The partnership — and productivity — puzzle

At our latest LPM supper club roundtable, conversation centred on big questions with which SME law firm leaders are currently grappling while at the same time considering routes to growth

The UK government’s first budget met with mixed reactions — an unwelcome increase to employers’ NI contributions when many businesses face rising cost pressures, but an expectation that plans to attract investment will eventually be a positive boost to the economy in the long run.

Meanwhile, UK businesses are still struggling to improve productivity, which has been sluggish since the 2008 global financial crisis. It’s the gateway to higher profitability and growth, but only 29% of organisations are currently measuring employee productivity, according to business leaders recently surveyed by the Open University. Published last month, the Powering up productivity report finds that SMEs (<250 employees) tend to lag significantly behind larger companies in applying metrics to measure it — with only a third (35%) using KPIs to monitor performance, versus two-thirds (66%) of larger companies.

The topic of KPIs came up at our latest LPM supper club roundtable in October, capably co-hosted by LPM partner oneAdvanced. Conversation centred on big questions with which SME law firm leaders are currently grappling while at the same time considering routes to growth — challenges for their businesses as well as employees.

How to grow sustainably is top of mind for firms in the <100 headcount category — jokingly referred to as the ‘teenage phase’ of a firm’s growth journey by one leader — and of course there is a concern that failing to scale up leaves businesses vulnerable to being swallowed up. Firms are therefore weighing up targeting inorganic growth through small acquisitions and lateral hiring, versus organic growth by focusing on business development training and career progression. With the evening’s conversation mostly focused on the latter, perhaps it suggests this approach is one that most firms are more inclined towards.

How, then, can lawyers be incentivised to bring in more — and better — work? Applying KPIs to fee earners is seen as extremely important, but still a considerable challenge. In fact, some argue it’s even harder now with younger generations’ expectations of better work-life balance and hybrid working’s lack of opportunities for osmotic learning. While there’s some disagreement on the notion that ‘the kids are not all right’, the general view is that something fundamental appears to have been lost to the Covid years — the drive to be a business ‘activator’.

On the flip side, these leaders find no shortage of appetite for career progression among young lawyers — even if there’s resistance to fulfilling the expectations required for promotion. Firms may need to own up to contributing to crossed wires here. Some have taken stock of outmoded tacit understandings about how to make partner, and sought to codify a schema for the partnership track through explicit strategies, guidelines and targets that communicate what is expected of tomorrow’s leaders more clearly.

An aptitude for winning business doesn’t automatically make for good leaders though, and law firms suffer from the age-old problem of promoting high-performing individuals up the leadership ladder without regard to their competency or motivation for management. How can they overcome the Peter Principle, while continuing to find ways to reward and retain these rising stars?

The question had a lot of traction around the table, with discussion around alternative routes to career growth and success that don’t depend on managing people — and aren’t necessarily reserved for lawyers. Some firms have, or are considering introducing, the role of legal director — an added middle rung on the leadership ladder, or a title for those who may not be interested in (or suitable for) partnership. Others are considering how they can support and incentivise their non-legal talent.

How then should they decide who to promote, and how to structure leadership? The route to scale for many fledgling firms that have successfully grown into larger businesses has been to ‘professionalise’ the business, taking strategic and operational responsibilities away from partners and handing these roles to professional managers. One leader observed that the managing partner can no longer be a first among equals but must perform like a full-fledged CEO. There’s obviously a concern leadership may be undervalued in an equation where lawyers lead lawyers.

Redefining leadership from within the traditional partner model is easier said than done, but staffing and structuring the business in accordance with a vision of its future increasingly seems like a non-negotiable for firms looking to break through barriers to growth.

Tailpiece

With lots of studies showing that music helps boost motivation and enhance productivity — and the Pet Shop Boys experiencing a resurgence among the young and… less young — perhaps consider adding their classic ‘Opportunities (Let’s Make Lots of Money)’ to your office playlist:

I’m looking for a partner, someone who gets things fixed

Ask yourself this question, do you want to be rich?