Practice Management Q&A
How Do Client and Industry Teams Fit Into Our Practice Management Structure?
Client and industry teams are the hot topics in almost every firm today. Most law firms have established at least a few industry and client teams and some firms have established dozens. Too many firms, however, see these teams simply as a part of their marketing program or a cross-selling strategy, rather than a part of the fundamental structure of how they manage their law firm. As a result, in many firms, their initiatives with client or industry teams have failed. Let’s look at why this occurs and how these teams should fit into practice management.
The Role of Industry Teams
Practice management basically means managing the firm through smaller business units whose role is the development and management of the work, the client relationships and the professionals in the firm. These business units can be based on substantive practice areas, offices, industry niches or clients -- or a combination of several. For most firms, practice groups based upon substantive law niches (such as products liability, tax, commercial litigation, labor and employment, etc.) is the most common primary management structure. The second most common structure is where the practice groups are a mix of substantive law groups and industry groups such as health care, energy, banking or technology.
At the same time, at least for most large or multi-office firms, managing a law firm along a single dimension (e.g., using only practice groups based on substantive practice areas) tends to be inadequate and ineffective. Within the strategy of most large firms today, there is a strong focus on core clients and industry specialization. As a result, there is a need for business units to manage this focus, usually called industry and client teams. In addition, the firms’ offices also have management issues and are another dimension of management. As discussed briefly in earlier columns and in great detail in my first book, the most appropriate dimension for its primary management is either practice groups by substantive law or by a mix of substantive law and industry niches. This matrix approach is depicted in the chart below.
For these practice groups to be the firm’s primary dimension of management, the lawyers must be willing to be a member of only one primary practice group (though they can be a member of several secondary groups in most firms). As discussed in my first book, most lawyers in a firm are not willing to have only one primary practice group if the groups are exclusively based on industry niches so industry niches have to be secondary dimensions of management. This article will now explore the use of industry teams specifically and a future column will address client teams.
Even in firms that have some industry-based practice groups, there are often major areas of industry focus for the firms that are too comprehensive to be within a single practice group. For example, in many firms of 500 lawyers or more, there are some industry niches where more than 100 of their lawyers have experience and which many substantive practice groups have served. Thus, it makes sense to have some method of organizing by industry that can bring together lawyers across a wide spectrum of practice groups – for purposes other than the day-to-day management of the people or work. The objectives for industry teams vary but typically include:
- Identifying and expanding the firm’s market share in a particular industry;
- Enhancing the firm’s position in that industry (i.e., increasing the firm’s visibility for experience in that niche);
- Capitalizing on the expertise of many lawyers in a firm who have diverse expertise serving the same kinds of clients and bringing to bear that experience across office and practice group barriers;
- Helping to integrate lawyers from various offices and practice groups to prevent “silo” approaches to business development or client relationship management; and
- Differentiating the firm from other firms with which it competes based on the industries it has distinctive expertise in.
The most common industry teams currently are energy, life sciences, pharmaceuticals or biotechnology, technology, financial services, health care, mutual funds, real estate, telecommunications or media. Since industry teams are relatively new, the approaches to their use vary widely. However, some common approaches and challenges are emerging.
In many firms, the head of the industry team reports to one of the department chairs with whom the industry is most closely aligned or to the managing partner in charge of practices or practice management for the firm (a new role that has developed in firms). In a few firms, the heads of the industry teams report directly to the chair or managing partner of the firm because the industry teams involved are focused on industries that are of critical strategic importance to the firm’s strategy. In a very small but growing number, they report to a partner in charge of industry teams who is part of the firm’s operational board. This board is usually composed of the managing partner, the department chairs (in firms with two levels of practice oriented structure -- departments with practice groups underneath them), the partner in charge of client teams and the firm’s executive staff like the COO, CMO and CFO.
Most firms still do not have specific job descriptions for their industry team leaders. The responsibilities are generally outlined informally and include primarily marketing or business development functions with clients in the industry niche and associations that serve the industry niche as well. The responsibilities in some firms also include industry-specific training such as having a speaker from that industry to educate the team’s members about client needs.
However, a growing number of firms do have a job description for these team leaders. Excerpts of a job description for this role are covered below:
- The goal of a team leader is to develop and grow a team that is viewed by the market place as one of the leading providers of the target services and/or to the target industry in the relevant market (for most groups this will be a national or international market).
- Lead the team in the development and maintenance of expertise in the designated legal or industry specialty by insuring: 1) continuing skill development among partners and associates; 2) following latest developments in the law and in the best practices of the firm and its competitors; 3) staying abreast of relevant business and related legal developments in the industry that is the focus of the group or the industries which are the primary marketing targets for the specialty service; and 4) development and maintenance of our intellectual capital in the area, including forms, legal research, memoranda etc.
- Lead the team to provide innovative services and products to the target market.
- Lead the marketing and development of the practice of the team by: 1) assuring participation of the group in relevant specialty and industry events; 2) requiring regular writing for and speaking to consumers of the target services of the group; 3) assuring participation by appropriate members of the group in the leading organizations related to the expertise, industry and target markets of the group; and 4) leading the group in organized and sustained selling efforts to existing clients and to prospects.
- Lead the team to grow in revenue, profitability and volume through a combination of developing new business, which includes the people to serve it, the acquisition of lawyers for the group (with incremental practice that can be brought to and further developed by the firm), or lawyers with necessary skills that can be sold by the firm.
Some industry teams are larger than practice groups. In other cases, a very successful team leader may see his/her group grow to the point where it becomes a firm-wide practice group. It is clear though that an increasing number of firms are clarifying these roles and responsibilities with a written statement or job description for reasons we will cover below.
Expectations For The Industry Team, Its Leader and Members
To enable industry or other teams in the firm to be successful, it is important to clarify expectations for the team, its leaders and members. Without clear expectations, we see the following issues may occur:
- Teams flounder around trying to find their way;
- Development of internal competition between practice groups and industry or other teams for resources, time commitment of lawyers for group or team projects and more;
- Lack of meaningful metrics in order to be able to measure return on investment or other goal achievement; and
- Wasted time as a result of unclear roles and responsibilities.
It is important to clarify how the industry team will interrelate with the departmental and/or practice group and client team structure. This involves three areas: (1) the job description for the team leader vis-à-vis other management roles like practice group and client team leaders; (2) clarification of the goals firm management has for the team, such as expansion of revenues, increases in market share in the industry, cross-selling of new services to the clients represented in that industry, etc.; and (3) clear expectations for what members of the team need to do in terms of specialization in the industry and time commitment to implementation of the plan for the team.
Sizes of Industry Teams
In many firms, the industry teams are interdisciplinary and cross many substantive practice groups. As a result, in major firms, the industry teams are often large with 50 to 100+ members. Obviously, with teams that large, they operate with smaller subgroups as steering committees, task forces and other smaller groupings with specific goals or functions. In smaller or mid-sized firms, the terms are often more like 10 to 20 members.
Integration with Practices
It is important for firms to ensure that the efforts of industry teams are integrated with practice groups and not competitive. For example, in one firm where two industries are fundamental to their firm strategy, they request that all practice groups consider how their plans can support the efforts of these industry teams and the industry teams’ goals often take precedent over practice group goals that conflict. If they are working well, the industry teams enhance the business development of the practice groups by helping them focus on certain types of clients and providing differentiation from firms that do not have as much experience in a given industry. For example, one major national firm that has a niche in the energy industry regularly wins merger and acquisition business from energy companies over top New York M&A firms because they have such extensive industry knowledge, even though they would not win business over these New York firms if it were simply “general” M&A work.
Motivation For Team Contributions and Performance
The historic compensation system in most firms -- even those with “subjective” systems -- has primarily rewarded personal production and business generation on an individual basis. If a firm hopes to incentivize participation in industry teams or other practice group or management activities, there must be perceived incentives for contributions to team performance, not just focusing on individual performance. In addition, the firm must candidly evaluate whether its compensation system actually disincentivizes group and team activities by rewarding personal numbers, rewarding attraction of new clients more than expansion of existing clients, encouraging partners to keep their business portable, etc. Other aspects of firm culture which must be evaluated if teams are to be effective include individual autonomy and trust among partners.
Keys to Effective Industry Teams
While the use of industry teams and the “best practices” will continue to develop, there are some definite keys to success that are evident so far:
- Do not implement too many at once. For most firms, this means no more than three to five of these teams.
- Clarify the expectations for the team, the team leader and the members -- preferably with job descriptions or other written communication.
- Establish reporting and accountability relationships. Most industry teams are not successful unless they are accountable to firm or practice management for their use of firm resources and goal achievement.
- Ensure that team leaders and members believe that working toward industry team goals will be rewarded like other valued firm building or investment time activities, and sometimes this is more valuable than “billable” time.
- Identify any firm cultural, compensation or other disincentives to the behavioral change that is necessary for any real teams to work – practices, industry or client teams.
Please share with us your experiences with industry or client teams as this area of law firm management continues to develop. We would love to share these experiences with our readers in future columns and on the annual conference on practice management I chair each Spring. Contact me at email@example.com or 800 223-0937, ext. 220.