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The tyranny of billable hours: Why law firms can underestimate leadership

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Each sector brings with it its own unique leadership challenges. Whether due to regulations, legacy practices, new market disruptors, regional factors or cultural expectations, the pressures leaders face are rarely identical. 

Few understand the leadership challenges of law firms more than Richard Macklin. Former Global Vice Chair and Global Client Partner at Dentons, the world’s largest law firm, he is a leading authority on law firm strategy and market positioning. We sat down with him to get his perspective on the future of law firm leadership.

Typically, lawyers put their focus on working billable hours, on personal revenue generation, and on technical excellence. But for reasons that Richard unpacks, these are the wrong priorities entirely. 

Leadership is not about management

“The truth is that lawyers generally don’t value leadership,” says Richard. “Nor do they understand the difference between leadership and management.”

Because, broadly speaking, lawyers tend to focus on minutiae rather than the big picture, Richard says they rarely see the value in vision builders. Instead they end up equating leadership with management, as a kind of unnecessary link in an otherwise self-organising machine.

“When I was co-leading the Corporate Practice,” says Richard, “the problem was, and still is, that people would imagine I was spending 50% of my time counting the paperclips. Of course, what we were trying to do was build a vision, but others often didn’t understand the value of such work.”

The value of this leadership was seen in the results though. Richard, along with a small team, helped build his firm from the 164th largest to the largest law firm in the world.

Technical excellence is not a differentiator

Part of the reason lawyers underestimate leadership, Richard explains, is that they value technical excellence over other skills. For them, it’s often all about knowing the minutiae. They are brilliant at spotting opportunities in the detail that can swing a trial, but they don’t tend to notice larger opportunities in the market.

“Lawyers have difficulty believing that technical excellence is not a differentiator,” says Richard. “Granted you do have the magic circle, the silver circle, and so on. But within each peer group, technical excellence is actually a commodity because every firm has it.”

So if technical excellence is not your product, what is? “It’s your delivery,” Richard says. “The way you respond to what a client wants and needs. They’ll assume you have a great product because if you don’t, you’ll get sued for it anyway. What they care about is how you’re going to partner with them.”

When law firms rely on technical excellence to differentiate them, their market positioning is often ineffective, and they can end up depending on an already-established client base – one that might have provided plenty of business throughout the pandemic, but isn’t so loyal that they won’t jump at the chance of a better deal elsewhere, particularly now that same pandemic might have crippled them financially.

Richard says: “Now that we’re facing an even greater economic shock than the Lehman’s collapse, clients are going to want more for less and there’s more chance of getting it now. Ever since the Lehman Brothers collapse clients have been screaming for value-based billing and cost certainty.”

This legacy practice of billable hours is a big issue. It doesn’t just pain clients, but can prevent law firms from raising a greater profit too. 

Leadership is meant to raise profitability 

Billable hours can turn the legal profession into a pursuit of immediate results. The value of leadership feels less tangible compared to the hard numbers generated by hours billed. But when we’re chasing revenue in such a narrow way, we can miss out on greater opportunities. 

“It’s a no brainer,” says Richard. “If one partner is able to increase profits by, say, 20% by  redirecting 50% of their billable hours time into leadership matters, they’re making the firm more profitable across the board. You lose 50% of one lawyer’s billable hours, but you make much greater gains elsewhere.”

There is an element of risk in such an equation, but the potential rewards are far more lucrative. To increase profitability, you can’t just maximise business-as-usual efficiency, you have to look at the bigger picture. 

Richard points to data as a better indicator of performance than hours billed. If you’re able to roll out a strategy and analyse how the profits are impacted over time, the results may persuade lawyers to stop underestimating the value of leadership. There’s no doubt that there’s a risk there, but the opportunity might be too big to miss. 

Looking to make an impact in your department or firm? Get in touch to find out how TPC can help. 

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