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When 1 + 1 = 3

13 August 18

The author, a keynote speaker at this year’s Law Society of Scotland conference, found in research that law firms need to break out of practice “silos” to maximise client retention – and revenue

by Heidi Gardner

Today’s law firms face a serious conundrum. Their clients increasingly need them to solve complex problems – everything from regulatory compliance to cybersecurity – that only teams of multidisciplinary experts can tackle. Yet, most firms have carved up their highly specialised, professional experts into narrowly defined practice areas, and collaborating across these silos is often messy, risky and costly. Likewise in small firms, lawyers face market pressure to specialise in a niche area in order to develop their reputation as a go-to expert, and they also need to team up – sometimes across other boutiques – to provide well-rounded advice. 

Even when partners recognise the need for greater collaboration in their firm to drive revenues and growth, their intellectual buy-in doesn’t translate to behavioural change. Unless you know why you’re collaborating and how to do it effectively, it may not be smart at all. 

But before we move on, let’s clear up some confusion. One reason that smart lawyers might resist collaborating is that they are getting mixed messages. Firm leaders are often pushing partners to “cross-sell,” but clients hate to be cross-sold. Specifically, they hate it when their lawyer who handles one domain offers introductions to other partners in the firm who can provide service in their own narrow domain. It’s the legal equivalent of “Do you want fries with that?” 

My research shows that when firms get collaboration right – that is, do complex work for clients that spans practices and offices within the firm – they earn higher margins, inspire greater client loyalty, gain access to more lucrative clients, and attract more cutting-edge work. This form of integrated client service that often crosses practice groups and other silos is what I mean by “smart collaboration,” and it’s the kind of client service that leads to the benefits detailed in this article.

More revenue, stickier clients

Just like managing partners predict, the financial benefits of multi-practice collaboration are clear: the more practices that serve a client, the more revenue the client generates for the firm each year. As the figure below shows, moving from one to two practices serving a client triples that client’s revenues, and the addition of each subsequent practice continues to grow fees. Clearly, if 1 + 1 = 3, then the lawyers who are involved in cross-practice service are doing more than just referring their colleagues to provide their own siloed work. 

Cross-practice collaboration allows lawyers to gain access to senior executives who have broader responsibilities, larger budgets, and more sophisticated needs. This complex work commands higher margins, revenues and hourly rates. As one partner said: “The clients are much more generous on fees because if it’s so big, the deal’s got to get done, and they cannot waste time negotiating or nit-picking.” While single-specialty service is often viewed as a commodity awarded to the lowest bidder, cross-practice work is less subject to price-based competition. 

Done right, cross-practice collaboration makes clients stickier in the long run by creating switching barriers. As the general counsel of a Fortune 100 company explained, “Despite what they think, most individual lawyers are actually quite replaceable. I mean, I could find a decent tax lawyer in most firms. But when that lawyer teamed up with colleagues from IP, regulatory, and ultimately litigation, I couldn’t find a whole-team substitute in another firm.” Our analyses show that clients served by a team of lawyers – even just two partners instead of one – are at least three times more likely to stay with the firm if their main contact departs. In an age of rampant partner mobility, firms can’t ignore this benefit of collaboration. 

Why clients care

Clients want you – their law firm – to embrace and practise smart collaboration. But clients are only willing to pay for perceived value, so it’s your job to help them understand the benefits of smart collaboration – as early in the project as possible, and always before you bill them! 

The table following outlines our research findings about why clients care about smart collaboration.

Barriers to smart collaboration

Considering the sort of value-added, sophisticated collaboration that clients want, why do rational lawyers find it so difficult to see the potential benefits? As mentioned before, one reason is that lawyers confuse collaboration with cross-selling, and clients hate that approach. Moreover, many lawyers are simply not used to working in teams; they have had far more experience in competitive, individualistic settings.

Distrust of other partners’ competence is another obstacle, including concerns that colleagues won’t uphold high enough levels of quality and responsiveness. In some firms, lack of interpersonal trust is even more pressing; some partners worry that a colleague might “steal” a client, deliberately undermine the originating partner’s relationship, or take undue credit for success. 

Another hurdle is that collaboration takes time. The financial rewards of collaboration, such as referrals from colleagues after working together, accrue slowly over time. But most of the costs and risks, such as locating an expert and accessing whether she’s trustworthy, available and conflict-free, are borne right away. Fortunately, as professionals gain more experience with collaboration, the costs tend to fall because people discover how to collaborate more efficiently and effectively as they construct a set of reliable collaborators. 

Implications for firm leaders

How can partners practically promote collaboration among colleagues in their firm? 

  1. Stop hiring jerks. Don’t compromise on a candidate’s character to get the one with the biggest book of business. If you do, then you can’t build a firm where people widely trust other partners enough to invite them along on client work.  
  2. Analyse your data. Measure and understand today’s level of collaboration to set benchmarks, uncover areas of excellence, and find pockets of opportunity. Over time, track progress, and celebrate even small wins in order to build momentum.
  3. Set specific objectives and hold partners accountable. You can’t simply hope that busy partners will start to work differently. Pair your business development team with partners to identify specific high-value clients (e.g., those with a high legal spend and needs that match your firm’s offerings – but where you presently have low share of wallet). Agree with partners how they will pursue the opportunity and tie their results to meaningful outcomes.
  4. Build relationships. Coordinate regular face-to-face meetings and events such as partner retreats and practice group off-sites to allow people to develop interpersonal connections that foster trust and collaboration. 
  5. Showcase collaboration. Distribute “latest wins” to highlight big and little cross-practice success stories via email bursts, or stage 20-minute “roadshow” presentations to allow lawyers to highlight their expertise and potential cross-practice collaborative opportunities.

Start the journey

Smart collaboration is an investment that takes time to generate returns. Clear evidence shows that those benefits do accrue for partners, their firms and their clients when specialist lawyers collaborate across silos to tackle sophisticated issues. Clients’ needs are shifting, and law firms that can kick-start a journey toward more collaborative, higher-value client service – and sustain the momentum till the benefits materialise – will emerge as the clear leaders with a sustainably successful future.  

Dr Heidi Gardner, a Distinguished Fellow at Harvard Law School, is author of Smart Collaboration: How Professionals and Their Firms Succeed by Breaking Down Silos, and a keynote speaker at the Law Society of Scotland’s Leading Legal Excellence conference on 26 October 2018. For further details and to book, go to www.lawscot.org.uk/annualconference

 

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