People screw up law firms
In 2011 Stuart Woollard, author of The Mature Corporation — a Model of Responsible Capitalism, wrote a piece for The Guardian, where he argued that to understand the true success of an organisation you could not ignore the people — the human systems fundamental to long-term business and societal value. In his writing, Woollard wrote that any performance-measurement must look at its complete maturity — both its financial and human value.
In any organisation, argued Woollard, the things that create value, risk and harm are human beings. And if we can’t capture, measure and communicate this in a way people understand, and that is quantifiable — compared to other organisations, to share good, bad and indifferent practice — we’re missing a key element of organisational value and maturity.
If we take this approach it is no longer far-fetched to consider The Independent’s Chris Blackhurst’s opening words in his 2019 article, about factors critical to organisational success. It really is the case that just as they hold transformative power, so too can ‘people screw up businesses’.
Since then we’ve seen the working world transformed, as we’ve weathered pandemic, war and global recession. Working practices, human relationships, values and wellbeing have been brought to the foreground as critical factors influencing organisational success. Indeed, as Woollard predicted in 2011, ‘those firms who manage people within their ecosystem as a source of value, as opposed to a cost of doing business, [are now generating] better societal outcomes and superior financial performance’.
How does this impact the legal sector?
When we look at the legal sector, The Great Resignation is a major factor playing out across private practice firms. As more lawyers seek out consultancy models, in-house counsel roles and even complete career changes, the value people hold — both in terms of what they bring to a firm but also what they now demand from their employers — is being keenly felt.
But it doesn’t just stop with the workforce. There is an increasing drive to understand all human relationships that a law firm might have. Success is no longer simply based around billable hours but also the extent to which they are investing in human capital to deliver value to all stakeholders — shareholders, employees, supply chain, clients and society at large.
And, we’ve seen a significant increase in the number of firms recognising their responsibilities for not only addressing their own impact on environmental and societal matters at large, but their roles as ‘trusted business advisors’ promoting solid, systemic change. ESG is now a term all firms understand with increasing numbers recognising that success isn’t on purely financial terms but also through minimised planetary harm and maximised societal impact.
The demand for ESG commitment is coming from all angles
Law firms increasingly want to understand the reality of their organisational maturity in all of these areas, versus where they think they are. And the reason for this sea change is that demand for change is coming from both external stakeholders, as well as internal.
Future talent is increasingly making decisions based on a law firm’s maturity — by which we mean their ability to marry purpose, human potential and performance. Existing talent is demanding the opportunity to release greater potential within their working lives. Clients are asking for firms that “fit” in terms of ESG, culture and values — and they want to see evidence for how this is measured, tracked against objectives and integrated within the overall strategic plan. GCs are asking to see greater insight and data so as to understand the lived experience at panel firms, driving greater accountability and demonstrable alignment with their own organisational cultures. And regulators are increasingly expecting firms to comply with guidelines as to how they can demonstrate that they are ‘authentic’ in terms of the ESG claims they make to clients.
How can law firms understand their maturity?
At LexSolutions we believe the future of the legal sector lies in balancing traditional financial metrics with a clear understanding of organisational maturity. Viewing success only in terms of financial performance is shortsighted and, ultimately, a fraction of the picture. By looking at both the financial and human health of the organisation, law firms can get a fuller, more holistic picture of overall health. And we call this organisational maturity.
DNA Diagnostic has been based around the OMINDEX®, a methodology that has been tested across academia, investment professionals and corporates over seven years. It’s a full health check that captures and measures all value and risk elements arising from human stakeholders. It looks at 32 key factors to diagnose the human health of your firm. Indicators of this include purpose, values, principles, culture, decision-making, engagement, trust, diversity and inclusion, wellbeing, retention, innovation, burnout and more. In short, it is a comprehensive study of the true health of your firm, from the perspective of how people generate (or remove) value.
How does the DNA Diagnostic for law firms work?
An example of this in practice is law firm one, which has a notable number of fee earners heading towards burnout, as well as several people on leave due to mental health problems. Despite both expectations and what they’d wish, these individuals are unlikely to be able to work well, or to add value to their firm. Allowing this to continue will devalue organisational potential. Conversely law firm two has structures and measures in place to monitor burnout and mental wellbeing, as well as to support fee earners experiencing this. As a result this firm is likely to have a more productive, ‘valuable’ workforce. We can see how law firm one is therefore less valuable — less mature in commercial terms — than law firm two.
The output from this process is designed to be viewed alongside financial performance reporting and credit reports. Firms are given data that shows how the ‘human aspects’ are impacting on the bottom line, as well as what they need to do to fix the problems. Firms are able to understand where they are, compared to where they think they are, how to drive their value proposition and brand, how to demonstrate authenticity externally and how to present this in an evidenced, meaningful way alongside financial performance metrics. Together, we believe that this presents a complete picture of the firm’s value, health and maturity.
Will you adopt the DNA Diagnostic?
Just the other week at Legal Geek, a meeting of minds when it comes to the future of legal, we listened to Nicola Beckett (Senior In-House Counsel) and Martin Storrs (Global Head of Sourcing) at Fidelity International discuss what matters most when it comes to their suppliers, including their law firm panel. And embracing ESG is top of the agenda. We are at a tipping point. Clients are awarding business based on ESG factors and industry-wise standards are becoming increasingly important.
Our work with The Maturity Institute on the DNA Diagnostic is amongst the most meaningful work we do at Lex Solutions in supporting law firms who want to put ESG at the top of their agenda. Will you work with us in 2023 to build your organisational maturity?
Contact Manu@lexsolutions.com for a conversation on how we can work with you.
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