The Amazing RACE
Jill Schachner Chanen
Around the offices of Horwood Marcus & Berk, it used to be pretty easy to tell when it was that time. Slowly but surely, the Chicago firm’s associates would make their way down to the accounting office where, posted on the wall for all the firm to see, were tallies of their billable hours for the previous month.
Then, as if on cue, the whispering, the insults and the finger-pointing would begin. The firm had always prided itself on being a refuge for big-firm lawyers from the demands of relentless billing, yet its young lawyers viewed the postings as placing a premium on just that. And they reacted by blaming one another for hogging work and by justifying their own low billable hours through criticism of their practice groups or clients. The practice, partner Jordan Goodman concedes, “created a lot of ill will.”
So the firm put an end to the posting. What was supposed to be motivating associates to work harder and happier was instead sinking morale.
Internal competition is nothing new in law firms. In fact, lawyers and experts alike call internal competition a necessary management tool that fuels growth and profitability. Indeed, sophisticated accounting software now allows law firm management to keep score on everything from lawyers’ billable hours to practice group profitability.
And firms often find willing participants among their ranks. Lawyers are by nature smart, driven and entrepreneurial people, and competition can be an inevitable consequence when there types work together in a profession where value boils down to cold, hard numbers. From the obvious, such as billing reports, to the more oblique – unofficial contests to stay the latest, arrive the earliest or pull the most all-nighters- competition on some level has always been business as usual.
But whether internal competition is a good or bad thing creates almost as much of a divide as the dissemination of partnership points at year-end. It’s clear that while a little competition can be a good thing, too much of it is not. Where one draws the line, however, is anyone’s guess.
“What a lot of people do not realize is that some [competition] is a good thing because it can inspire people who are not performing to do better. But it can be carried to extremes where it becomes counterproductive and works against the whole,” says law firm consultant Ward Bower of Altman Weil Inc. in Newtown Square, Pa.
Law firms, because of the way they compensate and advance lawyers, are in an especially tricky and precarious situation when it comes to internal competition. Firms that value nothing but hours and business origination create incentives for lawyers to think of themselves first and the client last. Firms that do not, by the same token, may find themselves losing their edge in the marketplace. Or worse.
Striking the Right Balance
Although posting billing totals failed to appropriately motivate their associates, the Horwood Marcus partners haven’t abandoned the concept of internal competition as a motivator.
In fact, the firm hasn’t tried to scale back its attempts at working the internal competition angle when it comes to encouraging partners to bring in new business.
The firm unabashedly-and understandably-values new business, and the currency used to express appreciation for rainmakers in the origination credit. But doling the credits out, Goodman admits, is not always easy.
That’s because the credits can be split when, for example, one lawyer is responsible for origination but another is assigned to the matter. When a split is possible, Goodman says, firm partners have upfront conversations to determine how credits will be worked out. Usually this approach solves the problem, but not always. “There are those who do not want to share, but then find themselves having a hard time getting support,” he says. “But we allow it to exist.”
Goodman says the firm decided to let individual partners hash out origination credits up front to curtail the end-of-the-year disputes that happened among partners previously. Even though some of the splits end up unresolved, Goodman says the system has worked well enough for the lawyers that the partner are happy with the way it works out for all of them.
At Godwin Gruber in Dallas, internal competition is alive and well at both the associate and partner levels. Executive committee member Michael Hurst says the firm actively encourages competition among its lawyers.
The firm holds an annual intrafirm mock trial competition for associates where the winners are rewarded financially and with an engraved plaque bearing their names that’s added to the walls of the firms’ mock courtroom. When it comes to rewarding rainmaking, partners and associates alike get bonuses for bringing in new business.
The firm also has a two-tier partnership and equity status is not sacred. Lawyers can go from tier to tier in any given year based on their performance, Hurst says.
Hurst, speaking for himself, says he believes that some level of competition inside the firm is healthy. “I do believe it makes attorneys work harder and bring in more business. If attorneys are not motivated by their peers, they are probably not the kind of attorneys that I want to work with.”
The firm even has taken the Horwood Marcus posting approach and kicked it up a notch: It distributes monthly statistical information on billing and business origination about every lawyer and paralegal in the firm to every lawyer and paralegal in the firm.
So why does on competition-provoking strategy work at one firm and flame out at another? The answer may lie in Godwin Gruber’s equally tenacious emphasis on fostering teamwork at every turn, especially when it comes to credit for new business and client service. For this firm, focusing on teamwork has become a check of sorts, promoting balance in the face of the competitive forces within the firm.
One example of the firm’s pro-collaboration approach is its handling of origination credits. While there may be some working out to do between lawyers regarding their chits, the firm strongly encourages one outcome in particular: sharing. “It is incumbent on those of us on the executive committee to make sure that the internal competition is productive and not destructive,” Hurst ways.
Firms that don’t take measure to counter internal competition risk low morale and high levels of turnover, and they never fully achieve their potential market position given their expertise and capabilities, says Blane Prescott, a San Francisco-based consultant with Hildebrandt International. “They never seem to earn the income, gain the reputation with clients or build up a reputation in the community that fully takes advantage of their capabilities,” he says.
Worse yet, firms that are highly internally competitive tend to get lower grades from clients for the quality of work and the quality of their services, Prescott adds.
John Remsen, a marketing and strategic planning Consultant in Atlanta, says the less obvious consequences of internal competition and just as harmful. They include infighting over seemingly innocuous forms of recognition like the more desirable office or parking spaces, titular appointments and even getting the firm’s support – financial and otherwise – to buy a listing in the latest best-lawyer book.
Changing the Reward System
It would seem, then, that a law firm must forever police its management practices if it wants to succeed in a business environment where the link between compensation and performance ensures internal competition will never go away.
Maybe. But workplace conflict-resolution specialist Anna Maravelas says it doesn’t have to be that way. Competition, according to Maravelas of Arden Hills, Minn., is a learned behavior. She believes that organizations can shape behaviors by changing what they reward, what they promote and what they broadcast.
Remsen agrees. More and more firms have become enlightened to this concept, he says, and they now are rewarding lawyers who are good corporate citizens over those who simply bill and bring in business.
This “good corporate citizen” designation has become an additional compensation model, along with lockstep and eat-what-you-kill systems. More law firms are adopting this compensation system because, Remsen explains, it can provide the desired combination of motivated lawyers and less competitive workplaces.
Lockstep systems, once the standard for most large law firms, encouraged civility and neighborliness inside the firm, but did little to motivate lawyers to work harder or bring in more business. Eat-what-you-kill systems, which evolved after law firms began paying associates high salaries in the late 1980’s and early ‘90’s, motivated lawyers to bill more and bring in more business, but they also were responsible for promoting internally competitive environments, a lack of loyalty and a sense of individualism, legal experts say.
To successfully change a law firm’s culture to a good corporate citizen model, Remsen says management must reward the kind of behavior it wants to promote.
Is your firm tipping toward toxic?
Law firms are unique creatures because their structure allows for independent fiefdoms instead of interdependence, says workplace conflict-resolution specialist Anna Maravelas of Arden Hills, Minn.
“If I were to draw a picture of a normal organization, it would go in a circle where Joe hands off to Betty, who hands off to Frank, who hands off to Sally before it goes to the customer,” says Maravelas, author of How to Reduce Workplace Conflict and Stress. This doesn’t always happen in law firms, she says. “A lawyer will get a call from a client and respond. There is very little interaction with one’s neighbor.”
Cohesiveness and the social interactions and trust levels that result, she says, are “absolutely essential in order for a group to go through periods of conflict without breaking into factions.” And when a dysfunctional work environment combines with a performance-based evaluation system, the results can be toxic.
How to know if a workplace crosses the line? Maravelas has identified 10 negative practices that help indicate whether a workplace has become too competitive:
|1. An increase in self-oriented behavior2. A loss of the sense of cohesiveness between co-workers3. Hoarding of information
4. Distorting or fabricating of information
5. A growing sense of resentment toward the organization
|6. The disappearance of good-citizen behavior7. The lack of any opportunity for mentoring8. A halt in cross-functional collaboration
9. People’s behavior narrowing to the criteria being measured
10. A drop in creativity and risk-taking