Future-focused leaders: Six steps to stay ahead of the change curve

How can managing partners be more
strategic leaders? Steven Krupp and
Paul S. Schoemaker suggest six steps
to stay ahead of the change curve

The legal field is not known as a hotbed of strategic leadership. The decades leading up to the recession were profitable for many law firms, with a constant stream of legal work being the hallmark of a growing global economy. The pace of change has historically been slow in the legal community and it was not until the financial crisis started in 2007 that the need for strategic thinking became painfully clear.

Furthermore, as business has become more complex, with increased regulation and greater uncertainty, many clients are hard pressed to afford legal services under the traditional time-and-services billing model. Many tasks that in the past were performed by associates at large law firms are now being outsourced to new legal vendors for a fraction of the cost.

From this calamity has arisen an opportunity to rethink the traditional law firm model and re-examine widely-accepted assumptions regarding billing, client service and talent development, among other areas. A number of firms are hiring non-billable chief marketing officers, chief financial officers and chief operating officers to help implement more robust strategic planning. These external leaders bring fresh, outside-in perspectives to a stale industry.

In a VUCA world (volatile, uncertain, complex and ambiguous), leaders must focus on the future rather than get stuck in the past. For law firms, this might mean reinvention. However, a recent survey has found that less than half have made significant changes to their traditional business model.¹ Clearly, many firms are unwilling to alter course in the face of an increasingly uncertain future; strategic acumen is in short supply.

Law firm leaders seeking to successfully navigate this new terrain need not brace themselves for a massive overhaul of their industry. They do, however, need a longer-term plan with strategic repositioning that involves more external focus and an emphasis on adding value to clients with changing expectations and cost concerns. To take a more outside-in strategic approach to law firm management that is better suited to today's less certain environment, managing partners should master six disciplines of strategic thinking (see Figure 1).

1. Anticipate

Anticipate by looking out further and wider to be prepared for the pace of change. This requires a broad view, with close attention to the moves of government, businesses, clients, regulators and competitors to see change sooner.

Timely anticipation has historically been weak in the legal field; many firms remain mired in short-term thinking, hoping for a steady influx of traditional client work. For example, many well-established law firms were late to recognise an emerging market for class action lawsuits; these opportunities were gobbled up by smaller, specialty firms.

By picking up nascent developments that might impact their firms or clients down the road, law firm leaders can get ahead of the curve. For example, in the wake of the recession, Littler Mendelson (currently the largest employment and labour law firm in the US) anticipated increased regulatory pressure on employers. It established the Workplace Policy Institute (WPI) as a resource for the employer community to stay abreast of regulatory developments that might impact their business strategies. WPI serves as an intermediary between Littler's clients and Capitol Hill; companies have access to the firm's more than 1,000 labour, employment and benefits lawyers, who offer advice on a range of subjects, from preparing an amicus brief to drafting official comments to executive agency proposed rules.

To be future focused and look beyond industry walls, you should:

• identify forces outside of law and professional services that could disrupt your practice or generate new opportunities; and

• recognise signs of internal issues, such as projects derailing, unhappy staff and subtle messages that
  clients are not happy with the work being done.

2. Challenge

Challenge deeply-embedded traditional assumptions about legal practice, such as those around billing practices and compensation structures. Strategic leaders challenge old ways of doing things and encourage contrarian views.

Ajay Raju, CEO of Philadelphia law firm Dilworth Paxson, has a knack for challenging the status quo. Early in his legal career, he assembled a team that included several non-lawyers and developed an innovative workflow process based on management strategies employed by logistics experts like Wal-Mart and UPS.

By involving high-priced partners only when important decisions were required, Raju was able to charge a fixed fee, relying on greater efficiency and cheaper talent to make flat-rate billing profitable.

"If a skyscraper can be built with a budget," he reportedly likes to say, "why can't you tell a client what their legal work will cost?

Managing partners must also learn to deal with challenges from their clients to cut legal costs. Following a rash of mass-tort cases in the 1990s, Thomas Sager, DuPont's general counsel, instituted the DuPont legal model, applying business discipline to the practice of law. Sager spearheaded a new procurement model for legal services for large US corporations, a disruption that caught many large firms off guard.

To challenge better, you should:

• foster constructive debate and candid dialogue between partners and associates to promote out-of-the-box ideas; and

• use a devil's advocate to challenge the prevailing view, much like a litigator who considers his opponent's evidence to enhance his own position.

3. Interpret

Interpret a wide array of data instead of looking only for evidence that confirms prior beliefs. Strategic leaders consider all relevant data points, particularly ones that might disconfirm their presuppositions,
or those of the legal industry at large,
and test multiple hypotheses before arriving at conclusions.

Big data is an area in which many law firms see opportunities to create value. Bryan Cave is one firm which has been at the forefront of this quest. In 2010, it appointed Christopher Emerson as director of practice economics. Emerson was tasked with figuring out how the firm could be profitable charging fees on a set project basis as opposed to billing by the hour.

Emerson assembled a diverse team of business analysts, lawyers and software developers to analyse more than two terabytes of data that Bryan Cave had accumulated over the years. In 2011, the firm launched its 'Tasker' program, which analyses how lawyers spend their time. Using this information, its partners can not only reassure clients but also decide whether it would be profitable to take on work with a set upfront fee.

An area in which many firms were late to read the signals of change was the massive outsourcing to highly qualified yet cheap labour in India and Southeast Asia. Law firms have had to rethink their traditional pyramid structure after many clients made it clear that they are no longer willing to pay for expensive and inexperienced associates when many of their day-to-day tasks can be farmed out overseas. Most partners did not see this coming.

To interpret data and events more effectively, you should:

• search for disconfirming evidence that might disprove your hypothesis;

• seek insights from outside the legal field to expand your perspective; and

• record your assumptions about clients' priorities and then actually observe them in action.

4. Decide

Decide after examining multiple options. Strategic leaders have the discipline to review alternatives based on clear criteria. They balance speed with rigor so that they do not fall prey to analysis paralysis or getting bogged down in search of complete consensus.

Managing partners will face tough decisions when confronted with disruptions to their firms' traditional business model; seeking out alternatives and having the courage to trust analysis that might go against their preconceived notions will be key.

Dewey & LeBoeuf's demise is a prime example of firm management failing to explore options effectively. The firm aggressively scaled up in the early 2000s, hiring top-flight talent with a high commitment to salaries and bonuses. Yet, this decision was made with a narrow view of the future. Rather than considering various scenarios, the firm inadvertently pursued a fragile strategy that was not robust. Leadership failed to appreciate how dependent their strategy was on continued economic good times.

When making tough decisions,
you should:

• consider multiple options to a problem before settling on one solution, weighing the options based on clear criteria and how clients or associates may react; and

• explore non-conventional decision choices rather than always following law firm norms.

5. Align

Align the interests of stakeholders, especially clients, based on a deeper interest and understanding of their views. Strategic leaders gain buy-in from people with divergent agendas to achieve a common goal. This requires open dialogue to understand potential areas
of conflict and address misalignment.

Fred Krupp, president of the Environmental Defense Fund, has been successful in orchestrating solutions that benefit both clean energy and business. Rather than protesting business polluters, he built bridges between traditional rivals based on market drivers and common interests. Krupp leveraged his legal background to negotiate collaborative solutions to environmental problems that yield win-win outcomes for all parties, rather than focusing on adversarial litigation as the default position.

Dewey & LeBoeuf was not able to
find common ground to align the all-star team it assembled through a massive merger in 2007. Despite its great talent, it failed to rally key partners of the two merged firms, many of whom barely spoke with one another even as signs of impending collapse became difficult to ignore. The inability to bridge differences or build loyalty to a shared vision was
an element in their demise.

To better align your firm or team,
you should:

• listen more than you talk and ask questions of clients and stakeholders to make sure you understand and acknowledge differences; and

• map the stakeholders and their interests that will be most affected by your intentions - not just clients but junior partners and associates as well. Engage them to inform and buy in to your agenda.

6. Learn

Learn through experimentation, trying new things and drawing insights from the ideas that did and did not succeed. The most strategic leaders are entrepreneurial and curious; they always seek to learn from interactions with clients, affiliates and competitors. They are open to innovation, know mistakes come with the territory and apply lessons learned to their next effort.

Sara Blakely, founder of American hosiery company Spanx, grew up with an appreciation of learning from failure. Her father would ask, "what have you failed at this week?" He wanted her to appreciate that failure was the lack of trying versus getting a bad outcome, which allowed her to be much freer and more resilient. Interestingly, she performed poorly on
her law school admission tests twice before realising that she was better
suited to business.

One classic example of strategic learning in the legal field is the use of mock juries, a practice that first became popular in the early 1980s and has since spawned an entire trial consulting field. The data accumulated over years of cases gives lawyers insights into which jurors to select, depending on their profile, resulting in a clear competitive advantage for such firms.

It is not only entrepreneurs who have a quest for learning. Any partner seeking to improve their team or firm should:

• try new options with non-traditional collaborators to cultivate fresh insights; and

• reframe mistakes as a source of learning; innovations to the legal business model are possible, but require calculated risk taking.

Power of vision

In this new VUCA world, the most successful business leaders employ strategic thinking to set a clear, compelling vision. The same practices can be applied to managing law firms. The six disciplines of anticipating, challenging, interpreting, deciding, aligning and learning can help you and your partners to become more outside-in and future focused. They can inspire a new insight or idea to stay ahead of the change curve and help your firm to avoid potential threats and successfully adapt to changing conditions.

As Charles Darwin noted, "it is not
the strongest of the species who survive, nor the most intelligent, but the ones
most responsive to change".

Steven Krupp is CEO and Paul S. Schoemaker is an associate at
Decision Strategies International
(www.decisionstrat.com). Some of
the concepts and examples in this
article were adapted from Winning the Long Game: How Strategic Leaders Shape the Future by Steven Krupp
and Paul J.H. Schoemaker (PublicAffairs, December 2014).

Endnote

1. See 2014 Law Firms in Transition, Thomas S. Clay and Eric A. Seeger, Altman Weil, 2014