UNPRECEDENTED CHALLENGES REQUIRE IMAGINATIVE AND THOUGHTFUL APPROACHES
This is my third post about law firms in the Coronavirus Crisis. Last week I addressed leadership. Today I turn to management.
Managing during this crisis will be challenging and mission critical. It will require leaders to draw on their experience and imaginations to adapt pre-existing strategic and operational plans to guide radically changed circumstances. The firm still intends to go where it was going, but it needs to deal with a new set of challenges on its way.
Today, I want to share some thoughts about two of those challenges.
Managing a Remote Workforce
Starting in mid-March, all law firms suddenly found themselves with a totally remote workforce. An unprecedented management challenge.
Most firms have fundamental information technology tools that enable their people to communicate and access data remotely, creating a built-in head start in managing this development. Imagine how much harder this would have been 25 years ago. That said, it is just a head start. Managing a remote workforce is much more than a communication challenge.
As Richard Susskind recently wrote, “It is a massive shift in working method–operationally, technically, culturally and emotionally.” It will require a corresponding shift in how firms manage.
To make that shift, leaders must take full account of the realities of their people working from home (WFH). They are worried and frightened by personal, financial and health risks. They are trying to get their work done, either in total isolation, or surrounded by children, spouses, and pets, in their kitchens. Most of them know how to operate remote working tools, but few have depended on them as fully as they now must do. All of this weighs on their outlook and their ability to perform. And it influences what it will take to lead and manage them as team members.
Leaders must adopt tools, protocols, and approaches to permit and induce people working far from each other to operate as teams and at the firm’s quality standards. Modern collaboration software will help. So will the data integration and management software. But the most important element will be human interaction, that sets expectations, fields problems, encourages and pushes, and otherwise leads and manages the team.
In the end it will depend on the effort and skill of firm leaders to make it happen.
Balancing Financial and Other Considerations
The crisis is going to reduce revenues materially for most firms, for an undetermined time. Firms will estimate the magnitude of the potential revenue hit, and its impact on partner income, and then turn to what they can do to limit the damage by reducing expenses.
As firms go down this path they should be mindful of the implications of cutting in each expense category. I want to focus on one in particular in this post: headcount.
For most firms, headcount is the largest expense category, and therefore the most significant opportunity to shore up profits. For me, it is also a category firms should be extremely reluctant to cut.
There are two reasons: First, given the nature of this crisis, healthy firms can reasonably expect that demand for their services will return when it is over; it will be hard and very expensive to replace the people who were laid off. Second, and more important, a layoff in these circumstances will unnecessarily undermine morale and the vital “we are all in this together” spirit I wrote about last week.
Firms should also be mindful of context: the profits per partner competition is a self-imposed “derby” in which law firms compare themselves to each other on how much they pay their equity partners. I have never thought this was the right way to measure a law firm, not even its financial performance. But even if one thinks this is the right measure, in this unique year, no one is going to think less of a firm that permits its PPEP to drop in the interest of caring for its people. In fact, I am pretty sure most relevant observers, e.g., clients, potential hires, and the community, will think more of such a firm.
Firms have many other expense categories to choose from. In some cases, they will find that reductions are overdue. But most budget cuts will hurt. Just not as much as terminating satisfactory employees, in a temporary downturn, for the sake of partner income.