Last month, I talked about whether doing a better job of measuring lawyer performance could unlock diversity.
This month, my co-author, Gregory Richter, partner and vice-president at Major Lindsey & Africa (MLA), joins me to explore how clients are starting to measure lawyer performance transparently, just as performance in other fields is measured.
Greg is an ideal collaborator because he and MLA are market leaders in three important and interrelated areas of (i) law firm partner lateral recruitment, (ii) board performance, and (iii) general counsel recruitment.
To set the table for this piece, I (Paul) recently spent time with a group of very senior medical school professors in New Haven, who shared some of the challenges facing medicine—similar to those faced by law. I'll do a separate piece on the parallel changes in law and medicine, but for now we can summarize them as:
So today, lawyers (and doctors) are held to New Normal standards:
These shifts have not come easily and are not universally embraced. Professionals in both fields love autonomy and take great pride in the idea that the work they do is complex and requires a unique set of skills that few others possess and fewer still can assess. As Steve Harmon from Cisco puts it, "lawyers want to say they are artistes, not shortstops."
Rather than continue to fight a rearguard action against cost pressures and transparency, we believe lawyers should accept and embrace the new transparency. In other words, go Moneyball and figure out what really drives results.
To do useful performance metrics, we have to be very specific. So far, most of the emphasis on metrics in law has been on inputs, whether billable hours or cost reductions; but increasingly we'll see the focus shift to outcomes. Let's look in the corporate setting:
Fundamental corporate metrics are pretty straightforward:
Stock price = Revenues – Expenses x Multiple.
How do lawyers contribute to revenues?—Act as a business enabler, help sales, increase the velocity of commerce, help create or acquire assets (like intellectual property) that lead to sales, and help eliminate obstacles that are an impediment to sales.
How do lawyers contribute to expenses?—Direct legal spending, indirect "frictional" costs associated with legal work (delayed sales, extra steps for compliance), and litigation damages, penalties or business disruption.
How do lawyers contribute to the multiple?—The stock market (and all other ways of valuing companies) assign a multiple to corporate earnings, based on the growth rate and a variety of tangible and intangible factors like market share, reputation, expected market growth, etc. So a lot of the intangibles that lawyers believe they contribute around reputation, predictability, risk management, or corporate culture, should ultimately be reflected in the multiple.
So what will this mean in practice?
For some lawyers, this will be profoundly liberating, as they will know how they're measured and will no longer be judged on how they did on a multiple choice test when they were 21 years old. The ability of the general counsel to create a vision for him or herself that goes beyond the standard definition will soon be an expected attribute, much like most top-notch executives in peer functions. Exceptional lawyers (i.e. leaders) will be those who choose to take the risk to start the conversation or begin to move explicitly in this direction. They will see the benefit and will, ultimately, add true value to the growth and health of the business placing them on par alongside their c-suite counterparts.
For others it will be terrifying, as they will be judged on things they can't control or have little perceived influence over, especially if the vision for their role and metrics is imposed by someone else.
But it will be. And it has already happened in medicine.
This article was originally published on American Bar Association Legal Rebels, May 10, 2017.