Rethinking Law Firm Growth: Moving from Bottom Line to Triple Bottom Line Success Metrics
When it comes to being a lawyer, it is the best of times. It is the worst of times.
The legal profession has had a pretty good run. Lawyers are busy and overall law firm economics are solid. After a decade of declining and flat growth, 2018 brought an upward tick in demand. Key practices of corporate, litigation and employment all reported growth. Anecdotally, a general sense of “busyness” contributed to attorney confidence and sense of productivity.
And yet, the human toll on the practice of law reached a tipping point. Although issues related to lawyer stress, mental health, addiction, divorce rates and personal debt have always plagued the legal profession, 2018 brought these concerns to a head. Headlines that can’t be ignored, coupled with increased worry about a looming economic slowdown, now provide a wake-up call for firms to rethink how they measure success.
Since the financial crisis, most firms have increased their focus on business fundamentals – and rightfully so. But a relentless focus on bottom line success metrics alone comes at a cost to a profession when maximizing productivity equates to an hourly rate times 24 hours a day times seven days a week. It’s a high-risk endeavor that places short-term gains over long-term sustainability.
But there is another model that enables firms to leverage what’s working by expanding a singular emphasis on the bottom line to a broader focus on the triple bottom line of profits, people and purpose. This reframing of success to account for an investment in human capital and culture building is not an altruistic business philosophy, it is a sound approach for building a stable financial model that will enable more firms to compete for the best and most profitable work.
Triple bottom line is not a new concept. It was coined by business writer John Elkington in 1994 to define a responsible corporation’s accounting practices as encompassing financial, social and environmental factors when determining success.
In GrowthPlay’s work with law firms around the country, we have found that a distinguishing factor of high performing firms is their focus on a form of the Triple Bottom Line that focuses on:
- Profits: Building a portfolio of profitable clients that enables them to make smart decisions about growth investments
- People: Attracting and retaining talent that are not only great at what they do but fit within a common culture, and
- Purpose: Enabling lawyers to achieve personal and professional fulfillment in whatever way they define.
So, what does it take for a firm to build a Triple Bottom Line culture?
Past performance is a lagging indicator of success and can create a false sense of confidence about the future. To properly assess your leading indicators of growth, you need a profitability model that doesn’t just look at who hires you for what, but why and how clients engage with you. Client retention is largely driven by a firm’s ability to tailor what they do to the problems they solve for clients. A simple portfolio model that looks at revenue streams in categories such as bundled, bulk and transactional services, helps firms better understand and anticipate buyer needs and more easily flex to changing market conditions.
The ability to maximize individual earning potential is an important driver of professional success but it is not enough if it requires working in an environment that does not bring joy.
Good firm leaders recognize the importance of attracting and retaining the best people by nurturing an environment where people want to come to work each day. They recognize that value statements don’t define a firm’s culture, behaviors do. Great firm leaders are intentional about both defining the common strengths that make up the culture of the firm shining a light on unique attributes that create a more diversified environment.
They also recognize the benefits of getting the right people into the right roles. Rather than expecting all attorneys to be good at all things and taking a survival of the fittest view of success, more firms are focusing on how they can divide and conquer by leveraging the strengths of individuals. Some are even going so far as to use talent analytics to better define specific attributes attributed to their growth culture.
Purpose, widely considered the highest form of motivation, is defined as the ability to connect to a higher cause. Making as much money as you can before you die is fine if that is truly the desire of a partnership, but studies show that is seldom the case. Evidence suggests that an intrinsic desire for the work we do to matter is innate in most professionals. Whether purpose is fulfilled through pro bono service, corporate social responsibility or personal acts of generosity, having a clear purpose is the first step to putting wellness back into the concept of wellbeing.
Moreover, while we tend to view generosity as an act of altruism, it turns out the giver gains measurable benefits in the process as well. Studies show that that generosity not only makes people happier, it improves overall health, promotes cooperation and social connection, evokes gratitude, and is contagious.
Ultimately, one of the biggest benefits of Triple Bottom Line thinking is the opportunity to create a culture focused on potential and possibility rather than pain and pressure. While the initial trajectory of growth may take longer, you ultimately create the ability to accelerate sustainability growth that promotes client retention, attorney wellbeing and bottom line success.