Don’t blame the recession

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Posted in: Management, Talent

Bear with me for a moment while I start with a media story. The Washington Post has announced another round of buyouts of writers and editors, including several very senior and respected professionals. Commenting on the impact of the mass exodus is Post writer Howard Kurtz (HT to Rob Hyndman), who notes:

“The talented reporters, editors and photographers walking out the door are part of the heart and soul of a living, breathing organism. How do you replace a Tom Ricks, one of the best Pentagon reporters ever? Or a Sue Schmidt, the investigative reporter who revealed Jack Abramoff‘s dirty dealings? Or Robin Wright, who’s covered the Middle East for a quarter-century? What about battle-scarred editors with deep knowledge and a light touch?

I know, I know. The future is digital. … That’s why The Post (and every other paper on the planet) is beefing up its online presence and why I write a daily blog for the Web site. But — and stop me if you’ve heard this one — newspapers matter. … The economics of the Web, for now, won’t support a staff that can hold public officials accountable across the region and still cover every Nationals game.

Now, if these talented, even legendary professionals are the heart and soul of a great newspaper that does important work, why exactly is the Post is clearing them out? Does a struggling manufacturer discontinue its best products?

Yes, I know newspaper circulation is down, at the Post and elsewhere, and that the web is the future. But good reporting on the web requires the same courage and tenacity demanded by print reporting — and with those qualities not yet in abundance in web journalism, that’s all the more reason the Post should retain its best assets and further strengthen a powerful brand-name advantage that’s the envy of most other newspapers.

“No one yet knows how to monetize web news,” the Post could have said, “but we figure outstanding journalism matters no matter where it appears. We’re going to lean into the wind and reinforce our prize-winning team in the face of change and contraction.” Instead, the message the Post has sent comes down to: “Times are tough, so we’re jettisoning our best and brightest in the hopes that lower costs will restore our profit margins.” That kind of thinking isn’t the Internet’s fault.

This brings me back to the law, because the Post‘s plight reminds me of a number of stories in the legal press about law firms “de-equitizing” partners, cutting associates, and even firing secretaries with the recession setting in. Continue Reading

Surviving a succession crisis

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Posted in: Big Firms, Generations, Management

Law.com’s Small Firm Business features an article today about succession planning for law firms. I’ve seen a lot of these articles lately, talking about the importance of transitioning clients from one generation of lawyers to the next, encouraging leadership development among younger lawyers, and motivating more senior practitioners to mentor the younger ones and share files and client contact. All sound advice, of course. But from the tone of some of these articles, you’d think this process was just a task force and a subcommittee away from easy implementation.

The fact is, succession planning in law firms is a monstrous challenge. And if you’re just now getting around to thinking about it, then there’s a pretty good chance you’re already too late. Shifting the bulk of client responsibilities from more senior to more junior lawyers isn’t something you roll out on short notice. If your firm culture doesn’t already endorse in some way multi-generational client responsibility, genuine mentoring efforts, and innovative compensation methods, be realistic that the odds are against a happy ending.

Why is succession planning so hard? Pick your poison:

1. Loss of power. Succession planning hits every lawyer, especially older ones, at an almost feral level. Change in law firms is always hard, but when you’re talking about fang-and-claw issues like money, power and control, lines will be drawn and obstinacy will rule the day. Those with power will cling to it all the more tightly when they feel it’s threatened.

2. Resistance to change. Lawyers don’t like change at the best of times, so don’t expect them to suddenly start liking changes to who gets to lead trials, drive deals and get client face time. As independent professionals, they will fiercely resist management’s attempts to dictate how “their” clients are handled.

3. Few future leaders. Senior lawyers will say that the juniors “aren’t ready” to take on more responsibility — and often, they’re right, because the seniors have systematically excluded the juniors from meaningful client contact and lead roles on key matters. You can thank firms’ compensation systems in part for that, rewarding lawyers for direct proximity to clients and encouraging hoarding.

4. Generational conflicts. I still can’t get over the resentment that Boomers and even some Xers feel towards the Millennials now moving up the ranks. Gen-Yers are not a passing fad — there are 25 years of Millennials lined up to enter firms, and they’re going to change a lot more than the furniture in the reception area. Too many firms waste too much energy in pointless conflicts between older and younger lawyers, and it can make real succession planning a very unpleasant chore.

So what can you do if your firm is in this situation — late to the succession-planning party and facing multiple challenges to success? Continue Reading

The culture-driven law firm

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Posted in: Big Firms, Leadership, Management, Talent

The era of the free-agent lawyer, and the law firm lateral hiring frenzy that it spawned, is drawing to a close. The rise of the culture-driven law firm is at hand.

It’s going to take me a while to explain how I got here. I’ll try to do this in two parts.

1. Followership in law firms

This all started when I came across a provocative article called “Leaders need followers: tips for team performance“ by Australasian legal consultancy FMRC Legal. The thrust of the article is that successful law firm management hinges on followership — lawyers’ ability and willingness to align their personal values and goals with those of the firm. I first came across “followership” in the law firm context in a 2005 blog post by Gerry Riskin, which was in turn expanded upon by Patrick J. Lamb shortly thereafter.

Here are some excerpts from these three insightful articles that I think sum up what they’re saying. Continue Reading

Law firm success metrics

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Posted in: Big Firms, Management

How successful is your law firm? A question that broad is bound to invite myriad answers, depending on when and to whom you pose it. The traditional terms by which lawyers have described their firms’ success have been financial, most recently through Profits Per Partner (PPP) and then, after non-equity partners were introduced into the mix, Profits per Equity Partner (PEP). The AmLaw 100 (2008 edition due next month) ranks US law firms primarily on PEP, as does a report on the 50 most profitable US firms just published in The Lawyer.

The noisy annual springtime rite of massive law firms shouldering past one another on the PEP rankings suggests that a more comprehensive approach to the question of law firm success metrics would be welcome. And there are now encouraging indications that a counter-trend is emerging, in which the profession buckles down to find a better way to measure just how well firms perform against their own expectations and those of their competitors.

First, let’s look at the problems with PEP as a meaningful guide to law firm success. It has its virtues, no question, primarily as a rough equivalent to corporate return on equity. But it is deeply unreliable as a single gauge of law firm profitability and success, since it ignores elements such as sustainability, efficiency, client and non-partner satisfaction, and corporate social responsibility, among others (not to mention the transparency and reliability of the figures themselves).

Two articles published last year by lawyers at UK law firms nicely eviscerate the value of PEP as a stand-alone metric, one by Allen & Overy partner Guy Beringer in March 2007 and the other by Philip Fletcher of Milbank Tweed in a May ’07 LegalWeek article. Together, they enumerate many of the critical success factors for which PEP doesn’t account.

Philip produces a comprehensive list of what PEP can’t cover: sustainability of revenue over time, the skewing influence of superstar fee earners or one-time revenue boosts, divergent accounting practices, currency differentials in foreign offices, debt levels, recruitment and retention efforts, pro bono work, and overall collegiality. PEP speaks little or not at all to these factors. For his part, Guy lists four reasons why PEP is not only inappropriate, but even dangerous for firms to follow:

First, it ignores the two audiences that determine the success or failure of a law firm: its clients and its people. Second, it tells you almost nothing about the underlying performance of a firm in terms of efficiency and sustainable profitability. Third, it is out of touch with a world which increasingly requires a demonstrable level of corporate responsibility and a broader contribution to the communities in which firms operate. Fourth, it is a calculation in which both the numerator and the denominator have become more impressionist than real. Continue Reading

White-water change management

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Posted in: Big Firms, Innovation, Management

If you help make the decisions at a large law firm anywhere in the world, I assume you’ve been keeping tabs on the developing impact of the UK’s Legal Services Act. There’s been talk about the fallout from the Clementi Report for quite awhile now, especially regarding share offerings by law firms. Seminars are coming up and commentaries have been published; now, we might be about to see a practical application of all the talk.

A Legal Week story published late last week contains this striking opening paragraph: “Lyceum Capital has become the first investment house to openly target legal services, as the private equity firm moves to position itself ahead of sweeping deregulation of the U.K. profession.” Lyceum is not fooling around: the investment house has set up an advisory panel that includes, among others, Richard Susskind and Tony Williams. Any project with those two people on board is to be taken seriously. Big, creatively destructive change is coming, and fast.

This leads me to think that a lot of firms are not taking the ideal approach to change management. There’s a tendency, in any change initiative, to imagine that your organization is fixed, your environment is fixed, and all you’re doing is moving your organization from A to B — shifting the furniture, basically. This overlooks the reality that (a) every organization operates in (and is affected by) multiple external environments simultaneously, and (b) the organization itself is changing every day, whether its members know it or like it.

A better way to approach change management might be to envision your environment as a wild river, the kind you go white-water rafting on: fast, unpredictable, dangerous in parts, requiring constant course corrections. Your job is to navigate that river by guiding your craft along it as best you can — while understanding that the shape of your craft, the people handling the paddles, and your overall water-worthiness are constantly in flux, often in ways that are beyond your control.

The legal marketplace has never been a fixed room full of furniture, but for many years it was a pretty sedate stream. It’s been a rougher ride than that for quite a few years now, but I’m here to tell you: there are white, foaming rapids ahead, maybe steeper than we’ve ever seen, and a lot of boats aren’t going to make it. Those that do will be focused on riding the waves, staying alert to the dangers, keeping one eye on the far shore, and most of all, understanding one key thing: you’re not in full control. The river has more to say about your destination than you do.

Successful change management in this environment requires both a commitment to do whatever it takes to survive coupled with an appreciation of the modest influence you can exert over the end result. As we enter a time of true upheaval in the legal profession, place your highest priority on alertness, adaptability, acceptance of powerful forces, and a focused, unified effort on the goal. Give your full attention to what you can control, keep a respectful eye on what you can’t, and make sure everyone understands and accepts the difference between the two.

Moneyball, women and law

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Posted in: Big Firms, Innovation, Management

Google my name and you’ll find I’ve written a few things about baseball, mostly during my time as a co-founder of and contributor to Batter’s Box, a top-notch Canadian baseball blog. As it happens, one of my favourite baseball books (outside of Thomas Boswell’s and Bill James’s works) isn’t really, I don’t think, about the game at all. Moneyball, a Michael Lewis best-seller about the innovative team-building strategy of the Oakland A’s, is, to my mind, a business book that happens to be about baseball.

If you’ve read Moneyball, you might agree with me that its fundamental lesson is the importance of identifying undervalued assets in a marketplace and stocking up on them before the competition figures out what you’re doing. The A’s front-office combo of Billy Beane and Paul DePodesta figured out that players who reached base a lot contributed as much as or more to victories than did players with more dramatic talents (e.g., stealing bases), yet commanded much lower salaries.

For a team with one of the lowest payrolls in the game, it was a no-brainer for Oakland to pursue the high-value, low-regard personnel, even in the face of derision from richer teams who favoured highlight-reel players. And that’s just what they did. In the result, the A’s were one of the winningest teams of the late ’90s, equalling the performance of New York Yankee clubs with five times their payroll.

It wasn’t a perfect story: Beane conceded that his, um, “stuff” didn’t work in the playoffs, and some of the young players most highly touted in the book never fulfilled what the A’s expected of them. But other teams vindicated this strategy by starting to follow his approach, so Beane switched gears — he began targeting top defensive players as his next “market inefficiency” to exploit. Today, the A’s, when healthy, continue to be a perennial contender.

Looking for the law connection? Others have found it before now: the Moneylaw blog is a great example, as is a terrific blog titled Empirical Legal Studies, which challenges conventional wisdom in the law through the careful application of metrics and reason. Ever since I read Moneyball, I’ve been interested in identifying inefficiencies in the legal talent marketplace.

One of the most obvious is women lawyers, especially those in their 30s and 40s, who are driven out of many law firms by relentless billing demands and inflexible workplace cultures. Continue Reading

Something’s actually happening

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Posted in: Big Firms, Billing, Clients, Competition, Innovation, Leadership, Management

There’s a lot of buzz building about an article in today’s New York Times with the rather odd title “Who’s Cuddly Now? Law Firms.” It summarizes a recent rash of new business models in American law firms, from flextime for lawyers to flat-fee bills for clients to alternative billable-hour schemes and more. It’s the second article the Times has run recently about lawyers seeking satisfaction, and it prompted its rivals at the WSJ’s Law Blog to ask: is there really something happening here?

The WSJ blog’s readers are providing their usual snarky responses: “This new ‘movement’ will dovetail nicely into the massive layoffs that will be coming in the coming months,” says one. “So, you want more time with your family or to pursue your passion for flamenco guitar? Here is 3 months severance.” Nice. So, here’s my answer to the blog’s question: yes. As Judith shouted at Reg in The Life of Brian, “Something’s actually happening!”

I can refer to you any number of articles and links about law firms that are making changes to the way they manage their employees and their work — see the Financial Times‘ law firm innovation report and the Innovaction Awards, for starters. In addition to the firms identified in the Times article, there are others making changes to how they operate in terms of compensation, of partnership, of billable hours, of women in law firms, and even of the entire firm itself. And these are just a few of the ones we hear about — other changes are occurring, quietly and beneath the radar, in areas such as recruitment, retention, training, parental leave, and evaluation.

Law firms are under pressure. They’ve gotten used to a comfortable world where they could set the tone and pace of operations. That comfort zone is evaporating from two directions: externally from clients and internally from lawyers. Clients really are more sophisticated and more demanding, and they’re looking for more than their firms have traditionally been willing to give them. And lawyers really are more inclined to walk away from (or try to change) work conditions that don’t satisfy a wide range of personal needs.

But even that’s not really new — both clients and lawyers are longstanding complainers, and pressure has been brought before, which law firms have ignored. And keep in mind that many, many law firms are continuing to ignore these pressures. What’s really new this time, I think, is not just that law firms are changing the way they do business, but why. I think they’re doing it, voluntarily, to gain a competitive advantage. Continue Reading

Legal secretaries 2.0

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Posted in: Innovation, Management, Technology

With an assist to Ron Friedmann‘s Strategic Legal Technology blog for locating the story, here’s another neat law firm innovation that qualifies as a “why didn’t we think of that?” moment. A Buffalo law firm, Rupp Baase Pfalzgraf Cunningham & Coppola LLC (I’m sure glad I don’t answer the phones there), is giving each of its legal secretaries a specialty for which she’s responsible and to which she can devote her attention and training, rather than assigning her to work for a specific lawyer. Here’s the managing partner, Tony Rupp, with the details:

“We have secretaries specializing in different fields,” Rupp said. “We have someone who’s filing, someone who’s calendaring, someone who’s filing motions and several typists who are concentrating on transcribing the dictation and producing the documents.”

This is a great idea, and it highlights an area in which law firms have been extremely slow to innovate: workflow. The traditional alignment of one lawyer -> one secretary still makes sense in a solo practice, but in a firm with multiple lawyers and a large volume and range of tasks to perform, keeping that alignment just encourages redundancy and inefficiency.

Allowing secretaries to focus on and develop expertise in one particular area creates clear channels through with assignments can flow much more easily and efficiently. Lawyers have specialties; why shouldn’t their secretaries have them too? More importantly, logistics is revolutionizing commerce worldwide, and while a study of law firm logistics (or rather, the near-complete lack thereof) would be a major undertaking, it’s still encouraging to see even one example of a firm willing to rethink how it accomplishes its daily work.

Now, that said, what disappoints me about this effort is that the secretaries’ specialties are still largely clerical and administrative. Continue Reading

Partner up

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Posted in: Management

I’m always a little bemused by those notices in the legal press in which national law firms announce that “X has joined the partnership.” I find it odd that a lawyer in, say, the Montreal office could refer to another lawyer in, say, the Vancouver office, as “my partner.” It seems to stretch the word rather beyond its general meaning.

The strict dictionary definition of “partnership,” as applied in a business context, is “a legal relation existing among persons contractually associated as joint principals in a business.” That’s a suitably dry, distant reading of the term for lawyers, who like to keep warmth and familiarity out of the workplace wherever possible. But it doesn’t jibe very well with the common understanding of what a partner is.

Think about the ways in which the word is used outside the law — “dance partner,” “tennis partner,” “jogging partner,” even “domestic partner.” They all suggest elements of teamwork, togetherness, friendship, common goals, and sharing. Try bringing up togetherness and friendship at the next partnership meeting and see how well that goes.

A lot of law firms these days, though, are gripped with tension and even turmoil about matters like partner compensation, partner defections to other firms, or partners’ behaviour towards others. At the core of many of these difficulties is a shortage of mutual trust, openness and common interest — precisely the elements that make non-law partnerships so successful. Maybe firms should rethink their aversion to the touchy-feely aspects of partnership.

This post originally appeared as the editorial in the December 2007 issue of National magazine.