Law firm leaders must figure out how to guide their organisation through the inevitable process of digital transformation. Leveraging outsiders’ experiences, modernising systems and piloting new approaches, and instilling a learning culture are all essential – but not easy – steps for digital leaders.
Artificial intelligence and other emerging digital technologies are undoubtedly poised to disrupt the business models of both law firms and their clients. Legal tech is shifting the competitive landscape by creating a whole new set of alternative legal service providers, from online gig-economy players to niche start-ups to in-house legal departments and established players like the Big Four firms. At the same time, client needs have become more complex and more interdisciplinary, and a technology-enabled gig economy combined with a generational shift have produced a talent pool that wants a different career proposition. These developments mean that law firms need leaders to navigate the transformation from their historically successful business strategies, structures and cultures to new, emerging models and the different ways of operating they require. A primary role of law firm leaders over the decade will be to lead their firms through the process of digital transformation. A 2015 PwC report showed that improving the use of technology was the top priority (94%) in law firms in the following year. But, putting technology in place to do the same things faster and cheaper is only a starting point. Decades of research on technological innovation show that technology itself is rarely a source of sustained performance improvements; benefits invariably depend on the firm’s ability to reinvent its core business models and internal operating processes and procedures. Getting the productivity and innovation benefits of any new technology inevitably requires organisational change – and change is precisely the work of leadership. To be clear, this effort requires collaboration across a range of leaders inside law firms, including both lawyers and business professionals, such as the management committee, practice group leaders, office managing partners, and functional leaders in marketing, human resources, business development, technology and other support areas.
Moreover, digital technologies are inherently iterative and experimental, learning from data and adjusting along the way. This is a radical departure from the traditional ‘plan and implement’ approach to organisational change, one that places a premium on experimenting and learning. But most law firms’ people processes and organisational cultures are geared towards flawless performance, leaving little room for error. Instead, a learning mindset is required to embed the new forms of collaboration that are essential for meeting clients’ needs. Thus, law firm leaders throughout the organisation will need to guide not only business model and structural change but also the ‘softer’ process of cultural and mindset transformation. This article lays out a practical, research-based approach to help law firm leaders become more effective in guiding their organisations through the complexities and vagaries of the digital age. The chapter starts with a brief exposition of what it truly means to be a leader in the digital age, and makes the case that leaders need to undertake three core actions:
• set a future course;
• lead transformation processes to reinvent outdated systems and cultures; and
• instil a ‘growth mindset’ culture that inspires people to experiment and learn outside their current strengths.
The subsequent sections take each action in turn, laying out what those actions mean, providing examples from firms that have adopted them and recommending concrete steps for leaders.
What do leaders do – and, is it different in the digital age?
To answer this question, first consider the age-old distinction between management work and leadership work.1 At its essence, management work entails doing today’s work as efficiently and competently as possible
within established goals, procedures and organisational systems. Leadership work, in contrast, is aimed at creating change in what we do and how we do it, which is why it requires working outside established goals, procedures and structures and explaining to others why it is important to change – even when it may be blatantly obvious to you.
When we are going about our routine work, we’re asking, “How can we do the work better (ie, faster, in a less-costly way, with higher quality)?” We spend our time with our teams and current clients, or on our individual contributions, executing plans and goals to which we have committed. We usually know what we’ll get for the time, effort and resources we invest. We have faith that we’ll meet our goals because we are using the skills, processes and procedures which have worked for us in the past. The time horizon is the near-term: achieving goals for the quarter or the year and solving immediate problems.
When we go about our leadership work, we’re asking, “What should we be doing instead?” We spend our time on tasks that might not have any immediate payoff and may never pay off. For example, when connecting with experts outside the firm in order to understand future trends that might affect firm strategy, you have no guarantee either that you’re listening to the right person or that the world will evolve as they predict. Similarly, when investing in developing the next generation of partners, you have to admit that some of those individuals may leave the firm or even the profession; your returns may be limited to the satisfaction of building stronger relationships and fostering talent, rather than commercial or quantifiable ROI. Ultimately, leadership is about creating change towards a better future, and that inevitably involves strategy, organisation and talent. The time horizon is the longer-term-making strategic, architectural and talent choices that will nurture innovation and sustain performance over the longer term.
The importance of these leadership capacities is only growing in the wake of the technological changes affecting the legal profession. In a world in which intelligent technologies will increasingly do more and more of the routine legal and administrative work, leadership is needed to set a future course, lead transformation processes to reinvent outdated systems and cultures, and instil a ‘growth mindset’ culture that inspires people to experiment and learn outside their current strengths.
Set a future course by leveraging outside networks
As new technologies alter the delivery of legal services, law firms need leaders to be able to set a future course in which digital technologies are not only a tool for efficiency but also a driver of innovation to meet emerging client needs. The ideas and knowledge that often prove most relevant for innovation, however, typically reside outside the firm and even outside its established network of relationships with clients and other parties. Often ideas and knowledge come from very unlikely sources. That’s why setting a future course requires first and foremost an external focus. But when most lawyers in large firms consider leadership, they think only about internal processes, influence and relationships.
In study after study, over a time span of more than 20 years, MIT professor Deborah Ancona and her colleagues have debunked consistently this conventional wisdom about what makes for effective team leadership.2 These ideas translate directly to practice group leaders, office managing partners, partners running client relationship teams and to business professionals across functional areas. The researchers found that the leaders who delivered the best results did not spend the bulk of their time playing internal roles. Instead, the best leaders worked as bridges and boundary-spanners between the team and its external environment. They spent much of their time outside, not inside the team: going out on reconnaissance; making sure the right information and resources were getting to the team; broadcasting accomplishments selectively; getting buy-in higher up when things got controversial; and monitoring what other teams – potential competitors, potential teams from whom they could learn and not reinvent the wheel – were doing.
Strategic leaders, therefore, need a network of wellplaced contacts outside the firm who will help them understand the bigger context in which they operate.
Key questions to consider when soliciting outside views
If you put this idea into practice in your own firm, remember that it’s not enough to bring in just any outside views. Think carefully about which examples are both analogous and will resonate with partners – for example, using high status companies or leaders whose reputation will bring credibility to the ideas.
Beyond this, consider these key questions:
• Which parts of the firm are most ready to engage in experiments? Once you identify willing partners, think about how to structure a pilot so that you capture data on what works and what doesn’t.
• How can you create a process to identify outside exemplars on a regular basis? Consider using associates or business development staff who might find it energising to take on this role of seeking external ideas. Make sure to give them due credit for their efforts, and then keep them involved in the firm’s efforts to build on these new ideas.
• What is the best way to overcome the ‘not invented here’ problem – that is, convince partners to adopt ideas from external sources like tech companies? Think about drawing in a couple of the firm’s key influencers: partners who may not have a formal title, but actually play an outsize role in shaping how their colleagues think about issues. Once you personally engage them in a change effort and address their concerns, they can be critical resources for helping to drive internal changes.
David Benton, head of capital markets at Allen & Overy, is a good example of the value of bringing the outside in to help chart the firm’s direction. His own experience led him to conclude that the firm’s annual, rankings-based performance appraisal process was no longer fit for purpose. Wanting something that encouraged more frequent, and more developmental conversations between associates and partners, he looked at what other organisations like Adobe and PwC were doing, and then asked his firm to help him create a new, tech-enabled continuous feedback approach. The new system, Compass, is already producing returns in terms of enhancing engagement and boosting the firm’s ability to retain the very best talent. Finding such innovative ideas requires leaders to reach beyond the boundaries of their own firm – and often well beyond the bounds of the legal arena. Part of the secret of their success is that all their bridging activity gives them the perspective they need to develop a point of view on their business overall, see the big picture organisationally and set direction accordingly. Here are two concrete actions that help to harness external ideas to become more adaptive and innovative:
• Start with your colleagues to scout for innovative external ideas. Hold internal focus groups to seek ideas about clients who excel in tackling problems with interesting technologies or using digital solutions in new ways. This approach starts to build awareness and buy-in from partners about the topic; consider including associates who are often au fait with outside trends and excited by the chance to contribute. Also involve your business development team to leverage their knowledge of competitors and clients.
• Organise forums or special events that convene key players from across the ecosystem. Your clients are also wrestling with the challenges of digital transformation. Demonstrate leadership by bringing together key players from across your client organisations; for example, invite general counsels to bring along their company’s chief technology officer or chief strategy officer. Keep the meetings intimate enough to build trust and encourage genuine knowledge sharing. This approach helps to create more people in your organisation who are capable of functioning as bridges to external parties, and it provides insights on pain points and opportunities in the ecosystem.
Setting a future course for the firm to cope with digital shifts – both disruption and possible upside – demands that leaders across the firm develop, nurture, and use their external networks across the ecosystem for soliciting ideas and generating insights.
Lead change to reinvent outdated internal processes
The last decade has witnessed an unprecedented acceleration of technology diffusion and adoption in the top law firms. This technology sets the stage for firms to more directly and quickly reach their clients, transforming how, when, and where work gets done, as well as by whom and for whom, leading to the creation of new business models (eg, new employment arrangements via platforms whose algorithms enable the short-term contractual engagement of independent workers).
Gaining sustainable competitive advantage from these transformative technologies depends crucially on the ability of leaders in adapting firms to confront, and ultimately reinvent, an often outdated system of interlocking processes, behaviours and mindsets. That’s why a second key set of skills for law firm leaders is the capacity to lead change, from an old, highly successful but increasingly outdated model, to new and different ways of serving clients and developing their people.
To return to our example above, at Allen & Overy, the new performance management system’s champions wanted partners to spend their time focusing on helping people develop and giving regular, meaningful feedback – not on ‘pushing paper’ to create dozens of backward-looking written assessments. But the idea couldn’t simply be rolled out to the rest of the firm. The highly opinionated experts and rainmakers who populate the ranks of law firm partnerships don’t easily follow along, unless they are persuaded of the value of changing. So, the process of leading change is not simply the product of one individual’s vision but a collective endeavour, created through conversation and interaction among powerful peers.
At Allen & Overy, colleagues who were intrigued enough to experiment with the new idea set up pilots – in Singapore and in the Middle East, alongside the original pilot in capital markets. Each group was interested in different facets of what it was designed to do, so they implemented it differently; one was much more interested in the technology, for example. The experiences of the pilot groups and the data analytics generated provided food for debate among the partners. Learning how to make the case for change, knowing who to enlist in developing and testing the ideas, iterating on the basis of what has been learned in experimental pilots, and most importantly, constantly engaging in crucial conversations with an ever-expanding subset of the partner group about “what are we trying to do and why”, is part of the key work of today’s law firm leaders. Here are a few more specific suggestions:
• Monitor the shifting winds within the firm. One of the biggest risks in using an outside-in approach is ideas will get rejected by the organisation because they lack buy-in from the users or other critical stakeholders. Influential colleagues with a not-invented-here mentality can stamp out innovation, and so it is essential to understand their concerns and bring them into the discussions in productive ways. The best leaders will persuade influencers through specificity: by appealing to their particular concerns and articulating concrete benefits that they especially care about, not by using general arguments or evidence.
• Manage up and across to get support and resources from top leaders and peers. One of the most crucial resources is time: make sure the institution signs on to a timeline that gives you the opportunity to properly plan, pilot, and prove an idea’s worth before the firm gives up on it. Especially for ideas that come from outside the firm, implementation requires time for adaptation. Commitment from the executive committee is essential, but you also need strong buy-in from formal leaders of practice groups and functions.
• Exercise patience yourself: Leaders with a strong vision and a high sense of urgency are often in a hurry to implement change. Resist the temptation to jump ahead without strong alignment of interests. The work of convincing peers, listening respectfully to objections and compromising all take more time than you would like. If you’ve done the hard work of getting top leaders’ and others’ support for a clear process, then stick to it.
Instil a learning culture
With technology – and the business models it enables – evolving in unpredictable ways, leaders cannot simply set a future course and restructure accordingly.
They must stay abreast of the constant changes in their clients’ needs and in the marketplace, and adopt a flexible mindset about changing their course when necessary. A third critical skillset for leaders, therefore, is instilling a learning culture that allows the firm to detect changes and to react nimbly and decisively.
Learning processes, individual mindsets, and cultural norms are all critical underpinnings to a culture that promotes experimentation. Why? Because initial trials are inevitably replete with disappointments, and eventual success is not guaranteed. For example, many law firms are using technology to analyse pricing data, manage caseloads, forecast legal or transactional outcomes, and even decide whether or not to take on a new client. But getting real insights from such analytics is a learning process. The first attempts to build a system for scrutinising any of those decisions nearly always reveal problems with the way a firm’s data has been entered and coded. Rather than point fingers, add up costs, and turn to the next shiny idea, firms need the discipline to learn how to improve from their findings.
That’s why many of the firms that are most effectively adopting such technologies are also investing heavily in training their partners to be better coaches, facilitating the development, learning and performance of one another. In essence, they are using coaching as a tool for their transformation.
At Allen & Overy, the firm’s leaders had also observed that younger associates were demanding deeper and more meaningful support to help them develop professionally, as well as open conversations about development and the opportunity to explore career paths. Former Global Managing Partner David Morley put it like this:
The average adult has around 10,000 conversations a year (do the math). As a senior leader, roughly 100 of those a year in your professional life will be particularly high value. High value in the sense they will change your life or the life of the person you’re talking to. We want to help you acquire the skills to maximise value from those 100 conversations, unlock previously hidden issues, uncover new options and reveal fresh insights. That resonated. When we introduced the coaching skills training to partners, almost all of them realised they struggled with those uncharted or ‘difficult’ conversations and could readily see they lacked skills.
At another professional services firm, partners were pleasantly surprised to see that the coaching training the senior team embarked on had a significant bottom line impact on their relations with their clients. As one of the partners put it, people used to dread the inevitable moment when clients would ask for help on big messy problems totally outside their area of expertise:
Before we really knew how to structure an open conversation, my heart would sink – we’re experts, people hire us for our answers. But now that we’ve added an expertise on coaching, we have confidence that we can help on any topic they throw at us – because our task is to dig the answer out of them. So we say, “Pull up a chair.” So often these conversations, which we all used to dread, have led to us winning the most interesting kinds of new work.
In one research study we conducted, a law firm reaped an incredible financial return on its investment in this kind of training. For several years in a row, the firm selected between 16 and 20 partners to undergo intensive training to learn how to change the nature of their dialogue by asking open-ended questions and developing ‘honest and informed curiosity’. We used an experimental design to analyse the impact of the training; in essence, we treated the participants as if they were subjects in an experiment, and statistically examined their outcomes relative to a matched3 set of partners who hadn’t been trained (ie, the control group). In the few years following training, the subjects significantly and reliably outperformed their peers – often by very large margins. These pilots clearly showed the value of these coaching-style conversations in client settings, which we studied because the outcomes were clear and measurable. Beyond that, we have strong anecdotal evidence that partners trained in those coaching-style skills became far more effective leaders inside the firm. They were also more willing to take and tolerate risks – an essential element of a learning culture.
Here are some concrete steps that leaders can take to foster a learning culture in their law firm:
• Train partners in the core skills of coaching. This is a critical part of developing a learning culture, because coaching is about asking good questions instead of telling people what to do. Many lawyers mistakenly believe that their questioning skills, such as in a deposition, already equip them with coaching competencies, so you will need to help them understand the major differences between the approaches and outcomes.
• Destigmatise failure. Lawyers tend to be perfectionists, so law firm leaders need to consistently emphasise that mistakes are learning opportunities rather than a cause for embarrassment or punishment. Leaders’ own behaviour will be closely watched, so they must act in ways that reinforce their message.
• Use a data-driven approach to identify what caused success or failure. Although many leaders believe that data is important for uncovering the root causes of different outcomes, they don’t always insist on collecting and analysing the necessary information. And don’t just focus on ‘post-mortem’ analyses of failed initiatives: understanding the reasons behind successes allows you to replicate them more readily.
From know-it-alls to learn-it-alls
Across industries and sectors, practitioners and academics seem to agree on one thing: successfully piloting new technologies requires shifting from a traditional plan-and-implement approach to change to an experiment-and-learn approach. But experiment-and-learn approaches are by definition rife with opportunities for failure, embarrassment and turf wars. Without parallel work by senior management to shift corporate cultures toward a learning mindset, change will inch along slowly, if at all.
When Microsoft CEO Satya Nadella took charge, for example, he saw that fear – and the corporate politics that resulted from it – was the biggest barrier to capturing leadership in cloud computing and mobility solutions. A convert to Carol Dweck’s idea of a growth mindset4 – the belief that talent is malleable and expandable with effort, practice, and input from others – he prioritised a shift from a ‘know it all’ to a ‘learn it all’ culture as a means to achieving business goals. Today, not only does Microsoft rank among the top firms in cloud computing, but the company is also ‘cool’ again in the minds of the top engineering talent it needs in order to compete.
As smart technologies and rapid growth transform law firms’ services, internal operations and even business models, they also enable – and demand – new ways of leading. Of course, specialised expertise and rainmaking prowess still matter a great deal but so do innovative thinking, collaboration across practice areas and the ability to engage peers and associates in open and effective conversations centred on their development and growth.