Edition: April 2014
Success not rocket science for law firms: Harvard professor
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Many law firm leaders hold the mistaken view that they are offering high-end “rocket
science” services to clients when they are, in fact, delivering a commodity.
This lack of awareness – typically the result of professional pride or a changing market – can
have serious implications for the strategy the firm adopts and its likely success, according to
Professor Ashish Nanda, Director of the Indian Institute of Management, Ahmedabad, and
the Robert Braucher Professor of Practice (on leave) at Harvard Law School. He delivered
the message to a full-capacity group of about 75 law firm leaders at the World Masters of
Law Firm Management conference at the Intercontinental Hotel in Sydney on March 13. The
session, organised by the Law Council of Australia’s Law Management Group, addressed
solutions to the unique challenges facing law firms.
Professor Nanda says law firms need to clearly understand where their practices sit on a
spectrum of service offerings in relation to their competitors. On that band, moving from
left to right in terms of the complexity and potential profitability of services, most firms
deliver:
Commodity – the practice has hard-working lawyers who take clients’ issues and solve them
faster and more efficiently
Procedures – the practice has detail-oriented people with a set way of solving problems
with proven, labour-based systems
Grey hair – the practice has highly skilled lawyers with a proven record of performance
based on experience and good judgment
Rocket science – the practice has brilliant lawyers who tackle difficult, unique problems.
“When you ask firms where they are on the spectrum, their self-assessment tends to skew
to the right from where they are empirically,” Professor Nanda says. “This leads to
misalignment.”
Even practices that fit into the right side of the spectrum must continually innovate; reject
work that pulls them to the left, even if it offers the prospect of stability and growth; and
focus on recruiting the best and most brilliant talent. Commodity practices have to
understand their market position and recruit accordingly.
“There has to be an element of realism,” Professor Nanda says.
The Australasian Law Management Journal is produced by the Australian Law Management Group
of the Legal Practice Section of the Law Council of Australia
www.lawcouncil.asn.au/almj
Master class
The full-day session of the highly respected World Masters conference, hosted by the
Australian Law Management Group of the Law Council of Australia and sponsored by
Thomson Reuters, featured the revered Case Method learning approach for which Harvard
is famous. The methodology involves a participant-centred learning style which draws from
real-world case studies, puts participants in the shoes of managers, and helps create leaders
who can adjust as required to ever-changing business climates.
Presently director of the Indian Institute of Management, Ahmedabad, Professor Nanda is
acclaimed as a world expert in the management of professional service firms. Apart from his
role as Robert Braucher Professor of Practice (on leave) at Harvard Law School, he also
teaches in Harvard Business School’s executive education courses.
Participants at World Masters – including law firm leaders from a range of Australian and
New Zealand firms – gained insights into the strategies of successful international firms such
as Wachtell Lipton and Linklaters. Topics covered areas such as creating a successful
leadership strategy; strengthening client relationships; and managing pricing and improving
profitability drivers.
Professor Nanda detailed strategies to help participants explore leadership approaches from
multiple points of view and gain the skills to align capabilities with strategy and maximise
organisational performance.
Successful strategies
Setting appropriate strategies is at the heart of success for any law firm, according to
Professor Nanda, who urges law firm leaders to develop an “elevator statement” about
their firm – identifying its unique strengths, determining which clients to target, and
assessing the core capabilities that must be developed.
“Strategy is about choice,” he says, adding that it “bridges the chasm between vision and
tactics.” It should define how a firm occupies a unique place in the market to achieve
sustained success. That requires making hard choices; doing the right things, not just doing
things right; and being consistent.
Professor Nanda says simplicity is at the heart of most good strategies. Implementing them
requires commitment (with brilliance being overrated and persistence more likely to pay
dividends) and flexibility (they should provide a direction for the firm, but allow adjustments
according to market cycles and circumstances).
Firms should commit to a long-term strategy, Professor Nanda argues. While life in a
professional services firm often feels like a sprint with quick, intense bursts of activity, he
believes building a strategy should be “a marathon” that enables a business to develop and
evolve slowly. Most importantly, that strategy should be clear to everyone in the firm, and
everyone in the organisation should be working towards achieving it.
The Australasian Law Management Journal is produced by the Australian Law Management Group
of the Legal Practice Section of the Law Council of Australia
www.lawcouncil.asn.au/almj
Professor Nanda says embracing the three Cs – choice, clarity and consistency – can help put
firms on the road to a successful strategy. Choices determine what a firm will or will not do.
Clarity ensures a well-defined blueprint – “It must be clear – not gobbledygook” – that is
easily understood by the firm and sets out service offerings for clients. The alternative is
being a jack of all trades and master of none – a perilous place for most firms. And
consistency helps firms avoid following ideas or trends that are simply “the flavour of the
day” and which may not be sustainable.
Professor Nanda says under the brilliant leadership of Jack Welch during the 1980s to 2001,
global conglomerate GE followed such an approach. Welch and his management team
decided that GE had to be either No. 1 or No. 2 in a particular service or product area,
otherwise they would either cull the division or overhaul it. They made a choice, it was clear
and they worked consistently to achieve their goal – turning GE into one of the most
celebrated business stories of its time.
The Wachtell Lipton story
In delivering a case study at World Masters of American law firm Wachtell, Lipton, Rosen &
Katz, Professor Nanda noted that one of the keys to its success is that it has had a clear and
consistent strategy since the firm’s inception in 1965.
A good example of a ‘rocket science’ firm, Wachtell Lipton has set itself apart through a
team of brilliant lawyers who have filled a relatively narrow sector of the legal services
market in the US. While it does not cover every area of law, the firm has a reputation for
excellence in its specialty areas. Partners know what kind of work they are doing. Clients
know when to go to Wachtell Lipton, and for what legal services. And lawyers know what is
expected of them.
In effect, Wachtell Lipton has made its choices – and there is clarity and consistency around
delivering them. The result is that Wachtell Lipton has for many years been one of the most
profitable law firms in the world on a per-partner basis and regularly tops the American
Lawyer rankings of profits per partner, with annual PPP regularly exceeding $4 million.
Professor Nanda says Wachtell Lipton has a strong culture and produces high-quality work,
especially in the area of mergers and acquisitions, strategic investments, takeovers and
takeover defence. When general counsels and chief executives in New York have a problem,
they often choose Wachtell Lipton to help them.
“They found an opportunity that others did not,” Professor Nanda says.
Still a relatively small firm with just over 200 lawyers, he says Wachtell Lipton has opted not
to grow with demand. This, in turn, allows it to recruit and retain the best lawyers without
fear of being forced into making cuts according to market ups and downs. Better still, if it
stays smaller than the market for its services, no matter how bad business gets it will always
have enough work.
The Australasian Law Management Journal is produced by the Australian Law Management Group
of the Legal Practice Section of the Law Council of Australia
www.lawcouncil.asn.au/almj
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The 7S alignment model
It is one thing to have a law firm strategy, but quite another to ensure that there is
alignment of that strategy. At World Masters, Professor Nanda suggested that the more
tightly aligned an organisation, the better its performance is likely to be. He advocated using
a model such as McKinsey’s 7S model encompassing:
strategy – outlining how a firm occupies a unique place in the market to achieve sustained
success;
structure – determining the way in which tasks and people are divided;
systems – including management control, performance measurement, budgeting,
information, planning and capital budgeting systems;
staff – defining how people are selected, recruited, trained and developed;
skills – setting the basic competencies that reside in a firm in areas such as management and
technology;
style – outlining the leadership approach of top management and the overall operating style
of the firm;
shared values – determining the values that are widely shared within a firm and which serve
as guiding concepts of what is ‘right’.
Professor Nanda says long-term success depends on interaction among all the Ss. He adds
that Wachtell Lipton provides a perfect example of a firm that has achieved such alignment
– and with it has come enviable success.
The bottom line
At World Masters, Professor Nanda offered no easy answers for law firms seeking to
determine strategies for success. Asked to outline the best model, he concluded: “It
depends.”
The dynamics of the sector are one determining factor, while alignment of strategy,
organisational culture and people are among a host of other issues that will influence the
decisions of the management team.
“Most of all, you must find a place that meets the needs of the sector and clients,” he says.
And for ‘rocket science’ firms of today, Professor Nanda delivers a warning that what works
today may not be the same in five to 10 years. Service offerings are bound to have to
change, placing great pressure on successful partners who shot to success in the past on the
back of strategies that suited the time. Professor Nanda says one of the biggest barriers to
firms offering new services is previous innovators and successful firms who become
reluctant to change.
“Incumbency avoids radical innovation.”
The Australasian Law Management Journal is produced by the Australian Law Management Group
of the Legal Practice Section of the Law Council of Australia
www.lawcouncil.asn.au/almj