Saturday, 26 March 2011

How hard can it be? HR in law firms


This week CMS Cameron McKenna (CMCK) announced they were outsourcing the whole of their HR function to Integreon. Yawn, yawn. Who cares? It's not a real profession is it? I mean, seriously, how hard can it be? Aren't they just removing a back office administrative function and reducing costs for their clients?

Before we try to answer that question, I ought to declare an interest. I'm currently, temporarily, leading my company's HR function, which consists of about 65 people around the world, in addition to my role as General Counsel. So, although I've gained most of my experience as a customer of HR, for a brief period I am responsible for delivery of the HR service at a decent sized company. I'm therefore taking a very close interest in it. 


Earlier in my career, I was employee of GE, a company of 330,000 people, with annual revenues around $180 billion. That's about the same as the GDP of Singapore (where I'll be later today) and on its own bigger than all the top 100 law firms in the UK put together. That company treated HR as a deadly serious issue, pouring huge amounts of talent and money into the function. If you want to read what Jack Welch, the former CEO of GE, thinks about the importance of HR, try this link: http://bit.ly/ecmORU


By comparison to almost any serious sized company CMCK is a cottage industry. Yet CMCK thinks it can entirely do without an in-house HR team when all the world's major corporates think differently. Either this is a stroke of genius which will win the grateful applause of the world's business leaders or the actions of a set of management ingenues. Which could it possibly be?


Let me refer you to the work of Dave Ulrich, Professor at the University of Michigan, and famous in HR circles as the thinker who articulated the division of HR into Business Partners, Centres of Excellence and Shared Services. For all you legal elitists reading this, there really are professors who spend their time on HR. Try this link: http://bit.ly/eYGWjv.  In Prof Ulrich's analysis, widely subscribed to, there are three categories of work in HR:


(1) Business Partnering, consisting of HR p
rofessionals working alongside business leaders influencing strategy and implementation of that strategy. The size and nature of this kind of role will vary greatly in different organisations;

(2) Centres of Excellence, consisting of teams of experts with specialist knowledge, in complex areas such as Compensation & Benefits. This work can either be done in-house or the expertise can be bought from external providers.

(3) Shared Services, consisting of routine transactional services. This includes what most lawyers understand as "personnel" issues, like running payroll, processing holiday entitlements etc. This kind of activity is the foundation of every HR department's service and can be done in-house or outsourced, because it's highly susceptible to commoditization. Some of it can be made self-service, just like online banking. 

In case you haven't yet made the connection, the analysis for Legal is exactly the same. The providers of work in category 2 are called law firms. Those in category 3 are LPOs. 


What does category 1, the business partnering, consist of? For HR, it's what Jack Welch is describing. For Legal, it's what most lawyers, in-house or out-house, want to be: a trusted business adviser. Lawyers spend time agonizing about how to move up the value curve from specialist to business partner. It's the subject, in one way or another, of this entire blog.


As soon as I saw CMCK's decision reported in Legal Week, I tweeted that it was misguided. That's a strong word and not one I use lightly. But I believe it for one simple reason: CMCK have outsourced the whole function, not just the category 2 and 3 stuff. That means they don't understand or value what HR does in category 1. In my view, over time, lack of good HR advice in any business is going to lead to degraded decision making on performance, succession planning, compensation, resource and capability planning, diversity and talent. This is particularly the case in service delivery businesses entirely built on people, such as law firms.


All this is deeply ironic. Lawyers are often to be found bemoaning the fact that businesses don't properly understand how they add value. It's dispiriting to see lawyers making exactly the same mistake about HR.

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Next time, as promised, "If you aren't doing segmentation, you aren't doing marketing"  

Sunday, 20 March 2011

I'm glad it's your end of the boat that's sinking - the legal department in five years time

Recently Private Eye ran a cover featuring Kate Middleton with a speech bubble saying: “I’m like, yah, so totally a commoner”. You could probably run a version of that joke for many lawyers: “I’m so totally a businessman”. Technically, it may be a true statement, but it doesn't convince. Your perception is all a question of where you're standing and to many business people, lawyers don't look all that business minded. That's probably because many lawyers are unconvinced that the practice of law should be too overtly business-like. It's the old divide between the professions and trade.

For a while now, people have been making predictions about fundamental change in the provision of legal services. Back in 2002, the Evening Standard reported: "During its short existence, Garretts had become a byword among lawyers for multi-disciplinary practices (MDPs) - that controversial union of lawyer and accountant which at one point promised a fundamental shake-up of the legal world” [emphasis added]. MDPs had been a major discussion topic in the profession in the late 1990s. Now we have the Legal Services Act and ABSs. How much change should we expect this time? I’m not sure. If you open your copy of Great Expectations, the attitudes of the lawyer Jaggers are still recognisable today.


I’m not in the camp that thinks that lawyers are bad at business. That’s plainly false. The UK’s legal sector ought to be proud of its success while, around it, many other sectors have gone backwards. In the 1970s, the UK’s car industry imploded. The staff of British Leyland described one of their cars, the Austin Princess, as a “flying turd”, a refreshingly honest comment from any company, but hardy an advertisement for British engineering. Then, during the 1980s and 1990s, the UK investment banks were systematically taken over, mainly by the US banks. Meanwhile, the UK law firms have continued to thrive, making a major contribution to the country’s balance of payments. When it comes to legal services, the UK is still on the field as a major player. Good.

However, change is coming, it’s accelerating and its source really isn’t whatever the MoJ and the SRA are doing in London. Technology is one major cause, notwithstanding the touching loyalty that property lawyers show for their fax machines. But the most dramatic change is in the world’s workforce. I'm writing this post at Heathrow on my way to Bengaluru, India. I first visited in 1988, when it was still called Bangalore and it lived up to its billing as India's Garden City. As a keepsake, I took a photograph of the Karnataka State Legislature, because I wanted to capture the immortal inscription: "Government Work is God's Work" above the portico (
bit.ly/f4elif). Bangalore has changed and the work is now being done in the expanding parks of private sector technology businesses.

If you haven't been to India and China on business recently, it's difficult to describe what’s happening to the world. There is storm of competition coming from the East, the scale of which many people in the UK haven't yet fully understood. For example, in May 2007, it was reported that 300 million people in China were learning English. That's close to the entire population of the USA. Perhaps the easiest way to visualise this is to have a good hard look at a graph from the Economist showing the share of world GDP over the past 2,000 years econ.st/dHWe5G. For hundreds of years, India and China together accounted for around 50% of world GDP. The only rational conclusion is that they will do again. We just happen to have been living through the brief period when this wasn’t the case. Clearly the hundreds of millions of new participants in the world economy represent an enormous pool of intellectual capital. They are going to play a part in every sector, including legal services.

Having set the scene, what does this mean for in-house legal departments? Let’s turn to the list of challenges currently facing General Counsel. The storm of competition I’ve described is forcing all companies to innovate and be more productive. Every company is entitled to expect every function to participate in that effort. For that reason, near the top of every GC’s list is the interaction of cost, scalability and quality. In-house teams are, in absolute terms, cheaper than private practice lawyers in the same jurisdiction, but the in-house team is a fixed cost and there’s a big difference in how companies view their fixed and variable costs. In-house teams cannot be easily scaled up and down as demand fluctuates. Also, unless an in-house team is very large, it often lacks specialist knowledge in some areas of law or geographic reach. Law firms provide excellent specialist knowledge and some help with fluctuating demand, but the billing model remains essentially "time and materials" and law firms have done such a poor job of collecting pricing data (which is boring but important), that few of them really understand how to price fixed quotes. Many fixed quotes are therefore just very high, to ensure the profit is protected.  

Jurisdiction boundaries form a natural barrier in the legal profession but, nevertheless, work will flow to the people competent to do it at the most affordable price. As a profession, we need to start to look very seriously at our productivity and the mix of provision, including the balance of "buy -v- make", together with the type and location of internal and external resource. This effort is going to have to be led by General Counsel and the more enlightened leaders of our law firms, because, if we don't face into this challenge, CEOs and CFOs are going to make our choices for us.

It's important we don't get mired in internal bickering inside our profession. Change is going to be uncomfortable. Law firms are going to lose some work to LPOs and others. In-house teams are going to change shape. If we fight each other, we may emerge at the end of the next decade like the British car industry in 1980, blinking in the sunlight having missed what was really happening.
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I'm soon going to be meeting up with some fellow Twegals for a chat about law firm marketing. My next post will be an evolution of some of the themes in this one. "If you're not doing segmentation, you're not doing marketing".

Saturday, 5 March 2011

Name the behaviour - what makes a lawyer successful in-house?

For a very few people, usually labelled as eccentric or rude, telling someone to their face what you really think of them comes naturally. But for most of us, it's something we have to learn. Unless we're taught how, most of us struggle to pass judgement (out-loud) on a person sitting opposite us. It feels faintly sociopathic, like Hannibal Lecter talking to Clarice Starling in The Silence of the Lambs. People go to great lengths to avoid it. But, in business life, telling people how they're really doing is a critical part of running a company well. If you're a manager and you want to improve the performance of your team, not to mention the career potential of the individuals who work for you, you need to get to grips with this particular skill.

I'll always be grateful to the person who taught me how to give honest feedback to my team-members and colleagues without feeling like a sociopathic mass-murderer. To do it properly, you need to avoid the common pitfall, which is to rush straight to the conclusion. Let's start with an example of how not to do it. A boss once said to me in my appraisal "you're very stubborn". You can hardly respond by saying "no I'm not", so we had a rather pointless conversation instead. Inside, I was thinking "only because you're so often spectacularly wrong". From that meeting, I learned how not to conduct an appraisal but little else, which was shame, because looking back with the benefit of another 15 years of experience, he had a point. 


If you tell someone "you're difficult to work with", or something similarly conclusory, 
they'll normally react by denying it. Where does that leave you? You haven't convinced them you're right and they certainly won't change as a result. No change, no improvement. Added to which, there will now be a simmering resentment for what you've said about them. 

Instead of rushing to the conclusion, the secret lies in the phrase "name the behaviour". Don't believe me? 
Let's try it together. Close your eyes and think of your most difficult work colleague. What are the specific behaviours that lead you to your judgment? Try to go for things which are clearly manifest and you can easily describe. Is it that they don't really listen when you're speaking? Is it that they tell you they agree and then go away and tell other people they disagree? Do they pass work to others but never accept it themselves? Maybe they nitpick over trivial details? The possibilities are endless.

Now imagine you are this person's boss. Maybe you really are. You have to tell them what's holding them back. Reach for "name the behaviour". That means focussing, one at a time, on an identifiable behaviour, something you can actually describe. For example: "you're often late for meetings, for example the budget review on Tuesday." Once this has sunk in, next you can move to: "how do you think that affects me and the other attendees?" Unless they have Lecter-like tendencies of their own, you can normally lead them to the conclusion that they are disorganized and/or arrogant (keeping people waiting is a form of arrogance after all). A process of self-recognition like this is far more likely to result in change.

How is this relevant to the question of what makes a lawyer successful in-house? There has been a lot of discussion in recent blogs about what it means for lawyers to be "commercially aware" and the degree to which this is important for those starting their careers. Some commentators insist on the primary importance of being a "great lawyer". Others have argued that business knowledge is also important. The point has been made that it is unfair to ask lawyers to be commercially aware 
when it's not emphasized on law courses. The opinions expressed a strongly held by both sides (for example on Michelle Hyne's blog http://bit.ly/hOJrVn). Ashley Connick has posted a nice overview of the debate and some interesting viewpoints of his own (http://bit.ly/hfQD8D).

My own view is that law is always practised in some context, whether politics, society, business or something else. Beyond that, I'm really only qualified to comment from the viewpoint of business. As a General Counsel, do I think lawyers need to be "commercially aware" to succeed in-house? Of course I do. But what does that actually mean? I think we've strayed into the same trap as the boss mishandling the appraisal. We're rushing to to a conclusion which is difficult to understand and easy to deny or affirm. This isn't getting us anywhere. 


Instead, let's reach for "name the behaviour". What are the behaviours we expect from an in-house lawyer who is "commercially aware"? Below are some specific behaviours I think are needed for success. In my own department, these are written down and tied back to our company's stated values. They're by no means exhaustive. But I think they're applicable for all in-housers.

First, get your analysis right. This means you need to know the law and know the facts. You need to apply the law properly to the facts. Being an in-houser doesn't entitle you to be any less rigorous as a lawyer. You wouldn't expect your company's Financial Controller to say "I've prepared the accounts approximately right. I'll let the auditors do it rigorously". After all, in a company, if the in-house lawyer doesn't get the legal analysis right, nobody else will. It's a core expectation and the foundation of everything else, so don't shirk it.

Second, show courage. Speak truth to power. Whatever your conclusions are, whatever you think, you have to be brave enough to tell people fearlessly, even when they are powerful. If you cannot do this, you're as good as useless. Any fool can be a "yes man" and your business leaders won't make better decisions unless you speak up. I'm not advocating being undiplomatic. If you need to tell your business leader something difficult, I recommend you do it one to one, behind a closed door, rather than in front of their entire team. By all means choose your moment, but once you get that moment, do not shade your message. You have what McKinsey call the "obligation to dissent" if you don't agree. 

Third, be concise. Get to the point. Nothing is more tiresome for busy business leaders trying to synthesize the inputs they are receiving from multiple sources, than a long explanation of the legal reasoning behind your conclusion. Think and speak clearly. Nobody else is interested in your reasoning, let alone the law, although they will expect you to know it and you should be ready to explain it if that's needed to convince people you've thought things through carefully. 
 

Fourth, give solutions and options, within the law. You're not an in-house lawyer to hand down olympian pronouncements on what is and isn't allowed. Your job is to help crush your boss's and your company's objectives (see my post on ignoring some e-mails). You're supposed to be there to help. Offer alternatives - it shows you understand what people are trying to achieve and care about the outcome.

Fifth, act with integrity at all times. Don't forget your professional obligations to uphold certain standards. This doesn't need explanation to anyone who has trained and qualified as a lawyer. But remember, you need to be prepared to accept that there are some extreme circumstances in which you'd have to resign if you couldn't reconcile this obligation with what others are doing. 

Sixth, develop yourself, your colleagues and your direct reports. Each of us has learned what we know because of the efforts of others to teach us. Never stop forcing yourself to learn new things and get better at what you're doing. Then put the same energy back into helping others do the same, whether they are colleagues or team members. You owe it to them to tell them how they are really doing and how they can get better. So, back to the title of the post - name the behaviour.

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Postscript: I've received some interesting comments about other behaviours which help in-housers to succeed. For those interested in further reading on this topic, I recommend the Reebok Rules, published in the ACCA Docket in 1992 (http://bit.ly/fjPAWM).
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Next time, I'm going in a different direction, looking at everything from LPOs to the law firm business model. The topic will be "What's the shape of the legal department in five years from now?"