures by Australian residents for an intended period of 12 months or more. This was more than twice the number of Australian residents who departed in 1985 (69,600).

In 2005, almost two-thirds (64%) of all departures (or 101,000) were to OECD countries. The age profile of Australian residents departing for a period of 12 months or more in 2005 differed from that of the overall Australian population. Most noticeable was the peak in the 25–29 years and the 30–34 years age-groups. One-third (34%) of all departures were of people aged in these groups, yet people aged 25–34 years made up only 14% of the Australian resident population.

This trend has continued since 2005. So far, Australia has had a net brain gain with skilled migration offsetting Australian emigration. However, this is small consolation to individual firms struggling to recruit and retain good people.

Friday, August 10, 2007

Professional Services - why mergers fail

Interesting short post plus comments on David Maister's blog as to the reasons why mergers fail.

From my perspective, a core reason for failure is often lack of clarity about the reasons for the merger in the first place. Even where there is apparent clarity, at least in terms of the reasons being clearly stated, a little digging shows that those involved have not thought the reasons for the merger through.

Just being being clear on the reasons does not ensure success. But without this, success becomes pretty much a matter of luck. And luck is thin on the ground!

Wednesday, August 08, 2007

A Passion for Management - Caring about your people

There was a rather wonderful post by the blond canadian expressing her passion for teaching.

In some ways our teachers are the most important professionals of all for they teach our young. The influence of a good teacher can be measured down the generations.

As a manager, I have always had a passion for my people. This holds whether I like them or not. Mainly I have. But regardless, I have always measured part of my success by how well my people do.

Today I attended some code of conduct and ethics training. It was a useful course because it illustrated various elements and problems about the organisation in which I am presently doing some project work. But when I looked at most of the sample problems - several former staff are in jail for corruption - I felt that I was looking at the outcomes of management problems.

Caring for your people does not mean being soft on them. Any professional organisation must demand standards. But it does mean being close to what they do. And if you do this, you will normally spot emerging problems in advance. Better, you have a chance to help your people achieve their own potential.

This always works to mutual advantage. Staff work better while they are with you. Then. when they leave, they retain a soft spot for you that can work to your advantage in the future.

Sunday, August 05, 2007

Law, Life Style and Legal Salaries in Australia

Marsha Jacobs in the Australian Financial Review (3 August) alerted me to the fact that Mahlab Recruitment had released its Australian annual legal salary survey. The material that follows is drawn from Marsha's article. You can find the full survey here. It is free, but you will need to register.

In an earlier post I referred to a report suggesting that Australian graduate starting salaries had been declining in real terms with a median starting salary for law graduates of $42,000. I also commented that there appeared to be a growing reluctance among professional services firms to employ raw graduates, targeting instead those with some experience. This was beginning to create a chicken and egg problem.

The Mahlab survey found that salary bands rose by nearly 5 per cent nationally over the last year. High performers received salary increases of more than 20 per cent as well as bonuses. This represented the largest increase in seven years.

Average salary increases were highest in Perth (up 9 per cent) because of the mining boom. Then came Sydney (+6.4 per cent), Melbourne (+5.3 per cent), with Brisbane lagging (+4.7 per cent).

Average salaries for corporate lawyers with five years experience ranged from $125,000 in Perth and Brisbane, $128.000 in Melbourne, $150,000 in Sydney.

Average salaries in the top-tier firms for those with five years experience were noticeably lower: $96,000 in Brisbane, $110,000 in Perth, $120,000 in Melbourne and $125,000 in Sydney.

Partner salaries rose by an average of nearly 11 per cent over the last year. Here the range in the average in top-tier firms was $795,000 Brisbane, $805,000 Perth, $1,028,500 Melbourne and $1,084,000 Sydney. However, partners were having to work harder to earn their money.

In this context, the report suggests that you need to have a minimum practice of $2 million to make partner in a top-tier firm, $1.2 to million in a mid-tier firm, $700,000 to $900,000 in a small firm.

Attrition rates among young lawyers continued to be high. Many of those leaving firms were going in-house or overseas where Australian trained lawyers remained in demand. UK was still the number one international destination, although New York was increasing in importance.

Despite record level partner recruitment, the trend among younger lawyers against the partner option continued to increase. The proportion of young lawyers interested in partnerships is now 42 per cent, down almost 14 per cent from the previous year.

Work/life balance was cited as the single most important factor in increasing job satisfaction.

There is a real issue here that I see in my own daughters (ages 17 and 19) and their friends. They are prepared to work hard, certainly they are interested in money, but they are simply not ambitious in career terms in the way that I was. Life is more than work and success.