Unintended Consequences (The Essence of Law Firm Management) Spring 2003 Volume 14 Issue Number Peter J. Winders "According to the best thinking on law ofrice man- the there may be unintended consequences to agement, the best thinMng hash philosophy of promotion, that been done yet. management incompetence will be fostered. Anonymous of familiar with Dr. In law fn-ms, unintended consequences arise any you are from various management philosophies, including Lawrence Peter's books on manage- one that maintains that the most productive lawyers His or corporate ment governance. have earned the right to run the finn and a corollary most famous law of management is The Peter Principle, which reads: "In a hier- philosophy that various compensation incentives archy every employee tends to rise to his level of work in the best interests of the firm as a whole. incompetence." Consequences Unintended of Law Firm Typical policy is that the best Management Ideas company employees should be rewarded by promotion. The unintended consequences that law firms Thus, a business promotes its most outstanding are those that (t) interfere should worry about salesman to sales manager, which is, of course, a a goal to increase the overall quality of the with job requiring different and additional skills. The client base or the overall quality of the work per- mediocre salesmen remain salesmen. If the new formed for clients; (2) interfere with loss preven- sales manager has only marginal skills as a teacher tion goals for example, policies that might or counselor, he will not get further promotions, a lawyer to work outside his area of encourage and will remain an incompetent sales manager. If competence, or take a case with borderline confi- he does have those skills, he may do a wonderful dence in the quality and character of the client; (3) job as sales manager and get a promotion to dis- interfere with good management in any aspect; (4) trict manager, where the primary skill set is that of invite competition or power plays between mem- administrator. If he has no administrative skills, he bers, rather than decisions made by the firm for no further promotions. The corporation will get the greatest benefit to the firm; (5) work contrary has lost its best salesman and sales manager by to the core values, expressed, understood or per- promoting him to incompetent district manager. ceived, of the firm;(6) may produce avoidable job The process continues until it reaches equilibrium, dissatisfaction, unnecessary stress, or burnout in with no person in the position he is best qualified valuable members of the team. fill. Incompetence the unin- at every level to am continuously surprised at primitive, tended consequence of a management idea that a flawed and plainly destructive aspects of systems job well done is rewarded best by "promotion" to see in (other) firms. Less extreme and therefore a supervisory job. more dangerous, there are instances in almost Dr. Peter's point is to examine the management every firm where well-meaning plans have gone philosophy that promotion to a different position awry, and in a number of firms a management phi- is the proper reward for good work as a salesman, losophy that, while well-intentioned and firmly job". and that sales is "better manager a the opposite held, that have creates pressures Underlying this examination is the realization that effects than intended, that punish good behavior and reward bad behavior, and can lead, have led, Peter d. Winders is shareholder with Carlton Fields in Tampa, Florida. Continued on page 4
Unintended Consequences, continued J•om page 1 (f) "Accountability" pressures. or will lead to the damage or downfall of the firm. Of Specific to practice group leaders and those in similar course, there are many situations less than the extreme, in positions, "accountabilit)•" pressures may create a tendency which law finns do not fully implement stupid ideas, but to understaff. Certainly, the firm does not want anybody to a spirit of compromise and adopt them only "a little bit" in have less work than they need to make a profit. But there is deference to the idea of the brilliant rainmaker. They may be a chickerdegg question. If the finn has quality work, does it only a little bit dangerous, but if perceived as more impor- is paid, the firm should be prof- promptly and well, and tant than intended, they can be more significant worries. itable. If the work is delayed, or if the leadership is happy are at full capacity (and there- think it will be useful to examine the unin- because existing personnel In any event, fore not working on developing new business, or not doing tended consequences of various management ideas, partic- ularly compensation ideas. hope that the reader, if any, will other things in the community) there is a substantial risk of stagnation, or of being unable to handle growth available not be satisfied with a "we do not do that" reaction. That is the point is that a law firm should main- from cross-marketing and other business generation efforts. beside the point tain awareness that doing something approaching Are some practice group leaders feeling so much pressure to or per- avoid that they are understaffed, either with ceived as "doing that" may have adverse or unintended con- expenses lawyers or nonlawyers? sequences, and what those consequences may be. are basically amateurs as managers, and, Factors Promoting Unintended Consequences Lawyers as almost every profession appears easier than one's own, There are several factors that promote unintended conse- management is harder work than it may appear. quences in this arena: Common Troublesome Assumptions (a) A policy may have been addressed at one aspect of The "Renaissance Man" model the management, but the effects may not have been thought through as to other aspects.: assumption that the person who is most to the firm is the person who valuable (b) Erroneous assumptions may have "touches all the bases." been made about the cause of the problem "[A]ccountability" pressures may create a a little thought, it is apparent that With sought to be addressed. tendency to understa#. a requirement "touching all the bases" as (c) There is considerable validity to the for success/compensation is inefficient stereotype that laufers tend to address a and does not tend to maximize the profit of specific problem by making a general the firm. Suppose the formation of the A, rule. ]t is best to address specific problems B & C partnership by three lawyers who directly. a matter of core principles that a lawTer is obligat- agree as Illustrative of all the above, if firm is concerned ed to serve his profession, his clients, and the community. a because billable hours are down, neither an increase in the Suppose A is extremely interested in the organized bar and is billable budget nor a bonus for hours over budget will solve talented at both the substantive and leadership roles entailed the problem of insufficient business. And if the problem is in bar work. A's partners agree such work serves the core inefficient allocation of work, such changes will magnify principles and should be a source of referrals for the firm. to hoard work by the problem, increasing the temptation Suppose B is the best lawsfer of the three, a "lawyer's those who have it. Nor will such changes address the prob- lawyer" who likes nothing better than working on a client's lem that some of the lawyers are lazy. problems, and is very good at it. Finally, suppose that C is well connected in the community, has a history of commu- (d) Erroneous assumptions may have been made about nity leadership, and is good at it. Again, the partners agree C the motivations of the people affected. Again, if hours are should continue such activities both as an obligation of ser- down, it may not be because of laziness, but because of lack vice and as an important source of business for the finn. of business or poor morale. Money may not be the primary purpose, fairness, motivation of an individual or group In this hypothetical three-person finn, it would be fool- respect and recognition are equally important, and may pre- ish to require B, the person best at handling the actual prac- a manager whose own primary goal is dominate. Further, tice, to run for Bar president and require the person who is to operate on the erroneous assumption money may tend slated to head the Community Chest to spend most of his that everyone is similarly motivated. time in the library. It is a much more efficient means to the to provide service in the three areas, and ends of the finn (e) Systems may be developed for ease of administra- to put the best person in the job at to develop business tion. This is a frequent management mistake. While ease of which he is best, and to think of the firm as a team. If one administration is good, note that the systems that cause the agrees that this is a sensible approach, then it may not be most problems are easy to administer (e.g., theocracies and productive to have a compensation system that says the per- formula systems of compensation). Since the goal of man- tries to work in all three son who "touches all the bases" is not management itself, but the benefit of the agement is the most valuable, because if at the same time organization, easy administration cannot be an end in itself. areas TIlE PROFESSIONAL LAVCYER, SPRING 2003 4
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