Today’s column is by Janet Stanton, Partner, Adam Smith, Esq.
It’s a truth universally acknowledged that Law Land resists change like the plague. And, yes, this is pretty widely attributed to the phenom known as the “lawyer personality,” characterized by an almost pathological aversion to risk. But let’s unpack this a bit to better understand why lawyers, in particular are so risk averse.
Lawyer-psychologist Dr. Larry Richard, the leading expert on the psychology of lawyer behavior has quantitatively established that a preponderance of lawyers share (among others) two personality traits that in combination scotch the very notion of experimentation. The first is “Resilience.” Somewhat surprisingly, lawyers score really low on “Resilience,” essentially the ability to recover quickly after a setback. On this trait, Lawyers score only 30%, which would be enough on its own to seriously dampen any appetite for experimentation.
But wait – there’s more. What won’t surprise anyone is that lawyers score really high on “Skepticism.” Dr. Richard’s work reveals that lawyers score 93% on this attribute (only 5% of the population is as skeptical). Lawyers can (and do!) poke holes in anything. So, any proposed change will be scrutinized and picked over to such a degree as to discourage all but the most stout-hearted.
These two characteristics, lack of resilience coupled with a high degree of skepticism are a double whammy to the notion of experimentation. Failure is perceived anything but “noble” in Law Land.
This inclination is under-girded by law firm governance policies. Specifically, balance sheets are stripped clean at the end of each fiscal year, with profits distributed to the partners. There is no line for “Retained Earnings” on a law firm’s balance sheet, so even if there were a taste for experimentation, a key mechanism for same, i.e., $$$s isn’t there. Moreover, our tax laws provide the final coup de grâce to establishing a fund for future investment; partners are on the hook for their proportionate share of earnings, whether or not they are distributed; fat chance that they’ll eagerly fork over cash that they’ll end up being taxed on.
Where does that leave us? Many law firms find themselves hobbled; less capable of effectively responding to the challenges inherent in a no/slow growth market where clients are driving increasingly hard bargains and more competitors than ever are nipping at our heels.
So, what’s to be done?
As many of you know, I did not grow up in the alternative universe that is Law Land; I spent the majority of my career in Corporate Land (hardly universally sane, but certainly more business focused) – and as we’ve seen before, there are some lessons from that other country that law firms could benefit from.
One possible solution is to introduce R&D at law firms. Specifically, establish an ongoing program to experiment with new ideas funded with a (very) small percent of revenue (we’ll get to that in a bit). In fairness there are a few firms with a robust commitment to exploring new ideas (and kudos to them!); they are, however, in the far, far minority. And, having a “slush fund” with ill-defined goals doesn’t really count.
Why an R&D program? The beauty of R&D programs is that there is absolutely no presumption that everything will work. Among Albert Einstein’s many noteworthy observations is this gem: “If we knew what it was we were doing, it would not be called research, would it?” We’ve all heard of “failures” that led to the most astonishing, even transformative discoveries. On a more quotidian level, think of 3M’s discovery of sticky notes (the scientist was actually trying to develop a super-strong adhesive). Of truly inestimable value to human kind was Alexander Fleming’s accidental “discovery” of penicillin in 1928.
In recent corporate history, Jeff Immelt tripled GE’s R&D budget from 2% of annual revenues to 6%. One very dramatic result is that previous to this GE introduced one new commercial jet engine per decade; now they introduce a new one each year. First off, think of the competitive advantage this affords GE over Pratt & Whitney and Rolls Royce; must give them fits! As important, is the much enhanced sense of corporate confidence; if perchance one year’s engine isn’t so hot – another will be on its way in 12 months.
A voice closer to home had this to say:
“If everything you’re producing is a success you’re probably not doing enough R&D.”— Tony Angel, former MP of Linklaters and DLA
