Rationality – Mark Gould…

If you think everything’s fine, it may be time to change

4 June 2015 Mark GouldLeave a comment

Over the past few years, change managers have relied heavily on the idea of the ‘burning platform’ to help them awaken organisations to the need for change. Perhaps the most famous example was the company-wide memo sent by the then CEO of Nokia, Stephen Elop.

It is a logical approach. When things are going badly, there is little point in continuing as normal. However, such forced change is also high risk. This is clear from the original context of the phrase, which goes back to the Piper Alpha disaster in 1988.

One hundred and sixty-six crew members and two rescuers lost their lives in what was (and still is) the worst catastrophe in the fifty-year history of North Sea oil exportation. One of the sixty-three crew members who survived was Andy Mochan, a superintendent on the rig.

From the hospital, he told of being awakened by the explosion and alarms. Badly injured, he escaped from his quarters to the platform edge. Beneath him, oil had surfaced and ignited. Twisted steel and other debris littered the surface of the water. Because of the water’s temperature, he knew that he could live a maximum of only twenty minutes if not rescued. Despite all that, Andy jumped fifteen stories from the platform to the water.

When asked why he took that potentially fatal leap, he did not hesitate. He said, “It was either jump or fry.” He chose possible death over certain death. Andy jumped because he felt he had no choice—the price of staying on the platform was too high.

In a true burning platform situation, change (jumping from the platform) is high-risk, but probably less risky than not changing. Nokia is now a very different company than it was in 2011, but it is still moderately healthy.

Sometimes, however, the burning platform idea is used to engineer acceptance of change when the risks of not changing are actually not especially high. In those situations, people often see through the claims of those seeking change and so they ignore the change initiative and carry on as normal. They need a different kind of persuasion.

That is not to say that change is impossible (or unnecessary) when everything appears to be going well. Two items I came across today indicate that change might be necessary and easier in good times.

The first is a TED talk by Tony Fadell, who developed the iPod and the Nest thermostat. He starts by observing that habituation (getting used to the way things are) is a natural and often necessary human attribute. He then highlights three ways good designers (who are just a particular kind of change agent) learn to work around habituation.

The key points from Fadell’s talk are that it is necessary to take a different perspective on things (looking at the larger context and the detail) and that naive questions and observations can trigger insights that are lost to the habituated.

Law firms often talk about understanding their clients, but they rarely actually see their work from the client perspective. Likewise, trainees, new employees and other professionals within the firm can ask naive questions about the way work is done. If those questions are explored rather than batted away, novel insights might follow.

The other item is a LinkedIn post by Anne Marie McEwan. She reflects on accounts of the recent history of RIM, the BlackBerry manufacturer. Unlike Nokia, RIM has responded to the growth of Apple and Android smartphones by concentrating on improving and developing their existing products. (Nokia shifted its focus to other areas of the market.) This strategy hasn’t served RIM well. For Anne Marie, amongst the reasons for this is the difficulty of making change in times of stress.

Business as usual is constant pressure as normal but there are degrees. It can be difficult for people to take on new ideas and ways of working when they are under unbearable pressure, although I have worked with people where things were already so dreadful that they were eager to try anything.

I’ve found that the best time to instigate change is when things are not going badly. The most receptive businesses are those performing well but they know that they will need to adapt to maintain their position; they can see external threats and opportunities coming over the hill.

So the best time for change is probably before the platform is at risk of catching fire. Spotting the threats and opportunities is best done with the benefit of a design approach — noticing when everyone else hasn’t that the things you have got used to are actually bad. That’s what Apple did with the iPod and iPhone.

In the legal sector, I suspect that the predominant view is still that almost everything is fine. Certainly, the comments on a report about consolidation in the High Street bear this out. Clients (whether individuals or businesses) may have a very different view. Two posts by Bruce MacEwen detailing his experience as a client (“The Client Seat” and “The Client Seat (2)”) suggest that from that perspective things very definitely are not fine. Here are some key quotes (from Bruce and other members of the group interviewing potential advisers):

The engagement letter from Firm C (a firm you all know) has all the charm of a utility bill. Let me emphasize that they entirely skipped over the step of responding to the reasonable questions posed by the committee and went straight to an engagement letter. An oversight in the haste and press of business? Hard to believe. Presumptuous? You bet.

This letter unfortunately confirms what many think of lawyers and law firms (which I happen to believe is untrue) as heartless and rapacious (aren’t we all tired of lawyer jokes?). It would hardly rise to the level of “over investment” to reference the issues and address the recipients in more personal terms.

After many years of working with contractors, both as an IT executive and then in supply chain, I firmly believe that when vendors do not respond to an RFP as requested, it says that they will do what they want to do, not what the client wants. I have seen this pattern repeatedly – we went for the firm with the better name or more likable people only to be sorry once we were under contract. Vendor selection is like dating – if they do not treat you with respect now, it is not going to get any better when you’re hitched.

You might imagine law firms responding to RFPs would think their overriding goal should be to make it easy for the client to select their firm. If this sample of three is any indication, they seem to be operating under some alternative assumption, although it baffles me what that might be. Each in their own way made it harder for us to pick them.

If you are a lawyer, can you be sure that your clients aren’t this critical of your work? If you are, how is that? Maybe they have just become habituated, and once an alternative provider comes along with a better way of doing things they’ll transfer their allegiance. That’s what happened to Nokia and RIM. Those companies are still dealing with the aftermath.

Don’t wait for your platform to smoulder. Learn to see what needs changing while it is still possible to test things out.

The reality of client ‘loyalty’

8 April 2015 Mark Gould2 Comments

In my last post, I said I would come back to the question of client loyalty. It isn’t possible to state definitively what keeps clients with firms — each situation will be governed by a unique combination of events and actions. However, experience suggests that, amongst those elements, one or more of three key factors is likely to be at issue. Knowing and dealing with those will help firms (and their new competitors) understand and address their strengths and weaknesses within the future market. In the end, they may conclude that what looks like loyalty is no more than inertia. It is essential not to be complacent about that — inertia is rarely permanent.

These observations are primarily relevant where firms have long standing relationships with clients with the expectation of a pipeline of work. Similar factors may be at play where the relationship is more intermittent or ad hoc, but I know much less about those.

The three factors that play a part in sustaining relationships between clients and their firms (whether a single firm or a panel) are the following:

Minimal relationship management
The 9x problem
Genuine trust

Relationship management

In recent years, some law firms have invested significantly in actively managing client relationships. On the other side of the fence, some of the largest clients have begun to extend existing vendor relationship management programmes to their legal advisors. This is atypical — for most businesses, the relationship with lawyers is much less important than that with other suppliers. Law firms value the client relationship much more, which is why they are right to invest in it.

A few months ago, I spoke to a former colleague who now runs a significant in-house legal function to see if he might need any help with knowledge issues in his team (or in liaison with his panel firms). I got a friendly, but firm, rebuff. As he saw it, his biggest problem wasn’t one that I could fix — he just didn’t have enough time to do everything the job demanded.

I think this is a common situation for GCs and in-house lawyers generally. I once started to sketch out on a mind map all the things that a GC might have to do, manage, or understand. The result is below (click for a bigger version).

I only have a partial understanding of the burdens of an in-house lawyer, so I have probably mssed many more things that concern them. This exercise was also done in the context of thinking about content published by firms for clients, so there is a bit of an imbalance. Notwithstanding these caveats, I think it is clear that GCs have very little time for active management of their external lawyers, except when a formal review of advisors is scheduled.

As a result of pressure on time and the low priority for legal supplier management, it shouldn’t be surprising that many clients are loyal to their law firms for no better reason than a disinclination to invest in change. Businesses without in-house legal support probably have even more inertia.

The 9x problem

Even if a client commits time and effort to reviewing existing relationships with advisors, there is no guarantee that they will value new providers properly. The Harvard academic John T. Gourville has studied the psychological reasons why new products or services don’t succeed as quickly as they might. Building on, amongst others, Daniel Kahneman’s and Amos Tversky’s prospect theory, Gourville suggested a rough rule of thumb for expressing the scale of the persuasion problem that new entrants have.

At the heart of this conundrum are two facts.

People who use a particular product or service (consumers) will tend to overvalue it, by comparison with new alternatives
People who produce a new product or service (developers) will tend to overvalue its benefits, by comparison with existing equivalents.

Gourville applied numerical factors to these propositions:

Consumers overvalue losses by a factor of roughly three.

And:

Developers overvalue the new benefits of their innovation by a factor of three.

With this outcome:

The result is a mismatch of nine to one, or 9x, between what innovators think consumers desire and what consumers really want.

This is presented diagrammatically:

The 9x effect explains why innovative entrants into any market often fail to achieve the success they expect (at least initially). Incumbent firms with a traditional offering will benefit from their clients’ nervousness about novelty. The psychological factors are also relevant, but to a lesser extent, when a like-for-like exchange is proposed — any incumbent has an advantage even against an equivalent competitor.

The trust factor

When all else is equal, an firm with a particularly good relationship with the client (or, at least, those who are responsible for instructing lawyers) will have another advantage — the relationship itself.

One of the clichés of professional services is the notion of the ‘trusted advisor’. It is even the title of a classic book on the topic. One of the authors, Charles H. Green, now runs a consultancy focussing purely on developing trustworthy professionals. At the heart of The Trusted Advisor is a measure of trustworthiness based on four elements:

credibility
reliability
intimacy
self-orientation

These elements match the common academic division between cognitive and affective trust:

Cognitive trust is a customer’s confidence or willingness to rely on a service provider’s competence and reliability. It arises from an accumulated knowledge that allows one to make predictions, with some level of confidence, regarding the likelihood that a focal partner will live up to his/her obligations.

Affective trust is the confidence one places in a partner on the basis of feelings generated by the level of care and concern the partner demonstrates. It is characterized by feelings of security and perceived strength of the relationship.

(These definitions are taken from “Cognitive and affective trust in service relationships” by Devon Johnson and Kent Grayson.)

Most law firms now claim to understand their clients. Ultimately, such claims can only be assessed by reference to the clients’ level of trust. Lawyers (or any other professional) who work hard on knowing everything about their clients’ businesses, markets, and customers may succeed in being seen as credible and reliable — cognitive trust. Only those who show that they genuinely care about those things and provide security in the relationship will enjoy sufficient intimacy and diminished self-orientation to justify affective trust.

The distinction between the two types of trust matters most in times of stress. When the relationship is tested (when mistakes are made, for example) it is unlikely to survive if only cognitive trust is present. This is because cognitive trust depends only on what is known or presumed to be known of the other party’s credibility and reliability. If those are demonstrably reduced, trust will disappear and the relationship will founder.

By contrast, a relationship rooted in affective trust can withstand failures in performance. Being good at the job is necessary but not sufficient as a foundation for affective trust to develop. Once affective trust is present, mistakes are more likely to be forgiven — at least until the point that confidence in the other party evaporates.

Newton’s first law of motion

An object that is at rest will stay at rest unless an external force acts upon it.

An object that is in motion will not change its velocity unless an external force acts upon it.

The three factors described here may explain why law firms might be confident about the loyalty of their clients. That confidence is misplaced unless nothing changes at all. In reality, many things may happen to overcome inertial loyalty.

Incumbent firms should, first of all, be wary of the assumption that any or all of these factors are present. Only those who engender affective trust in their clients, whose services are not three times overrated by those clients, and whose clients are disinclined to spend any effort reviewing the relationship may rest easy. Anyone who doubts the nature of their clients’ trust, who is nervous about the perceived quality of the service provided, or whose clients regularly examine the relationship closely should be very worried.

I suspect most firms are in the latter category. Whether they are worried enough is another matter.

Very few lawyers can be sure that the trust the client has in them is rooted in confidence and intimacy. It is much more likely to be based on an expectation of service quality that can be spoilt too easily. Even where there is affective trust, it is likely to be a bond between individuals. If either the lawyer or the client move, the relationship is likely to move with them. The firm cannot rely on it.

More significantly, any of these factors are irrelevant when the relationship is controlled by others. One such situation arises when the client’s procurement team manages and reviews appointments. That team is likely to be immune to the 9x problem, unbothered by trust issues, and ready to review relationships on a frequent and/or regular basis.

Client loyalty is by no means an immovable object, and the forces acting on firm/client relationships are almost unstoppable. The only same assumption is that inertia will be overcome. The only possibility of surprise is when and why it might happen.

Firms can reduce the element of surprise by actively working on improvements for clients, to match client need with the firm’s own capabilities (this doesn’t mean aping new entrants, since they will always have a head start). The situational awareness required to assess need and capability should in turn make it less likely that firms would fall short on any of the three factors described here.

Improving work with better relationships

18 March 201519 March 2015 Mark Gould3 Comments

Roosevelt and Churchill at Chatsworth House

There is a growing body of people bringing new perspectives on the way organisations are structures and how work gets done. Amongst these, I have recently found a podcast, Reimagining Work, presented by John Wenger and Rogier Noort. It has now been running for 14 episodes, and I listened to a few of these on my walk this morning.

The presenters have very different backgrounds, which makes their conversations more interesting than if they came from the same direction. Rogier’s experiences are more rooted in technology, whilst John’s come from helping businesses with people issues. In the first episode they talked a little about their previous work, and I was struck by John’s description of something he offers as part of his consulting work — sociometry. John described this in the podcast as follows:

Sociometry is a word that literally means ‘measure of social relationships’ — connections between people. One of the themes of sociometry — teachings of sociometry — is that the quality of an outcome is directly related to the quality of relationships between the people who are trying to generate that outcome. Therefore, if you have better relationships, what you try and do together will be more productive, more satisfying, more life-giving.

There is also a later podcast dedicated to the topic (which I have yet to listen to), and John has a blog post on the topic. But John’s description made me think about teams and crews.

I have mentioned crews before. For now, the important point is that unlike a team, which has an existence of its own, a crew is a temporary group of people brought together for a particular job or task and then disbanded. In sociometric terms, the members of a crew may not have a relationship of any sort prior to coming together. There is value in both approaches to work, but does the lack of a pre-existing relationship mean that a crew-based approach is at a disadvantage against a team focus?

I am not sure that it does, as long as the organisation is not bound to traditional models of work and management. The classic crew might be a group of fire-fighters, police officers, paramedics and road managers brought together to deal with a serious motor collision. Each member of the crew brings their own professional expertise, which is respected by the others and which the others have no interest in challenging. As a result, they all do their work as a group and achieve most effectively what needs to be done — often without a lot of command and instruction. Discipline and practice takes the place of strong relationships.

By contrast, an organisation that depends heavily on hierarchy and command-and-control management probably could not use crews to get work done. Instead, teams arise and are managed more or less well (depending largely on the quality of the relationships within and between them. They therefore miss out on the possibility that a crew might bring a better outcome by introducing new expertise and experience. By contrast, I think that an organisation which uses social technology to build relationships where there isn’t necessarily an existing working connection (along the lines of Mark S. Granovetter’s “Strength of Weak Ties”) can use those relationships as the basis for task- or activity-based crews. The outcome would be a much lower dependence on managed structures, more autonomy for people working in groups, and improved value for the business.

Building on the relationships theme, John and Rogier spend some time in a later podcast discussing empathy and its power to improve the way people work together. This leads to a conversation about the way organisations tend to dehumanise people when they think of them as assets or resources. Coincidentally, I have been reading a paper summarising critiques of the resource-based view of the firm. I was led to that research by my concern that organisations were treating knowledge as an asset and that this didn’t reflect the reality of how knowledge flows and how it is valued.

In the paper, the resource-based view of the firm is described thus (I have removed the references for ease of reading):

The resource-based view (RBV) has become one of the most influential and cited theories in the history of management theorizing. It aspires to explain the internal sources of a firm’s sustained competitive advantage (SCA). Its central proposition is that if a firm is to achieve a state of SCA, it must acquire and control valuable, rare, inimitable, and nonsubstitutable resources and capabilities, plus have the organization in place that can absorb and apply them. This proposition is shared by several related analyses: core competences, dynamic capabilities, and the knowledge-based view.

The paper summarises eight ways in which this view has been challenged, but doesn’t offer an alternative approach (reasonably, as it is a literature review). In listening to John and Rogier, I wondered whether a better way of understanding the strength of a business might be an evaluation of the strength of its relationships (internally — within teams and more generally across the organisation — and externally — with clients/customers, suppliers, competitors, and the wider market) and the merit of the work it does (in terms of social value outside the organisation and personal value within it). A business that was well-connected and whose people enjoyed their work and knew that it added value to the world would be in a stronger position than one which demotivated its employees by keeping them in unjustifiable silos producing things of no particular worth.

This combined relationship/activity-based value probably wouldn’t appeal to traditional economists, because it has the benefit of being additive — a business that is successful by this measure does not succeed at the expense of another. Good relationships and social value are like knowledge in this respect — if they are shared they grow rather than being diminished. As the authors of the RBV review put it:

Another characteristic of knowledge, hardly taken into account in the RBV, is its nonrivalrousness—meaning that its deployment by one firm, or for one purpose, does not prevent its redeployment by the same or another firm, or for another purpose. On the contrary, deploying knowledge may increase it.

That sounds like a powerful reason for organisations and individuals using knowledge well, in addition to building relationships and generating real value for society. In short — doing great work.

Testing… How can you be sure you aren’t doing the wrong thing?

12 February 201529 April 2015 Mark GouldLeave a comment

I had a long walk today, accompanied by a number of podcasts. One of them was new to me (although it has been going for some years): The Infinite Monkey Cage. This episode was on the appropriation of quantum physics by various strands of pseudoscience. It was a really interesting discussion about the way scientific concepts are misinterpreted and what might motivate that.

At one point, one of the guests, Jeff Forshaw, made a really important point about the nature of scientific investigation that is often lost on non-scientists. Where does confidence in science come from, given that (by definition) research is providing answers to questions that have never been answered before. At 37′ 42″ in the podcast, he says:

My trust in other scientists comes from — and I often ask this when i am doing things like PhD exams — “so what did you do to demonstrate that this isn’t wrong? How much have you tried to break what you’ve done?” I trust the professional scientists who have spent a lot of time [doing this] (and I expect the answer to that to be “yeah, we tried everything: it just won’t be wrong”).

(I have slightly tidied up the transcript for clarity.)

This process of challenge is inherent to good science — it is built into the peer review that all research goes through before publication. Actively welcoming criticism is also part of scientific culture, as another guest, Ben Goldacre, pointed out at an earlier point in the discussion (34′ 55″ in the podcast):

You know, the Q&A after a work-in-progress seminar or a conference presentation is often a blood bath. But it’s all consensual. In general people don’t take it personally — its a consenting intellectual S&M activity — and we know that it’s good for our soul. We welcome it, and we want it because we know that’s how we will purify our ideas.

This made me think about decisions made in other contexts. In particular, how often do clients challenge the advice their lawyers give them in this way. I know that some will — and hard. Equally, I am sure that some are looking for reassurance that their preferred course of action is permissible and so are not inclined to push their lawyers to prove that what they are hearing is not wrong. Similarly, when firms make their own business decisions, can they always be sure that those decisions are pure and trustworthy?

One of the Cognitive Edge methods can be useful here. This is Ritual Dissent, which can be seen as a way of using Jeff Forshaw’s questions in the context of business decisions or choices — subjecting them to robust critique and testing so that the wider organisational community can comfortably trust them.

This technique, along with others derived from the same source, has the power to lead organisations to much better decision-making. Please get in touch if you are interested in knowing more about how your firm might benefit.

Strategy step 0: understanding where you are

25 September 2014 Mark Gould2 Comments

One of the areas where knowledge is undervalued in law firms (and probably in other organisations as well) is the creation of strategic plans. This has always seemed odd to me, but I suspect that the pressure to respond to changing markets in the same way as other firms is a very strong one. (Especially as it sometimes appears that there is little differentiation between firms — something that I believe less and less the more firms I see at work.)

Why is knowledge important for strategy? A number of reasons. I found these particularly well explained by William Duggan in his book Strategic Intuition. He described Napoleon Bonaparte’s success (the first in his military career) in the siege of Toulon as resulting from a combination of factors: tools and resources, knowledge of previous actions, openness to different solutions; and insight.

In 1793, the port of Toulon was held by the British navy in the name of the French royalist forces. Napoleon was an artillery captain in the revolutionary army. He formulated a plan to put pressure on the British forces by attacking forts on either side of the harbour. The first attempt at executing the plan failed due to the poor leadership of the general in charge. A later, better coordinated, attempt was successful. The British withdrew their forces in fear of being cut off from the rest of the navy.

The tools and resources Napoleon used were available to all — light cannon and contour maps. What he brought was an understanding of historic battles — the sieges of Boston and Yorktown in the American Revolutionary War, and the siege of Orléans in 1429. At both Boston and Yorktown, British forces on land were threatened with being cut off from their navies at sea and gave up the fight or surrendered. At Orléans, Joan of Arc’s forces routed the English army by attacking smaller forts rather than the large well-defended town itself. Napoleon’s insight was to see that rather than attacking Toulon (the obvious target, but a recipe only for a prolonged siege of attrition), his forces could use the high ground (discovered with contour maps, and accessible to light cannon) to take two key forts protecting the harbour. This strategy combined elements of all three historic actions in a way that was unique to the situation at Toulon.

Duggan is interested in the intuitive leap that Napoleon makes — he calls it strategic intuition. Successful strategic intuition depends on drawing together previously uncombined elements. Duggan recommends a similar approach to business strategy. In reality, what I see of many strategic efforts appears to depend more heavily on mere intuition — gut feel — without a real understanding of key factors affecting the organisation.

Firms often focus very closely on their own capacity and capability — what can we do now, and what could we do in the future — without thinking deeply about territory and logistics — external forces that need to be understood or managed. Ultimately, of course, Napoleon’s failure to consider logistics properly led to his greatest strategic failure — the march on Moscow in 1812. The most fundamental failure, though, is not getting to grips with the territory.

My earlier posts in the legal ecosystem series were aimed at helping law firms get to groups with what is happening around them — helping them ask (and work towards answering) the right questions. Richard Susskind’s work has a similar aim — especially his characterisation of legal services transitioning from bespoke to standardised to systematised to packaged to commoditised.

I recently came across a more thorough way of mapping activities to help organisations understand how the land lies before making their strategic choices. The value chain mapping model was created by Simon Wardley, whilst working in the technology sector. Most of his examples arise out of this sector, but there is no reason why the mapping technique should not work elsewhere. He explains it well in this video of a conference presentation.

There is also a site that brings together many of Wardley’s writings on maps, including guidance on how to create maps for your own organisation.

I am still getting to grips with how the mapping might best be used for law firms, but the basic concept is fairly easily understood. It comprises three main activities.

The first thing is to describe the value chain, starting with user needs (client needs in law firm terms) and then identifying every subsequent need. Wardley uses a cup of tea value chain as an easily-understood example. (The diagrams that follow are taken from and link back to Simon Wardley’s blog.)

This simple diagram shows how a person’s need for a cup of tea depends on a chain of other needs, some more readily acquired than others.

However, even a complex set of such diagrams, describing a host of business needs, is incomplete because it is fixed at a moment in time. In reality, things change. Making a cup of tea in a domestic kitchen now is a much easier task than it might have been 200 years ago because of the reliable ubiquity of electricity, piped fresh water, supermarkets selling vast arrays of different types of tea and so on. Without those things, making tea was a more labour-intensive process.

So what Wardley does is to align each of those needs against an axis marking the typical evolution of products or services (similar to Susskind’s model): from genesis to custom-built to product to commodity to ubiquity.

The different components of the value chain can then be placed at the right (current) point of their evolution. That then allows the organisation to look at how each of those components may develop and plan accordingly.

The end result may look a bit like this map which describes a major infrastructure project. The location of each of the components allows the project owner to decide how best to acquire or develop that component. The most evolved can be bought off the shelf, and those that are novel can be developed internally.

This kind of unbundling or componentisation is something that a number of law firms are doing for client work, although rarely to this level of abstraction. I am still reflecting on how well it might adapt to other aspects of a firm’s activities (I have a lingering uncertainty about the placement of risk factors and regulated activities, for example), but my current thinking is that this would be a very powerful tool to help firms with the very first step of developing any aspect of their strategies — working out the lie of the land.

Partnership and client service

1 September 201412 September 2014 Mark GouldLeave a comment

There is an interesting article on the Lawyer website today. It draws on interviews with a number of senior lawyers about the past and future of legal practice. The whole thing is worth reading, but I want to comment here on some of the remarks about partnership as the organisational norm for law firms.

When asked “Is partnership the right model for a 21st century legal services provider?”, most (but not all) of the panel responded positively. It was clear that for them, the mode of ownership was causally linked to quality of client service.

Here are some examples.

Chris Saul, senior partner, Slaughter and May:

I do think that the partnership model is the right model for a 21st century legal services provider.

It brings with it the essential coincidence between ownership and management. That means that all of the owners (the partners) are driven to manage the business and the practice in a responsible, thoughtful, progressive and creative way. Once you divorce ownership from management, problems can arise.

I think that clients very much appreciate the partnership approach. They like the fact that each partner is an owner and is thus naturally motivated to provide the best possible service to the client but in a way that means the full resources of the firm are used in support of the service.

Tim Eyles, managing partner, Taylor Wessing:

I actually like the partnership model. It creates a sense of ownership. That in turn creates glue internally and externally; it engages a team spirit in delivering what’s still a very personal service. We should hesitate before dismissing the partnership model, given the nature of the services that we provide.

If it’s accepted that clients want their lawyers to be in effect their business partners and business advisers, the partnership model is flexible and it engages people, which is hard to replicate in a corporate structure where it’s more pyramidic.

John Schorah, managing partner, Weightmans:

[I]t would be misguided to think the partnership model has no role in the 21 century legal services provider. Partnership can be a really empowering tool and if every partner in a legal services provider did his or her job well, and that empowerment is a big part of that, you will have a really successful legal services provider.

Simon Davies, managing partner, Linklaters:

A hypothetical ‘blank sheet of paper/perfect model’ law firm today comes with no guarantee of long-term success tomorrow. Every operating model needs adapting sooner or later and that’s where the real challenge lies.

Such a law firm might do worse than to build an operation that keeps this need for flexibility front of mind and choose an organisational model that is equipped to respond quickly.

I firmly believe that lockstep firms have a real advantage when it comes to implementing lasting change, largely because of the shared ‘team’ objectives that are inherent to that model.

David Patient, managing partner elect, Travers Smith:

For the time being, yes, I think so, although I am sure we will see different types of legal services providers in the future. I am not convinced, however, that in the short term they will compete for the type of work we do at Travers Smith. A law firm partnership should be built on trust, respect and friendship – ours is, and it’s a key component of our culture and our ability to provide the highest quality service to clients.

Later in the article, the panel is very supportive of the work done by their business services people, which started me wondering why partnership is seen as necessary for lawyers to provide good client service, but (in most firms) not so for their colleagues in other areas. Richard Masters (head of client operations, Pinsent Masons) put it most clearly:

Top quality client service is at the heart of the law firm proposition. It’s not possible to deliver that without really top quality business support, be that IT, facilities or knowledge. Unless business services are respected and integrated as a key part of the overall service solution, they cannot provide the quality of support service that’s needed.

In his recent detailed analysis of the top-level firms in New York and London, Bruce MacEwen showed that those firms appeared to be converging on a partnership comprising about 20% of total lawyers. If that figure is replicated across the sector, it is inevitable that four of every five lawyers working with clients are not partners (although many of those will aspire to become partners, of course, and that may affect their outlook). In reality, the figure may be greater than this — the responsibilities of ownership and management may leave less time for partners to attend to client work than their non-partner colleagues. I’d be interested in knowing whether clients really get better service from the lawyers who don’t own the firm. And of course, virtually none of the business services professionals who contribute to client service will even be eligible for partnership.

I am also intrigued by the idea that ownership (or promise of ownership) generates a more client-focused culture. My experience of working with a range of marketing, IT, finance and other professionals has been that they can be client-focused as any partner. And I have seen partners put their perception of the firm’s interests ahead of those of their clients, to the firm’s ultimate detriment.

I think some of the comments above are actually very context-sensitive. Slaughter and May is not a typical law firm, and it is easy to imagine that its partnership motivates its lawyers to perform in a very different way from others. Just because a model works well in one place, we can’t expect it to translate well everywhere else — other factors will play a critical role.

Coincidentally, today I also read a post by Charles Green on the balance between individual and organisational responsibility for trust and integrity. He is clear that there needs to be personal responsibility as well as institutional support.

A proper view of trust and integrity in business would squarely locate accountability on individuals. The penalties for violating rules should be in the range of 3X the ill-gotten gains, not 1X or less. Auditors may or may not be considered accountable for integrity and trust, but they shouldn’t think they can address these issues solely through risk assessment, monitoring and communications – not unless they address whether or not managers are clearly accountable (cf the recent GM mess), and whether or not the sanctions imposed on them for misbehavior are absolutely clear (e.g. swift termination for ethics violations, period).

One of the problems with partnerships is that (depending on the terms of the partnership deed) it can often be hard to ensure that accountability for poor partner behaviour is as swift and public as Charles Green suggests it needs to be. The behaviour generated by a partnership culture is not necessarily all positive.

I can see why firms cleaving to the traditional partnership model need to justify that choice, but the tone of some of the views expressed in the Lawyer article concern me. They almost suggest that any client choosing to work with a firm that is not organised as a partnership will get a poorer service as a consequence. In reality, my suspicion is that service culture is independent of organisational choice. As more different types of professionals become involved in supporting clients, I hope those clients will judge the quality of that work on what actually happens, rather than the way the business is owned.

Complexity, drivers and modulators in life and the law

31 July 201410 April 2015 Mark Gould1 Comment

This video is fascinating for a host of reasons. In particular, it illustrates a concept that is critical in my continuing series of posts about the legal ecosystem.

Patterns

The video shows an aggregation of anchovies — a shoal of fish obeying simple rules, but creating a constantly changing unpredictable pattern in the sea (just as a murmuration of starlings does in the air). What I find especially interesting is the way the fish react to humans in their midst.

Studies of fish show that they observe very simple rules when they shoal (as starlings do when they flock):

Move in the same direction as your neighbour;
Remain close to your neighbours;
Avoid collisions with your neighbours.

Armed with these rules, it is possible to simulate the behaviour of shoals. It is even possible to predict large-scale changes in behaviour (such as migration). What is impossible is predicting the precise pattern traced by the shoal itself as it moves through the water. There are simply too many variables to allow this — for all intents and purposes each pattern is unique for the fleeting moment that it exists. This can be demonstrated mathematically.

For any number of items (N), the number of links (L) between pairs of items can be expressed thus:

$\L=N(N-1)/2\$

Likewise, the number of patterns (P) that can be generated by connection items can be calculated thus:

$P=2^{L}$

A simple table shows how the numbers of patterns grows exponentially as items are added:

Dots	Links	Patterns
N=4	L=6	P=64
N=10	L=45	P=35 trillion
N=12	L=66	P=73.8 quintillion

The number of possible patterns generated by hundreds of fish is inconceivable.

Drivers and modulators

We often refer to actions driving change in life and work. The word ‘driver’ suggests a direct and predictable link between cause and effect: if I do this, the outcome will be that — every time. Drivers of this type do exist, even in some quite complicated systems. When I turn the steering wheel in my car, I need the result to be predictable. It usually is, unless the system is broken or some other factor (ice or gravel, perhaps) has been introduced without my knowledge.

As the number of components in a system increases and the connections between them are loosened, the behaviour of the system become less predictable. However, when we see the outcome it often looks inevitable; we are persuaded by hindsight that it should have been predictable.

This can be seen in the video when people swim towards the anchovies. Sometimes the shoal just moves away from the swimmer. Sometimes it parts and rejoins beyond the swimmer. Sometimes it forms a ring around the swimmer. None of these outcomes was predictable, but they all appear to follow the same rules — the fish maintain a constant distance from each other and follow the course of their neighbours, but they keep a greater distance from the alien body (whilst not fleeing from it altogether).

Similar things happen in organisations. Patterns of behaviour might look fairly constant and predictable, but can be disturbed by significant events (a change of leadership, for example, or some external pressure). The consequence of that disturbance is unpredictable before it happens, but may look obvious afterwards — hindsight makes us think that it was inevitable.

It is at this point that the ‘driver’ fallacy comes into being. If we see a number of events that appear to form an inevitable sequence of events, it is natural to think that repeating the initial cause will drive the same outcome. If the outcome looks good, then we are likely to take the same initial action expecting it to result in the same outcome. This is the thought process that underpins so-called ‘best practice’ and books like Good to Great. These hold out a promise that success will follow emulation of others.

Dave Snowden has suggested that it is more appropriate to think of change in complex systems being effected by modulators rather than drivers.

Imagine that you have a round flat table and around that table are a series of electro-magnets. They can vary in strength and also polarity. Some you control, some are controlled by people you know and some appear to change at random. In the middle of the table are a lot of iron filings. Now as long as the magnets don’t change, the iron filings will form a complex stable pattern. However as the magnets fluctuate in strength the pattern changes. if some of them change polarity then change is sudden and drastic before a new stability emerges. At the same time some of the iron filings get magnetised in turn as they pass through electric currents, making the situation even more complex. I may not even be aware of some modulators until they suddenly come into play and their impact is seen.

The magnets in this case modulate the system. They interact with each other and with the system as a whole, they make it inherently unpredictable. Understanding what modulators are in play will help us understand emergent behaviour of the system, but not to predict its future state. Attributing cause to a limited number of dominant modulators (that is what I think people mean by drivers) is a mistake as the level of interaction is too much. I can build models to simulate the behaviour of the system, however simulation does not lead to prediction.

Modulating change in law

A common type of ‘driver error’ arises when two systems appear to have the same objectives and basic structure. If one of the systems appears to have a good way of achieving a particular outcome, it is natural to consider transposing it into the other system. This sometimes occurs in legal and political systems, when adoption of different approaches to similar problems from foreign jurisdictions might be proposed. It also happens in law firms and other organisations that are apparently similar in scope and purpose. Otto Kahn-Freund skewered the notion of transplanting between legal cultures in his 1973 Chorley Lecture, “On the Uses and Misuses of Comparative Law”. His view was that there is a continuum of actions ranging from the organic (rooted in unique cultural, social and political soil) to the mechanical. The closer a particular process is to the mechanical end of the continuum the more likely it is that a transplant will be successful.

I prefer the Cynefin framework to Kahn-Freund’s continuum. It is better rooted in theory, as well as being more subtle — the linearity of a continuum is an immanent flaw. I intend to explore that further in a future blog post.

Whatever explanatory tool one uses, it should be clear that some practices translate better between organisations than others. At the moment, there are a few practical changes that are fairly universally recommended to law firms as panaceas to help them ride out changes in the legal market. These include legal project management, process mapping, fixed-fees, and so on. Some of these will work for some firms, but how can we know at the outset which and why? The answer is that we cannot do so reliably. Instead, it is important to test things out. There should be clarity about how the experiment can be evaluated — what does success or failure look like? — and there should be a safe fall-back position in the case of failure. Anything else is wishful thinking.

An experiment might be fairly small-scale, but it can also be quite audacious, as shown in this video explaining what happened when wolves were reintroduced to Yellowstone National Park.

The sequence of events described here — leading eventually to changes in the physical environment — is unique. It is not possible to say that reintroducing wolves in other places would have the same effect. A number of other factors also played their part:

The patterns of grazing behaviour of deer
The topography of the park itself
The availability of other species (beaver, coyotes, bears, birds, etc)
The time taken for plant species to regenerate
and so on…

So, for a law firm, introducing new ways of working or doing business might be a really good idea. The success of such changes depends on a host of components responding in particular ways. Beneficial outcomes are neither inevitable nor predictable.

Better outcomes arise from a process like this:

An understanding of why particular changes might work (and knowing what ‘working’ means for your firm);
Testing the change;
Evaluating if it is working or not (by reference to the first step);
If it works, continue;
If it doesn’t, revert to the previous safe state.

Improving yield: an agricultural metaphor for organisations

25 June 20144 December 2014 Mark Gould3 Comments

As a schoolchild, despite my mother’s agricultural ancestry, my understanding of farming was as basic as the writer of the classic hymn, “We Plough the Fields and Scatter.” The hymn suggests that all one needs for a plentiful harvest are some good seeds, a ploughed field, and a beneficent god to bring the right weather.

Nowadays, I know better. Although plants and animals may be capable of reproducing and growing naturally, the science of agriculture has allowed farmers to improve yields hugely. As an example, drawn from the FAO’s database, the following graph shows the increase in cereals production in Europe over the last 50 years. (Not shown is the fact that the area under cultivation has actually fallen over the same period.)

This scientific approach is merely the culmination of millennia of human development, from the Neolithic period onwards. As we learn more about how other species can be manipulated, or the earth itself can be nurtured to support greater yields, it is possible to feed a growing population.

Modern farming therefore depends on the advances in techniques and materials that are available. Cereal crops are now planted by GPS-guided seed drills that allow the farmer to ensure that as little seed as possible is wasted — no longer is it scattered wantonly. Plant and animal species have been bred for improved yield over centuries. A modern farm is as far from natural growth as it is possible to be.

By comparison, many aspects of our human organisations depend heavily on trusting people to work effectively. Worse, where we aim to make improvements, there is often little science behind them to show that they will actually increase productivity. As a result, people often struggle with poorly designed systems that obstruct their efforts to work better.

I keep coming back to agriculture as a metaphor for the way we manage organisations. I think it is especially relevant for knowledge management. In order to improve the yield of the organisation (by whatever measure is appropriate), managers need to enhance people’s natural capabilities (fertilising for growth), while reducing the impact of adverse conditions (sheltering crops from bad weather). That isn’t possible without a deep understanding of the environment within which the organisation works, the natural capabilities of the people within the organisation, and the value of whatever the organisation produces.

A manager armed with that understanding (and an awareness of how the different factors change over time) can test different approaches to improving productivity, based on the factors that are known to make a difference. Managing in this way means that time isn’t wasted on things that won’t make a difference (even if the organisation next door is using them). Testing different techniques allows success to be observed — unsuccessful interventions can be stopped without significant loss.

In fact, many business interventions are more like cargo-cult science. They are often copied wholesale from other organisations (where they may or may not have been successful). They often fail because they don’t fit the way people want to work. (This is especially the case with KM systems.) But when they fail, the blame falls on the people who failed to change to fit. Too often the cry goes up, “how can we make people use the system?”

I have never heard a farmer blame the wheat for not growing properly when they try out a new cultivation technique, or the cows for a reduced milk yield when the feed mix is changed. Farmers often complain, but they know to change the right things when they can. Organisational leaders too often complain about the wrong things and therefore make the wrong changes. Poor organisational productivity is as often a product of a badly managed environment as improved agricultural yields are of painstaking land management.

Be irrational about irrationality

11 May 201218 March 2014 Mark Gould

Given my focus here on challenging traditional assumptions about knowledge and the law, it would be negligent of me not to draw attention to a concise Scientific American blog from last month that points up a key flaw in much popular writing about the psychology of decision-making.

The shortcomings of our rationality have been thoroughly exposed to the lay audience. But there’s a peculiar inconsistency about this trend. People seem to absorb these books uncritically, ironically falling prey to some of the very biases they should be on the lookout for: incomplete information and seductive stories. That is, when people learn about how we irrationally jump to conclusions they form new opinions about how the brain works from the little information they recently acquired. They jump to conclusions about how the brain jumps to conclusions and fit their newfound knowledge into a larger story that romantically and naively describes personal enlightenment.

This is not a new problem, but it is enhanced by the proliferation of this kind of literature, and the way that the message of these books is amplified by blogs and tweets. I confess to being part of this chorus, so this is a conscious effort to help myself avoid being sucked into unwavering belief.

Ultimately, we need to remember what philosophers get right. Listen and read carefully; logically analyze arguments; try to avoid jumping to conclusions; don’t rely on stories too much. The Greek playwright Euripides was right: Question everything, learn something, answer nothing.

Knowledge and information are different (no doubt about that)

27 February 201218 March 2014 Mark Gould3 Comments

In one of those internet coincidences, I have encountered (or re-encountered in some instances) a number of assertions today that we need to distinguish knowledge management and information management. Largely for my own benefit I have synthesised these in the following post.

David Gurteen’s regular newsletter contained the first pointer, to a blog post by Stephen Bounds.

I don’t agree that Information Management should be primarily backwards looking. The use of BI tools like Cognos et al are squarely IM but they are just as useful for forecasting as analysis. More generally, effective IM should always be done with a view to enabling KM process improvements.

I define the difference in this way: Knowledge Management is practised through activities that support better decision-making. IM is practised by improving the systems that store, capture, transmit etc information.

In this sense, a librarian neatly captures both sides of the coin. The act of building and making a library catalogue available is covered by IM. But the transaction by which a person can approach a librarian and leave with a relevant set of data to make a better decision is covered by KM.

Stephen’s post builds on a comment he made to a blog post of Nick Milton’s, in which Nick gives vent to a self-confessed rant:

If, as many people claim, Knowledge Management is “getting the right information to the right people at the right time” then what on earth do they think Information Management is?

Management of X is not concerned with delivery of Y.

Interestingly, although I have had similar experiences to Nick’s of people muddling knowledge and information, many of the links from the linked Google search use the quoted phrase to highlight the same error. One of the clearest of those rejections is that provided by Joe Firestone in one of a series of posts exploring US Governmental Knowledge Management.

If to do KM, we must understand problem seeking, recognition, and formulation, and knowledge production (problem solving), in order to know what is “knowledge,” and what is “just information,” then why not simply recognize that a First generation KM program based on “Getting the right knowledge . . . “ is not a clean alternative that allows one to forget about problems, problem solving, and innovation, but that since it also requires knowledge of these things, we may as well pursue a version of Second Generation KM that seeks to enhance not only “Getting the right knowledge . . . “, but also how we make that “right knowledge,” in the first place.

And as long as we’re at it, let’s also make that distinction between “doing” and “managing” that is at the very basis of the field of Management, and say KM is not primarily about Knowledge Managers “making knowledge” or “Getting the right knowledge to the right person at the right time,” but rather is primarily about enhancing the ways in which knowledge workers do these things. If we do that, we in KM won’t be stepping all over the turf of other managers, who, from a point of view distinguishing managing “knowledge processing,” from “doing knowledge processing,” are some of the primary knowledge workers part of whose job it is to actually make and integrate knowledge into organizations.

Independently, and most freshly, John Bordeaux has revisited an aspect of his critique of KM in the US Department of Defense. Specifically, what is the difference between Information Management and Knowledge Management. His answer:

The difference between IM and KM is the difference between a recipe and a chef, a map of London and a London cabbie, a book and its author. Information is in technology domain, and I include books (themselves a technology) in that description. Digitizing, subjecting to semantic analysis, etc., are things we do to information. It is folly to ever call it knowledge, because that is the domain of the brain. And knowledge is an emergent property of a decision maker – experiential, emotional framing of our mental patterns applied to circumstance and events. It propels us through decision and action, and is utterly individual, intimate and impossible to decompose because of the nature of cognitive processing. Of course, I speak here of individual knowledge.

John’s position is especially interesting for his assertion that knowledge is distinct from information in part because of its location. If I understand him correctly, once knowledge is captured, stored, or manipulated outside the brain, it ceases to be knowledge — it is information.

This makes sense to me, but it is at odds (I think) with Joe Firestone’s position, as expressed in a paper elsewhere: “My Road to Knowledge Management through Data Warehousing” (pdf).

[T]he desire to get beyond “arid IT-based” concerns and to take the human-side of decision support into account, is about a view of KM that sees knowledge as subjective and personal in character, largely “tacit” or “implicit”, and as distinct from codified expressions, which are really not knowledge, but only information. Knowledge is frequently viewed as “justified true belief” in this approach, a definition that has been the dominant one in philosophy since Plato, but which has been under vigorous attack since at least the 1930s. People who take this road to KM, view it as primarily an applied social science discipline, whose role is to “enable” better knowledge creation and sharing by facilitating the “conversion” of tacit and implicit knowledge to codified expressions.

The problem with this road to KM is that (a) in viewing knowledge as “justified true belief” it makes it dependent on the “knower” and therefore basically subjective. And (b) in restricting knowledge to beliefs in the mind, it neglects the role of management in providing a framework of rules and technology for testing and evaluating codified expressions or knowledge claims and thereby creating a basis for producing objective knowledge. In a number of other places, I’ve specified two types of knowledge found in organizations: surviving beliefs and surviving knowledge claims. In restricting attention to facilitating expressing surviving beliefs alone, this road to KM misses one of its major objectives: to enhance Knowledge Production and, in this way, indirectly improve the quality of surviving knowledge claims used in future decisions.

I am not sure that I understand Joe’s position completely, especially as his comprehension of the philosophical foundations far exceeds mine. However, the final sentence of the first paragraph above appears not to fit John Bordeaux’s position, although I think the first part of the paragraph does fit. I also struggle with the second paragraph. Even if one can separate knowledge from the ‘knower’, there remains the possibility that what is known depends on the context. As Nick Milton puts it in a comment on his original post:

I could give you a whole stack of information about the rocks below the North Sea – seismic sections, maps, core samples – but could you make an effective decision about where to site an oil well?

I think this comes to a practical problem. Capturing what is known in an objective sense would require a correlative capture of enough context to make it comprehensible by anyone at any point in the future. How much effort would that take, and at what point would it be more economical just to ask the relevant person (or even to start again from scratch)?