Linking Business Development to Partner Compensation

Partner Compensation

In recent years, as client fee pressure has increased and client loyalty has decreased, law firms are investing significant time and money in business development programs. Some partners receive training to dust off selling skills that were largely unnecessary during a time of plenty. Other partners receive training, then individualized coaching, then more training, then more coaching, in an often-futile attempt to turn everyone into a capable rainmaker. Mathematically, if every equity and income partner generates just a little bit more, this is far more impactful than demanding even more production from our handful of true rainmakers. Trouble is, this rarely works out as planned. There are logistical, financial and psychological barriers to this plan of turning every partner into a rainmaker, and it's time law firm leaders recognized its ineffectiveness, and instead adopt a more productive approach. It's time to touch the third rail of law firm management: partner compensation. Conventional wisdom suggests that law firm partners are motivated by financial incentives, and therefore many compensation plans are designed to encourage behavior that generates financial success. Conventional wisdom is often wrong. Many compensation plans overemphasize origination and in so doing fail to recognize the critical contributions of many partners. Furthermore, the plans often fail spectacularly in addressing and rewarding origination. But this is a problem that can be solved.

Different Strokes

The first mistake with most law firm compensation plans is the expectation that partners are, or can become, what baseball enthusiasts call "five-tool players." As noted business development coach Mike O'Horo says, "While there are certainly some superstars who are equally adept at a variety of things, the reality is that most players are exceptional at just a few skills." Compensation plans often fall into this trap by expecting numerous exceptional behaviors such as new matter origination, high leverage, high utilization of billable hours, inbound and outbound cross-selling, mentoring of young lawyers, firm or practice group management, pro bono activities, matter profitability, high billing and collection realization, expense management, marketing and business development activities, and more. In reality, successful teams are composed of players with different and complementary skill sets and a good compensation plan should recognize and reward different contributions. In a well-designed plan, partners are able to maximize compensation by maximizing their particular and unique skill sets.

To be clear, generating new business is challenging in any industry. There's a certain tenacity required to doggedly pursue new opportunities, to network and meet new prospective clients, to understand their business challenges, to devise custom solutions to these challenges, and to overcome objections and negotiate prices to win the business. Done well, it involves significant rejection, and significant time—time that quite obviously cannot be billed or recaptured. So, origination should be a key driver of compensation.

But too many plans stop there. First of all, the partner who excels at networking may lack the deep subject-matter expertise necessary to craft a custom legal solution. He or she may lack the financial acumen necessary to devise a creative fee arrangement that both meets the client's budget and generates profits for the firm. And so begins the arduous negotiating process of determining the relative contribution of other partners who helped advance an opportunity to a close. Treating this as a solo effort fails to acknowledge the contributions of others, and relying on the largesse of partners to divvy up their spoils fairly, or even consistently, is a recipe for unrest. This is why most other businesses provide some sort of team compensation when multiple parties are routinely involved in closing a sale. In fact, many companies willingly "double pay" commissions, or, in law firm parlance, award greater than 100 percent origination credit, when it's demonstrated that doing so nets more wins and higher revenue. Companies, and law firms, that do this poorly incentivize the hoarding of opportunities: "I would likely win more engagements if I collaborated with others, but it's not in my economic self-interest to do so, so I'll act alone."

And let's not overdo origination credit. Too many plans treat origination of a single matter as a perpetual annuity, crowding out any incentive to cross-sell, or for older partners to transition key client relationships to up-and-coming younger partners. Other plans allow partners to stake a claim on all future business from clients they initially generate, whether or not that partner is ever again involved in winning another engagement.

Most businesses recognize that "hunters" are best deployed at hunting, whereas "farming" involves cultivating relationships to yield more results over time. Generating new business from existing clients is far more likely to involve other lawyers, particularly those billing time to a matter. There is a clear link between the quality of the work product and client retention, but the definition of quality has evolved to include the manner in which the legal services are delivered, not merely the outcome, and certainly not merely the cost. A partner could put forth significant effort to win a matter, and then poor communication, poor budgeting and poor project management can impair the client's satisfaction, even when the matter's outcome is favorable. Accordingly, retention is a common factor in corporate compensation plans but is glaringly missing from most law firm partner compensation plans. The short-term thinking that leads law firm leaders to view business in one-year increments, tidying up financials at year-end and distributing profits to shareholders, creates the illusion that financial performance can be effectively measured one matter at a time rather than by measuring a myriad of variables over an extended period.

Retention is a powerful financial driver. Incorporating a retention incentive moves client satisfaction from a subjective aspiration to a concrete goal. A focus on retention solidifies client relationships and insulates the firm from the potential financial devastation caused by lateral departures. Retention incentives recognize multiple contributors, from those who generate the work, to those who deliver the work, to those who manage the relationship. Retention is also a significant factor in measuring profitability. In a typical law firm compensation scheme, a matter that earns premium fees and generates significant hours may produce significant revenue and therefore significant compensation to the originating partners and/or billing timekeepers even as it generates minimal profits. However, a matter that is priced strategically, thereby lowering the cost of sales, that maximizes leverage by pushing the work down to the lowest-cost resource capable of delivering quality work product, that generates high client satisfaction and therefore repeat work across numerous practice areas, and that results in significantly higher profits, might generate minimal financial rewards for the partners involved. Profit cannot be fully measured in the short term, and retention is a key factor in measuring profitability over the long term.

Change Management

A successful compensation plan meets three primary requirements:

• It furthers the firm's strategic objectives

• It's easy to understand and therefore helps manage partner expectations

• It's easy to administer

It's a rare law firm compensation plan that meets these requirements.

In many cases, law firms have no strategic objectives beyond growth, or perhaps profitable growth. There is no stated retention target, or cross-selling target, or a bottom-up financial forecast reflecting the realistic growth trajectory of each practice and sub-practice and the timekeepers associated with each. Vaguely aspiring to "grow the business" year-in and year-out isn't a strategy so much as an aspiration. When law firms delineate specific objectives, the actions required to achieve the objectives become more obvious. And just as importantly, the actions inconsistent with achieving the objectives become more obvious.

A compensation plan that is readily understood and clearly defines which actions will generate what income is much more effective and less distracting than a vague plan that places a premium on origination or billing credit, and then incorporates a mystical subjective analysis to address all other behaviors and outcomes. Despite the many shortcomings of today's plans, there are two primary reasons partners resist change: it may be a terrible plan, but they've grown comfortable with it and change begets uncertainty; and everyone fears that a new formula will lead to decreased compensation.

It is true that new formulas will lead to changed compensation for some. But that partner whose compensation varies significantly from year to year is likely to embrace more certainty, even if the new target is lower than an earlier high point. The partner who dreads networking on the cocktail circuit but does it out of a sense of obligation might serve everyone's needs better if she participated in—and helps win—far more pitches at her colleagues' invitation than trying to drum up a new matter or two on her own. And the rainmakers today will remain the rainmakers tomorrow, and are more adept than most at adjusting their selling parameters to incorporate new compensation measures. And, yes, there may be a partner here or there who's found a way to game the system—hoarding origination credit, minimizing leverage, keeping key clients close to the vest, periodically threatening to leave—who will refuse to change, and for good reason. Under a more effective plan, these behaviors will be recognized for the profit-dilutive actions they are, and a partner adhering to such models will need to accept that doing so comes at a price.

Designing the new compensation scheme is only half the battle. As great a challenge as it is to define a firm's strategic objectives and design incentives that drive and reward behavior consistent with these objectives, it's just as challenging to migrate from where we are today. This is why compensation plan changes need to take place over time, in phases. An abrupt shift, even to a plan that everyone agrees has the potential to be more effective, can be just as disruptive and distracting as a poorly designed plan. Rolling out a new plan has as much to do with strategic planning and financial analysis as it does with organizational psychology. Success comes from staging changes in increments, accompanied by detailed financial analysis and a comprehensive communication plan.

Law firm partners want to be rewarded for their efforts, they want certainty in a time of great unrest. Law firm leaders want profitable growth. Clients want quality legal services at market rates delivered in innovative new ways. We can't afford to wait until all of this takes place and then design new compensation plans. By designing the compensation plans first, we can design the future we want and need.

Timothy B. Corcoran is the 2014 President of the Legal Marketing Association and an elected Fellow of the College of Law Practice Management. He delivers keynote presentations, conducts workshops, and advises leaders of law firms, in-house legal departments, and legal service providers on how to profit in a time of great change.  To inquire about his services, contact him at +1.609.557.7311 or at tim@corcoranconsultinggroup.com.

A version of this article first appeared in The Legal Intelligencer, an ALM publication, and is reprinted with permission.

Demystifiying Law Firm Marketing, Part 1: What is it?

In my consulting practice I work with many sophisticated lawyers and experienced businesspeople. I also work with professionals, lawyers and businesspeople alike, who are exposed for the first time to new disciplines outside their comfort zone -- marketing, finance, pricing, project management, process improvement, and so on. Increasingly I've faced a number of questions on topics that some would argue have been long-settled.  But one refreshing and challenging aspect of the dynamic legal marketplace is that there is a constant learning curve - and not everyone on that path is a fresh-faced graduate. So this series will address law firm marketing - what is it, how to do it, who should do it, how to hire and compensate marketing professionals, how to measure success, and much more. Readers with deep experience are welcome to offer insights or alternative views in the comments. Readers on the learning curve are invited to ask questions, in the comments or privately, to be addressed in future articles.  

Recently I had lunch with a recruiter who specializes in placing senior marketing officers in prominent law firms. We had a wide-ranging discussion about the evolution of the law firm marketing function, the refreshing influx of new talent, the growth of pricing as a discipline, and much more.

When I asked him how this new climate had impacted the way he conducts searches, his disappointing reply was, “Not much at all.”  He went on to add, “I often have a progressive discussion like this at the start of a new assignment, but too often what the partners demand, and what the law firm leaders settle on, are safe choices.” He explained that while some law firm leaders seek an innovative marketer to help drive the firm’s efforts, the partners by and large want someone who’s worked at several law firms, who will “keep the trains running on time,” and who won’t offend partners by creating distractions to their demanding billable hour focus.  Oh how far we have… not… come!

Refreshingly, I work with more than a few law firms whose marketing function is by any measure progressive, innovative, comprehensive, and grounded in financials and analytics. But there are far fewer of these examplars than the size of the legal market would otherwise suggest. Why is this? Why do so many law firms, and law firm partners, continue to struggle with understanding the role and impact of professional marketing? Why, when faced with declining financial fortunes, or at least the clear and unambiguous risk of increased competition and price pressure, do law firm leaders double down on what they’ve always done rather than seek new ways of doing business? The answer is nuanced, but at its core I suggest it boils down to this: lawyers don’t understand what marketing is, and they don’t understand the skills necessary to do it well.

When I advise law firms on improving the Marketing function, I find it helpful to start first by defining terms. We can quibble over the textbook definitions, but the practical reality is that there is a difference between marketing and business development, and each of these is distinct from activities in which some law firms engage that might best be characterized as “community involvement.” Let’s break these down.

Marketing

Marketing is about creating visibility and awareness of the firm’s and the lawyers’ credentials and capabilities, with the ultimate objective to be included in the “consideration set” when a prospective client needs outside counsel to address a business issue. And while law firms have produced a lot of marketing activity over time, some of it – and depending on your perspective, perhaps much of it – hasn’t been all that helpful in generating leads or winning work, even if it has won awards for creativity. This isn’t necessarily the fault of the chosen marketing tactics. It may very well be that the firm directed its marketing message to the wrong audience, or invested in tactics that didn’t expose the firm to potential buyers. This tends happens when the profession believes that “all revenue is good revenue” and “first let’s win the work and then we’ll figure out how to do the work.” How do you know who to target, and what to say, and how to say it, and who you’re competing with?

Business Development

Business Development is about advancing an opportunity from “who should we talk to?” to “we may be able to help” to “and here’s how we’ll do it” to winning the work and generating fees from a new matter. And unlike traditional marketing, much of which can be delegated to competent professionals to address, business development relies heavily on direct lawyer involvement and not solely on the shoulders of experienced BD professionals. After all, Business Development is essentially sales. This means identifying which clients or industries to pursue, being clear about what problems we solve, understanding a potential client’s needs, establishing alternatives for addressing the needs, quantifying the impact of proposed solutions, and quantifying the costs and risks of doing nothing. Some of this is handled by lawyers; some of this can be addressed by BD professionals. But none of it happens without a plan. Or at least it’s not typically very effective without a plan. Yet few law firms, and even fewer individual partners, have a well-designed and thoughtful plan for growing their practice.

Instead, some law firms invest time and energy into programs that are, at best, tangentially helpful to exposing the brand to potential buyers. These “random acts of marketing” sometimes work, and sometimes the prospective client hires a lawyer in spite of ineffective marketing tactics. And this reinforces poor behavior. To be clear, it’s not the tactic itself that may be wanting. It’s not knowing whether the tactic is effective or not.  What works for one may not work for another; there is no universal “best practices” and certainly little to be gained by parroting what other firms in dissimilar markets with dissimilar practices and with dissimilar clients do to market their services. For some firms, purchasing a luxury suite at a sports arena is a well-designed tactic used effectively to foster new relationships or cement existing ones. For others, it’s an expensive investment in the wrong audience. Some lawyers will sit on charity boards and access a network of like-minded professionals; others donate time to an endeavor that has a one in a million chance of exposing the firm to qualified potential buyers. Some partners participate in practice-specific bar meetings, interacting with rivals who are unlikely to refer business. Yet other partners may derive great benefits from referrals from other members of the Bar, even from rivals facing a conflict. If you aren’t measuring the impact of your marketing and business development, how do you know if it’s working?

Many firms confuse volume with effectiveness. So filling a large hotel ballroom for a seminar on some new regulatory changes has better optics than a hosting a handful of clients in a small, corner conference room in the firm, even when the small room consists of senior decision makers and the large room is filled with juniors. Or a newsletter pushed to 10,000 names on our mailing list with only a 5% bounce rate is considered more successful than a blog post with only a few hundred views, irrespective of which approach provokes an inquiry to the lawyer who authored the piece. Securing a lucrative and expensive sponsorship at a notable client industry black tie dinner is deemed a coup, until none of the partners confirmed to attend actually show up and the firm’s table sits empty and forlorn.

Community Involvement

Many firms confuse community involvement with marketing. There’s nothing wrong with sponsoring a local charity’s 5k race, but the partner who participates in the run, whose clients are primarily sovereign wealth fund bankers based overseas, shouldn’t consider this as an effective business development tactic for his practice. Law firms should invest in their communities, and there’s a certain amount of brand building that is expected. But at a certain point, we have to shift from general awareness to specific targeting, specific messages, specific solutions, and specific tactics. And we must measure, analyze, and adjust to stay on top of new developments.

The overriding challenge is to first understand the fundamental differences between marketing, business development, and community involvement.  After that we’re in a better position to hire the right professionals with the right experience who can advise, plan, and help execute the firm’s marketing and business development plan. The partners must hold themselves accountable to pursuing the plan and not sitting back and hoping others grow the firm. And we must all measure the effectiveness of our actions, and adjust our approach as needed.

Timothy B. Corcoran is the 2014 President of the Legal Marketing Association and an elected Fellow of the College of Law Practice Management. He delivers keynote presentations, conducts workshops, and advises leaders of law firms, in-house legal departments, and legal service providers on how to profit in a time of great change.  To inquire about his services, contact him at +1.609.557.7311 or at tim@corcoranconsultinggroup.com.

Law Firms Getting Schooled

Law firm partners have a curious approach to addressing client needs.  Imagine a crowded subway car in which a General Counsel is sitting comfortably while a Biglaw partner stands next to him. When the train lurches, the partner inadvertently stomps on the GC’s foot. “Ouch,” exclaims the GC, “You’re standing on my foot.” The partner’s response is, naturally, to call the office and direct three associates to drop everything and enroll in medical school, to specialize in podiatry, and to attend only night classes so as not to miss work, in order to ensure that, should the client’s foot pain persist in the future, the firm will be in a good position to resolve the issue.

This is what I envisioned as I read the recent article by Nathalie Pierrepont of The Recorder, an ALM publication, describing a new associate training program at Orrick. In “Orrick Puts Would-Be Partners Through Business Boot Camp” (subscription may be necessary) we learn of a refreshing and innovative program to teach business skills to lawyers, specifically senior associates on the partner track. The program, produced by The Fullbridge Program, covers a number of business topics that will help lawyers speak the language of business.  The program, or something like it, should be required in every law school immediately. And it should be required of every practicing lawyer who wants to serve business clients. I’ve talked at length with Andrew Notaro, executive director of Fullbridge – he gets it and he provides a necessary service. Trouble is, most firms organize these programs for associates – law firms may be sending the wrong students to class!

Or more precisely, the law firm leaders, by failing to enroll fellow partners, are missing the central point of business leaders’ most common complaint. “Our outside law firms don’t understand our business” rarely means that an associate billed to a M&A transaction is unable to calculate the after tax weighted average cost of capital. Or that the lack of such knowledge means she’s therefore unable to properly advise on the relative risk of this investment over alternative courses of action.

More often it’s something less profound and business-mathy: “The partner in charge of this transaction, despite having led a half dozen substantially similar transactions for us in the last five years, once again underestimated the legal costs, this time by a substantial margin, and exacerbated the situation by failing to alert us until long after we closed our quarterly budget re-forecast process.”

Or “After relying on the same litigation counsel for numerous cases and constantly fighting over growing fees, a new law firm identified two key areas upstream in our business processes that we didn't realize were creating ongoing exposure. We addressed the exposure and within months the number of filings plummeted - and so did our legal costs.”

Pulling an all-nighter to cram for the test isn’t learning.

Perhaps my cynicism stems from hearing one too many in-house counsel or business client express frustration with outside counsel and their lack of interest, empathy, and insights into the client’s business.  To be fair, many law firms have tried to address the issue, but many have also failed on execution:

• Technology: Sophisticated tools have been purchased and breathlessly rolled out to help lawyers obtain “the most comprehensive go-to-lunch report” on a moment’s notice when meeting with a client or prospective client. However, few clients are impressed with a partner whose industry knowledge is parroting analyst report headlines or recent stock movements.

• People: New roles have emerged in recent years, such as competitive intelligence specialists, whose primary skill is analyzing and synthesizing vast sums of information to proactively identify compelling marketing opportunities that provide a competitive advantage. The good ones are worth their weight in gold! Regrettably, more than a few spend a great deal of time manually creating last second, on-demand, “urgent” go-to-lunch reports rather than help inform strategy, resulting in fruitless pursuits of the wrong clients at the wrong rates.

• Process: Some law firms have implemented client teams with the objective of capturing client insights, sharing learnings, cross-pollinating ideas, and collaborating to increase cross-selling opportunities. But even eager people stumble in the face of flawed processes -- and compensation systems that reward isolationist activity coupled with firm-centric org structures that inhibit cross-functional interaction are most assuredly flawed processes.

So what does work?

As a former business leader, I was pleasantly surprised when my outside advisers were familiar with my business segment. On a few occasions deep industry insight is crucial, but for many companies legal needs aren’t so unique to an industry that specialized knowledge is crucial. What most need, and what is a constant struggle to find, are advisers who understand our appetite for risk, how we make build vs. buy decisions, what factors matter and who’s involved in go/no-go decisions on major capital investments, our budgeting and re-budgeting (and re-re-budgeting!) schedule, and the relative importance we place on legal advice in the overall context of running a business in fiercely competitive markets.  And we are often just as dissatisfied with in-house counsel as we are with outside counsel in this regard!

In case my point is buried, I’ll emphasize it: the partners who send their associates to business school need to attend business school first. The weakest link in the law firm value chain isn’t the associates, it’s the partners.  Much of what business leaders and in-house counsel describe as “knowing our business” refers to how we do business, not our SIC codes or movements in our EPS. What keeps a business manager up at night? It’s not placing a multi-million dollar bet on a new product line or new acquisition – we do that all the time because of our high tolerance for risk and our endless quest to gain a competitive edge. It’s looking like an idiot in front of my CEO when the advisers I hire continually go over budget after claiming to be deep subject matter experts who have advised in this sort of matter hundreds of times previously. We all look incompetent as a result, and that’s not the sort of reputation that earns me a seat in the Boardroom.

So high marks to Orrick for making this investment in its lawyers' professional development, for an investment it is, not an expense. It will surely pay dividends down the road as business-savvy lawyers establish beachheads as trusted advisors rather than as expensive suppliers.  But collectively, we can all do more to serve our clients' needs. And it should start at the top of the law firm hierarchy where partners with demonstrably improved business acumen can deliver immediate benefits, for their clients and their law firms.  What are you waiting for?

Timothy B. Corcoran is the 2014 President of the Legal Marketing Association and an elected Fellow of the College of Law Practice Management. He delivers keynote presentations, conducts workshops, and advises leaders of law firms, in-house legal departments, and legal service providers on how to profit in a time of great change.  To inquire about his services, contact him at +1.609.557.7311 or at tim@corcoranconsultinggroup.com.

What's next for law firm leaders?

MimesisLaw: "Senior Privilege: How Some Law Firms Stifle Rainmaker Development"

I met with Lee Pacchia on Mimesis Law's "Business of Law" web TV program to discuss, among other topics, my recent post in which I described how some law firms are stifling the growth of future rainmakers.  I made a few bold comments, many of which are culled from the remarks and presentations I deliver at numerous law firm and law department retreats, and from previous articles. Yes, it's easy to lob critiques. But it's also easy to hide from the truth. There are answers for the major challenges facing law firm leaders, yet we see so few bold, progressive moves on any scale.

"Law firm leaders tend to think their business is so complex and challenging and unlike others." Nonsense. Most complexities are self-induced. Many leaders are challenged by the changing incentives driven by client price pressure. Finding the right balance between rewarding the origination of new matters, which is important in all industries and should be rewarded well, and those who deliver the work, maintain the relationship, upsell or cross-sell additional services, or focus on client retention, can be challenging, but there are hundreds of compensation schemes used every day in every business that can provide guidance. Law firm leaders who invent their own plans to address their "unique" business model are often simply unaware of these other models.

"I've come around to the view that you can't change behavior unless you change the compensation plan first." Many partners won't say it out loud, but I will: if it looks like changing behavior is contrary to a partner's financial self-interest, it's easy to find numerous objections that pertain to quality, or client satisfaction, or the infinite variability of legal matters. Fact is, it's not a choice between making more money and making less money. If we have to change the compensation plans to emphasize different outcomes such as, say, profitability, client retention, and client satisfaction, and de-emphasize the longtime inefficient proxy for all of this, namely hours, then so be it. Good lawyers will continue to make good money.

"If you're hiring the wrong people and you can't trust them to write an article that puts the firm in a positive light, then I'd look in the mirror and say who am I hiring and what are my skills as a manager?"  If you can't trust the people you hire, then fire yourself as a manager, since you're evidently terrible at recruiting, on-boarding, and training.

"The younger generation is not bound by the traditional partnership path." It's a cop out to say that the younger generation of lawyers doesn't want to work hard just because many tend to eschew the traditional pursuit of Biglaw partnership. For one, they're aware of the math that illustrates the extraordinary unlikelihood that the firm hiring them out of law school will anoint them partner someday, regardless of how hard they work. They're also adaptable and flexible and value their time differently. Embrace their creativity and use this flexible work force as a competitive advantage.

"It's easy to demonstrate that changing behaviors will put more money in the partners' pockets." Many partners embrace the fallacy of the false dilemma when they assume they must either pocket profits or reinvest in the firm for future growth, i.e., deplete the profits and thereby lower their compensation. By maximizing short-term profits, they have always forgone more lucrative long-term profits. They're like day traders flipping a stock purchased in the morning for $32.05 and selling it in the afternoon for $33.50, yet ignoring the better option of holding onto the stock for 6 months until it reaches $176. Of course it's a bit more complex than this... but not much.

"A law firm partnership model is a ridiculous model for governance. Giving people an equal vote on how an operation should run is silly." This is not even worthy of a lengthy debate, as it's been long-settled in every other business on the planet. Corporate stakeholders include clients, competitors, employees, bond holders, equity investors, management, executive leadership, and board members, and yet very few of these stakeholders have a voice in the daily operations of the enterprise. Allowing every partner a say in operations just because he or she has an equity stake is as sensible and noisy and ill-informed as conducting a political debate on Facebook and expecting a rational dialogue.

"Nowhere in my job description does it say I've got to protect the model of the Biglaw business." Dominant incumbents in any market will erect any roadblock to change under the guise of quality, competitiveness, and customer needs, but in reality most of these roadblocks are designed to protect the status quo. It's human nature. Whether it's auto dealers in New Jersey claiming that direct-to-customer sales are bad for customers, or bar associations prohibiting alternative business structures, the actual voice of the customer is often quite muted in the debate.

"A potted plant can demand discounts from suppliers." The notion of continuous improvement in a business is not just about perpetually lowering costs, though that's a key outcome. It's about improving quality and throughput and competitiveness while lowering the marginal costs of production. After several years of essentially demanding discounts from law firms, many GCs have to get more creative. And many are struggling. This speaks to the increased role of procurement (which is as much about analytics as it is about cost). There has never been a more opportune time for law firms and law departments to collaborate to find a better way.

Timothy B. Corcoran is the 2014 President of the Legal Marketing Association and an elected Fellow of the College of Law Practice Management. He delivers keynote presentations, conducts workshops, and advises leaders of law firms, in-house legal departments and legal service providers on how to profit in a time of great change.  To inquire about his services, contact him at +1.609.557.7311 or at tim@corcoranconsultinggroup.com.

Ceding the Stage - Lessons in Leadership

I've been engaged in a lively discussion with other legal marketers in which two topics I love, basketball and leadership, have come together nicely.  You don't have to be a basketball fan, or even a sports fan, to benefit from the leadership lessons that are often played out, literally, on the courts and fields for all to see. Many sports teams succeed because of superstars, those supreme talents who lead their teams in numerous statistical categories. Some achieve an even higher, supernatural, level, like NBA stars past and present Michael Jordan and Kobe Bryant, both of whom have earned the league's top offensive and defensive accolades and are considered, respectively, the greatest player of all time and in the running for 2nd greatest of all time.  Jordan won the league scoring title a record 10 times and earned all-defensive first team honors 9 times. Bryant also earned all-defensive first team honors 9 times, led the league in scoring twice, has the 2nd highest scoring game in league history, and is the youngest player to score 25,000 points. Notably, while Jordan won 6 championships and Bryant has won 5 (so far), neither has been able to win a ring without the contributions of other stars and significant role players. Jordan had Scottie Pippen, voted one of the top 50 players in league history, and Kobe had Shaquille O'Neal, another top 50 player, and Pau Gasol, a former NBA rookie of the year, two-time Olympic silver medalist, and two-time European player of the year. Enough with the basketball history lesson. What's the larger leadership lesson?

Ken Mink, who at age 73 played for Roane State Community College, and is an inspiration to all aging athletes!

On some teams, transcendent talent is enough. For most of us, we need a team around us in order to succeed. But what happens when the leaders refuse to cede the stage, when the leaders won't sacrifice their personal statistics for the larger good, saying they want to win but doing everything they can to erect obstacles to success?  I was engaged by a law firm that had plateaued in its growth and wanted my help "shaking the cobwebs" from some of its weaker junior partners so they'd generate more business and "put a little fear" into the associates who were coasting by doing work the partners brought in but who weren't developing their own books of business.  Sure enough, just as with every law firm, there were some junior partners and associates who needed assistance getting out of the office to network and create some visibility for their practice. But the more we explored avenues for networking, the more I learned that these were "off limits."  Upon further discovery, I learned that the most successful partners had established a framework that perpetuated an us vs. them mentality. They honestly and earnestly believed the compensation plans were thoughtfully designed to foster collaboration, but had they specifically set out to erect barriers to collaboration they could not have devised a more insidious scheme.

Many leaders want success, but only on their terms. The constraints they place on winning are often the very inhibitors to success. This firm implemented a compensation structure and operating practices that include the following constraints:

• There is no formula for sharing origination credit. Partners are left to decide how, and if, to allocate credit, with the not unexpected outcome that few partners ever share credit

• The originating partner receives all origination credit for all future matters in perpetuity, whether that partner is involved in delivering any of the work, up-selling or cross-selling new matters, or has any interaction whatsoever with the client ever again

• Partners are not required to introduce any lawyers into their relationships, so as not to "muddy" the origination credit issue. After numerous complaints from other lawyers who not surprisingly wanted a share of new matters, the partners responded not by providing guidance for collaboration but by specifically instructing relationship partners to limit client interaction with other lawyers so as to avoid internal disputes

• No lawyer is allowed to write articles or present at conferences or events, except for partners. This is designed to provide "quality control" and protect the firm's reputation

• Partners who are heavily involved in client industry associations, and many are, may prohibit other firm lawyers from participating. So if a partner serves on the board of an association, she or he may forbid more junior lawyers from attending or participating at any level, so as not to create any confusion over origination credit generated from clients in this sector

Switching back to our sports metaphor, when superstars refuse to cede the stage, often in the form of individual stats or playing time or compensation, even though they profess an all-consuming desire to win, they often, and not surprisingly, don't win. This reluctance to allow others to shine is specifically what's holding back the team. Any objective observer can review the above policies and identify numerous opportunities to improve collaboration, share credit, and grow client relationships at multiple levels, just as any casual observer can watch a basketball game and recognize a ball hog who refuses to pass to the open man.  When I confronted the senior partners on these issues, their advice to the junior lawyers was to "find your own category to make a name for yourself, and then you too can reap the rewards and benefits of 'owning' your own client niche."  Despite my several attempts at illustrating the benefits of collaboration using simple mathematical formulae, the partners were too protective of their own stats to change.

Note: Plot the expected value of generating 100% credit for a limited number of matters against the expected value of generating partial credit for matters that increase in both volume, size, and repeatability due to collaborative efforts, and the result will invariably demonstrate that collaboration is far more lucrative in both the short-term and long-term.  Said another way: 100% of nothing is still nothing. Often infecting this expected value calculation is both a failure to grasp the difference between optimism and probability, and a tendency to see winning as a zero-sum game.

Eventually all stars fade. In sports, we often see some former superstars sign on to another team as role players in a last ditch attempt to win a ring before their careers are over.  Many others retire, often unwillingly, because they can't convince their own team, or any new team, to rely on them to be the superstar. I can imagine the partners in the above firm bemoaning "the youth of today who don't want to work hard" or losing work to competitors when their one-to-one relationship with a key client fails to survive the arrival of a new general counsel. I can also imagine these partners getting pretty nervous as they approach retirement, particularly since their unfunded pension requires the firm to not only survive, but to carve out a significant portion of future earnings to fund the partners' retirement incomes. Who in their right minds, let alone any on their current staff, will willingly divert a portion of their income to support these stars who are doing little now to grow future rainmakers? A more likely outcome is that those junior lawyers with potential will move on, taking their income potential to greener pastures. Today's leading partners who won't cede the stage are tomorrow's disgruntled retirees, reliving their glory days.

This isn't a generational issue.  This is a leadership issue.  If your firm has erected barriers to entry for potential future stars to get playing time or to score a few baskets, take a hard look in the mirror. Will you allow them to blossom on your roster, or would you prefer to compete with them in the future when they're at the top of their game and you're at the end of yours?

Timothy B. Corcoran is the 2014 President of the Legal Marketing Association and an elected Fellow of the College of Law Practice Management. He delivers keynote presentations, conducts workshops, and advises leaders of law firms, in-house legal departments and legal service providers on how to profit in a time of great change.  To inquire about his services, contact him at +1.609.557.7311 or at tim@corcoranconsultinggroup.com.