Over the past three years, law firms globally have enjoyed record levels of profitability. However, much of which has been driven by cost savings and price increases, rather than stronger performance. In many markets, hours billed per lawyer have remained stubbornly flat.
Balancing financial levers
In my experience, partners often fear that a focus on performance will damage the firm’s culture. The concern is that demanding higher financial standards will erode collegiality, discourage collaboration or even push ‘low performing’ partners out of the firm.
In new research being launched by the IBA Law Firm Management Committee, the extent to which the opposite is true will be tested – that a positive culture does not mean avoiding hard conversations or lowering standards but rather creating the trust and respect that make those (perhaps difficult) conversations possible.
Clarifying strategic purpose
When people feel valued, supported and connected to a common purpose, they are more willing to stretch themselves, hold each other accountable and commit to shared goals. In other words: culture is the foundation of performance, not its enemy.
In elite sport, the highest-performing teams succeed by combining two essential ingredients: fostering a culture of trust and maintaining high standards of performance – defining clear roles, sharing ambition, enforcing accountability, and as part of that, discipline.
They do not succeed simply by demanding more wins from their players. Instead, they create an environment where team members:
- Understand the team’s goals.
- Recognise what excellence looks like in their role.
- Trust that their teammates and coaches have their back.
- Feel proud to belong to the team.
Balancing support and accountability is what enables teams to perform at the highest level – not choosing one or the other, but combining both. Crucially, it means aligning individual aspiration with a collective purpose that could not be achieved alone – allowing people to pursue their personal aspirations while contributing to something greater than themselves.
A law firm must answer both the ambitions of each individual partner – recognising personal goals and career aspirations – while also developing a compelling firm-wide shared purpose that unites everyone behind a common vision.
This new research builds on the findings of the 2023 ‘Perfect Partner’ study published by Harvard Law School’s Centre on the Legal Profession, which warned that a focus on purely financial metrics is counterproductive, highlighting the importance of financial and non-financial contribution.
The firm’s strategy must include clear financial objectives – but if it focuses only on financial targets, it will fail. Success depends on a compelling call to action that inspires partners and teams to pursue something greater than financial success alone, aligning personal aspirations with a shared purpose.
Research priorities
The research will be investigating the following priorities:
- Exploring how increasing billing expectations may not address the underlying drivers of performance.
- Examining how firms help partners and teams understand the broader ambition and how individual contributions align with it.
- Investigating how firms set clear expectations while investing in coaching, mentoring and genuine partner development.
- Assessing how firms create climates of trust where constructive challenge is welcomed – with partners demonstrating respect, openness and a willingness to listen.
Personal and institutional trust
Trust within a firm is not only personal, but also institutional. It is only when individuals trust the firm’s approach to recognising and rewarding contribution that they feel able to act generously: passing work to colleagues who are better placed to deliver, whether due to capacity or expertise. This kind of collaboration depends on believing that doing the right thing will be valued – not just informally, but through a fair and transparent review process.
Current approaches to delivering legal services are under pressure. Clients are more demanding, talent is more mobile and profitability drivers are shifting. This shift will accelerate as AI becomes more widely adopted.
In this environment, performance matters more than ever. But performance cannot be separated from culture. One without the other is fragile. Together, they create long-term success.
Moray McLaren is a partner at specialist law firm consultants Lexington, and professor of law at the LawAhead Centre, IE Law School, Madrid.
If you would like to participate in the research, please email [email protected]. You can also visit the Lexington website to explore previous studies: lexingtonconsultants.com/copy-of-market-trends.
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