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Saturday, 26 March 2011

How hard can it be? HR in law firms


This week CMS Cameron McKenna (CMCK) announced they were outsourcing the whole of their HR function to Integreon. Yawn, yawn. Who cares? It's not a real profession is it? I mean, seriously, how hard can it be? Aren't they just removing a back office administrative function and reducing costs for their clients?

Before we try to answer that question, I ought to declare an interest. I'm currently, temporarily, leading my company's HR function, which consists of about 65 people around the world, in addition to my role as General Counsel. So, although I've gained most of my experience as a customer of HR, for a brief period I am responsible for delivery of the HR service at a decent sized company. I'm therefore taking a very close interest in it. 


Earlier in my career, I was employee of GE, a company of 330,000 people, with annual revenues around $180 billion. That's about the same as the GDP of Singapore (where I'll be later today) and on its own bigger than all the top 100 law firms in the UK put together. That company treated HR as a deadly serious issue, pouring huge amounts of talent and money into the function. If you want to read what Jack Welch, the former CEO of GE, thinks about the importance of HR, try this link: http://bit.ly/ecmORU


By comparison to almost any serious sized company CMCK is a cottage industry. Yet CMCK thinks it can entirely do without an in-house HR team when all the world's major corporates think differently. Either this is a stroke of genius which will win the grateful applause of the world's business leaders or the actions of a set of management ingenues. Which could it possibly be?


Let me refer you to the work of Dave Ulrich, Professor at the University of Michigan, and famous in HR circles as the thinker who articulated the division of HR into Business Partners, Centres of Excellence and Shared Services. For all you legal elitists reading this, there really are professors who spend their time on HR. Try this link: http://bit.ly/eYGWjv.  In Prof Ulrich's analysis, widely subscribed to, there are three categories of work in HR:


(1) Business Partnering, consisting of HR p
rofessionals working alongside business leaders influencing strategy and implementation of that strategy. The size and nature of this kind of role will vary greatly in different organisations;

(2) Centres of Excellence, consisting of teams of experts with specialist knowledge, in complex areas such as Compensation & Benefits. This work can either be done in-house or the expertise can be bought from external providers.

(3) Shared Services, consisting of routine transactional services. This includes what most lawyers understand as "personnel" issues, like running payroll, processing holiday entitlements etc. This kind of activity is the foundation of every HR department's service and can be done in-house or outsourced, because it's highly susceptible to commoditization. Some of it can be made self-service, just like online banking. 

In case you haven't yet made the connection, the analysis for Legal is exactly the same. The providers of work in category 2 are called law firms. Those in category 3 are LPOs. 


What does category 1, the business partnering, consist of? For HR, it's what Jack Welch is describing. For Legal, it's what most lawyers, in-house or out-house, want to be: a trusted business adviser. Lawyers spend time agonizing about how to move up the value curve from specialist to business partner. It's the subject, in one way or another, of this entire blog.


As soon as I saw CMCK's decision reported in Legal Week, I tweeted that it was misguided. That's a strong word and not one I use lightly. But I believe it for one simple reason: CMCK have outsourced the whole function, not just the category 2 and 3 stuff. That means they don't understand or value what HR does in category 1. In my view, over time, lack of good HR advice in any business is going to lead to degraded decision making on performance, succession planning, compensation, resource and capability planning, diversity and talent. This is particularly the case in service delivery businesses entirely built on people, such as law firms.


All this is deeply ironic. Lawyers are often to be found bemoaning the fact that businesses don't properly understand how they add value. It's dispiriting to see lawyers making exactly the same mistake about HR.

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Next time, as promised, "If you aren't doing segmentation, you aren't doing marketing"  

2 comments:

  1. Many firms(corporate and professional services) do not recognise the strategic importance of HR and HR seems content to remain personnel in nature despite the name change.

    The function needs to be upskilled. Some firms (including law firms) appoint HR directors with business and/or legal backgrounds. Goldman Sachs is one firm that employs former employment lawyers in senior HR posts. It is also a reflection of the importance of lawyers at GS.

    Archie Norman who turned around a struggling ASDA in the 1990s has been quoted as saying that he is more interested in people and motivation rather than financial engineering.

    Firms need more leaders like Archie Norman and Jack Welch to unlock the true potential of the HR function.

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  2. Another great post Tom. I totally agree with you. Having run and sold my previous business and now in a new start up, I think so much of the value of a business is the people and strategic HR is too often sidelined and undervalued.
    Hiring the best team and keeping them engaged, motivated and challenged has so much value and high attrition rates bring massive costs to a business.
    I'm sure you are doing a great job of running your HR and with this attitude, they'll want it to be more than temporary!
    Jane

    ReplyDelete