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Is Your Firm a Good Parent?

Is Your Firm a Good Parent?

Law Firm Practices and Parenting Theory

For many years, the collective wisdom of advisors has tended to advocate that a ‘one-firm’ firm approach to practice management has strategic and operational advantages over the ‘collection of boutique’ practices managed as a conglomerate.  In my experience, all but the largest mid-tiers and the top-tier firms (and not all of those) have been unable to achieve the one-firm model, despite some considerable effort and investment of resources.

Also for many years, corporations which manage many large business units and subsidiary businesses have applied Parenting Theory to their role as leaders and administrators of those business groups.

Maybe, the application of Parenting Theory by law firms could deliver better and more sustainable results than the pursuit of the One-firm dream?

What is Parenting Theory?

Most law firms operate with individual practices lead by a dominant partner or partners, and in some cases, structured as Practice Groups of common expertise.  These practices are supported by the firm’s ‘centre’, comprised of the leadership team (Managing Partner/Management Committee/Board) and functional Managers in HR, IT, Finance, Business Development etc.  The Parenting Theory is that the combined expertise and experience of the centre provides a nurturing and disciplining role in managing the operations of the practices such that their full potential is realised and leveraged.

As the centre of a corporation or a law firm represents cost without compensating revenue, there is a need for the centre to attribute value to the businesses it ‘parents’ in excess of the attributed costs.  The question is: how to you determine and measure that value?

Understanding the Firm’s Parenting Advantage

The concept of Parenting Advantage covers two propositions:

  1. That practices which might otherwise operate effectively as stand-alone independent businesses, will perform better when parented by the firm’s centre; or,

  2. Assuming that practices will be part of one firm or another, that their key success factors will be better delivered, nurtured and leveraged by your firm than they would be by a competitor firm, due to your firm’s Distinctive Parenting Characteristics.

The additional value attributed to the practices under the care of your firm is your Parenting Advantage.  This concept can be seen in action also where a good football player performs better at one club than another; a child with special gifts in the arts or academia performs better at one school than at another.

It is important that the firm is able to identify and understand its distinctive parenting characteristics, as these are what enable the firm to deliver value to the right practices for the firm.  These characteristics deliver comparative advantage for a particular style of practice when with your firm, over that achieved at a competitor firm.  These distinctive characteristics might include:

  1. Best in class technology supporting collaboration and process efficiency

  2. Strong knowledge management systems

  3. Low-cost delivery of high volume work

  4. Powerful brand and marketing capability to attract particular corporate or government clients

  5. Diverse and inclusive culture promoting innovation and creativity

  6. Particular industry expertise and tailored business processes

Applying this model to your Firm

Once your firm understands, and is able to articulate, its set of distinctive parenting characteristics, you are ready to review each of your existing practices, or those that you are considering strategically to acquire or build.

For each practice you should:

  1. Understand its Key Success Factors (KSF) that, if you are able to support them, will allow the practice to flourish.  In some it might be particular technical skill or access to particular markets, others may require great knowledge management processes; some will need slick low-cost delivery processes while others may need very high leverage with staff stability and experience.

  2. Identify and quantify the level of potential or opportunity to improve the practice.  These are the Parenting Opportunities and will relate to the KSFs identified in 1. above. The opportunities might be to increase market share; increase profitability; improve file velocity and reduce cost; achieve greater leverage and productivity; introduce an innovative pricing regime, etc.

  3. Once at this point, you can predict how the application of the firm’s distinctive parenting characteristics can lead to the achievement of the potential identified in your practices.  While this is more of an art than a science, honestly and sensibly applied, it will provide you with a good tool to guide your decisions about where to invest your time, effort and money – for the best outcome.

  4. It then remains to plot your practices onto the Parenting Advantage matrix in Figure 1, at whatever level of analysis you have carried out – that is, you may choose to do it by practice group, by partner practice or by profit centre.  It must be meaningful in terms of the ability to get advantage through the application of your firm’s Parenting Characteristics.

Figure 1

Interpreting the model

In plotting each practice onto Figure 1. you are looking at:

  1. The match between the KSFs for the practice and the Parenting Characteristics of the firm

  2. The ability of the firm’s distinctive parenting capabilities to deliver the potential identified for the practice

Where there is a high fit for the practice on each dimension it is said to be in the ‘Heartland’ where high net value is achieved from the parenting of the practice by the firm’s centre.

The ‘Edge of Heartland’ practices are capable of being moved into the Heartland as the firm becomes better at, and more focused on, delivering what is required by the KSFs of the practice.

The ‘Ballast’ practices have little upside in terms of unrealised potential, but can be a reliable source of earnings and profit as little investment of distinctive parenting resources is required.

The ‘Alien Territory’ and the ‘Value Trap’ areas of the grid are places to be avoided.  They are practices with low fit between what needs to be in place to make them successful and the firm’s ability to provide what is needed.  That is, a practice may need intensive systems capability to drive efficient service delivery and knowledge management, but the firm does not have that capability or would not invest in that area.  Where this is combined with low opportunity to improve the operation of the practice – then you are in Alien Territory.  If on the other hand, that same system-dependent practice also had an opportunity for improved performance through greater leverage of staff and strong business building, and your firm could deliver those but not the systems investment, then you might be in a Value Trap position where the use of your parenting skills on leverage and business building would not gain the return on effort that a firm with a better match of KSFs and Parenting characteristics would achieve.  This would indicate that some choices need to be made by the firm and the practice.

Where there is a poor fit of practice KSFs with the firm’s distinctive parenting characteristics there is little point holding the practice and you may even destroy value through long-term involvement.

What to do now

If you feel that this model is intuitively correct for your firm, but you need some assistance in getting started and maybe some encouragement to face the bigger questions, we at Flexion Consulting have the experience and discipline to help you achieve the desired outcomes.

Please contact us:

Mike Watson         0418 514 766  mike.watson@flexion.com.au

Helena Kuo           0408 530 732  helena.kuo@flexion.com.au

www.flexion.com.au

 



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