HR departments at law firms are becoming increasingly key

The shrinking legal market is forcing some corporate lawyers to do things that not very long ago would have made them squirm. Things like personality assessments and relationship coaching, safe to assume, would be high on that list. But with longstanding client loyalties eroding and taken-for-granted files now coming as RFPs, everyone is angling for a competitive advantage.
HR departments at law firms are becoming increasingly key
Effective and sophisticated human resource departments at law firms are becoming increasingly key in a challenging legal economy

The shrinking legal market is forcing some corporate lawyers to do things that not very long ago would have made them squirm. Things like personality assessments and relationship coaching, safe to assume, would be high on that list. But with longstanding client loyalties eroding and taken-for-granted files now coming as RFPs, everyone is angling for a competitive advantage.

Some firms are using their resources to build large global platforms. Others are turning their focus inward, investing significant resources in HR-style tools and training — betting they are the keys to unlocking business development. Law firms of all types are increasingly run like businesses, with structures that include chief executives and chief operating officers. Can top-level human resources executives be far behind?

Jonathan Bond, director of HR & learning at Pinsent Masons LLP in London, believes not. And he says that's a good thing. He calls the practice of designating a former practising lawyer to run HR strategy “quite a high-risk approach, accomplished people they may be.”

Bond, a former banker and long-time global head of HR for the global corporate practice at Allen & Overy, is an award-winning HR executive recognized as one of the most forward thinkers in the area of law firms and human resources. He says that, while corporate law firms used to see HR as a purely administrative function, some are recognizing that it can be an important tool in executing their strategic vision. In fact, Pinsent Masons hired him to do just that — design an HR strategy to help drive the firm towards its long-term goals. “HR can be crucial when it comes to growth plans and getting the right people in the right place with the right skills and the right style in terms of the firm's values and the culture,” says Bond. “It has quite a significant role to play in the whole strategy of the organization.”

To do that properly, the office has to work closely with senior management, he says, although that doesn't necessarily mean sitting on the management board or committee. “At my firm, in terms of the main executive board of five people, I'm not one of those five members. Does that bother me? Not a bit. I work in head office, I share that space with the executive board, I attend all the executive board meetings that deal with global and all the relevant parts — anything where there are any people implications. I'm in daily contact with members of the board and very much part of the team.

“So as long as you're part of the informal management structure, you don't need to be part of the formal structure. But it certainly is a problem if you're not a part of either of those two.”

Asked whether law firm partners are starting to better understand the role human resources can play rather than just paying lip service, he laughs: “There's a real range. There are about 300 partners at Pin-sent Masons, and I think the top 50 per cent absolutely get it and they're really engaged; they spend time with HR people and they're interested and involved. Then you have a middle bunch who realize it has benefit but don't get too much involved. And then the bottom 20 per cent don't have any understanding or interest in what the HR team is doing and may even doubt that there's any value-add whatsoever.

“But my bet is those bottom 20 per cent aren't our leading performers.”

The law firm world is still rife with nonbelievers, and the legal industry as a whole is seen as eons behind the corporate sector in HR matters. So what arguments would Bond use to persuade skeptics that HR should be inside the tent? “I'd say that it involves developing the right skills to go out and win new work and new clients. Maybe 30 years ago partners who were very good lawyers technically would attract repeat work and they didn't need to develop sophisticated marketing skills. But unfortunately that's changed.

“It depends what the strategy is, of course, but if it's about winning new market share, being in different markets, expanding globally, then it's almost inevitable that there's a people aspect to it — and that's where an HR strategy can help.”

That view of the world is dramatically different from many Canadian law firms where HR is still limited to hiring, training, setting goals and assessing the performance of staff, and administering payroll and benefits for everyone. Hiring, business development, leadership training, assessments and compensation matters, when applied to the firm's lawyers, falls under professional development or talent management, a separate group.

The two silos typically have different reporting lines, with HR reporting to one of the firm's executive officers while professional development reports through practice group leaders and managing partners.

But the two facets of this domain – let's call it “people management” – inside law firms have one thing in common: neither has historically been seen as strategically important or given a voice in board decisions. If bond is correct, that may not be the case much longer. In fact, in Canada, there are already the first stirrings of change.

Stikeman Elliott LLP is among a handful of Canadian firms that have decided that keeping HR and professional development in different silos no longer makes sense. “We thought there were lots of things wrong with it,” says Anne Ristic, assistant managing partner of the firm's Toronto office. “One of the most interesting trends these days is not having that siloed approach.

“The underlying philosophies and processes are the same, or should be the same, and so we thought we could get some real synergies out of doing that. I think there's also a recognition that if you've got really good recruiting, really good development and good performance-management processes, then you can deal with some of the management challenges in a more thoughtful and strategic way. So we have the lawyer professional-development and recruiting people and the HR people on the staff side all on one team.”

While law firms need senior partners to make decisions about strategic direction, she says, firms looking to implement sophisticated business strategies need the help of talented professional management. “When you're talking about strategy at the board level, whether it's for the Toronto office or the M&A practice group or anything else, obviously you're talking about your clients. And where there are opportunities, a huge, huge, huge part of your strategy is: ‘Okay, who do we have? Who can we put on this?'

“You can't always predict where your clients are going, so you have to put your faith in having the best people, who are going to find the right opportunities and then do the right things. Why wouldn't you do everything possible to train and support them?”

But HR in law firms goes far beyond even that, says Ristic. “If you boil down a lot of the factors that have been very difficult for law firms over the past five years, it turns out a lot of them are HR issues.”

Really? She sees things like value billing, project management, alternative fee arrangements and even the growing reluctance to pay for teams of juniors on a file as HR-related? She does. “The demand for legal services no longer exceeds the supply of lawyers. In fact, it's the reverse, which colours a lot of things. It means your recruiting, for example, has to be much more focused on who is going to be successful in the long term. In a lot of the partnership decisions around associates coming up for partnership, it means you're looking at the business case against the backdrop of a shrinking market as opposed to a growing market.”

Fallout from the retirement of the Baby Boomers is also an HR issue, she says — presumably one providing a firm with a chance to reshape itself. “We had larger numbers of lawyers in the past and we had this clear growth trajectory, and now there's less room for growth. So that affects people's career prospects and their motivation and all kinds of issues. It all comes down to people management.”

The way Ristic sees it, bringing HR and professional development into a single department helps both sides. Having former practising lawyers working alongside trained HR professionals can expose them to best practices in areas like business development, diversity programs, developing and more transparent performance metrics. HR professionals, who have usually never practiced law, can also benefit by learning how to customize recruiting strategies, client programs and relationship coaching that suits corporate lawyers.

“While the two sides aren't doing exactly the same thing, they're using many of the same strategies,” she says. “Our hope is it will be more efficient, that you won't have the same people doing the same things but on different sides of the house.”

Efficiency is a philosophy everyone can buy into these days. But not every firm agrees that merging the two facets of professional and human resources is the best way to go. McCarthy Tétrault LLP, for example, has looked at it a few times and decided it is more efficient to keep things as they are. For now.

There's no question there has been a sharp escalation in the importance of training lawyers in skills that fall outside of law, says Stephanie Willson, McCarthy Tétrault's chief professional resources officer.

“It used to be what was expected of a partner was that they were an excellent lawyer. Partners now need to be able to manage teams of people, they need to be able to be more sophisticated about their client management, they've got to be able to develop business — and they've got to be an excellent lawyer. That's a much broader range of skills, and so they need support in doing that. There's a business case to be made for investing in your talent.”

At first glance, Willson might appear to follow the old model of a former practising lawyer (commercial litigator, in her case) sliding sideways into professional development — but she's more.

When she moved into this area in 1997, Willson went back to university to get her Certified Human Resources Professional designation, and then did a second stint to get a certificate in Organization Development. She has the same credentials as many top HR professionals. And far from being old school, she is a big proponent of modern-day HR tools such as psychometric testing. “That said, I'm also a big believer in psychometric testing being done by people with a Ph.D. in psychology,” she adds.

The strategic importance of professional development has become very clear to McCarthys, she says. “If you think about our business, we're selling our lawyers. Our lawyers are our biggest asset. Investing in that asset in a way that accelerates development makes us more competitive in the marketplace — and I can't think of anything much more strategic than that.”

Willson is part of McCarthys' senior organizational structure. She sits on the leadership team along with top management, the firm's five practice-group leaders, the regional managing partners, chief diversity officer, general counsel and the CFO. (The human resources department, in contrast, reports through the firm's chief operating officer.)

Asked why the two are still kept as separate departments, Willson indicates it's probably history. She says there's an argument to be made for merging HR and professional development, and an argument for keeping them in different silos.

“At our firm, we've chosen to keep them separate for now. It's been working for us well, and quite honestly one of the reasons we have kept them separate – because we have talked about this – is that the firm is quite ambitious about what it wants to do in terms of development of both lawyers and staff. And we want to keep going on that for now. As long as we're working together where it makes sense, we haven't seen the need to formally combine the departments. There is more than one way to skin the cat.”

If you need proof of how important this area is becoming to mid-size and large corporate law firms, all you have to do is look where the budget is being stretched. At a time many firms have been cutting spending so closely you see more than the occasional glint of bone, some are putting serious resources into HR.

Take Torys LLP. On Sept. 4, managing partner Les Viner sent out the following internal email:

“After a thorough search process, I am thrilled to report that Valerie Duffey will join us as our new Director, Human Resources. Valerie is well positioned to take on this role with her 20+ years of human resources experience in a variety of industries and workplace environments including over nine years as the National Human Resources Director of KPMG and her most recent role as Vice-President, Human Resources for Aviva Canada, a leading global insurer.”

Duffey's hiring is proof of how seriously Torys regards the skills that human resources professionals can bring to the business of law, says Viner. He believes the focus on “platform and globalization” at some other law firms has come at a price: a redirection of their resources. He is convinced the real key to achieving competitive advantage is having top talent, and the key to that is being “hands down, the ‘best place to work.'”

Deborah Dalfen, the firm's director of professional resources, says performance management is “a huge part” of what Duffey will be doing. “Setting goals and those sorts of things are traditionally HR roles, and given I don't have that HR background, she is going to be extremely helpful in thinking through how we bring that to the professional side.”

In some ways, it's easier to understand why a law firm would want to bring in a senior HR executive than it is to understand why a senior HR executive would want to work at a law firm — where antiquated structures can often leave the office struggling to impact business decisions and make itself heard by the board.

Asked just days before she took up her new post whether she had to think hard about whether to move to a law firm from a corporate insurer, Duffey shoots back, “Not very hard. … I think it's going to be a fun ride.”

She said that, while she expects her work at Torys to have quite a “different complexion” from her work at Aviva, she is looking forward to the challenge. “HR's job as strategic adviser is to help the organization develop the systems,” she says. “For example, performance assessment: HR would have a hand in helping define that performance assessment mechanism. How do we set goals? How do we set targets? How do we balance out the various success metrics, whether it's around billable hours, client feedback, whatever those key metrics are. How do we help people set their objectives around that? How do we assess performance around that? How do we create the right reward mechanisms around that? HR's job is to facilitate the use of those systems.

“So my role is around helping to create some transparency, some clarity, and really help enable individuals and leaders to partner and manage individuals' careers together. People need to understand the rules of engagement, what good looks like, how they get ahead, how they are rewarded based on individual performance and how they're rewarded based on the organization's performance. That's absolutely my role.”

Asked whether she expects to be able to use corporate HR tools such as 360-degree feedback in a law firm environment, she replies by saying she has a large range of tools at her disposal. “As I said to the folks at Torys: ‘I have a whole kit bag of 20-years of experience of different kinds of solutions. But I don't know whether I need a saw or a hammer until I get in there.'”

Back in London, Bond is asked what advice he would give a new HR director coming in to a law firm from the corporate world — an experience he himself has lived through. “It would be as in any business: understand where your business is at, where it's trying to get to, what the goals of the board are, and what its shortcomings are, what's holding it back — the gaps between aspiration and reality, and therefore how you can help fill those gaps, and get the organization from A to B. It may be very different from your previous sector.

“Also, of course, you need to be credible with your audience. You need to gain their respect. So you need to speak their language to avoid banana skins. A particular banana skin in law firms, of course, is that lawyers have a fantastic attention to detail – and particularly on the written and spoken word – so it's such a mistake to send a document to a lawyer that contains some wonderful ideas but isn't well presented, because it gets rubbished very easily if there are typos and grammatical errors in it. So paying attention to detail is very important.”

He says that, while historically it may have been challenging for non-lawyers to get the proper level of respect in a law firm context, that is changing. “I think 20 years ago, anyone who wasn't a lawyer was in a second division, or class. But I think most of the top 20 law firms have certainly accepted the idea of using professionals who are expert in their field, and most senior lawyers are now more open to other professionals being involved in their field.

“Most lawyers would rather manage a merger between Shell and BP than a poor performance assessment. So to any lawyer that doesn't ‘get it,' I'd say, ‘What is it that gives you heartache? What could make a difference to the firm's effectiveness?' People who don't perform drain so much energy and management time. Having professionals who can take care of that properly can save you a lot of heartache.”

Some Canadian law firms are starting to get it, judging from the difference in the job descriptions they provide when looking to engage HR professionals, says Christopher Sweeney, CEO of ZSA Legal Recruitment. “We're noticing a change in the HR landscape as the job descriptions and core competencies of HR are changing,” Sweeney says. “What we're seeing is that HR is increasingly becoming involved in the firm's response to changing business conditions and client expectations.

“By becoming involved in developing, sustaining and understanding long-term relationships with key clients, HR is successfully able to engage in business-development strategic discussions and clients services. That's very different from a few years ago.”

Sandra Rubin is a Toronto-based writer and strategic consultant.