Andrew Giacomini

Proactively Building Leadership Infrastructure Keeps the 7 Silent Growth Killers at Bay

November 07, 2014

Case categories include: Leadership   Strategy & Planning   

By Robert Sher

Law firms that intend to be great for many years to come must invest in great leadership and develop a culture that values and rewards that leadership. Too much emphasis on this year’s originations and hourly productivity can be a recipe for disaster.

In the depths of the downturn, many longstanding firms around the country fell, including

Wolf Block (Philadelphia, 1903-2009), Morgan & Finnegan (New York, 1896-2009), Heller Ehrman, (San Francisco, 1890-2008), Thelen, (San Francisco, 1924-2008), and Thacher Proffitt & Wood, (New York, 1848-2008). Dewey & LeBoeuf (New York, 2007-2012), formed by a merger in 2007 tried to pump sales up through the downturn with high-cost laterals, debt, and other short-term tactics, but failed in 2012 leaving them $300 million in debt.

Yet San Francisco-based Hanson Bridgett LLP, then a $70 million firm with 350 employees in five Northern California offices, held its ground, maintaining its size despite a shrunken market. The key to their success? Developing a sound leadership infrastructure to protect them against the seven growth killers of midsized firms—classified as those with revenues between $10 million and $1 billion.

Let’s start with a look at the growth killers:

Letting Time Slip-Slide Away

Time—or rather, lack of appreciation for it—is the first silent growth killer. Projects seem to take too long, or get stuck altogether.

Strategy Tinkering at the Top

For midsized firms, tinkering with the business’s core strategy can be deadly, particularly when changes are made without proper research, planning and testing.

Reckless Attempts at Growth

In the effort to scale, organizations face increased risk and expense. If the attempt at growth costs too much and the revenue doesn’t match the expense, growth won’t materialize, but a cash crunch will.

Fumbled Strategic Acquisitions

Acquisitions can be vital part of a growth strategy, but they can also derail an organization. Successful less than half of the time, acquisitions are less about the deal and the closing and more about selection and what happens afterward: the integration process and execution of the acquisition plan.

Operational Meltdown

A rapidly growing bottom line and a rigorously lean operation can be a death sentence under the cover of success. Leaders must be able to recognize four early signs that an operational meltdown is looming.

The Liquidity Crash

Running out of cash can happen to any organization—particularly those making reckless attempts at growth and those suffering financial erosion or a shock to the system.

Tolerating Dysfunctional Leaders

Having a strong, high-performing leadership team in place is critical to growth and to overcoming the other silent killers—or better yet, avoiding them in the first place.

These growth killers often grow out of sight and out of mind for midsized firms, and can drive even successful firms into extinction. Firms looking to survive the killers must proactively guard against them by developing the firm’s leadership infrastructure—the set of people and processes used by the leadership team to create stability and predictability.

At Hanson Bridgett, as the downturn gripped the economy in 2008, the first order of business was creating a stronger growth strategy for the firm—and rallying support from the firm’s management committee members. The next step was to define clear responsibilities for the management committee in executing the strategy. (Hanson Bridgett’s partners vest the seven-person management committee with the authority to make most major decisions.) Previously, the management committee’s role was to come to meetings and make decisions on behalf of partners. “Occasionally and on an ad hoc basis, members of the management committee would take on projects,” said Managing Partner/CEO Andrew Giacomini. The arrangement was too informal, the responsibilities too ill-defined.

A core element of leadership infrastructure is a strong team of leaders with clearly defined roles. Andrew and the six other management committee members defined the scope of their responsibilities. They operationalized those responsibilities: pairing up with a leader from the administrative side of the firm. Each “leadership pair” took on responsibilities for issues that previously had been primarily on the plates of Andrew and his Executive Director/COO Jim Nichols.

All this has helped Andrew get the top management team more fully integrated into the firm’s key initiatives. “The more leadership that can be developed in the firm, the more I can free myself to focus on external matters such as building a brand in the marketplace,” he said. “In five years, I want us to have a robust leadership team that allows the managing partner and the executive director to do other things.”

As any organization grows, it will need more leaders throughout the ranks. The development of those leaders is critical. At Hanson Bridgett, they had long ago established section leaders. These leaders actively practice law and originate business, and had less time to devote to general leadership tasks. The firm needed more leadership hours, yet compensation and expectations for those hours was unclear. The result was lesser emphasis on leadership, and that was impacting the firm’s growth. Two Hanson Bridgett practice leaders in early 2012 crafted a document with a vision of the role, duties and compensation of section leaders that was met with excitement and interest. One of the section leaders is executing on the vision as a pilot.

Many midsized firms outgrow their ability to develop leaders from within, and must find skill sets from the outside. In June 2013, they created the position of Chief Strategy Officer and filled it with Margaret Abeles, a former executive at Charles Schwab who is responsible for facilitating the creation, communication and implementation of the firm's strategic initiatives. She’s a member of the Management Committee and strategic advisor to the Managing Partner. Hanson Bridgett has become one of the first law firms to bring in a Chief Strategy Officer whose sole focus is to drive growth. Hanson Bridgett is building leadership infrastructure to drive growth and keep the 7 silent growth killers at bay.

Don’t think for a minute that adding leadership infrastructure was all cost and no benefit. In fact, it was quite the opposite. The ultimate financial measure of success in all professional services firms is profits per partner. From 2008 through 2013—through the depths of the downturn, Hanson Bridgett’s leadership delivered an average annual increase in profits per partner of 4.1 percent. That’s far above all industry norms for that period.

Knowing about the seven growth killers certainly is a good start to defending against them. When each rears its ugly head, you can spot it sooner and whack it into submission. But playing whack-a-mole every day is both exhausting and unrewarding. And while you’re whacking, you’re not growing. Midsized company leaders should look at their company’s needs for leadership infrastructure holistically to try to picture what the company will need in one or two years. Then tackle the work in phases.

Robert Sher is the founder of CEO to CEO and the author of MIGHTY MIDSIZED COMPANIES: How Leaders Overcome 7 Silent Growth Killers (Bibliomotion; hardcover; Sept. 16, 2014). A regular columnist on Forbes.com, Sher has worked with executive teams at more than 80 companies to improve the leadership infrastructure of midsized organizations.