Antoine Henry de Frahan, (afrahan@frahanblonde.com) is partner of FrahanBlondé (www.frahanblonde.com), a consultancy focusing on professional services.
The problem with figures, also acknowledged by that same manager, is that they tend to attract all the attention and put in the shadow what is not measured. Since metrics are the only means to objectively compare performance and therefore often have an important impact on remuneration, people will focus their behaviour on complying with the metrics, with a tendency to give less priority to what is not measured
In the June issue of Toplegal International, you will find the list of the Top 50 of largest independent firms in Europe, based on turnover. The Legal 500 Directory just released its European chapter. Law firms have dealt with the Q1 M&A league tables and are heating up to prepare Q2. The Anglo- Saxon law firms' results season has just covered us with numbers and percentages. In the past few months we have celebrated awards of all kinds, we have seen firms being listed on the number of new partners they made, on pay hikes and bonuses, on the quality of their websites and even – thank you, Roll on Friday, for the rare humoristic note – on the quality of biscuits in the meeting rooms.
Increasingly, law firms and lawyers are compared, evaluated, judged, categorised, ranked and balanced. It's the fated consequence and side effect of a rich and opaque market coming to maturity. The Anglo-Saxon culture, generally more fond of rankings and statistics, has been dealing with the phenomenon for quite a while already, but now it is also hitting the rest of Europe at full strength. Metrics, numbers, benchmarks, ratios, targets… will become increasingly important in the management of law firms. On all levels: on firm level, on practice group level, on individual level. Most lawyers are not comfortable with numbers but, unfortunately for them, this trend will not blow over. European law firms better get to terms with it.
Learning from Anglo-Saxon firms
The good news is that the European firms can learn from the experience of the Anglo-Saxon firms. The Anglo-Saxon firms have introduced metrics as a management instrument to focus energy, to align behaviour and to gear up operations to new levels. The achievements cannot be denied: both market positions and financial results of Anglo-Saxon firms are impressive, to say the least.
But the signals that the ‘metrics-pendulum' has swung to the other side are growing stronger. The obsession of law firms with billable hour targets is coming under severe pressure from several stakeholders such as bar associations, clients, associates and law students. One example: www.betterlegalprofession.org founded in January 2007 by Stanford law school students and widely covered by American media. The website ranks (‘let's fight evil with evil') US law firms on features such as billable hour pressure, work/life balance and pro bono work.
Worse even, is probably that other fixation of the Anglo-Saxon legal world: the ‘Profit per Equity Partner', commonly known as ‘PEP'. The PEP has become the share price of Anglo-Saxon law firms and it is used, by the media but fed by the law firms themselves, as the sole measure of success. A must read, brave FT article on this subject comes from Guy Beringer, former Senior Partner of Allen & Overy. He calls PEP ‘a dangerous and undesirable metric' because:
- "It ignores what determines the success or failure of a law firm: its clients and its people, because it's says nothing about the underlying performance of a firm in terms of efficiency and sustainable profitability;
- It is out of touch with a world which increasingly requires a demonstrable level of corporate responsibility" and;
- It is a calculation in which both the numerator and the denominator have become more impressionist than real."
The PEP-mania suffers from the same ills as quarterly earnings reporting of listed companies. To quote Adam Smith Esq.: "the hyping can lead to a variety of antisocial behaviours with toxic unintended consequences." The PEP is a dodgy trap European firms should carefully avoid.
"You are what you measure"
Albert Einstein once said: "Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted."
The Anglo-Saxon experience clearly demonstrates the power and danger of using metrics in management. Any decent manager will acknowledge the importance of having figures, benchmarks and metrics to steer business. They are the compass by which to guide the performance of individuals, teams and organisations. They keep everyone headed in the right direction. One of the great advantages of the current transparency boost in the legal market is that it provides law firms with better benchmarks to assess performance.
The problem with figures, also acknowledged by that same manager, is that they tend to attract all the attention and put in the shadow what is not measured. Since metrics are the only means to objectively compare performance and therefore often have an important impact on remuneration, people will focus their behaviour on complying with the metrics, with a tendency to give less priority to what is not measured.
The importance of the choice of metrics and benchmarks used, be it on firm-level or individual level, cannot be underestimated. It will not only have a strong impact on the immediate behaviour of partners, associates and staff. It will ultimately determine the brand, the culture and the values of the firm. In their famous research1 John Hauser and Gerald Katz convincingly demonstrate that organisations end up being what they measure. For European law firms, who generally are only at the doorstep of metrics management, the title of their paper "You are what you measure!" can be translated into "European law firms will become what they measure".
Este artículo fue publicado por TopLegal International en su edición de junio de 2008.
