The pink elephant, of course, is a metaphor for a problem that everyone knows exists and which everyone tries to ignore. In this case the pink elephant is underperforming partners. Some firms, however, have taken steps or are about to take steps.
In March of this year the partners at UK-based legal giant Clifford Chance LLP approved a hard line policy on partner underperformance. The new policy provides the firm's partnership council with the power to expel underperforming partners without the need for a firm-wide vote. The partner has the right to present his or her case to the council. The partner also has a right of appeal, which then triggers a partnership vote on the expulsion. To affirm the expulsion the backing of two-thirds of the partnership is required, not 85 per cent as was previously the case.
The thinking is that few Clifford Chance partners being expelled will push the matter to a vote. It is embarrassing. Generally, lawyers just do not want to talk about partners, colleagues, and in many cases, friends who are not contributing sustainable value. Off the record, senior lawyers and managing partners freely acknowledge that the problem of underperformance exists, that it is costly, and that they worry about it constantly. On the record, a surprising number of lawyers and managing partners declined to be interviewed for this article.
Leading firms now set rigorous selection criteria and have training, mentoring and performance evaluation programs designed to identify and hopefully correct underperformance. Nevertheless, underperformers, sometimes described as "B players," are alive and well in firms.
Compounding the difficulty is the fact that these underperformers can be found at mid- and senior partnership levels. "What makes this problem even more hard," one senior lawyer explains, "is the fact that five or ten years ago, many of these lawyers were regarded as being just fine. It is not so much that they have become less competent as it is that our market and clients have raised the level of expectation."
The pink elephant of underperformance is not unique to law firms. It is also found in most corporate boardrooms. In the corporate world failure to address and cut losses (underperformers) early and aggressively derails many CEOs. The big pink elephant problem in the legal profession, however, is somewhat unique. It is exacerbated by the culture and very psychology of those who practise law.
Let's begin with the obvious. Law is often referred to as a "secular priesthood." The profession attracts and selects from the highest "tail" of a normal distribution curve for raw intelligence (at or above the 90th percentile). Overachievement is assumed. It is part of the "package," which includes collegiality, shared responsibility and significant social status. Most individuals who apply to and are accepted by law schools are motivated by higher level needs, such as intellectual challenge, achievement, professional recognition and reputation.
Psychologically lawyers as a group are "wired" to be high achievers, which is important for a profession that demands commitment, dedication, and longer hours than most. Rigourous selection and recruitment criteria employed by law schools and law firms set the bar well above the reach of all but the best. "The screening process is so highly qualified today that the failure rate should be extremely low," notes Purdy Crawford, Q.C., of Osler, Hoskin & Harcourt LLP. "It should be like going to Harvard. No one who gets in flunks." But as firms know all too well, it is not intellect alone that determines success.
The purpose of this article is to examine the pink elephant of underperformance in law firms. How big of an issue is it? Why does it exist in a profession with such high standards? What are its root causes, costs and consequences? How can law firms best avoid it?
An opening caveat. Much is unknown. It is unclear how large the problem is. Off the record many lawyers are of the view that in a "soft" economic market where the profession is "consolidating" through mergers, the problem is becoming larger and is more of a threat to the competitive positioning and economic well-being of firms than one would think. There are no cost statistics as to how much underperformance costs. While much of the information is anecdotal rather than analytical, it is clear that firms can no longer pretend the problem does not exist. And like dealing with all problems, the first steps involve understanding exactly what the problem is.
Failure to Adapt
"There are lots of reasons why lawyers underperform." This comment was made repeatedly by the lawyers interviewed for this article. Reasons given included external developments (changing markets, market consolidation, etc.) and personal matters (stress, burnout, poor interpersonal skills, etc.). But all of these reasons came down to one common characteristic: failure to adapt to change.
Those who succeed in the current legal market have the ability to recognize the need for change and the ability to respond in a suitable manner. Adapting to change is not about reading the newspaper and recognizing new market opportunities. Adapting to change begins with self-awareness, knowing one's own strengths and weaknesses, how these strengths and weaknesses impact others and, ultimately, knowing when and how to change one's approach. Star performers have the skill or intelligence of self-awareness in spades. Underperformers are often missing it or, as others observe, "they just don't get it."
The Bar Has Moved
"The legal profession was once a fairly small pond," notes Steve Nash, senior legal recruiter with the Counsel Network. "However the same market forces that drove the service economy and then the information/technology economy during the 1970s through to the late 1990s caused an explosion of growth in the profession. Law firms had to take large numbers of young lawyers to meet the demand. Many if not most of these lawyers were told they did not need to bring work in. The performance expectation was very much focused on technical excellence."
As Nash and others explain, market developments have generated a different set of performance expectations. The business model for major law firms is no longer relationship-based. It is transactional. The competition is fierce. It is now both a profession and very much a business. A big business which, as one would expect, requires a business skill set.
As Carmen Diges in the Toronto office of Davis & Company points out, "There are a lot of lawyers who are now mid- and senior level partners in major law firms who have not been able to shift from the vocation of law to the business of law." Bill O'Reilly, managing partner of the Toronto office of Davies Ward Phillips & Vineberg LLP, expands on the point. "1996 to 2000 were years of serious shortages of talent combined with rapid growth in the profession. As a result, firms had to take more chances on candidates. The soft market conditions of the last several years have forced firms to re-evaluate lawyers from a perspective of sustainability. By sustainability I mean the extent to which every practice role, management role and support role work for both the firm and the individual."
Terry Burgoyne, co-managing partner of the Toronto office of Oslers, agrees with Diges and O'Reilly. Burgoyne takes the argument further. "The bar just keeps going up. Increasingly what happens in the US legal market is a bellwether for us in Canada. In the US today the single most important measure of success for law firms and lawyers is net income per partner. This has put real pressure on firms to do whatever it takes through structure (ie, equity, non-equity), selection, and performance management to increase net income per partner to the highest possible level. The reason is that this, in turn, determines to a large extent the firm's success in attracting and keeping the best talent."
Burgoyne goes on to add that demographics are also undermining once high achieving partners. "In the corporate sector executives and managers retire at an earlier age. Our client base is getting younger and naturally prefers to deal directly with contemporaries. There is a whole generation of highly talented lawyers who have simply outstayed their clients."
Carmen Diges is an up and coming thirtysomething corporate/mining lawyer who is clear about her performance and achievement expectations. "Practically at the outset of my career I started to network and to build a self-sustaining practice. I understood it to be central to my success. I estimate that for every hour of billable time I docket, I invest another hour of non-billable time in building my practice, networking, etc." Diges goes on to add that you have to love what you do and that being highly motivated is a key criteria for success today. "Because," she laughs, "for the hours you put in, the money will never pay out and you will probably realize there are easier ways to make money."
Fear of Failure
Professionals who study the dynamics of large organizations often draw analogies to the culture of military organizations. There are historical reasons for this related to the origins of organizational theory as a separate discipline of study. Some find such comparisons embarrassing. Others find them flattering. Embarrassing or flattering, they are often apt.
One common characteristic of the military and large organizations, such as major law firms, is that the penalties for error are frequently more significant than the rewards for success. Norman F. Dixon is well known for his superb and provocative work, On The Psychology of Military Incompetence. Dixon writes that "The net result of this bias (within military organizations) towards negative reinforcement will be that fear of failure rather than hope for success tends to be the dominant motive force in decision-making and the higher the rank the stronger the motive because there is farther to fall."
Roger Martin, dean of the Rotman School of Business at the University of Toronto, argues that this "fear of failure" underlies underperformance in many other types of organizations, including major law firms. Fear of failure leads lawyers to what Martin describes as "the responsibility virus." "The law firm culture of 'up or out' is a particularly fertile breeding ground for fear of failure." As the fear of failure takes hold, lawyers will basically minimize their individual professional risk by only doing work that they are completely comfortable with. This sets up a rigid, hierarchical cycle of dependency between them and their more senior colleagues. This type of "fear of failure," of course, is antithetical to the need to recognize change and the ability to adapt, which underpins achievement.
Underperformance on the part of partners, particularly senior partners, erodes the talent base and intellectual capital that is the foundation of law firms. Major law firms in decline, as a rule, do not suddenly collapse. Rather, they slowly weaken and atrophy.
In Aligning The Stars, Jay Lorsch and Thomas Tierney argue that by "employing people who are less talented than those who built the firm and/or those who are now leading it, law firms institutionalize a culture of mediocrity." Poor judgment in the recruitment of junior lawyers, or a failure to remedy underperformance on the part of more senior lawyers, leads to a solid group of "B players." As these "B players" move up they in turn become responsible for recruiting, training and mentoring young lawyers coming in. Finally, as the "culture of underperformance" begins to take hold, those in the firm with talent and ambition begin to exit. They leave for firms with a better pool of talent or, as it is commonly described, a "better platform."
Why Smart Lawyers Fail
"You don't impress me much, you got the moves but you ain't got the touch." Shania Twain. Right. As noted in the opening to "The Top 40 Under 40" (Lexpert, September 2002), "If the formula for success were as simple as the many gurus such as Stephen Covey (The 7 Habits of Highly Effective People) or Tony Robbins (Unleash The Power Within) would have us believe, we would all click our heels three times, follow a seven- or twelve-step plan and, poof, be rich successful winners-if we truly wanted to be rich."
Underperformance and failure on the part of otherwise smart lawyers has a number of characteristics. A good number of these "flaws" can be corrected, which are noted below:
No touch. Touch clearly involves strong interpersonal skills. But there is more. Touch is a unique blend of intelligence, determination to succeed, and ability to "connect" with others, which enables an individual to earn the trust and respect of colleagues and clients. It transcends personality. Absence of "touch" commonly appears in the lawyer who has the "looks", ie, academic achievement, strong technical skills, but cannot relate with colleagues and clients.
Lack of self-awareness. As Carmen Diges of Davis & Company notes, "This is key. Some people 'just don't get it' around all kinds of issues ranging from their terrible interpersonal skills to their lack of passion or even active interest in their clients and work."
Burnout. The look of burnout is unmistakable except, unfortunately, to the individual suffering from it. It is the "no touch" look of lawyers who feel they have lost their edge, the worn down, slouched over, stooped body language. The eyes without the sparkle that signals energy and enthusiasm. The taut, unsmiling face.
"There is no question that practising law is very stressful," notes Sean Weir, national managing partner of Borden Ladner Gervais LLP. Weir's firm, and most other leading firms, have aggressive support programs and policies to combat stress and help colleagues find work/life balance. It is difficult to overemphasize the importance of this point. As noted by Hugh MacKinnon, managing partner of the Toronto office of Bennett Jones LLP, "Balance is elusive, but it is absolutely critical for long-term success and survivability in this profession." MacKinnon believes that both lawyers and law firms need to take a longer term perspective that sets a pace and balance for sustaining themselves successfully.
Tunnelling. As Diges notes, "Examples of this include being so preoccupied with oneself as the quintessential lawyer in one area of practice that one loses track of all the other aspects of themselves they might enrich." Tunnelling also involves defining one's area of expertise narrowly and/or over-reliance on one major client.
Failure to develop a self-sustaining practice. "Lawyers today need to build their own book of business and this requires networking, marketing and good relationship development." This comment was made by every managing partner interviewed for this article.
Losing motivation. "You have to love what you do," says MacKinnon. "Failure today is due more to loss of motivation than absence of ability," reflects Crawford. "Twenty years ago there were lots of lawyers who entered the profession who just wouldn't meet the qualifications today. But they made up for it with their drive and initiative."
Zealous gatekeeping. As noted by O'Reilly of Davies Ward, "Some lawyers are far too proprietary with respect to their practice. A lawyer cannot afford to be intimidated by young talent or by the abilities of other partners. Young lawyers need to be introduced to the best clients of senior lawyers. Older lawyers are the seasoned advisors and also responsible for the grooming of young lawyers in order to keep the talent stream moving. Zealous gatekeeping works against these roles and against everyone's best interests, including those of clients."
No mentors. As pointed out by Gary Luftspring, managing partner of Goodman and Carr LLP, "Having someone who believes in you and is willing to go to bat for you is essential." Having one or more strong mentors is clear signage of probable future success. Mentors not only act as valuable role models and sounding boards, they provide a constant "reality check" in that they are more likely to give the "straight goods" to young lawyers. They also facilitate networking efforts.
No business acumen. It would seem obvious, but apparently it is not. As noted by David Malach, managing partner of Aird & Berlis LLP, "Some of the smartest lawyers just don't get the fact that they have to educate and keep clients in the loop with respect to costs and collect payment." As Ron Fish, director of the Receivables Management Group for Professional Firms at PricewaterhouseCoopers, points out, "Billing and collecting is a central performance and profitability issue for firms."
Stop growing. The ability to change, to adapt, is common to all success. As Trevor Bell in the Vancouver office of McCarthy TÃ©trault LLP points out, "There are people in the profession who are practising exactly as they did 20 years ago. They have stopped growing. The best lawyers are people who are continually willing to stretch themselves, take pleasure in learning new things and who are willing to do things that at first may be very uncomfortable for them."
What can lawyers do to stay on top of the game? "Lots" was the immediate reply of every lawyer interviewed for this article. There is clear argeement that while technical ability is essential, it is the interpersonal skills and motivation that makes all the difference in terms of long-term success. "Get out, meet people, and develop strong relationships early in the practice." "Learn to look for the early warning signs and be proactive." "Problems don't develop overnight and early self-diagnosis of something that is going on with you or your practice is key." "Don't give up on yourself or the firm." "Most firm leaders will support and help in any way they can, until they don't believe that the lawyer cares anymore. Underperformance becomes a real problem when people give up."
The following are eight points frequently made by the lawyers interviewed for this article:
Do whatever it takes to sharpen your self-awareness (ie, assessments, career planning, etc.).
Think like an athlete. Develop the skill and discipline of continually soliciting specific and measurable feedback.
Treat your practice as a marathon. Consciously pursue balance and a realistic work pace to prevent burnout.
Make a strategic plan for developing a self-sustaining practice and book of business for yourself.
Diversify. Avoid narrow specialization.
Anticipate and be ready to respond to market changes, as well as internal firm strategic shifts.
Build strong relationships within your firm which become your support system and platform.
Develop and strengthen your team skills. Recognize that the complexity of modern practice requires multiple perspectives and approaches.
What Firms Can Do
"The structure and organizational dynamics of most firms have changed as they have grown larger," notes Trevor Bell. "But our management and HR systems are still rudimentary. We need to get better at the management and support of lawyers. We tell our lawyers that they need to take charge of their careers, but we need to put the support programs, policies and systems in place to do that. We know that early identification of difficulty is key. We need to directly address the problem with the individual in question, and we need better skills in doing this."
"Be proactive and be patient" was the seemingly contradictory advice repeatedly provided. Being proactive begins with focusing on the high potential up-and-coming candidates. "If you can take 30 or 40 strong up-and-comers," argues Crawford, "and create even five Clay Horners [a top corporate lawyer at Oslers], that is a real competitive advantage." "You need to strategically play people to their strengths," adds Malach. MacKinnon is unequivocal in terms of the end game. "The best offence against underperformance is building a culture of excellence."
For Sean Weir being proactive is about the role of practice leaders and senior firm leaders recognizing the "all is not well" signage early. "My experience as a managing partner is that people are often very relieved when you address the issue. One of the biggest problems with performance issues is all the denial that goes with it. We have to get better at the 'heart to heart' talks."
On the issue of denial Weir adds another important insight; namely, the underperformance that "stars" can create for others around them. "One of the toughest issues to resolve is dealing with the high-performing individual who, because of their ego and competitive nature, causes discord for others." This problem goes to the heart of what Roger Martin at the Rotman School of Business calls the responsibility virus, that is overachievers causing underachievement in others. "Of course, a firm needs high-performers," says Weir. "But what you get is a person who is like a thoroughbred race horse who has won a lot of races. They sometimes kick other horses around them and break the starting gate. It takes a lot of time and patience to channel their energies and keep them on the straight and narrow as part of a team."
Hugh MacKinnon, Terry Burgoyne and others stress the need for patience and the importance of taking a long-term view of an individual's contribution. This is coupled to taking the time to build a culture that supports optimum performance. "Platform gives people the base of support," says MacKinnon. "Small things, such as insisting upon people taking their vacations, also get woven into the culture. By the time people make it to partnership today we know they have the right stuff. It's a matter of helping them through cyclical rough waters."
A Shake Out?
There are cyclical developments that affect both firm and individual performance and then there are substantive market shifts. It is the latter development which was of most concern to the managing partners interviewed for this article. Corporate consolidation, corporate "hollowing out," financial services consolidation, and work bypassing cities like Toronto for New York, were substantive market developments noted repeatedly. As one managing partner put it, "The reality that no one really wants to confront is that the size of the law firms we created in the 1980s and 1990s is just not sustainable given the size of the probable future corporate market in Canada. Law firms know this and are looking more closely than ever before at the value and contribution of each and every lawyer."
A shake-out is inevitable, at least according to a number of managing partners. One way or another, the big pink elephant will have to be dealt with.
Irene E. Taylor is a leadership consultant with more than 25 years experience in coaching and advising senior and top talent in Canada and internationally. She writes for Lexpert and heads up Praxis, a talent and leadership consultancy.