Timothy B. Corcoran is the principal of Corcoran Consulting Group, LLC and served as the 2014 president of the international Legal Marketing Association. A former CEO, he specializes in helping law firm and law department leaders adapt and profit during a time of great change. He authors Corcoran’s Business of Law blog and can be reached at +1.609.557.7311 and tim@corcoranconsultinggroup.com.

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Every successful business must periodically review and adjust its service offerings in light of changing market dynamics. New entrants pose threats to entrenched players; emerging technology automates at a low cost what was once a lucrative manual undertaking; and leaders must engage in continuous game theory, acting and reacting to changing circumstances and competitors’ moves. In the global legal marketplace, rapid changes have increased the pressure on law firms and law departments alike to examine what and how they deliver legal services to clients, and leaders of these organizations must step up their game.

Redefining Strategy

In prior years, with near unlimited demand for legal services, legal services strategy required less rigor to identify new markets and new offerings. For law firm leaders, strategy was more closely aligned with branding and positioning — what do we want to look like in the future — with the expectation that whatever we choose to be, we will be. For law department leaders, strategy often followed the cadence of corporate strategy: decentralizing and aligning in-house counsel with business units one year; centralizing and consolidating legal services the next; but always with an eye on slowing the growth of overall legal services spending. As a result, the strategic planning process carried with it an unstated perspective: “We lawyers are here to stay, for what we offer will always be necessary.” The growth plans that resulted were quite often tactical in nature.

For law firm leaders, there was little need to engage in an organized process of internal advocacy, aligning the firm’s capital investments toward the practices, markets, and resources that generated the best return, for all practices generated increasing revenue year after year. Indeed, many firms have only recently begun to calculate profit margin at the practice or matter level, so it was often impossible or highly impractical to measure performance in any way other than top line revenue growth. Strategy plans, therefore, focused primarily on tactics to raise the firm’s visibility in target markets, employing vague financial metrics to measure performance, with minimal accountability for the partners expected to deliver results. After all, so long as aggregate revenues exceeded aggregate costs by a comfortable and increasing margin each year, the details of how firms reached their targets were less critical.

Tactics also ruled the day for many in-house law departments, as there was a prevailing expectation that legal services are, and always will be, a cost center rather than a profit center. As a service organization to its internal corporate clients, the law department’s reactive posture to whatever new strategy the corporate executives dreamed up left its leaders in a perpetual state of keeping up — hardly the best position from which to proactively organize and reexamine the role of the legal function.

The global economic recession that began in 2008 demonstrated beyond a shadow of doubt that legal services organizations are subject to the same economic realities of other businesses, and with declining demand — or, in the face of emerging substitutes and alternatives for the provision of legal services, at least declining demand for the old ways and old prices — law firms and law department leaders have finally recognized that engaging in more formal strategic planning is not just a good idea, it’s also most likely the difference between a thriving organization and one that is facing an inevitable decline.

Law firm leaders must account for both internal and external factors: not only what practices we want to offer, but what services are the market willing to buy, and at what price? They should no longer be deluded by the notion that “all revenue is good revenue.” Profitable revenue streams take precedence and deserve, and should consume, a greater portion of the firm’s resources and investment. Law department leaders, in turn, have come to realize that senior corporate leadership simply do not find credible that legal costs increase every year, in all areas, at a rate greater than other corporate costs, and cannot be predicted with any confidence, and furthermore that reducing legal spend will inevitably expose the business to greater risk. So, with these realizations, what are they doing about it?

Asking for Help

Perhaps the most notable change in post-recession legal organizations is the increasing influence of business practices and trained business managers to help guide strategy and operations. To be sure, many law firms and law departments have long employed experienced and sophisticated executives, some with long experience in law firms and others from industry. But by and large, these voices were muted, as those tasked with practicing law have always been afforded the benefit of the doubt when building an infrastructure to support their needs.

Second-guessing a partner’s demand for resources, or marketing tactics, or staffing preferences, or use (or avoidance) of technology tools, or approach to pricing and discounting, was deemed to interfere with and potentially impair the quality delivery of legal services and expose the law firm to client dissatisfaction at the very least. In recent years, a U.S. state bar ethics panel ruled,2 in so many words, that even allowing a business person to have a “chief” title implies that businesspeople have undue influence over a law firm’s practices, creating an ethical breach and a conflict between good business sense and the practice of law.

Leaders have discovered, however, that good business sense prevails. In law departments, there is a rise of legal operations executives tasked both with managing the day-to-day activities of the legal function and with finding ways to improve quality, throughput, and responsiveness while decreasing costs. Law firms have sought highly-experienced corporate executives to lead practices (sitting alongside the practice group chair who is, as often as not, deemed worthy of the role based on the ability to generate business rather than any observable capabilities in running a complex business) and the sophistication of those in longtime C-level roles, e.g., the CFO, CMO, or CIO, continues to increase as the duties of these functional siloes intersect at an increasing pace. One of the fastest growing roles in large law firms in recent years is the pricing director, which is often combined with supervision over project management and process improvement. However, law firm leaders are slowly but steadily recognizing that these are distinct business functions requiring unique skill sets.

Both law firm chairs and chief legal officers of law departments are increasingly turning to consultants to help them navigate the organizational and market changes. Just as some leaders who became rock stars and thrived in the earlier era are now embattled or have stepped off the stage, there are some notable consultants whose expertise was also attuned to a bygone era. Many, however, have long been encouraging firm management to adapt to the new economy, and can provide expertise gained from experience in industry or in other professional services fields and this expertise is in great demand. The role of a consultant may vary. In one organization, the management has a clear growth vision but need help selling it internally, and an objective and respected outside voice is additive. In another, the executive committee may have good intentions, but has a limited understanding of how to conduct a rigorous strategic review or initiate enterprise-wide multiyear business process improvement efforts, so they seek specific subject matter expertise. Still others may seek a consigliere, as trading ideas with a respected and independent peer can offer more benefits with fewer downsides than revealing confidences and asking for help from one’s law firm partners or law department senior staff.

Change Management

A principal role of a consultant is to help the organization embrace change. There are plenty of good ideas, but many organizations falter upon execution because of a poorly designed process to engage stakeholders, or they fail to factor in the how when devising the why and the what.

The chief legal officer for a brand name multinational corporation recently solicited proposals for a consultant to assist her in reengineering the global legal function. During the open Q&A session with prospective consultants, she shared that while her deputies were aware of the initiative and had offered their unconditional support, none would be involved in the process beyond providing access to financial information and easing access to interview internal stakeholders. Furthermore, her internal clients in business management had no idea that this effort was under consideration, and their participation was deemed unnecessary to produce a quality recommendation.

We advised that the project was unlikely to achieve glorious success because key stakeholders, namely the deputies whose organizations would be most impacted by any reorganization recommendation, were not part of the process and would most likely, if not intentionally, obfuscate any investigation that didn’t confirm the sensibility of keeping their empires intact. Furthermore, the internal business clients, whose service posture would be disrupted if a new law department organizational chart were to be sprung upon them, very likely have critical insights that could inform the analysis. She was incredulous, believing that the point of hiring outside consultants was to avoid distracting internal stakeholders.

An independent consultant can ask questions, interview stakeholders, conduct objective and unbiased research, and make recommendations without undue political influence. The best outcomes, however, result from a participatory and cross-functional process in which stakeholders from across the organization are involved; when there is a clear communication plan about the effort underway that helps those not involved in the details stay abreast of progress; and when those who are impacted have the opportunity to see both how decisions are made and what data supports the various conclusions. This is often contrary to the paternalistic mindset employed by many managers, where information is closely guarded. The rank and file, perhaps via designated representatives, can and should have the opportunity to offer insights into the day-to-day operations of an organization, and to illuminate and often dispel beliefs leaders have about “how the sausage is made”; this creates more informed analysis and acceptance on implementation.

Building a Data-Driven Culture

Good business leaders and consultants rely on objective data to inform decisions. Even when data are limited, such as understanding how a competitor’s cost structure impacts its pricing strategy, there is still a framework for plugging in whatever data are available and assigning a corresponding confidence level. Many legal organizations lack data. Law departments are beginning to understand the power of analyzing years of electronic billing records to identify quality and performance metrics and to distinguish between reliable and unreliable service providers. Law firms who have long treated “knowledge management” as a document archiving exercise now embrace cost accounting and experience tracking in order to better staff and price future services. Even so, data often still take a backseat in the strategic planning decision framework.

In a recent strategic planning effort for a mid-sized U.S. law firm, there was strong resistance to including any voices other than management committee members and top rainmakers. The partners felt that sharing any financial data, revealing any organizational “dirty laundry,” or even exposing strategic deliberations to anyone outside this group would likely generate disastrous consequences. These partners had yet to learn what corporate strategists have long known: Insulating those who devise strategy will create an echo chamber. Strong opinions will override sound analysis; political considerations will gain undue influence; confirmation bias will lead to analysis that supports the status quo and minimizes negative input; and, not surprisingly, few decisions will be made that negatively impact the leaders devising the strategy in any material way.

In a law firm this challenge is particularly acute: Partners are also owners, and they feel they have a right to assert their voice in business strategy, so a common result is that partner preference prevails over sound business judgment. The largest waste of time in a law firm strategic planning process is to allow partners to endlessly debate esoteric concepts when neither side has supporting data, and no matter what’s decided the partners have veto power if they don’t like it. The single greatest approach to overcoming uninformed partner input is to have relevant data on hand that supports a conclusion.

To be clear, partners may make decisions that are not in their economic self-interest, and many do, but these can and should be conscious decisions. For example, many law firms continue to offer practices that contribute little to the firm’s bottom line and provide minimal cross-sell or upsell potential. While allocating capital to a different practice may generate a better return, there’s nothing wrong with maintaining a legacy practice that is closely tied to a firm’s history or that occupies a longtime partner who is nearing retirement. Adopting sound business practices and relying on data to inform decisions does not mean that all decisions must be based solely on short-term financial benefits.

It is often the role of the consultant to advise leaders when their data infrastructure is lacking… and it often is. Still, a good strategic planning framework can help both to analyze external and internal forces and to generate reasonably informed outcomes. But nothing replaces building a data-driven culture where information, and the processes and tools necessary to capture the information, are deemed critical to the organization’s success rather than costly distractions.

Revisiting Incentives

The challenge of aligning and realigning incentives is greater in law firms than in law departments. A partner who has learned over time how to maximize the firm’s compensation plan to generate a healthy income year after year is generally resistant to any change, even one that on paper can be demonstrated to be more lucrative for the partner. The inherent risk that a change might reduce a partner’s take, even balanced against the corresponding potential to generate greater rewards, more often than not leads to stasis. A good consultant understands that when an organization’s compensation plan is in conflict with the firm strategy, the compensation plan is the firm strategy. Devising a strategy requires an examination of current and potential incentives to determine where there is alignment and where there is conflict. Conflict must be resolved, and this can be done most effectively by demonstrating with reliable data the positive outcomes associated with new behaviors.

Law department incentives are also in play, however. In corporations where legal costs are allocated to the business units, the executives in charge care deeply about the management of legal spend. When these internal business clients participate in some variation of a 360-degree performance evaluation of in-house counsel, their satisfaction influences in-house lawyer compensation. It’s now a fairly common factor in general counsel compensation that adherence to a budget has financial benefits or consequences. When devising a strategy to better serve internal clients, aligning the incentives of those managing the effort will help maintain focus.

Sustainability

As with any strategic plan, a law firm or law department must revisit it periodically. However, while tactics will surely change, and market dynamics may change the emphasis and direction of investments over time, the fundamental and underlying strategy rarely lurches dramatically in every three- to five-year cycle. A good consultant can help minimize the impact of short-term concerns and maintain the focus on matching the organization’s long-term capabilities to the relevant sustainable market opportunities. The secret to effective strategic planning is not all that elusive. It requires a rigorous process, data to guide decisions, wide stakeholder participation to help pave the way for implementation, and thorough communication to ensure transparency. A seasoned consultant can help legal organization leaders adopt this approach and can contribute to the analysis and recommendations. Done well, the impact of a strategic plan will be meaningful and material. Done poorly, however, strategic planning can be a costly distraction.

2 Opinion 642, TEXAS CENTER FOR LEGAL ETHICS, http://legalethicstexas.com/Ethics-Resources/Opinions/Opinion-642.aspx.

 Michael Roch is the Extended Enterprise and Professional Services Advisor at Internal Consulting Group. ICG is an ecosystem of more than 4,500 consultants worldwide. He also serves as Managing Director of allianceboard and as a Partnerships Advisor for Performance Leader. Michael advises on all aspects of domestic and international strategy, organizational structure and governance, and international mergers and alliances. He also advises law firms and other professional partnerships on all aspects of their partnership organization, in particular partner remuneration and profit sharing. Michael’s clients include boards, joint ventures, and strategic alliances, primarily in the professional services, financial services, energy, and technology sectors, across more than 40 countries in Europe, North America, sub-Saharan Africa, and Asia. He is a member of the Academy of Management, the Association of Strategic Alliance Practitioners, and the Managing Partners Forum in London. Qualified as a certified public accountant and New York attorney, Michael holds a J.D. and a Master of Accountancy from the University of Denver. He started his consulting career with KPMG in the U.S., followed by 10 years as an international corporate lawyer, most recently with Norton Rose Fulbright between London and Frankfurt, before returning to the management consulting profession. Michael is fluent in English and German

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.  Hiring a Consultant or Advisor

 “Who cannot give good counsel? ’T is cheap, it costs them nothing.” (Robert Burton, Anatomy of Melancholy, 1621)

Law firm leaders get input, information, ideas, suggestions, and advice from myriad external sources, including conferences, universities, colleagues of managing partner, information distribution lists — and the list goes on. Internally, the leaders of the most successful firms often have good systems in place, good people to run them, and good partners who provide constructive input regarding how the business should best be run.

With all of this knowledge, expertise, and experience around, why would you wish to engage with management consultants? It’s a fair question, given the amount of scrutiny (and sometimes worse) you may expect from colleagues anytime you suggest that your law firm may need assistance from the outside. This chapter addresses:

1) Why law firms hire consulting firms or consultants in the first place;

2) Subject matter areas for consulting that add value;

3) What to expect from each of the three broad approaches to consulting;

4) What a typical consulting process looks like; and

5) How to hire a consulting firm or consultant (and how not to). 

1) Why Law Firms Hire Consulting Firms

 Even the largest firms with significant internal resources in finance, human resources, marketing, business development, knowledge management, and operational management eventually end up with opportunities or challenges that neither their usual external informal networks nor the internal management team can solve. These issues usually have one or more of the following attributes:

The topic is too big: The expertise within the management firm simply isn’t broad or deep enough to resolve the topic. For example, the management team knows that knowledge management is an ineffective way to drive down costs, and the practice heads and management team have done all they can do within their level of expertise. Consulting firms that are subject matter experts in a given area can fill in the missing expertise.

The topic is too politically sensitive: The expertise may or may not exist within the firm, but too many of the partners involved in developing a solution either can’t sufficiently separate their own interests from those of the firm or will be perceived by their other partners as having an axe to grind. For instance, changes to how partners are remunerated or how their performance is measured and assessed often falls into this category. This requires consulting firms that not only have the subject matter expertise, but are also experts in stakeholder management and process design. This leads to designing partner involvement interventions that achieve a resolution passing the required voting threshold.

The topic is too important to handle in-house: The expertise may exist, and the topic may not be all that controversial, but the risk of getting it wrong is so great that external validation helps weld partners to a decision that they will comfortably implement. For example, a firm has been approached by a larger firm that seems like the ideal merger partner, the financials look good — but there is lingering doubt about whether the combined platform really will increase profits or whether the partners of both firms really are as culturally — behaviorally — compatible as the initial meetings and cocktails suggest.

There are too many topics: The management team knows there are many facets to a single challenge or too many opportunities to pursue. For example, the firm has experienced sliding margins for the last five years, its market is contracting, and prices (rates and structure) are under increasing pressure. Do we have a profile problem, a business development problem, a pricing problem, a problem with our culture that our partners don’t sell enough, a cost problem, a people problem, a partner underperformance problem, some of the above, or all of the above? This scenario requires less of a deep subject matter expert, but rather a business consulting team that understands how law firms work, with an analysis methodology that achieves a hard diagnosis, and helps management break down and prioritize the challenge.

Management capacity is too limited: Sometimes the challenge and the path to resolving that challenge are both clear, but the firm simply doesn’t have a sufficient number of bodies to carry out the actions required. Depending on the nature of the challenge, a consulting firm can serve as a stopgap by seconding one or more consultants to turn the situation around and to then hire someone to be employed by the firm.

2) Subject Matter Areas to Add Value

There is no consulting firm capable of advising on every business challenge or opportunity. The subject areas are endless, from blue-sky thinking about a possible new practice to enter to working hands-on on the day-to-day implementation of a new robotics process. 

The following broad categories provide a small cross-section of the spectrum 

Strategy: This is ably covered elsewhere in this e-book. Topics might include:

– Where to compete and how;

– Finding growth markets and coping with declining markets;

– Entering new practice areas or getting out of unprofitable ones;

– Geographic strategy (cities, regions, and countries) — getting in, working profitably, or getting out;

– Innovating how work is done and progressing the firm’s operating model;

– Developing the firm’s strategic intent and business model;

– Implementing strategies to reach that intent; and

– Designing an M&A strategy, and deciding whether to merge.

Relational capital: This includes everything that is market-facing, such as:

– Increasing business development returns;

– Managing key client relationships;

– Developing referral sources;

– Brand building and profile raising; and

– External communications.

Service platform: This area covers everything having to do with service delivery, such as:

– Developing and growing the firm’s portfolio of services;

– Pricing, alternative fee arrangements, and pricing management;

– Delivery processes such as legal project management and process mapping;

– Knowledge, intellectual property, and innovation development;

– Intelligent process automation / robotics; and

– Sourcing, flexible working, and outsourcing of legal work.

Human capital: This area covers a number of topics related to talent (after all, law firms are, first and foremost, people businesses), such as:

– Winning the war on talent;

– Recruiting the best partners, business managers, and fee earners;

– Leadership development and assessments;

– Diversity development;

– Learning, professional development, and training;

– Talent management and human resources; and

– Internal communications.

Organization: This covers everything around the organization that supports the firm’s client work and includes:

– Organizational design and structure;

– Decision-making, accountabilities, and overall governance;

– Incentives and remuneration of partners and senior managers;

– Partnership structure;

– Culture, values, and behaviors;

– Management system; and

– Succession planning.

Operations, finance, and risk: These cover all of the back-office functions, such as:

– Information technology;

– Facilities management;

– Risk management;

– Financial management;

– Administration; and

– Sourcing and outsourcing of non-core business functions.

The above can serve merely as examples of consulting areas. Each area will have hot topics, trends, and themes and will differ somewhat from country to country. For example, a country with a closed legal market that is opening up to international firms will see a flurry of market entry, strategic, and merger advice; in countries with mixed ethnicities, law firms seek consulting in relation to talent, diversity, social mobility, and economic empowerment.

No matter what the subject matter area, there often are more subtle topics to be addressed, such as:

–Collecting fact bases and evidence to support recommendations. Through research and market knowledge this may extend to peer group comparisons, sector analysis, client and market opinion gathering, etc.;

– Identifying the options that are realistically available, the consequences of taking such courses, promoting the preferred option, and offering clear rationale for such preference;

– Focusing the minds of partners and other stakeholders on the things that are important and relevant;

– Leading an intellectual journey designed to reconcile (if possible) disparate views and/or preferences and/or prejudices into a common or substantial majority understanding;

– Identifying blockages (whether in systems, organization, or culture) that stop firms being able to change or improve themselves, and showing what must be done to make it happen. Paying for consultancy is wasteful unless the people who will have to do things differently understand what must change, why it must change, and, crucially, agree to do it;

– Helping leaders to understand what must be done to implement the solutions successfully; and

– Working with leaders hand-on as quasi-internals to help achieve the desired outcomes.

All of that said, a good consulting firm will not seek to push their product or service, and won’t try to put your problem into their box; instead, the lead partner will seek to deeply understand the needs of the firm and its management team, and then craft a process by which their challenges can be overcome.

3) What You Can Expect

A good consulting firm should always distinguish between a.) the subject/content area of client’s challenge or goal, and b.) the process by which that challenge is overcome or goal is realized. The last section dealt with the subject/content area; this section explains why the process is important and the type of process that a law firm should expect of a consulting firm.

The process by which a consulting firm helps firm management overcome a challenge or realize a goal is critical for several reasons. First, while firms in similar market positions and of similar sizes may have similar challenges and goals, each firm is different; a pre-packaged solution often does not work out of the box. Second, it is highly likely that the firm’s management, with or without partner consultation, has already thought about an issue and is calling the consulting firm because the firm is stuck and can’t make progress on the issue. Third, the consultant’s first rule of engagement is that s/he must do no harm, and proper advice can be given only once the firm and its challenge are understood fully and deeply.

We distinguish between three types of consulting engagements: a consulting project around a given set of challenges (perceived or real) or goals, retained advice, and ad hoc advisory work. We consider these in turn, followed by a note regarding implementation and related services.

4) Projects-Based Consultancy

Consulting takes various forms, depending on the client’s situation and needs. Our organisation usually takes on discrete assignments that have multiple stages or overlapping/parallel elements, and can range from two weeks’ duration to 24 months. With such large assignments, it is essential to have a clearly defined objective and a detailed project plan agreed upon in advance with the client, and there will usually be a specified outcome. Most consulting projects — whether it’s a few meetings with experts or a project lasting 12 months or longer — usually have the following five broad components:

First, definition and diagnostics: This simply asks the following question: “What’s going on here?” The purpose of this element is to determine the actual underlying challenge, and whether this challenge is the same or different from the one perceived by firm management. Second, this element seeks to fully understand this challenge or, depending on the objective, to understand the goals that the firm needs to achieve relative to its competition. Third, depending on the project, this element also seeks to validate assumptions, develop and validate hypotheses, and to uncover insights that help develop options for a solution to the issue in the steps that follow.

Depending on what needs to be done, this element may simply take the form of a structured management interview, though additional assessment work is likely (financial, client, process, culture, talent, etc.). Even our best-structured assessment tools need to be tailored to each law firm in order to accommodate its unique features, and often to accommodate the lack of sound management information that goes beyond basic financial data.

For a major project that seeks to change how partners operate the business (and their practices) or to help a partnership make fundamental decisions about their future, we usually encourage that partners outside the firm’s management are involved early in the diagnostics process.

If this initial stage discovers that the problem the firm’s management wants the consulting firm to address isn’t the most important issue, a good consultancy will not blindly carry through the project that was sold but have a candid discussion with the client about a fundamental adjustment to project scope.

Second, developing and testing options: Unlike in law, in business there usually is more than one right answer to a challenge or more than one way to reach a goal – it is the constraint of resources (partner time and money available for investment) that often helps determine the best way ahead. Developing different options and testing which option will provide the maximum benefit to the law firm with the least investment of partners’ cash and time is a better approach than to provide one solution and ask the partners to accept or decline this single option. In our experience having worked with major law firms in more than 50 countries, we find time and time again that most well-meaning initiatives put forth by firm management end up not being implemented or adopted by partners because firm management concluded on a single path too early.

Third, involving partners in decision-making: Most readers of this e-book will belong to law firms with 150 or fewer partners; most if not all partners will know one another and expect some degree of understanding about what management is doing and why. “Horror stories” within law firms abound of Big 4 accounting firms where “partners” are employees who are paid high bonuses but who do not even have a say when their firm undertakes a major merger or acquisition, let alone a lesser decision to acquire a certain piece of software.

We have seen even the simplest measures fail because an insufficient number of partners were involved in the creation of the solution. Diversity and social mobility initiatives are a key example where well-meaning and well-designed initiatives by heads of human resources fail to be implemented properly and, thus, provide a questionable return to the firm simply because the partners were merely informed about how that initiative will add value to the firm but are now sufficiently involved in understanding and shaping how that initiative will change their practices.

The approach that will work best really depends on the size, style, and sophistication of the firm, and the nature and complexity of the problem. In some cases, a factual and directive report is all that is required, but the range of issues that a consultancy deals with tends to be contentious and involve a range of overlapping factors (e.g., culture, governance, and process). Thus, a bespoke engagement plan will need to be designed that steers over time a course of fact and opinion gathering; stakeholder (client, staff, partner) involvement; and communication, which will lead to consensus and usually a vote. The “consultation” is particularly important: People want to feel that they have had a chance to contribute to the debate, air their views, and feel they are being taken into account. You cannot satisfy everyone, but even if the final outcome is not everything that the partners had wanted, they are much more likely to accept and support if they feel that the consultation was fair, open-minded, thorough, inclusive, balanced, and transparent. If you fail to get the consultation right, then the outcome will feel like an imposition; with people of high intellect and egalitarian principles, you can expect heels to dig in!

Fourth, implementation testing and day-to-day implementation: A consulting firm usually assists with implementation in some way, whether by pilot testing the implementation; conducting the full, hands-on implementation as part of the internal team; training and coaching firm members through their own implementation; or simply reflecting the progress of implementation with the relevant members of the firm.

Fifth, establishing and managing feedback loops: The above elements rarely work sequentially; overcoming a challenge or reaching a goal often requires the above elements to be applied iteratively. For instance, a high-level development of broad options for a solution may follow an initial shallow-dive diagnosis, followed by additional analysis work as options solidify and others are discarded. Various groups of partners and other stakeholders may be involved at different stages of the consulting project. Feedback and learning loops may be agreed upon in advance or throughout a project as the scope changes. Note that the above five elements apply very broadly and in principle to any consulting project, whether it’s as operational as a major IT implementation of a new practice management software, a change to how partners develop business, or as strategic and fundamental as a change of the partner remuneration system. The work to be carried out and the exact structure of each element will of course vary widely given the law firm’s objective for the project.

Process design: A law firm should expect its consulting firm to assist in designing a process that helps achieve the client’s objectives so that the subject matter advice provided fits the business, is capable of implementation and takes hold within the firm. This is to ensure the law firm can earn a return from its financial and time investment in the acquired consulting services.

Project management: We stress the importance of project management in consulting projects. A well-managed project, following accepted project management norms, almost always achieves better outcomes and does so more easily, with less time wasted, than a project that is “defined as we go along.” Besides the substantive and process expertise, you should ask your consulting firm about its project management expertise, skills, and approach.

Retained Advisory  

Sometimes the needs are of a different nature, and then it may make sense to retain a consulting firm or very senior advisor for a period of time. This works best if the managing partner or executive committee is to have an ongoing sounding board providing an external perspective on a myriad of issues that can’t easily be distilled into a consulting project.

The reasons may vary; the three most common retained advisories we see are:

First, most firms now have at least one permanent external advisor who really understands the business, firm management, and the partnership to provide impartial advice on a broad range of strategic, tactical, and operational business issues. This may take the form of a consulting firm (with access to a number of partner experts within that firm), an individual consultant, or a non-executive director.

Second, consultants may provide ongoing implementation advice following a consulting project and to help firm management reflect on necessary changes until a new idea, process, or decision is implemented the way it was intended and in the best, most profitable way for the firm. For example, it is invariably helpful to any remuneration committee or other decision-maker for the consulting firm to ensure that change to the system of how partners are paid is being implemented as intended (and has been “sold” to the partners!).

Third, we have seen a number of firms with a single trusted external advisor who manages the relationships with all other advisory firms to guarantee a consistency of approach and to ensure that all consulting firms advising the law firm provide value for money.

Common also are a small number of design-and-implementation projects that are executed by small teams alongside the retained advisory. 

Ad Hoc Advisory

Sometimes there is the need for a looser, more ad hoc relationship. A new managing partner may wish to have some advice on how he should shape his agenda or how she might seek to convince the board on a particular approach to an issue. There is plenty of this level of advice being given, which tends to be paid for by the hour or the day. Sometimes this advice may be given more formality and delivered as part of a retained advisory, even as a coaching plan, with some specific objectives agreed upon.

Sometimes a managing partner merely needs the comfort of hearing about the experiences of someone who has done it all before as a managing partner. There are a number of eminent ex-managing partners who have offered a lot of help, comfort, and reassurance by selling the stories of the very real scars on their backs.

Using Consulting-Related Fields for Effective Implementation

Implementation work means helping to get things done. For example, when a new invoicing and collections process has been designed and decided upon, implementation is about ensuring the process works, the IT works, the partners comply, and that the new process works in the most effective and efficient way possible. The consultants who designed the solution often do this implementation work. It is usually most effective for this work to be done in conjunction with disciplines that are closely related to consulting. Often the line of what is “consulting” according to its textbook definition and what is a related service can be fluid. In our experience, it makes little sense to be purist about this; what matters is what helps the client overcome the challenge or reach the goal, not what label we as professionals put on the type of work being done.

Some of these related services are covered elsewhere in this e-book; we only touch on a few examples here:

Training: This involves the transfer of skills. In our experience, law firms and lawyers absorb knowledge easily; acquiring skills is more difficult, especially if this involves changing how lawyers work in their day-today client matters. For example, implementing a consulting project about how partners should price their services to achieve higher matter profitability nearly always involves an element of training in assessing price sensitivity and using an IT tool for discount/premium analysis for the implementation of the consulting project to be effective.

Coaching: In the consulting context, coaching involves a one-on-one or team-level resolution of barriers that hold back that individual or team from achieving certain goals. In the pricing example above, one-on-one sessions with practice leaders can help them work with and manage those partners who are reticent to engage with a discount/premium analysis for their matters.

M&A and executive search: When a law firm seeks to acquire another firm, be acquired, or seeks a merger of equals, it may engage a consulting firm that specializes in M&A advisory services; it may also engage with an executive search firm, or it might try a combination of both. When opening up in a new city or seeking to extend into a new practice area, the firm may also engage with an executive search firm to find the right talent. This is a good and effective route. Here, the lines of where consulting ends and M&A advisory or executive search begins may be fluid and not transparent. It is best if the firm’s advisors work together to define and achieve the best outcome. Good M&A brokers and executive search firms will work with firm management and its management consultants, accountants, and other specialist advisors to ensure that the project is well defined and that the firm’s objectives are achievable. A battle among advisors for “the lead” rarely provides a good outcome for the client.

Interim resourcing.  For some types of needs, it is more cost-effective to hire an interim manager or resource than an entire consulting team. An interim resource can add value where the challenge or goal is well defined, the firm has agreed on a path to action, and the interim manager is to lead the implementation. The key challenge for most interim managers is that they very quickly become part of the firm’s internal political system and thus may be viewed by some partners as “having an agenda” Or may lose their effectiveness because they start playing firm politics. Experienced interim consultants and professional interim managers know well how to best retain their “external internal” status, implement the change that is needed, and then turn their brief over to a permanent hire before going to the next assignment.

Non-executive directors.  A number of large firms have hired one or more professional non-executive directors. Typically, these are retired executives, providing deep leadership and management expertise form outside the legal industry and can add a tremendous amount of value to a law firm leadership team. They often work alongside retained consultants or help senior management manage the value-add consultants are intended to provide. 

What You Should Always Expect

No matter how a consulting firm or solo consultant works with you, you always should expect that the consulting firm is focused on your firm’s challenges and goals, and that the consultant has your firm’s best interests in mind. This sounds like “motherhood and apple pie,” yet one of the biggest complaints that we hear from our clients about working with consultants is that the additional hour or the additional day charged is more important than the client reaching his/her goals. It is appropriate that consultants look where else their organisation can add value; prioritising selling the next project is not. 

5) How to Hire a Consulting Firm or Consultant

In this section, I will provide an approach that works well for most law firm clients.

Initial consultations: When you know you’ve got an issue but you don’t quite know how to define the challenge yet, or if you know you want to achieve something different from your predecessor but you don’t quite know how to go about it, it is perfectly legitimate to call on a consulting firm or a solo consultant. You can sound them out about how they would approach the topic if they were in your shoes once internal resources and the thoughts by retained advisors are exhausted. That initial conversation, or even two, should always be free of charge, as the consultant should be pleased to build a relationship with you. If the problem resolves itself in these conversations, fine. Undoubtedly you will show your gratitude and call that same consultant again when the next topic comes around for which external input may be valuable.

Defining a scope: If these informal soundings are not sufficient, it is most effective to develop a short brief and get input from your consulting firm of choice. If that consulting firm is an expert in the subject matter, it will be able to assist you in shaping project parameters that help you overcome your challenge or achieve your goal. As is true for any type of project, you then agree on a scope and a fee basis for the work to be done if it’s a project (see above), or the terms of a retainer or indeed a combination of the two along with a success fee, as appropriate.

Defining objectives and scope is critical, no matter how the consulting firm wishes to price the work to ensure the law firm in the end gets the value it wants.

Consulting fees: Consulting firms often charge by the hour or the day. This is appropriate for work where the scope cannot be defined easily or if there are too many “known unknowns” in the work to be done. In most cases, any efforts-based pricing will put the interests of the consulting firm squarely against the interests of the law firm; the consulting firm will want to maximize days spent, and the law firm will want to minimize the time spent to save costs.

We posit that in many cases, a clearly defined scope and a fixed fee or retainer, sometimes coupled with a success element as appropriate, often is fairest to both sides. This is because this approach focuses on the challenge to be overcome or the goal to be achieved, not the inputs to get there. This approach helps establish clarity at the outset, allows both sides to plan their cash flows, and can avoid often tedious discussions about why our team needs to involve two or three team members.

This approach does require for both sides to be willing to have early and candid discussions about scope changes.

Competitive bids: It may be helpful to get input from several consulting firms and to select the firm that provides the best approach combined with the best price. This approach works so long as the challenge and goals are well defined. In our experience, we can achieve the best results when the client remains open to changing its approach, both on how it wants to work with the external firm and on its selection process. Rigidity often provides a result that falls short of what the firm hopes to achieve. I remember vividly receiving a request for proposal (RFP) to advise a firm on changing how partners are paid; I had to go as far as advising the managing partner that his partners would likely depose him if he insisted on the methodology provided in the RFP. We then could suggest an alternative approach that ended up not only saving the firm money but also achieved a high-quality result. 

Approach, methodology, technology: We distinguish between approach and methodology that the consulting firm intends to apply to the work at hand; both are very important. There is a big difference in approach and result among consulting firms that labor through structured workshops, rely on a lot of data mining, or rely solely on the “grey hair” and experience of its consultants. Each approach is appropriate sometimes, and likely a combination will help achieve the desired outcomes.

The methodology that a consulting firm applies is equally important. This is because the field of consulting does not have an easy reference point similar to codified law or generally accepted accounting standards that define lawyers’ and accountants’ advice they provide to their clients. Experienced consultancies continuously refine their methodologies as their main reference points in how they provide and tailor advice to help solve their clients’ challenges. For example, we often rely on a proprietary assessment methodology that allows us to get to the heart of any professional services firm quickly; the methodology combines the Balanced Scorecard, Intellectual Capital, and the McKinsey 7S, and is uniquely suited to law and other professional services firms. We also have developed a certain way of designing our partner workshops in a way that is particularly engaging (and disarming!) of highly intelligent and equally critical law firm partners.

Proprietary analytics technology plays an increasing role in consulting projects on the operational end. This includes legal project management, law firm cost management, e-billing effectiveness, and the like. Less “legal” areas include pipeline effectiveness analytics, talent turnover cost projections, and robotics /intelligent process automation implementation. 

In short, the firm’s approaches, methodologies and technologies need to be appropriate for the challenge to be overcome or goal to be reached, and both approach and methodology need to resonate with the law firm’s approach, culture, and way of doing business.

Additional things to expect in a proposal:

 In addition to scope and fees, any proposal should contain a clear understanding of what value-add the law firm seeks to gain from the consultancy’s involvement. Measuring this value-add sometimes is simple (“help us achieve a reduction in WIP days by 20 days”); sometimes it is not (“help us overcome our non-confrontational partner culture”). Where hard financial measures are difficult to come by, law firm and consultancy could agree at least on a qualitative indication of what the client hopes to achieve.

The consultancy also will usually spell out a short track record that proves the consulting firm’s expertise in handling similar issues. Where relevant, specialist, or professional qualifications of the team members also should be explained. In our experience, it is helpful to have a team of several qualifications working with a client organization, whether this is in consulting or in accounting, psychology, finance, law, economics, or banking, just to name a few examples.

Terms of business should include assurances of confidentiality of your sensitive information for a number of years. It is also common for consultants to ask that the client’s name be included in their pitch materials but, if it’s non-competitive, to keep the nature of the work confidential. We do make proper introductions to existing clients once a new client has made the “but for” decision to work with us.

Some firms provide an unconditional satisfaction guarantee for most work. We are comfortable providing this because we are experts at what we do, and we can always deliver against the scope upon which we have agreed. This approach also sets up early discussions if there is dissatisfaction looming instead of a soured relationship at the end of the engagement.

 A Final Word on Consultancy

 A statement of the blindingly obvious is that no law firm should seek to spend money unnecessarily on engaging outside consultants. Some larger firms have dedicated internal resources in order to help them find most answers for themselves. On the other hand, many firms labour on, making unnecessary mistakes and missing opportunities because the MP or some of the senior partners have a jaundiced view of consultants. When clients have had poor experiences with consultants, this is so often for one fundamental reason: usually it turns out that the client and consultancy didn’t work hard enough to clearly spell out expectations, outcomes, and value-add the work was to achieve at the outset of the engagement. Sometimes, of course, insufficient expertise by the consultancy of the subject matter, knowledge of the legal sector, or an understanding of how professional partnerships work is also to blame.

Faced with a real problem impacting competitive capability that is beyond the ability, experience, and resources of the firm to resolve in-house, the timely involvement of a properly selected consultancy can produce huge value, open up possibilities that were closed, and increase the satisfaction and sense of purpose of the partnership. Not to overstate the case, but having the right people on your side can even help ensure survival in the most intensely competitive markets we have ever experienced.

John Malpas Editor Global Legal Post. He was the publishing director of Legal Week, which is one of ALM Media’s flagship titles. He was previously editor and editor-in-chief of Legal Week and was a senior member of the team that launched the magazine in 1999. Since its launch, Legal Week has established itself as one of the world's leading media brands catering for the international business law community. This article is being republished with the permission of ALM Media.

Bill Carter took leadership of ALM as president and chief executive officer in March 2012. Carter has championed various acquisition strategies advancing the growth and expansion of markets ALM serves. In 2013, Bill was honored as a C-Level Visionary with a Folio: 100 Award. He joined ALM from Thomson Reuters, where he was senior vice president of the Small Law Business Unit since 2010 and led its successful reorganization and growth. An accomplished expert in the digital and legal services industry, he has also driven significant value creation as a senior executive at LexisNexis, Epiq Systems, Gerson Lehrman Group, and GES Exposition Services. Carter earned a B.S. in Computer Science at Tulane University, a Master’s in Computer Science from Georgia Tech, and an MBA with honors from The Wharton School at the University of Pennsylvania.