This question often pops up at smaller firms with fewer managing partners: “Should we submit application to be included into Top XYZ rankings?” Larger firms seem to be in agreement that “That’s just the way it is — we ought to be in the rankings because, well, everyone else is there.”
The fun part of these rankings is that there can be an infinite number of ways to rank firms: by revenue, size, locations, practice areas, professional contributions, etc. Even when a firm didn’t make it into Top 100 (by revenue) there are sub-categories, niche practice areas and things like (e.g.) “shareholder activism” that firms can rank for.
Some of the ranking organizations accept new category suggestions too. Thus it seems everyone has a decent shot at getting a badge.
One way of looking at this topic is by being cynical: it’s a load of crap, the other one — neutral: I couldn’t care less, and another — inquisitive: let’s consider the pros and cons. And this latter approach is the one I want to pursue in this article.
Managing partners’ contemplations
Here is a not-so-uncommon example of how two managing partners of a particular law firm discuss the rankings. The first thing I should point out is that while I have asked what activities they thought would be beneficial for the firm in-general in the near future, it was one of the equity partners that brought up the issue of rankings. I will explain why this is important a bit later.
Here are the arguments of Partner A against the Top XYZ:
- we won’t get any clients from this Top;
- this will cost us money (time, effort) and no ROI;
- we should disregard these rankings because it’s all just vanity;
- what’s the point if we can’t make it into the top 10 anyways?
Partner B had the following pro arguments:
- our competitors are ranked, so it follows that it must be good for the firm;
- we will be able to command higher fees;
- we’ll be more visible to prospects.
These are all valid points, and you can see why the topic can be controversial.
Things to consider
Let’s address the partner-mentioned points in an attempt to identify pros and cons for each. I’ll include some of my own points to consider as well.
Prospects will notice
The longer the list, the less likely prospective clients will find a firm that isn’t in the top 10. They’d glance at the bottom three out of curiosity, perhaps.
Providing some prospects have any interest in the list, they’ll skim through but won’t examine it thoroughly — we are lazy. If the category is of high interest, the most they’ll be able to remember is seven firms.
However, when prospects search (specifically) for your firm online and find a link to the rankings with your firm on it this sends a positive message: someone else, a third party, has validated your firm. This adds to credibility (but not in a big way).
Professionals have an intrinsic need for recognition. External validation is a testament to their skills. Junior as well as senior professionals want to feel (at the very least) on par with their peers.
Knowing that you are a part of a smaller firm yet still able to make it into the Top whatever makes professionals feel good about themselves. “Yes, we aren’t as big, but we are just as capable!” No one wants to feel inferior to other professionals from competing firms.
That’s why it is important to acknowledge where, like in our case with Partners A & B, the question of participation in rankings is coming from. It isn’t only the on-the-surface, rational argument, it is also the psychological need.
Thus it is the top management’s obligation to take the necessary steps to address the issue. Fail to recognize this at your own peril.
Since one of the partners considers participation in the rankings to be of import you can bet there are other professionals who’d think likewise.
Take soon-to-be professionals for instance — one of the talent pools. Some of the best graduates who happen to be ambitious, motivated and hard-working will consider the reputation of the firm and whether or not this reputation has been validated by the marketplace. Rankings contribute to checking off that box for them.
The same is true for lateral hires and paraprofessionals. Candidates will ponder: “Am I joining a known, market-accepted practice or is this a pig-in-a-poke firm?”
There must be a correlation (although I doubt there is any research to confirm or deny this) between candidates researching top-ranking firms and quantity of customized job applications received by these firms. My hunch is that the brightest candidates will do their due diligence, prepare customized applications and apply to (in their view) best-fit firms. Thus it is in the striving-for-the-top firms’ interest to take part (and obtain top positions) in such rankings.
Firms that are on the lookout to acquire are likely to investigate who’s in the Top ratings. If a firm isn’t ranking, perhaps that’s an indicator of weaker market position. If a firm is ranked at the top of a particular sub-category or practice area that is strategically important to the acquirer, more reason for both buyer and seller to consider higher valuation.
And if your firm is looking to merge, any additional information including ratings will affect (albeit slightly) your approach to the deal as well.
No, you won’t command higher fees unless you are consistently in the top five per cent of an established category. Caveat — the higher fees should be viewed in comparison to your direct competition and not the struggling bottom-dwellers of the market.
Buyers of professional services
Consider your buyers — are they actually looking into these rankings? If you don’t know, ask them.
For instance, if your buyers from the public sector, corporations or specific industry are known for their bureaucratic approach to buying, your job is to help the procurement officers to check off all the possible boxes. Rankings could be one of those boxes.
In making purchasing decisions, especially if the initial consideration process involves assistants to the decision makers, those gatekeepers will try their best to find a safer firm rather than the more capable one. Being in the Top whatever helps with being perceived as a less-risky service provider.
When these ranking organizations are part of or supportive of industry associations, or organize events themselves, it’s a great opportunity to get together with other professionals.
It’s yet another opportunity to keep tabs on the industry, especially when you know which data is relevant. The data obtained from these organizations can be cross-referenced with other data sources.
By looking at what’s being measured by these organizations your can get a sense of what’s important to other players and if anything worth noticing has changed recently. For example, while revenue, in and of itself, isn’t the best measurement of firm’s performance, it is a useful tracker of market volume and competition.
The biggest boon from participation comes from adhering to standards. Rating organizations tend to have the same set of questions that every participant has to provide answers to. If they don’t, they aren’t included in the ratings.
These criteria in effect are the standards for participating firms. Professionals can assess their standings and make effort to improve which is always a good idea.
Not everything measured by these organizations is noteworthy. However, there are some questions that can be very helpful if taken seriously. Consider the following criteria taken from some of the ranking organizations. I have grouped them by what (if measured and managed) has the potential to become a boon for your practice.
The following criteria encourages firms to seek out better work:
- display very strong technical ability for the most complex and innovative work;
- provide historical track record on top deals/cases; reputation for handling complex, innovative deals;
- mention notable achievements at work in the last 12 months;
- list three most challenging and unique projects (current or past 12 months).
These criteria invites firms to provide better client service:
- provide evidence of responsiveness, speed of action, clarity in communication and opinions;
- demonstrate understanding of the connection of specific legal/accounting/tax/engineering/etc issues to the clients business success.
These criteria is about becoming more efficient:
- give examples of organizational efficiency and innovation that save clients time and money;
- proof of in-depth capability beyond star partners; ability to support client needs right across the team from associate to senior partner (i.e., leverage).
In general, aiming at something and then pursuing it creates positive emotions — that’s how human beings are wired — which is good in and of itself. This is as much true for individual professionals as well as firms. When any firm finds itself aimless, any target seems to be better than none.
From where I stand I see more benefits of being ranked rather than not; and in any case I don’t see any serious negative implications of doing it. (And I am in no way affiliated with or benefiting from any of the ranking organizations.)
Of course if your firm is well-positioned in the marketplace you don’t need any of this externally-validated “vanity fair”. Your superior work speaks for itself. You always charge premium. Your backlog is full to the brim. In my experience, however, this is rarely the case; roughly 80% of firms aren’t there.
Applying the Swan-Crawfish-Pike model
Whenever there is a business decision to be made, I try to qualify it with the help of the S—C—P model. The goal is to make sure there is no misalignment across three pillars: Stakeholders, Clients and Profits. But first we have to make sure the business decision in question has the capacity to contribute to our firm’s sustainability.
Will Stakeholders (employees, partners) benefit from our firm making it into the Top?
Yes, because: A) self-esteem, B) effort to meet (and exceed) standards.
Will Clients benefit from finding our firm in the rankings?
Yes, because: A) it sends a message that the firm abides to, perhaps obscure (from clients’ perspective), but nevertheless existing industry standards; B) accountable to supervisors, people in charge of filtering out service providers will incline toward safer options, and rankings provide an additional safety cushion.
Will our Profits (revenue, margins, costs, valuation) pillar benefit in any way?
The answer to this one isn’t a definite Yes or No for every firm. A professional service firm that aims at becoming the leader in an industry niche, a sub-category or establish a new category will incline towards a Yes. Firms in preparations to being acquired would want to cover all the bases too.
For the rest of the firms there is no direct relationship of being ranked and lower costs or higher revenue and profit margins. The indirect relationship to profitability lies with staff getting better (knowledgeable, skillful) in their attempts to meet and exceed standards.
The point of doing this quick exercise is to understand whether or not this seemingly trivial question of (not) ranking can, in fact, contribute to the sustainability of the firm.
If this test gives you (e.g.) two Yeses to S & C pillars and a No to the Profits pillar, it doesn’t mean you shouldn’t participate in rankings, it means that you ought not to commit too many resources (time, money, people) involved in this business decision. Your firm’s sustainability is not at stake here — consider reviewing the matter next year.
Let me know your thoughts as I might’ve failed to notice something important.