If your firm is puzzling over conversations like inclusion, mental health in the work place, succession, stability or any aspect of how to grow, take it as a warning sign: critical areas of your organization may not be aligned.
Not that these topics can’t be plenty challenging. Indeed, any one calls for the best a leader or leadership team can bring to the table.
But if you’re having trouble finding a framework for addressing your challenges, the elements essential to a highly functioning organization are either missing or severely out of alignment. Until these elements are put in place, the pressure on firm productivity, profitability and stability is likely to intensify.
But enough of the dark side.
The good news is alignment changes the decision-making process — even around the most challenging issues — and results in maximum productivity at every level of the firm.
The First Step — Identify Guiding Principles
In a recent post we suggested 5 areas of every firm where the identification of guiding principles provides the basis for institutional alignment. These areas are:
- Nature of the Practice
- Nature of the Platform
- Compensation system
- Governance and Succession
- Work-Life equation
These areas form an interrelated construct of a firm, where the decision-making that accompanies both daily operation and the strategic pursuit of the vision take place. Without established guiding principles, it is difficult to manage day-to-day operations and opportunities, never mind navigate the issues related to leading in a competitive, changing market.
Consider a typical case — the firm aspiring to move into a new market.
When a firm elects to expand its geographic reach by combining with a firm with a significantly different focus, the expansion not only redefines the nature of the firm’s practice; it has significant impact on the nature of the platform — with practical implications for technology, finance, human resources, marketing, administrative, office services and risk management…to touch only the obvious areas.
Though everyone who has been part of a combination knows such a change will have dramatic impact on every area of the firm’s reality, firms continue to merge practices, cultures, and entire operational systems at enormous cost, and with results that call the strategy into question. In a July 2018 article for American Lawyer, Blaine Prescott notes findings that in the corporate world 70 percent or more of mergers meet with questionable success; and the numbers are similar for law firms.
This is not an argument that mergers are doomed to marginal success.
The articulation of basic values and shared aspirations in the five areas noted above provides a kind of manifesto — a set of Guiding Principles that are born of the vision partners have for the firm. Leadership is able to use these Principles to vet opportunities, analyze possible responses to challenges, facilitate better conversations and streamline the administrative process.
Given this framework, opportunities can be purposefully measured — from where and how to grow, to the ideal client profile; from what constitutes an appropriate investment in office space, to how much and where to focus marketing resources; from the comparative value of a million-dollar conference facility, to a client-driven technology capability.
Add the questions you’re investing disproportionate amounts of time on.
A set of Guiding Principles frames productive conversations.
Spotlight The Right Questions
When it comes to decisions that matter, success is often about asking the right questions. The presence of Guiding Principles makes this infinitely more clear-cut. For example, in our growth example above, Guiding Principles might lead to a series of questions like:
Is the expansion consistent with the footprint we envisioned in our strategic plan? Do current key clients benefit from this expansion? Are the demands caused by the acquisition consistent with the way we view the role of the platform, and our guidelines for investing in it? Does the expansion demand new technology? Will the infrastructure requirements tempt a compromise in what we’ve set forth as a guiding principle? How does this expansion impact our diversity and inclusion goals? Do the cultures mesh, or collide? How long will integration take?
How To Define Guiding Principles
Each of the five interrelated areas named above will have multiple areas that should be considered. For example, we suggest at least 7 issues to be considered as you seek to define the nature of your firm’s platform. Guiding principles should be identified in each. (See Fig 1, below)
- Size — What size do you aspire to be — specific goals, parameters, and timetables, as well as investment parameters should be specified;
- Footprint — Does the partnership seek to build a local, regional, national, international firm…and is there a strategic driver;
- Leverage — Define the leverage formula the partnership views as ideal;
- Cost per Professional — specify the ideal, and the acceptable range each lawyer will be asked to contribute to the creation and maintenance of the desired infrastructure — cost to operate should never be a surprise;
- Inclusion Profile — specify diversity and inclusion goals, and to the degree this is a challenge, a time table for realizing the goal;
- Career Path — define parameters and timeline for varying career paths;
- Professional Staff — define the specific role of the non-subject matter Professional Staff, including the role each team plays in pursuit of the Vision — IT, finance, HR, and Marketing should have a clear understanding of how their roles connect to the firm’s vision.
There is no right or wrong answer here. The objective is to identify the few basics your partnership feels strongly about — a set of principles agains which critical decisions will be tested. As noted, each of the five functional areas has a similar set of issues and questions that will yield a complete set of Guiding Principles. And yours may evolve over time.
Guiding Principles Reveal Vision And Drive Strategy
Sure — in some firms conversations around alignment and vision are met with an obligatory wink-and-nod. Sure…everyone says we should have one. It will make nice filler for the website; but we all know what the real vision is — a larger profit-pie this year. When push-comes-to-shove, wherever revenue is in question we all know what the guiding principle is gong to be.
Four things typically characterize partnerships with this view:
- Little-to-no organic growth (ironic, given the degree to which organic growth increases the profit-pie);
- Fractured culture — where few believe the firm stands for anything more than a pay check;
- Alignment has given way to silos, fiefdoms and fractures’
- Mediocrity — where there is little appetite for change, and zero incentive to innovate.
There are multiple benefits to the alignment that results from the identification of a set of Guiding Principles. Most can be summed up in two categories (and not necessarily in this order):
- streamlined operational efficiency;
- a culture where aspirations are shared, and core values are reflected in a set of guiding principles that shape daily operation and strategic execution.
In his paper — The Aligned Organization for McKinsey & Company Thierry Nautin characterizes it this way:
when people understand and are excited about the direction their company is taking, the company’s earnings margin is twice as likely to be above the median. And it showed that high-achieving organizations are also better than others at turning their visions into viable strategies that guide operational planning— something many business leaders may believe they already do well, but which often proves difficult in practice.
Earlier we mentioned that Guiding Principles form a kind of manifesto for the pursuit of a firm’s vision. As such, they provide an outline for how to begin to strategically address the issues, challenges and opportunities that present themselves today.