7/10/16

Managing Partners on Change: Clients Don't Ask, Partners Resist

It is hard to feel sympathy for extremely successful people. The problems of the powerful pale in comparison to the problems of the powerless. But the thing about power is that those who lack it have a difficult time understanding its limitations. Those who earn at the poverty line don’t really see the gap between the person making $100K and $1M, let alone the orders of magnitude that separate $1M from $100M.

Among the many great exchanges in The Wire is a former mayor giving advice to the mayor elect. The soon-to-be mayor is so enthralled by the potential of his new position that he cannot take seriously his predecessor's warnings about being beholden to those who put you there. The ambitious politician cannot imagine feeling powerless upon achieving such heights. Pride goeth before destruction, and an haughty spirit before a fall.
Many politicians find themselves straining to hold together loose coalitions in order to govern effectively. Many politicians have it easy compared to managing partners (MP) of law firms. MPs’ constituents are mostly lawyers. Dr. Larry Richard, the expert on lawyer psychology, explains, “Managing lawyers is like herding cats.

MP's most powerful constituents are really successful lawyers who can take their book of business elsewhere in the blink of an eye. During a lateral frenzy, it is probably not that much fun to run a “hotel for lawyers.

To the extent one deems the legal market as insufficiently dynamic--change occurs but is not fast enough, broad enough, or deep enough--you might be inclined to think that the people nominally in charge are burying their heads in the sand. But the data suggests otherwise. While there can be an unbridgeable gap between knowledge and action, the MPs seem well versed in the shifting economic landscape.

In the 2016 Altman Weil MP survey, the MPs provided their opinions on the permanency of important trends.

Many of these questions have been asked before. Below are trends of trends—i.e., how MPs have responded over the past eight years as to whether or not they think certain trends are permanent. First up is a graph with all the data points from 2009 to 2016. For example, the percentage of MPs who think the profit slowdown is permanent increased from 13% in 2009 to 47% in 2016 while the percentage of MPs who think price competition is permanent increased from 42% to 95% over the same period.
Next is a table that provides the results from 2009 and 2016 only but also calculates the difference between them as a raw number (Δ) and a multiple. There was, for example, a 62.8 point increase (25.5% to 88.3%) in the percentage of MPs who believe commoditized work is permanent while the percentage of MPs who believe the reduction in first years is permanent has increased 5.5 fold (from 11.4% vs. 62.8%).
In short, an MP’s job has gotten appreciably harder. Yet they mostly remain confident that their firms will be able to adapt to the changing economic landscape.
This question has been asked six years in a row. While the median response is consistent, look at what has happened at the tails. About a quarter of the MPs used to be highly confident. But that number is now below ten percent. Instead, where less than ten percent of MPs used to be pessimistic, now almost a quarter are.

The confidence question only goes back to 2011. By 2011, the MPs were already convinced that many of the trends identified above were permanent. The average increase in perceived permanence between 2009 and 2011 was 36 percentage points. The average increase from 2011 to 2016 is only 10 percentage points.

The shift in MPs’ confidence does not appear to be rooted in a changing perspective on external forces. My supposition is that the shift is due largely to internal dynamics. In 2011, the MPs were were fully convinced change was needed. By 2016, they realized just how hard real change is.

We don’t have the same kind of historical data on MPs’ views on the barriers to change. Altman Weil has only been asking my favorite question for two years. But the evolution in the MPs’ response in the last year is fascinating.

2015



2016


In one year, the response that Partners resist change jumped 20 points. Clients aren’t asking was down slightly (3.6 points). Despite “crummy” economic results even at the top of the industry, the law-firm pain threshold seems to have increased by more than 10 points. Partner (un)awareness makes its first, and very strong, showing. Less importantly, but not necessarily less interestingly, MPs appear to have slightly more misgivings about their organizational capacity (up 2.6 pts), are less likely to be convinced that their model is not broken (down 5.2 pts), and are less apt to believe that they’re already doing enough (down 4.6 pts).

Next post, I intend to further explore partner resistance and economic pain.

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D. Casey Flaherty is a consultant who worked as both outside and inside counsel and serves on the advisory board of Nextlaw Labs. He is the primary author of Unless You Ask: A Guide for Law Departments to Get More from External Relationships, written and published in partnership with the ACC Legal Operations Section. Find more of his writing here. Connect with Casey on Twitter and LinkedIn. Or email casey@procertas.com.

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1 comments:

Biglaw Investor said...

Great article Casey, thanks for putting it together. I was particularly surprised to see the shift from "very confident" over the years as MPs start to worry about whether their firm will withstand the current changes in the legal sector.

 

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