Peak performance

DMH Stallard has enjoyed some impressive financial results in recent times, with significant growth paralleled by profit hikes. Here, the firm shares its approach to financial management and cultural change, revealing the strategies used to drive better performance.

By Tim Aspinall, DMH Stallard

In January 1997 Donne Mileham & Haddock, as it then was, turned over around £6m, employed about 150 people and had never exceeded £60,000 profit per partner. Today, DMH Stallard is a £23m business with over 350 people and profits per partner approaching £250,000. The changes in the firm over that nine-year period have been significant and fundamental to our financial success. They are all based around valuing our people and creating a shared vision. This is the story of what happened.

The start

In January 1997 the partners decided that the firm was not realising its full potential, which was unacceptable, particularly to the younger partners. A new start was needed to improve the financial performance of the firm and make it a significant player in the legal marketplace. A new management team was appointed.

Our starting point was to involve everyone in deciding what sort of firm we were and what sort of firm we wanted to become in the future. We held a series of workshops on Saturday mornings and encouraged people to come along, whichever part of the firm they were from. We had about 25 per cent of the firm attend each workshop and they included partners, secretaries, trainees, receptionists and central support people.

We looked at fundamental issues such as where our offices should be, what sort of clients we should have, what core services we should be offering and what our pricing proposition was. These were difficult questions because at the time the firm had six offices. Four of these were relatively small and based around private clients in the high street. They often did legal-aid work. The other two, in Brighton and Gatwick, were much larger and focused on companies and business clients. There were clear incompatibilities between these two models and a choice had to be made. We decided to abandon the high street for the sake of our two larger offices so that we could concentrate on a relatively small number of key services and market them to larger business clients and higher net-worth individuals.

Over the next few years, therefore, we closed our network of offices on the high street and acquired larger premises in Brighton and Gatwick.

We encouraged as many of our people in those branches to relocate to our new centres although some, including partners, who did not share our vision, left and joined other high street firms. We also abandoned some types of work we did, such as shipping, because it was too much of a niche and not a service we could easily sell to our target marketplace. Our core offerings became corporate finance, corporate and commercial, real estate, dispute resolution, employment, planning and environmental, and private client.

They remain the same today.

We also agreed that we should have an office in London as it is such an important centre for any law firm. We decided to do this in stages. In 2000, we merged with a small firm in the City. The response from our clients and the market was positive. Our next step was to merge with another firm, which we successfully did earlier this year to create an office of around 75 people. The third phase of our strategy will be to double the size of that office.

Valuing our people

During the workshops we looked at the firm’s culture. We decided that we wanted to create a firm that valued its people and had teamwork at its centre. We knew that people could do more than was being asked of them and it became clear to us that if we could release that potential it would make a massive difference to each individual and to the firm’s performance.

We embarked on a huge training programme, not just in relation to professional skills, where we had always been good, but in relation to leadership, management, business and marketing. The programme was, and still is, modular, and we encourage people from all parts of the firm, including central support, to go on it to make them better team members and managers. Youth or lack of status is not a barrier to taking on responsibility at our firm and people are encouraged to develop their ideas and sometimes fail before succeeding.

We published career paths for lawyers and others so they could see what they needed to do to advance their careers in the firm. For solicitors this means that they can see how to become an equity partner from the moment they join the firm. The requirements at each stage of the journey are set out and the standard needed to advance to the next stage made clear. Candidates for promotion to associate, salaried partner and equity partner all have to go through an interview process and receive feedback on how they are performing against the requirements and on any areas they need to improve. The huge benefit of this approach is that it is fair and transparent and encourages behaviour that will make the firm successful. So if the individual does well, the firm does well.

Another key facet of valuing our people was to involve everyone in the running of the firm. As well as workshops we held conferences, introduced an annual general meeting and encouraged people to work together to improve the performance of their teams.

We made information freely available to people so they could see what was happening in the firm. Performance figures are published every month giving details of fees earned by person, team and department against budget; the amount of work in progress, time recorded and numbers of files opened; and details of debt and disbursements. This information is published in hard copy and is also available, along with virtually every other bit of the firm’s financial and other data, electronically on our intranet – ‘The Eye’. My managing partner’s briefing note published every month lets people know what is discussed at management team meetings and comments on important issues the firm faces. This helps people see the bigger picture and puts the financial data, good and bad, into context.

We trust people with all this information because we believe the benefits are so great. We have found that this transparent approach gives everyone in the firm a sense of ownership and responsibility.

It also gives rise to peer pressure as people can see how everyone else is performing. This encourages everyone to do well.

Valuing people meant that respect became a key aspect of our culture for everyone, including partners. As with many law firms, this was a particular issue for support people who were often treated badly. They gave us feedback at our workshops that this attitude needed to change because without internal respect, there could be no hope of doing the best for our clients. This was not such an easy thing to achieve, however. Some people found it hard to change their behaviour.

Sometimes this was because they did not know what they were doing – so we made it okay for others to give them feedback on their behaviour. We made respect a key measure for anyone wishing to join the firm or be promoted in the firm. Candidates have to be able to demonstrate they respect others and show an understanding of the issue in the interview. As a result, people who didn’t show respect left and were replaced by those who did.

Indeed, all our recruitment processes were designed to make sure only people who shared our vision joined the firm. No matter how good someone is technically, unless they are team players who can show a track record of working well with others, they are not recruited.

The result of all this is a firm of people committed to making it a success and with the skills and attitude to achieve that. People feel valued, involved in what is going on and trusted. They put the firm’s interests as high as their own and often higher.

For instance, when we moved our employment team from Brighton to Gatwick for operational reasons, not a single person left and many secretaries now make a 25-mile journey to work.

As a result of what we did, we achieved ‘Investors in People’ recognition in 2000.

In our IIP surveys, which we do every 18 months, over 95 per cent of people agree with the statement that the firm is a good place to work. We can still do better and we make mistakes, but having a culture that values our people has worked for us.

Teamwork

We had to convert all the commitment, energy and enthusiasm showed by our people for the firm into results.

In old Donne Mileham & Haddock, in common with most other firms, there was a focus on personal billings and performance. As this is what was valued in the firm, partners were always anxious to ensure their personal billings were high. This meant that assistants were sometimes under utilised. It also meant partners had less time available for business development and management as they were so busy earning fees.

The solution to this was to create teams and to change the emphasis from personal to team billings. Partners, therefore, became leaders of teams that included associates and assistant solicitors. Each team specialises in one type of work such as employment or corporate and commercial. The turnover of a team is usually around £500,000 to £1m. The team leader is responsible for all aspects of the performance of that team, including fees, debt, gross margin, utilisation and business development.

While each lawyer in the team has a fee target, the partner’s performance is measured on whether the team hits its budgeted numbers. If the partner hit his or her personal numbers, but the team does not, that is regarded as under performance. It is better for the team to perform than for the partner to shine.

We are careful not to measure our team leaders’ performances on anything the team leaders cannot control. But if it is within their remit, they are made accountable for it. Consequently, we do not measure the net profit of the team, as the team has no control over the rent, rates or central support costs. But we do hold team leaders responsible for the salary costs of the team, the debt of the team and, of course, the fees of the team. We also require team leaders to be responsible for the development of the people in their teams. We want to see people improving each year and achieving their potential as future team leaders or business developers. But we always want to see the financial goals achieved along the way.

We reward success. If the team achieves or exceeds its gross-margin budget, team members get a bonus; the higher the excess, the larger the bonus. Equity partners are rewarded in a similar way. We encourage them to take responsibility for teams and grow them. As we have a largely performance-related, profit-share system based on levels of responsibility, the larger the team the more points the equity partner can receive. In addition, the partner’s points can be increased or reduced at the year end depending on the performance of the team.

We have worked hard to transform the culture from one based on each individual partner’s performance to one based on team performance and we have been able to achieve significant financial gain as a result.

Budgeting and reporting cycle

To encourage a consistent approach to budgeting across the firm we introduced a budgeting and reporting cycle throughout the year. This starts with the firm’s strategy that is written annually in February and approved by the partners. This is a rolling three-year strategy that sets out our overall vision, three-year goals, key-performance indicators and the issues we need to focus on to deliver them. We encourage the teams to grow as quickly as they can and will often set minimum growth targets. They have to achieve these by finding new work and clients, and by improving margins through better utilisation and efficiencies.

Each team then has to produce its own budget and business plan showing what it is going to do and how it is going to contribute to the firms overall goals. We encourage an entrepreneurial approach, but each team has to operate within the general parameters laid out in the strategy. In keeping with our culture of involving everyone as much as we can, team leaders must produce their plans and budgets in consultation with their team members who consequently know what is expected of them and buy into their personal targets. Central support teams go through the same process. Not all budget proposals put forward by teams are accepted. We want challenging but realistic goals and will sometimes caution moderation or push for more growth. In this way, the budget is built both from the top down and the bottom up, and is owned by everyone. As a result, the chances of it being delivered are much higher than they otherwise would be. The whole process lasts from about March to June – in time for our new financial year, which starts on 1 July.

Every quarter, our finance director, Robert Mojab, and I meet with each team leader to review their team-performance reports against the budget and plan. These sessions are also useful coaching opportunities. Indeed, when we first began this process, team leaders found it difficult. In the early years, the focus of these meetings was very much on the immediate financial goals, such as billing, debt and gross margin. This is what we wanted to improve in the short term and we saw significant gains.

Now, however, team leaders are fully in command of their part of the business and want to take responsibility for it. The quarterly discussions are consequently now wide ranging. Team leaders provide a high level of analysis in their report to us about issues such as utilisation, profit by client, profit by assignment and trend data. They tell us about improvements they have implemented as a result of their analysis to deliver greater efficiency and productivity. Team leaders are able to support their projections about the level of fees to the next quarter or to the year end by using Excel spreadsheets and pivot tables. They will carry out a detailed analysis of the team’s caseload, work in progress, average fees per file, trend file-opening data and draw sophisticated conclusions about what is happening and going to happen in their part of the business. They have a real sense of ownership and responsibility, and deliver improved performance each year that drives the growth and financial success of the firm as a whole.

Risk management

As well as growing the top line, we realised it was just as important to control leakage of fees from the firm. At one of our early workshops someone remarked that there were more barriers to becoming a customer of Blockbuster than being accepted as a client of our own firm – this was, of course, before the new money-laundering regulations on client identification. We realised that the focus of many of our lawyers was on winning work of any kind and getting on with it as quickly as possible. When we reviewed what went wrong in cases, particularly non payment of fees, complaints and even claims, we saw that many of the problems could be traced back to this culture. We set about changing it and placed much more emphasis on the acceptance of new clients and the set up of new matters to reduce the possibility of things going wrong later. We encouraged partners to turn away clients and work that seemed to be inappropriate or that presented too great a risk for us.

We also rewrote every procedure we had as we realised there were so many inconsistencies and the emphasis in them was often wrong. We simplified what we could and then rolled each procedure out individually with training. The financial impact was significant.

We found our debt profile improved, we wasted less time on inappropriate clients and we had better contractual relationships with our clients. Most importantly, however, the culture changed so that people realised risk management was their responsibility and it became a natural part of their everyday work.

Valuing our clients

As well as valuing our people, another key part of our vision that was agreed in the early workshops was valuing our clients. We all signed up to that and ran many more workshops on what client’s wanted (we invited clients to these to tell us), how to manage expectations, how to improve service levels internally, and so on.

Our first challenge, however, was to grow our turnover while losing some of our high-street business. That meant we had to win plenty of new clients (and win more work from our existing clients). Our partners set about that task with enthusiasm and had many successes. Our client base now includes FTSE 100 and 250 companies, AIM companies, large privately-owned companies, professional-service firms (including two top-10 law firms), local authorities, public-sector organisations, serial entrepreneurs and property investors, as well as private clients.

As we began to examine our client base we saw that new clients almost always came to us through recommendation from an existing client or contact. We also found that new clients would often try us out for one assignment but then move more work to us as they appreciated our business-like approach. We realised that this was because our lawyers and support people were really committed to looking after our clients and they tried hard to impress.

We built on this foundation and now have a sophisticated CRM programme. By this I don’t mean software – although we have an extensive list of key data on our clients in our Axxia software, which we send automatically to an Excel spreadsheet, like so much of our other data, so our people can use it and manipulate it in this familiar format. Our CRM programme is a way of behaving and revolves around our culture of valuing our clients in everything we do. As our culture values transparency, we really do want to hear from our clients if things are not going well and we make it as easy as possible for them to tell us.

We continually seek feedback from our clients to see if we can do better. At the end of every assignment we send out a questionnaire, collate the information and act on it. We hold formal review meetings with key clients every quarter to see how we are doing and how we can improve. These meetings are also an opportunity to learn more about our clients’ plans for the future. Knowing about a client’s business is a key part of the programme. We want to be part of their team.

The benefits are obvious.

We keep our clients and we win more work from them at the expense of our competitors. We anticipate any problems in the relationship and sort them out before it’s too late. We encourage our clients to recommend us to others and find they will do this as they enjoy working with us and want us to succeed. We also use our time most effectively by focusing on our existing client relationships, rather than chasing many different opportunities in the market that may or may not result in work.

The journey over the past eight years has been an exciting one. Our transformation and financial success has in large part been the result of valuing our people – involving them, listening to them, training them, putting them into teams and giving them opportunities and responsibilities based on their ability not their seniority. As a result, DMH Stallard is seen as a good place to work: our people are committed and enthusiastic about making the firm a success and want our clients to feel valued so they use us time and again and recommend us to others. Our next goal is to double our turnover in the next three to five years, while retaining the key values that have got us to where we are now.

Tim Aspinall is managing partner at DMH Stallard. He can be contacted at tim.aspinall@dmhstallard.com