Internal Strategy

"Strategy" is what you do that's outward-focused, right?—in the sense that it's focused on what practice areas you are investing in or retrenching from, what your firm's geographic footprint is, and how you attempt to distinguish your firm from its peer group. 

But McKinsey, in "Better Strategy through Organizational Design," argues that "most leaders overlook a golden opportunity to create a durable competitive advantage and generate high returns for less money and with less risk: making organizational design the heart of strategy."   What do they mean by this?  Here's how they frame the problem:

"It's time for executives to recognize the strategic need to develop organizational capabilities that help companies thrive no matter what conditions they meet.

"Modern corporations are massive, complex, dynamic ecosystems. In many of them, organizational inertia is considerable. Organizational-design work is hard and time consuming, and any meaningful change usually involves difficult personality issues and corporate politics. No surprise, then, that rather than tackle internal organizational issues to boost the performance of companies, many CEOs typically opt for the ad hoc structural change, the big acquisition, or a focus on where and how to compete.

"They would be better off focusing on organizational design. Our research convinces us that in the digital age, there is no better use of a CEO's time and energy than making organizations work better."

[...]

"Modernizing organizational designs for a 21st-century business environment can trump the gains generated by other, more traditional strategic initiatives. The work often takes years of sustained effort to put in place but pays off by creating competitive advantages that rivals can't copy easily. Strategic-minded executives may not be able to control the weather, but they can design a ship and equip it with a crew that can navigate the ocean under all weather conditions."

Part of what they have to say is predictable, and amounts to what I file under sound management hygiene.  For example:

• Eliminate silo's and fiefdoms
• Undo needless complexity in organizational structure
• Focus on metrics that actually mean something, such as revenue per lawyer or profit per employee (that last is in itself worthy of a separate article here on "Adam Smith, Esq.," which I hereby promise is in the works)
• Increase the odds of productive encounters between lawyers—hold more retreats, make sure associates are at least periodically included, and bite the bullet on the expense of flying people in from various places around the globe—your investment in your partners' actually knowing each other (minimizing the name tag syndrome) will pay off in spades.

But then there are the research findings that focus on how to create wealth from talent, which is, after all, the only card we can play in law-firm land.   In management consultant speak, this is how McKinsey puts it (and mind you they are not talking about law firms or professional services firms: they're talking about broad-brush corporate land):

"Talent is the scarce resource because it is the ultimate generator of the intangibles that drive the creation of wealth in the digital age. Winning companies are those that can increase their profit per employee by mobilizing labor, capital, and mind power into profitable institutional skills, intellectual property, networks, and brands. The returns to companies that can accomplish all this are extremely attractive because intangibles now confer enormous scale and scope advantages. Furthermore, intangibles represent unique assets for the individual companies in possession of them—that is, they are unique in supply—so they can create “natural monopolies,” which are difficult for other companies to replicate."

How can organizational structure promote or defeat these inarguable goals?

The first imperative is fostering collaboration across the firm.  In small teams (they mention basketball and its scoring credit for "assists"), this comes naturally; it's human nature.  But in globally distributed firms, you need incentives and an infrastructure—this means technology—to make it possible, to make it desirable, and to make it rewarded. 

Does this mean abandoning a firm-wide vision, a firm-wide culture, a firm-wide consensus identity?  Au contraire.  Those values need to be communicated and reinforced relentlessly (OK, continually) from the top, enforcing tandards surrounding critical behavior patterns such as adherence to cultural norms and loyalty to the "one-firm firm" ethos. 

Once that's in place, encourage the spontaneous emergence of "communities of practice," groups that, through sharing common client, industry, practice expertise, or intellectual interests, coalesce to form powerful groups far over-shadowing any organizational chart diagrams. 

For example?  What if your firm has a corporate governance advisory group and a white collar crime defense group?   Shouldn't they be talking?   One about how to stay out of trouble and the other about how people do in fact get into trouble?

Facilitate collaboration.  Get them together at retreats; and see what happens.   Your lawyers are: (a) intellectually curious; (b) professionally competitive; (c) constantly striving for excellence; and (d) motivated to serve their clients in ever-better fashion.

You won't have to work that hard to make the chemistry happen.  

But: It will not "spontaneously" happen.

Think of ways to foster serendipitous encounters.  In a global firm, a photo on your internal portal or an "expert" revealed through your KM system is a grown-up Facebook connection.  But your partner that you met in New York (or London, or Hong Kong) at a firm event where you had a drink together last year is a human being you can confidently entrust with one of your key clients.

Talent is all we have to offer our clients, and the only way we can create wealth for them and for us. Make it easier to offer more of it.