Which Third Should You Invest In?

Over dinner with a colleague, the question of where should law firms invest their change dollars came up. The basic concept is you divide a firm’s lawyers into three groups: #1 gets it, and is already making changes to the way they price and practice. #2 is somewhere in the middle, perhaps willing to embrace some changes, but not really taking proactive steps. #3 is oblivious to the need or unwilling to make changes, since the old way has been working fine for so long.
So the question is where should a firm commit resources to improve its operations and bottom line? Which “third” of the firm will generate the highest return on investment in change? Here are some pros and cons for investing in each group:
#1 Pros: This group is already well on their way and will quickly adopt any changes that help them improve. In the classic style, this is investing your dollars on the highest performing part of your business.
#1 Cons: This group will keep adopting change no matter the investment. Spending money here may well have low returns, since the group is already well on its way to the New Normal.
#2 Pros: This group is generally amenable to change and likely just needs some encouragement and exposure to new thinking. Dollars invested here will likely return immediate value.
#2 Cons: The return on investment from this group may not be as large as #1, since this group may be willing and able to only go so far. So although quick returns may be seen, they may not be deep and sustainable.
#3 Pros: This group has the most ground to gain and any adoption of change will bring significant returns.
#3 Cons: With a history of inability and/or unwillingness to adopt change and improve performance, group #3 seems the least likely to embrace new ways of thinking and doing.
The outcome of our conversation: My colleague pointed to traditional management theory, which says focusing on the bottom third will drive the entire firm up the change ladder. Although I see some logic to this approach, I couldn’t agree with it. My experience is that the bottom third in a law firm are so entrenched in their thinking and methods that they not only avoid change, they fight it. My gut tells me to invest in the high performance group - #1. It sends a message to them that their efforts and approach are appreciated, and it lets the other two groups know what the future needs to be.
Every firm will need to look at its three groups and decide what works best for them. Whether it’s adopting AFAs, embracing Legal Project Management, or even just implementing process improvement, law firms should consider the “Thirds” question and focus their investments on their highest ROI return lawyers.

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Ron Friedmann said...

An alternative is not to invest in any of the three groups of lawyers. Instead, invest in real improvements, which could include enhancing knowledge management (KM), improving processes, structuring alternative fee arrangement offerings (which requires analysis and likely investment in BI tools), and deploying low cost non-lawyer resources via an owned or outsourced facility housing non-partner track lawyers.

If, after doing all that, some dollars remain, I would vote for the middle group (2). #1 will follow them. And I think we should write off #3 b/c they are too hard to change and the ROI therefore too low.

Scott Preston said...

My vote is for investing in process improvement (as Ron describes it) that will benefit all three groups. Until there is a change in mindset, the bottom third will not change no matter how many dollars are spent. The middle third will see some improvement, but will not sustain the improvement (without changes in mindset) and the first third already gets it.

Jordan Furlong said...

Ron and Scott's points are well-taken, but there will still have to be some investments in lawyers, because there will eventually need to be some degree of alignment and integration between lawyers and systems. And, more importantly, you'll need political support and cover for system-improvement efforts to continue and only lawyers can provide that.

That said, I might categorize the lawyers differently: rather than classifying them according to openness to change, I'd look for the small number of lawyers who are likeliest to impress and inspire their partners. The forward-thinking tech-savvy IP partner might double her revenue through innovative efforts, but her example will be easy for the others to distinguish or dismiss: "That's a unique situation, it doesn't apply to my client base," etc. Winning over a hard-nosed litigator who commands respect for his income as well as for his skills might give you a far more effective change champion than a fleet of first adopters.

I do agree that the least amenable lawyers should be ignored at this stage. If you choose to bang your head against a brick wall, that's not the wall's fault.

Lisa Salazar said...

I think, Toby, you are talking about a management style: beat the donkey (the firm), or dangle a carrot in front of him.

Beatings never work over the long run--you just end up with a dead donkey. But consistent carrots will move the donkey forward.

I say give the carrots to the second and first group and you will get positive moves forward. Even if only some of the first and second group respond, the donkey will be moving in the right direction.


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