Life in a Bubble – Chinese Style
 

High rates of growth in law firms are not always beneficial. It can induce ‘high altitude’ sickness in partners where they begin to display symptoms – ignoring many of the business fundamentals essential to long-term success in favour of short-term gains.

Chinese law firms are enjoying unparalleled growth and profits. Whilst the world’s attention has been captured by the manufacturing sector, the legal profession is looking equally impressive. Having been unshackled from the State (in the early 90s), it is common to find revenues growing at 15–20 per cent per annum year on year. I visited many such firms in both Shanghai and Beijing recently and was eerily reminded of some mistakes I had made in a similar environment early in my career.  

Very few Australian firms will be lucky enough to face this issue on a firm-wide basis but it is common to see one or more groups or teams growing dramatically. Such growth requires careful management. 

Management is as much about managing the bad times as it is the good. Having experienced the euphoria of the 70s and early 80s, I well remember the shattering effect the inevitable downturn had on the firm I was then working in. There is a real art in not only managing downturns, but in recovering from the effects of ‘altitude sickness’ brought on by the combined effects of a surplus of good clients, super profits and long hours. 

Let’s look at some key factors that are crucial to the sustained and satisfactory performance of any law firm or practice group within a firm. 

Of course it does not take a ‘bubble’ environment to see that many of these symptoms appear in even the best-run firms. The departures from what should be the norm that arise from such abnormal conditions, however, are normally resisted by other partners. As the pace increases, however, standards and benchmarks come under sustained attack with the expectation of ever-increasing profits lying at the root of most arguments. In many cases, objections are overcome or the objectors simply fall silent.

In my case, what was left of what had been a thriving but diverse firm after the ‘bubble’ had burst was nothing to be proud of. What was worse, the damage to our reputation from clients who had left us during that period, and our reputation with younger practitioners we were trying to recruit, haunted us for years. 

The message, of course, is to take great care if you detect ‘bubble behaviour’ in your firm. Do not concede ground easily if at all on such critical issues as partner admission, long held firm practices and procedures, values and strategic objectives. Do not put the balance of your practice, let alone your clients, in jeopardy.  

The first effects will be on your staff – both professional and non professional. As soon as you see those ‘churn’ figures exceeding 10 or 15 per cent, act quickly and don’t rely on ‘exit interviews’; find out for yourself what is going on. 

In dealing with partners, a certain level of compromise is desirable – what is not desirable is the complete abdication of responsibility that is often observed in partners not directly experiencing the boom conditions. Where one or more partners are prepared to sacrifice the clients, then employees, the values  which are the very basis upon which the firm has been built, can be lost very quickly. I suggest the following approach be adopted by the management team.

1   Satisfy yourself the condition exists.

2   Who is most directly affected?

3   Gather data – how long will it continue, what are the legitimate needs of the team/teams?

4   Confer collectively – if necessary, under the guise of making adequate provision for ‘bubble teams/partners’. A retreat can be useful.

5   At the retreat, identify the likely effects of current behaviour and options to keep the impact restricted so as to ensure the firm continues to function.

6   Get clear agreement about what you won’t do and what long-term aims the firm remains committed to – re-affirm the firm’s vision, mission and values.

7   Document the outcome and agree to revisit in say, six months’ time, or earlier if necessary.

8   Consider setting up sub-committees of partners who will assist ‘bubble teams’ – ensure this committee is representative of the whole of firm.

9   Actively manage the outcome of the meeting – be proactive about monitoring key areas of concern and ensure that key support staff such as HR, marketing and finance are kept in the loop and their input sought.

10 If ‘bubble partners’ begin to neglect their customary roles, you will need to review the need to have the partners actively involved in some tasks. Do not, however, excuse them of critical tasks such as attendance at partner meetings, performing the appraisal of their teams or chairing critical committee meetings. At the same time, ensure that holidays are taken and that all reasonable support is provided.

11  Consider the need for coaching in the ‘post bubble’ environment – a partner’s practice may well need rebuilding.

Duncan Hart

© 2005 Duncan Hart Consulting

E-mail: dh@duncanhartconsulting.com

www.duncanhartconsulting.com