Amazing Firms, Amazing Practices

The Services Safari Blog posted this yesterday:

Calling all Lawyers... The Bear Stearns Collapse

The following is an excerpt:

Shareholder litigants are going to be talking about this one tonight and tomorrow. Let's recap the fall of Bear Stearns stock price and market value the last year:

Stock price last year: $159/share - market cap: $18.76 billion
Stock price last week: $69.75/share - market cap: $8.23 billion
Stock price Friday: $30/share - market cap: $4.04 billion
Acquisition price Sunday: $2/share - market cap: $236 million

The post ends with:

Are criminal indictments in the future?

Punchline:  this trumps my wildest speculation about how erratic the economy may become.  Managing Partners:  Are the appropriate practice group and industry teams watching all economic indicators (formal and informal) and reporting to you frequently (a la #4 in my January 24 post: Recession-Proof your Law Firm).

Is your “winning streak” about to become a “losing streak”?  I believe it is likely unless you prepare for the test you didn’t ask for but are about to take.  Let's be honest, most law firms have had a pretty good run and your partners are well accustomed to it.  Will your partners understand what a decrease is? Will your firm maintain the winning attitude that brought you this far?  If you don’t think the next few miles of road are bumpier than you're used to then the following may be of little interest (except perhaps for the reference to “denying the facts”).

I Irecommend that you visit (or revisit) Confidence - How Winning Streaks and Losing Streaks Begin and End by Harvard’s Rosabeth Moss Kanter. 

Rosabeth Moss Kanter's biography for those interested

Confidence is a road map that helps you react more constructively than you might otherwise have to the challenges you will face (like this deteriorating economy).  The losing streak is fraught with a disease whose symptoms will infect your people - they include::

• Stop communicating
• Criticize and blame
• Disrespect others
• Become isolated
• Focus inward
• Let inequalities develop and persist
• Lose initiative
• Forget goals and aspirations
• Spread negativity
• Deny Facts

• Accountability
• Collaboration
• Initiative

Check out Soundview Summaries and getAbstract.  If there are others, let me know.

PUNCHLINE:  Put Rosabeth Moss Kanter on your informal advisory team by buying the book or subscribing to one of the summary services above.  You cannot prevent the legal profession from having a losing streak here – but you can prevent your firm from having one.

The worst market crisis in 60 years: "recession or worse"?  Says who? The 80th richest man in the world, George Soros, (estimated net worth of 8.5 Billion according to Forbes).  Is Mr. Soros toying with the "D" word: "Depression" when he says "recession or worse"?

I recommend that you read the entire Financial Times (FT) article dated January 22, 2008: The worst market crisis in 60 years.

This is not a new subject for me - see my August 3, 2007 post Doom and Gloom for the legal profession - it's coming with respect to which Valorem Law founder, Patrick Lamb, kindly called me "an awfully good soothsayer" in his January 19, 2008 post Will The Perfect Storm Fundamentally Alter The Foundation Of The Profession?

Citibank’s Law Group Head and friend, Dan DiPietro, seems to be singing in harmony with Mr. Soros.  Dan believes that US law firms may soon be battling unprecedented economic pressures.

As a law firm leader,  you need to ask yourself some hard questions.  My Edge International partner, Rob Millard, and I believe you need to: Recession-Proof your Law Firm and that Law firms must immediately prepare by reassessing their strategies in order to:

• minimize the potentially firm-threatening impact and
• capitalize on competitive opportunities

1. Strong Leadership 

  In ancient times, the Cherokee Nation had one chief who would rule during times of peace; another during war. The need for hard, courageous decisions, even sacrifice, is common to both recessions and wars. In both, strong leadership is critical if hard decisions are to be taken and actually executed.
2. Ramp Up the Frequency of Financial Data Reporting   

Things can change fast in a recession. Clients, under financial pressure themselves, terminate engagements. Revenues may contract. Debtor payment periods and write offs may deteriorate, putting pressure on liquidity. The firm’s key financial metrics must be monitored far more frequently than in boom times.
3. Make the Hard Decisions Humanely and Fast  

Layoffs, if required, must be quick and humane not only to preserve capital, but also to get the firm past this trauma quickly and focused on working forward again. Continued employment of underperformers must be carefully assessed. Where the market is no longer buying specific services there are two choices: retool (quickly) or separate. (Do not misinterpret this as a suggestion to rush to lay off people though. Long-term considerations suggest this is a last resort option for all personnel except those who ought to have been asked to leave years ago.)
4. Get Practice Leaders and Client Team Leaders focused on short-term action plans  

Actions must be executed more quickly than in “good times” and therefore designed for rapid implementation. Plans must be focused, systematic and disciplined. Those that will actually drive plans must be integrally involved in crafting them and managing their execution. Feedback and accountability measures are critical to ensure that the plans are executed, especially when they relate to the hard, courageous decisions (point 1.) Non-billable time becomes a valuable asset and must be actively managed to ensure that key tasks receive priority.
5. Involve Your Clients  

In recessions, client mobility increases. Client needs evolve more quickly as new threats and opportunities emerge. Firms need to go beyond simply expressing empathy and assuring continuing loyalty. They need to actively position themselves to meet emerging key client needs. This cannot be done without actively discussing business (not just legal) issues with clients. If you don’t have client teams in place for your key clients, now would be a good time to start!
6. Manage Internal Expectations   Business as Usual Could Be Lethal

Remember the tale of the two frogs? The first is dropped into a bowl of hot water. It jumps out. The second is dropped into a bowl of cold water and slowly heated up. It doesn’t jump out and eventually dies. Similar procrastination has been the death of too many good firms. You need to explain internally what is being done to weather the recession and the likely impact on the financial positions of your people. This knowledge will motivate your people to do what is expected of them rather than default to “business as usual.”
7. This Too Shall Pass   Keep a Balance With Your Long Term Strategy

Think strategically about whether and where to cut short-term resources. Retaining some temporarily unprofitable practice areas and individuals may be advisable if they are important to your long-term goals. On the other hand, a recession is an excellent time to re-engineer or sever areas that have become less profitable but have been tolerated to avoid conflict.

Thanks again to Robert Millard for his collaboration on this. 

As always I appreciate your feedback.

Gary Wingens of Lowenstein Sandler and Frank Burch of DLA Piper listen to Dan DiPietro of Citibank forecasting a tough 2008 at the Army and Navy Club in Washington DC during The Edge International Managing Partners Strategy Summit

Last week, my Edge International partner Robert Millard and I hosted a very private, personal, invitation only, Strategy Summit for the Managing Partners of 10 law firms to explore:

•    key strategic issues facing law firms today

•    what law firms are doing to address these issues

•    what constitutes "best practice" in the law firm strategy process

The managing partners represented firms ranging from the largest in the world (DLA Piper) to a tiny, brand new firm with a highly innovative business model (Valorem Law Group.) It was a truly fascinating two days of strategic debate and solution building.

On the facilitation / faculty side, we were joined by guests Dan DiPietro of Citibank’s Law group and Michael Rynowecer, President of BTI Consulting Group of Boston. The venue was one of the most prestigious and historic venues in Washington DC: The Army and Navy Club, barely a block from the White House.

We are currently preparing to communicate learnings from the Summit in a special publication in February. Not everything will be covered. The summit included many candid exchanges between the managing partners, sometimes on quite sensitive issues. Arguably, this was by far the most valuable part of the summit. We have agreed that the Managing Partners themselves will be the final arbiters on what gets published and what does not.

Thank you very much to the managing partners that participated. In alphabetical order, they were:

Charles P. (Chuck) Adams, Jr., Managing Partner, Adams & Reese
Francis (Frank) Burch Jr., Joint Global Chief Executive Officer, DLA Piper
Nicolás Herrera, Managing Partner "Guyer & Regules" (Montevideo, Uruguay)
R. Steven Kestner, Executive Partner, Baker & Hostetler
Patrick Lamb, Chairman, Valorem Law Group
Don G. Lents, Chairman, Bryan Cave
Christopher Marston, Chief Executive Office, "Exemplar Law Partners"
Keith Vaughan, Managing Partner, Womble Carlyle Sandridge & Rice
Mark D. Wasserman, Managing Partner, Sutherland Asbill & Brennan (substituted for by Executive Partner Tom Gick on Day 2)
Gary M. Wingens Managing Partner Nominee, Lowenstein Sandler

Each invitation was extended based upon personal peer recommendation.  The event was not publicized beforehand.  Many of those invited reluctantly declined because of conflicts with their internal firm events, often related to compensation given the time of year.

Given the very positive feedback from the participating Managing Partners, we will certainly host similar events in the future.  If you are interested in being invited and are willing to recommend other firm leaders with whom you would like to explore timely issues, please let me or my Edge partner Rob Millard know.

...you would have seen my Edge International colleague and friend, Robert Millard, present the findings from the latest Managing Partner Forum Survey related to differences in approach to strategy in firms in the United Kingdom vs North America, and also in CPA (Accounting) Firms vs Law Firms.  (Click on the sample slide to enlarge)

Download your own copy from Robert Millard’s Blog, Adventures in Strategy, post: Slides from Managing Partners' Forum meeting at White & Case LLP, New York on Thursday, 18 October 2007

Here are some teasers/excerpts:

"Attacks on the competence of Indian lawyers and law graduates are about as valid as saying that Indian software engineers are incapable of handling sophisticated IT (information technology) work. To the contrary, the Indian IT industry is a world leader, and the same will be the case with offshored legal services."

"A recent study conducted by Harvard Law School and LexisNexis reveals that 75 per cent of US law graduates admit they do not have the necessary skills to practise law."

"So you would expect that these deficiencies would be met by rigorous training programs undertaken by Western law firms. Guess again! The Harvard-LexisNexis study reveals that 64 per cent of young lawyers receive no organised, on-the-job training."

"By contrast, reputable legal services offshoring companies in India provide rigorous training to their lawyers, and the hours spent on training do not appear on invoices to clients."  

"…at least in the US, law graduates for the most part are notoriously incapable of writing effectively in English. The problem is so severe that some large US law firms now assign a writing coach to each incoming associate. However, most lawyers in the West never receive this kind of training. By contrast, reputable legal services offshoring companies in India train all their attorneys in English writing."

"The future of the legal services offshoring industry in India appears very bright."

"Corporations, not Western law firms, will drive the market in the years ahead."

"Another way that corporations will drive the market, indirectly, is by obtaining flat (or fixed) rate billing from their outside counsel, instead of hourly billing. For example, the mega law firm, Morgan Lewis & Bockius, now handles all of the litigation for Cisco Systems for a fixed annual fee."

"Every sector of the legal offshoring industry will grow dramatically, including lower end services, such as document coding and legal transcription. Ultimately, however, the biggest impact, the long-term mother lode, will be higher-value services such as legal research and drafting – services that constitute the bulk of the legal work now done in the West."

"Long-term, India’s enormous, mostly untapped population of over one billion citizens will continue to make India competitive in relation to other offshore destinations… ultimately it will not only decrease poverty, but increase the number of law graduates."

"On the most positive note, the growth and development of the legal offshoring industry in India will help bring about a major change in the way legal services are delivered in the West."

At Edge International we are often asked about how lawyers and their firms might be different from place to place around the world.    One of my stock answers is that many people misinterpret the propensity of the Brits to avoid hyperbole to mean that they are not aggressive.  There is a reason why they once ruled the world and their legal profession seems to be bent on repeating the feat.

According to a post today at LAWFUEL, "Lovells, the law firm, is to launch an alliance with nine Chinese counterparts, in the latest sign of the English legal profession’s aggressive efforts to export its services to big economies where foreign lawyers are restricted."  (Note, not one or two or three, but NINE!

As well, "China is one of a number of leading emerging economies being lobbied by the British government and legal industry representatives to scrap restrictions on foreign lawyers."

PUNCHLINE:  The Brits have never stopped thinking globally - many Americans have not started.  (There are notable exceptions of course but if I were placing a bet on world domination, my gold coin goes on the British square.)  Your thoughts?

       Mike Dillon

Would you listen to the General Counsel of Sun Microsystems, if he said:

“I do believe that there may be times when a $1,000/hour fee is warranted”

“…just yesterday, I read of another example of how law firms continue to be primarily focused on maintaining profits through consolidation and growth of headcount. As a GC, what I'd rather see is an article about how law firms are creating new business models that reflect the reality of my organization - providing consistently high quality of service with a constant focus on efficiency.”

“As recently as four years ago, we had several hundred (that's always embarrassing for me to say) law firms that we used for general purpose legal work in the United States. Since then, we have been aggressively reducing this number to the point that this year we announced that we are moving to nine "Preferred Partner" firms.”

“…we are already seeing examples where … firms are proposing creative pricing models and investing in better understanding our business.”

“…we needed to have about 10,000 agreements reviewed and summarized for an on-line database. We send out an RFP to a large number of firms and through this process filtered the number of candidates down to a handful. These were then invited to participate in an on-line competition for the work. During the course of the event, it was fascinating to see firms from around the world compete to win the business. (If you've ever sold anything on eBay, you know the feeling.)”

“…we quietly started a small team several years ago called "GLN" (Global Legal Services). They are focused on efficiently handling the less complex, but higher volume agreements and services we provide.”

The above quotes are from a single blog post called: Context is everything by Mike Dillon
Senior Vice President, General Counsel and Corporate Secretary, Sun Legal Department of
Sun Microsystems, Inc.: .

PUNCHLINE:  Managing Partners – do you dare not read his future blog posts?

Many of my friends and clients know me as a very optimistic person so this post may surprise them.  I feel like I am about to watch the next dot com crash only I am not talking about the internet or high tech.

I have held this belief for many months and I believe that the economic indicators that can hurt the legal profession are gaining momentum.  How much longer can the legal profession remain insulated from the market realities?  I say not long at all.

Our legal profession is in for very rough times. My message to Managing Partners is not to become pessimistic but simply to have a contingency plan in place.

Most firms will:

a) continue to be hourly billers (for the most part)
b) plan for extensions of the historic linear revenue and profit per partner growth
c) perhaps fine tune by de-equitizing or closing an unprofitable office or two

but few will create a contingency plan for:

a) dramatic drops in demand for many traditionally hot practice areas
b) over-staffing (at all levels and in most practice areas)
c) the cancer of internally competitive behavior as the pie shrinks

Those inclined to tell me I am crazy I ask to wait six months following the next US election – then I will eat this post if I was wrong.

I love our profession and want only the best for it so I hope the smart Managing Partners out there will prove that great firms can thrive through adversity – especially when your competitors are not capable of doing so.

My heart hopes I am wrong – but my mind tells me otherwise.  I decided that down the road it would be no good to say “I knew it” if I lacked the courage to post it now.

Your comments are most welcome, as always.

Addendum:

Patrick Lamb posted the following comment both here and on his own popular blog: In Search of Perfect Client Service in his post: Gerry Riskin's Forecast: Stormy Times Ahead.

I think he deserves a response:

Patrick’s comment/question:    Gerry--very powerful post.  Not one that I disagree with at all, but can you share with us the signs you see that lead you to this conclusion?  And are the elections tied to result or simply a benchmark for the time by which you think the changes will be apparent?  Ciao.

My response:  The US election is a process that sees powerful interest groups exercising their discretion in a manner which will increase the probability of their preferred candidate(s) being elected.  As a result, a temporary and indeed unsustainable economic climate may be manifested.   I think things get very real about six months after US presidential elections.  With outcomes certain, interest groups lose their motivation in a hurry – at least for a while.   As for the indicators themselves, I am afraid to start because where do I finish?  However, here are some things to examine:

    Currency fluctuations
    Price of oil
    Price of precious metals
    Increase and decrease in “real” jobs
    Geographic location of those jobs
    Political stability of job locations
    Foreign relations as they affect business
    Balance of Trade between countries and regions
    Housing markets (not just prices – but demand)
    Auto market (demand)
    Credit levels (or should I say “debt levels”)
    Interest rates (they are not falling, in fact, get ready…)
    The advent of the largely unregulated Hedge Fund industry
    The establishment pensions that invest in Hedge Funds
    The Domino effect – how one indicator impacts many others

And specific to the legal profession:
   
    The disparity between views of General Counsel and Outside Law Firms
    Associate starting salaries (and consequential impact on all salaries)
    “De-equitization of partners” trend
    “Law firms going public” (anticipated) trend
    The obsession by partners on remuneration
    The expectation of continued increasing revenues, PPP and PPL
    The surrealism of the financial expectations of new lawyers
    Comments from Citigroup’s law firm market specialists

Disclaimer:  Yes, I obtained a business degree before law and yes I studied economics and yes I subscribe to reliable publications like The Economist but I do not profess to be able to predict the stock market or future currency fluctuations.  In fact, I will admit that my post is based to a large extent on a hunch – intuition (I read Blink by Malcolm Gladwell so maybe this is OK).

Punchline:  If there were a fund that invested in the legal profession worldwide (at least in the western world) I am not a buyer – I might even summon the courage to put some money at risk by “selling short”.

In closing, perhaps not you, Patrick but there are many who will think I am completely wrong – I not only respect their right to hold that view, I hope that their view prevails.  I post this because if there I seven a significant possibility I am right, as stated in my original post:  “My message to Managing Partners is not to become pessimistic but simply to have a contingency plan in place.”

Addendum #2:  In light of the stock market tumble today, I thought I should clarify that this post was not a reaction to it but rather done before today and scheduled to auto post after midnight this AM - here is an image from my aggregator to verify:

-30-

Ahhhh yes… seduction! 

Many great firms that I serve have a common enemy ”complacency” which Is indeed the result of decades of success.  Managing Partners complain that they are unable to get their partners to pay attention to their future.

Read Jim Hassett’s blogpost, Have lawyers been seduced by success? In his fantastic blog: Legal Business Development.

Here’s a teaser quote: 

If you like money, it's a great time to be a lawyer. In Citigroup's Law Watch survey of "153 US law firms broadly representative of the industry," law firm revenue has gone up 9.8% per year since 2001. But as Bill Gates put it: "Success is a lousy teacher. It seduces smart people into thinking they can't lose." We know lawyers are smart people. Do some think they can't lose?

Read why Jim argues that you ought to read:

Harsh?  If killing the golden goose is stupid, then this is not harsh at all. 

Find out why 58% of (surveyed) General Counsel expressed outrage.  Find out why 84% of (surveyed) General Counsel wanted the law firms they use to contact them about associate salaries but none did.

Brilliant law firm leaders who can not empathize with the clients they serve (including General Counsel in their larger clients) are going to pay an enormous price.

If sustaining profitability is high on your agenda, read Patrick Lamb’s post called “Demand Destruction” in his famous In Search of Client Service" blog.  (In a better world, there would have been no need for this post.)

Punchline:  Within the next two years, many private practice law firms will be going through some rough times and many will blame the GC’s of their clients.  There are two sides to this story.  Some bold firms should gather the courage to communicate with their clients directly and with candor.  The best texts on negotiating describe win/win scenarios where both sides benefit.  There is a certain immaturity to the ostrich approach most law firms take to these issues – even major firms.

The Wall Street Journal posts: Slater & Gordon: The World’s First Publicly Traded Law Firm

Managing Partners and other members of law firm C suites had better look at Slater & Gordon’s prospectus – it’s a gold mine, (pun intended).

Have a look at how risks are described – the Wall Street Journal post quotes the passage balancing professional responsibility and shareholder profits.

"Lawyers have a primary duty to the courts and a secondary duty to their clients. These duties are paramount given the nature of the Company’s business as an Incorporated Legal Practice. There could be circumstances in which the lawyers of Slater & Gordon are required to act in accordance with these duties and contrary to other corporate responsibilities and against the interests of Shareholders or the short-term profitability of the Company."

I adored the "Key Risks" page (click on it to download pdf of this page):

PUNCHLINE:  If this does not fascinate you, you should resign from your leadership position.  I am not saying you should follow suit – I want you to know what your options are and what your competitors might be up to way sooner than you would like to think.

Science fiction movies adore time travel and ripples in the primordial fabric.  We are witnessing a collision - the future has just exploded into the present.  With Clemente in the UK just over the horizon, please fasten your seatbelts - this is a pivotal moment for the legal profession and for the Managing Partners within it.  Like Dennis Hopper's famous line in the movie Speed, "what are you going to do, Jack"

You may want to reference my earlier post:  The end of the legal profession as you knew it...

The Wall Street Journal speaks - shall we listen?

“[William Durbin Jr.] regrets having focused too much on profits and “de-equitizing” partners (reducing their stake in the profit pool) in an effort to boost the bottom line, a strategy that has become popular in Big Law. ‘There’s a lot more that people bring to a law firm than profitability: integrity, a cheerful demeanor, teaching ability,” he said. “These intangibles have more importance than I paid to them.”

“Durbin says he’s written two letters to a partner he had demoted. “I said that ‘I’m sorry. I have regrets. You were always good to me and this should not have happened.’” The partner never wrote back.”

“The 51-year-old Dallas resident says he’s gotten out of corporate law and has undergone an “interior change” These days, Durbin says, he is studying Spanish with the goal of helping underprivileged Latino children.”

Punchline:  Law is a profession… a calling… it has (and deserves) dignity…  may we please place a filter under the coffee of profit to ensure that we deserve to survive as a profession – shall we deserve to survive or shall we deserve to die.  This is directed at lonely Managing Partners whose constituencies persist that it is all about the PPP.  Maybe there is something else!

Note:  I haven't mentioned the firm name - does it matter?  If it does, see (WSJ subscription required): The Rise and Fall of ...

I am not willing to bet against Cravath Swaine & Moore, are you?  In fact their strategic decision in creating an insolvency practice may be cause for additional respect rather than cheap shots.

The Wall Street Journal in a post called:  The Horror! The Horror! Cravath Starts a Bankruptcy Practice is quite hard on Cravath by referring to its new practice area as "declasse" and by asking whether " the ultimate white-shoe firm, has decided to scuff up its oxfords a bit".

But before deciding that the recruiting of former Skadden partner Richard Levin,  "one of the authors of the 1978 U.S. Bankruptcy Code" might be in some way negative, think about this. 

Perhaps the brilliant minds at Cravath have peered into their crystal ball and decided that $4.00 per gallon fuel, an expensive war, continuing low interest rates, a sliding dollar and a rapidly deteriorating housing market mean that many significant businesses are on a collision course with insolvency.

PUNCHLINE:  It will be interesting to see what the hindsight analysis on this event is two years from now when my speculation is that  Cravath Swaine & Moore and the word "ultimate" will be used in the same sentence without any reference to scuffing up its oxfords.

"Buyouts alone accounted for 277 transactions worth $121billion in Asia last year" according to The Financial Express China is most popular destination for new law firms

Your thoughts?

According to The Wall Street Journal, "Mayer, Brown, Rowe & Maw LLP, on Friday said that 45 partners have been asked to leave or accept other positions there as part of a restructuring".

According to thier own web site, Mayer, Brown, Rowe & Maw LLP is among the largest law practices in the world, with more than 1,500 lawyers operating in 14 major cities worldwide including London, Frankfurt, Paris, Chicago, New York, Washington D.C. and Hong Kong.

Punchline:  I am not shocked that a law firm would cull its herd of partners but most do so discretely offering assistance to those affected to keep organic appearances.  This sudden and public move sends a message that is less than positive.  Why?

The story requires a subscription: Mayer Fires, Demotes 45 Partners

Does law firm success equal commitments + uncertainties + calibrated focus?  (I didn't say the formula would be simple.)

I hope top blogger Guy Kawasaki will not mind my using his entire question #7 from his post today featuring Michael Raynor, author of The Strategy Paradox.

Please take a moment to read it in its entirety and then look at my law firm questions below.  I think there may be a profound lesson here if we are willing to transpose. 

In order to be thinking “law firm”, substitute the words “Management Committee” for “Board”, “Managing Partner” for “CEO”, “Department Heads” for “Divisional or business unit vice-presidents “ and “Practice Group Leaders” for “Managers”.

Guy Kawasaki’s 7th question: What’s the proper role in strategy formation for each level in a hierarchy?

Michael Raynor’s answer: I’ve found that it helps to think about strategy in two halves: the commitments that all successful strategies entail, and the uncertainties attendant to those commitments. Commitments and uncertainties are only half the answer. The rest of the solution lies in calibrating the focus of each level of the hierarchy to the uncertainties it faces. It is common sense—if not common practice—that the more senior levels of a hierarchy should be focused on longer time horizons. What hasn’t been as widely recognized is that with longer time horizons come greater levels of uncertainty, and strategic uncertainty in particular. This fact has some profound implications for how each level in an organization should act.

• Board members should ask: What is the appropriate level of strategic risk for a firm to take? What resources should be devoted to mitigating risk? What sacrifices in performance are acceptable in exchange for lower strategic risk? This allows the board to be involved in strategy without getting involved in strategy making, which is correctly the purview of the senior management team.

• The CEO should ask: What strategic uncertainties does the company face? What strategic options are needed to cope with those uncertainties? In other words, it falls to the CEO, and the rest of the senior team, to find ways to create the strategic risk profile the board has mandated for the firm.

• Divisional or business unit vice-presidents should ask: What commitments should we make in order to achieve our performance targets? For these folks, it’s no longer about mitigating strategic risks, but making strategic commitments. Someone has to take the actions that create wealth, after all.

• Managers should ask: How can we best execute on the commitments that have been made in order to achieve our performance targets? To put it on a bumper sticker, they have to “show us the money.” There are no strategic choices to make at this level, because the time horizons are too short—six to twenty-four months. Strategies simply can’t change that fast.

Do the various levels of your law firm’s management think like Mike Raynor suggests?

Is your law firm strip-mined every year (every penny available is distributed to the partners less the investments that are made over the kicking and screaming of individual objectors)?  If so, is your firm deprived of the luxury of long term planning/investing (or even medium term)?

It has been predicted that China will dominate earth by 2050 because of its long term orientation.  A recent article in the New York Times, From 0 to 60 to World Domination, shows how Japan’s Toyota leads the automobile industry with its long term thinking.

PUNCHLINE:  So, I wonder if the extraordinary success of a few large firms is due to the fact that they have grown big enough to be business-like and the individual partners simply don’t have enough relative power to mess it up?  I wonder further if a courageous firm will emerge that will operate as Raynor suggests and with Toyota's winning long-term orientation.  Should that occur, a lot of today's law firms will have a lot to worry about.

Your thoughts?

Seth Godin explains this distinction simply with a post well worth reading: "The difference between strategy and tactics". 

Punchline:  My experience working with law firm leaders is that many are quickly seduced by discussions about tactics.  Perhaps they are more familiar with tactics than strategy or simply enjoy debating tactics.  The great firms have the discipline to do the right things well (rather than efficiently doing the camel-actions conceived by consensus).

Lovells has more than 1600 lawyers in 26 offices worldwide and according to RollOnFriday "the firm has signed a deal with Cass Business School and from next month, lawyers who've been at the firm for around two years will take a two year business foundation course in the evenings. Once this is completed, they'll spend three years studying three MBA electives. Some lawyers will then be sponsored to complete a full MBA"

Lovells joins several other major law firms in obtaining significant supplementary education for their lawyers either in house or by arrangement with a prestigious school.   While this behavior may not be commonplace, it is certainly a trend to watch.

Food for thought:  Ask yourself why a law firm would make this kind of investment.  I suspect it has to do with profession-wide declining client satisfaction scores and the number one concern of top clients that law firms simply don't understand their business.  You have to give credit to Lovells for this initiative – I hope it pays off for them and will therefore be emulated.

Dear friend, Sue Stapely, FIPR FRSA is thought to be the UK’s only practising solicitor providing comprehensive strategic communications counsel, with unrivaled experience, particularly working in the legal sector.

Read her July 20th article in UK's Law Gazette:

When reputations are on the line

Here's a tiny excerpt:

…we should also worry about the reputations of our firms. One slip, one oversight, one badly handled complaint, one aggrieved staff member can destroy overnight reputations that took decades to establish.

.

When you fire a client, you might want to be a little more diplomatic than the title of this post (or the posture of the fellow above) implies — but, diplomatic or not, when it's the right thing to do, DO IT!

The primary purpose of marketing is to give you choices. Effective marketing allows you to improve your client mix and get rid of the ones who consume your life forces like voracious vampires — you know the ones, they don't pay (or pay VERY slowly), they argue, they test your ethics and they demoralize you and your best staff — and they don't wear watches, at least not when they call you at home at 11 o'clock at night.

Read Seth Godin's post "The Customer is Always Right" and simply substitute "client" for "customer" You owe it to yourself!

"thinking first" may focus too heavily on the matter itself, interfering with deep understanding of the issues dividing people and actually preventing a good decision.

This is all according to a fascinating post today by my South African friend and Edge International colleague, Robert Millard, called Logic Not Always Best For Real-World Decisions

Robert discovered what he called a "startling conclusion" in an MIT Sloan Management Review Article by famous strategy authors Henry Mintzberg and Frances Wesley (more details in Robert's post).

Sometimes there are better ways — instead of thinking first, we can see first or do first.

PUNCHLINE: My take on this for Managing Partners (and others involved at the senior end of law firm management) is Robert is guiding us not to address problems in our old familiar patterns but to acquire the capacity to use diverse approaches depending on the situation. Check it out.

Patrick J. Lamb

There are many voices on the subject of the management of law firms but very few have Patrick Lamb's depth of experience and accomplishment. Patrick continues to practice in a complex and specialized area of the law attracting and maintaining clients at the high end of the curve. I think his own track record entitles him to greater credibility than those offered by pure theoreticians.

In his post, Are There Definite Rights And Wrongs For Client Satisfaction Surveys?, Patrick explores the evolution of the discussion on this topic including some of my own contributions. I liked the way Patrick summed up his thoughts:

A lawyer or law firm gains from every face to face meeting with the client, and those meetings should be as frequent as possible. Most of those meetings should be directed to providing service or exploring needs that the client has. The client satisfaction meeting, however, is critical and must be treated as distinct, both in form and in substance. It is a chance for the spotlight to be shifted from the client to the firm, and for the client to provide insights that the firm should desperately want to hear about how it can render service in a way that makes the client happier, more satisfied and more committed to the firm. This keeps the client satisfaction meetings separate in the critical spot they deserve.

PUNCHLINE: Follow Patrick's sage advice - the most important part is getting out there and "doing it"!

Jim Hassett

Thank you to Jim Hassett at his Law Firm Business Development Blog for continuing the conversation about Bullet Proofing Crown Jewel Clients with his new post regarding my thoughts on the comments of Steven Bell, Director of Sales at Womble Carlyle. See his post To Sell or Not to Sell in his Law Firm Development Blog today.

Jim's two part story on my recent presentation to the Marketing Partners Forum can be found in his recent posts:

Bulletproofing your crown jewel clients – Part 1

Bulletproofing your crown jewel clients – Part 2

According to a story in the Toledo Blade today, Fuller & Henry, founded in 1892, "has all but disappeared… Its sign is gone from the door". The article goes on to say: "At one time, the business occupied two floors of the city's most prominent downtown office building but lately had just part of a floor. By the late 1990s, it had closed its Port Clinton office; several years ago, it shut its Findlay office, and a year ago, it left its Columbus office."

But here's the clincher:

Observers at other law firms say the defections and downsizings resulted from partnership disagreements over compensation and management.

FastForward: Most lawyers will share a sense of sadness at the events that have befallen Fuller & Henry but few will realize just how perilously close their own firm may be to a similar fate. As times become more competitive, the forces that could cause a stampede of exiting lawyers are not so remote. In my opinion, complacency is often the worst enemy. You might want to discuss this at your next executive committee meeting.

Press Release

Just 30.7% of clients recommend their primary law firm
Low satisfaction drives client spending to new law firms

BOSTON, March 2 /PRNewswire/ -- The BTI Consulting Group's fifth annual survey of corporate counsel reveals an unprecedented drop in client satisfaction with law firms. Just 30.7% of large and Fortune 1000 companies recommend their primary law firms. These deep dips in client satisfaction, reports BTI, promise to drive dollars into the hands a new set of law firms, unsettling the status quo.
"Large clients are making broad-sweeping changes in how they hire and work with their law firms," comments Michael B. Rynowecer, BTI's President, "These changes will translate into opportunity for a select group of well-positioned law firms."

BTI's study analyzes how law firms can position themselves to benefit from these critical changes in a brand new report, How Clients Hire, Fire and Spend: Landing the World's Best Clients. BTI found an astonishing 53.7% of clients ousted their primary law firms in the past 18 months. More than 50% of clients also reported they plan to try at least one new law firm for substantive matters in 2006.

BTI conducted more than 200 independent, individual interviews with corporate counsel at Fortune 1000 companies and large organizations each year for the past five years. Find information on BTI's How Clients Hire, Fire and Spend: Landing the World's Best Clients and other compelling research in the legal services industry on BTI's website at http://www.bticonsulting.com or contact BTI at (617) 439-0333. BTI is the leader in providing high-impact market and client research to law firms and General Counsel.

For details, contact:
Michael B. Rynowecer
Phone (617) 439-0333
mrynowecer@bticonsulting.com

FASTFORWARD: Rynowecer's work has been extremely helpful to strategists within major firms. The trend he sites is alarming. I like his optimism that it means opportunities for many firms but it is a scathing condemnation of many established firms who are failing to Bullet Proof their Crown Jewel Clients. Could this in part be due to an ever increasing sophistication of demanding clients? Perhaps... but you know where the onus is. In my view, this should be a topic for discussion at your very next executive committee meeting followed by an action plan — it is only the firms who actually do something who will benefit from this crisis of confidence.

Seth Godin provokes our thoughts with a very quick intellectual journey through service to expectations. In his post, What customer surveys measure, he teaches us not that serving and satisfying is impossible but that it is possible to do the former extremely well without doing the latter.

TRANSLATION FOR LAWYERS: Excellent legal work is not enough. Excellent work plus managing expectations plus exceeding those expectations is indeed enough. Is your firm doing enough? Are your individual lawyers and client teams doing enough?

Follow me on a journey of logic — skip a decade to 2015 when air travel may dramatically increase in speed to 30,000 km per hour or 18,000 miles per hour — imagine a trip from Moscow to New York in 50 minutes or Moscow to Sydney in one hour and six minutes. (See reference to news story at end of post)

I contend that as the world continues to shrink, we will see a breed of global super lawyers who will go almost anywhere where there is a lucrative opportunity to bring unique skill and knowledge to bear on a legal problem.

What will this mean for competition — especially for the global firms. One might argue that they will be best positioned to exploit the opportunity because they can move their specialists around the globe more easily. However, it may also represent a threat to the global firms because agile competitors will be able to send top guns in without having to establish expensive local offices. A third possibility (my favorite) is that we will see even greater industry specialization such that any member of that industry will hire a known dream-team law firm the bricks and mortar location of which will be irrelevant.

I propose this as a serious planning issue, if not immediately, at least in the not too distant future. Competitive advantage comes from thinking ahead of the curve — not behind it.

Fasten your seatbelts!

(Story: Spaceflight from Moscow to New York to take less than an hour)

Since Alvin Toffler's Future Shock and Third Wave we have been expecting accelerating change and while I comprehend it intellectually, change usually seems to be gradual — it just sort of creeps up on you.

Well, according to this National Public Radio story, here's a change you will notice.

If you are designing new offices, two restrooms, one for each gender, just may not be enough anymore.

Morning Edition, December 15, 2005 · The city council of Nova Iguacu, Brazil, has passed a bill requiring night clubs, movie theaters, malls and other public places to provide a third bathroom for transvestites. The mayor has yet to sign it. But the council says having only two options -- men’s and women's -- is a big problem in a town with 28,000 transvestites. (Well, it is just outside Rio.)

I am not trying to be cheesy here, but let me ask you... did you see that one coming?

The additional irony here is that the story is about law — after all, that is what is being debated — a law forcing requiring three bathrooms in public places (albeit only in Nova Iguacu, for now).

For this one visible and rather remarkable change, there are thousands of more subtle ones from text messaging to internet in the friendly skies.

So, when you are planning, do not fall into the trap of simply doing a linear extrapolation from the present - or you may get caught with your pants down — or should I say panties — maybe even in the wrong restroom.

Thank you to Tom Peters Wire Service for the story

This post by Andy Havens on Larry Bodine's LegalMarketing Blog is a "must read".

PUNCHLINE: Five years from now law firms who are not paying attention will be trying to play "catch-up", an unfortunate strategy. Am I saying to Managing Partners: "join" — no... I am saying at least keep a watching brief.

Adam Lewis, a Director and the Managing Partner of the Australian and New Zealand practices of McKinsey & Company, was one of my co-presenters at the World Masters of Law Firm Management last week, in Sydney.

Adam told us a number of fascinating things about McKinsey, one of the premium consultancies in the world. Among them were two gems:

1) McKinsey & Company has no internal marketing department. (Why not? Because the consultants themselves market the firm.)

2) 2/4/8. Every Director in the firm is required to be working on "2" assignments, be in the process of proposing for "4" more, and in communication with "8" more prospective clients.

Management within McKinsey follows up to ensure that "2/4/8" is a reality.

Some superb marketing professionals in some extraordinary law and accounting firms confided in me that if their fairy godmother granted one wish it would be that their "professionals" would interact with clients beyond just doing the work.

It sounds like McKinsey's "2/4/8" means that the fairy godmother has already visited McKinsey & Company.

Bravo to Womble Carlyle Sandridge & Rice and Molden Holley Fergusson Thompson & Heard for their ingenious alliance to create and market diversity.

Molden Holley is a small and new African-American firm comprised of partners who came from major firms. In what appears to be a brilliant win-win alliance, this new firm will continue to be independent but will bolt on all of the resources of AmLaw powerhouse Womble Carlyle when and as required; meanwhile, Womble Carlyle gets to demonstrate to clients like Wal-Mart and Sara Lee that it is listening to their General Counsel who have been requiring all of their legal providers to make rapid diversity progress.

(For further particulars on those diversity requirements, see my post titled: Law Firms as "Exclusive Clubs for White Men")

PUNCHLINE: While other firms may not yet have diversity on their radar screens and while those who do are likely progressing slowly and in a linear fashion, these two firms are hitting warp speed.

The most fascinating part of this story is yet to unfold. It's the marketing initiative (contained in this quote from the complete story in Small Firm Business — referenced below):

"Regina S. Molden, the managing partner for Molden Holley, said members of the two firms will meet monthly to develop a marketing strategy targeted towards existing and potential Womble Carlyle clients seeking more diversity."

WOW! Imagine the potential here. This is not smoke and mirrors but rather a very real capacity to provide diversity to clients IF those diversity-demanding clients are prepared to accept that the alliance is genuine and truly fulfills the spirit of their diversity requirements.

Whichever firm initiated the idea, it is an illustration of strategic genius — especially if it works. If it does, it will be a pattern worth emulating.

For a more particulars, see the full story filed by Meredith Hobbs in the Fulton County Daily Report on July 29th as published in Small Firm Business: Big Firm Partners With Minority-Owned Boutique to Increase Diversity

In a recent Edge International Survey on Strategic Planning, we learned the following:

10% of firms have a strategy to remain flexible and opportunistic ("OK!")
13% of firms are in the process of preparing a strategic plan ("We believe you!")
15% of firms have a strategic plan but have not committed it to writing ("Oh my!")
60% of firms have a formal, written strategic plan ("Congrats — if all your people know what it says")
2% Other responses

If you ask most lawyers where their next matter will come from, they will say something like "it depends…". If asked: "depends on what?" the response is typically "depends on who calls or writes or faxes or emails next". Great plan. You just sit there like a grain of sand on the beach and your next work opportunity depends on the the nature of the next wave that rolls in.

Planning is about making choices about what you prefer to do. You earn the right to do those things by providing more valuable legal work that the right prospective clients can appreciate.

PunchLine: If you don't have a written plan, you don't have a plan. If you don't have a plan, then you are a ship without a course… and guess what happens to ships without a destination.

Is Diversity on your management agenda? Has it ever been?

This is a serious wake up call to every single member of your law firm's management team.

Diversity is not some do-good-philanthropic-topic for a tea party of the rich and bored. Diversity is serious business: serious to business; serious for business… not to mention that it is the right thing to do.

In her Law.com article today, Wal-Mart Demands Diversity in Law Firms, Meredith Hobbs explores the demands that General Counsel in major corporations are placing at the doorstep of law firms.

The General Counsel referenced in the article are in the following companies:

Wal-Mart
Visa International
Del Monte
Pitney Bowes
Cox Communications

The article goes on to say:

So far, close to 100 general counsel have signed on, including those from some of the nation's biggest companies.

If you think you can get by this issue with tokenism, you need to understand what is being demanded of you. For example, the article includes these quotes:

The nation's biggest retailer wants to see diversity at the top.

The goal… is to "increase the number of women and minorities directly responsible for [our] relationship at our law firms."

"We are terminating a firm right now strictly because of their inability to grasp our diversity expectations,"

In her Separate but Equal article in Marketing the Law Firm, a Law Jounal Newsletters publication, Elizabeth Anne 'Betiayn' Tursi offers this advice:

The idea that law firm leaders need not be at the helm of these initiatives can only mean that it will be doomed to fail. The chair or managing partner of a firm must be a proponent of the causes and must be involved in every aspect of promoting the initiatives. In the case of creating this particular blueprint, management serves as the "project leader" or lead architect. Leadership can set the tone for the institution of these initiatives and is in the enviable position of selecting others in the firm who can also promote and develop the actual initiatives. And yes, there should be a chair for each initiative — diversity, pro bono, recruiting and marketing — who meet once a month, with the directors of these initiatives to ensure that they are working together to develop the blueprint, and also to make certain that these individuals are in a positions that enable them to have a voice in implementing the programs to achieve the intended result.

Notes:

1) The title of this blog is based upon this quote from the Law.com article:

It is no longer enough, the general counsel at the symposium said, to raise the numbers of women and minority lawyers in a firm's lower ranks if its upper echelons remain an exclusive club for white men.

2) Photo Caption (Thank you Purdue)
A Purdue sociology professor explores racial and ethnic relations in his book "Diversity and Unity." Martin Patchen says inequalities among ethnic groups often lead to prejudice, segregation and discrimination. (Purdue News Service photo illustration by Vince Walter)
Color photo, electronic transmission, and Web and ftp download available. Photo ID: Patchen.diversity
Download Photo Here

The Winter 2005 edition of our quarterly magazine, Edge International Review, is now available for downloading as a PDF.

This is a full color 40 page magazine so may takle a few minutes to download. (Some browsers will display the magazine without downloading it.)

Senior management team members in law firms may request a complimentary subscription to the hard copy version by sending me an email.

Orrick Herrington & Sutcliff is a magnificent firm that had the courage to be innovative and create a Virginia based service center for itself.

…and now, according to an article in The Lawyer.com:

Orrick Herrington & Sutcliffe is planning a new outsourcing services company for other law firms.

"The truth is that the global 100 are competing with each other, but most lawyers aren't in those firms. There's a whole universe of lawyers who are spending inordinate amounts of money doing their own finances and supporting their technology and we can do it for a fraction of the cost," said Baxter.

Punchline: Whatever happens, keep an eye on this and learn from it — we don't see too many clear transitions in the practice of law — if this works, it will in hindsight have been a big one.

I believe this is the most important story in the legal profession in your lifetime, even if you are a centenarian. It redefines the debate as to whether law is a profession or a business. According to today's Financial Times UK edition,

"One in 10 of the 100 biggest law firms have indicated they could seek a stock market flotation in the wake of planned rules allowing outside investment in the legal sector."

And of those who are not contemplating a flotation:

"one in five expected their firms to seek outside investment"

"Two-thirds of the managing partners, in effect the law firms' chief executives, said their firms were likely to admit professional managers to the partnership."

Food for thought – Good News and Bad News:

The Good News: The notion of allowing non-lawyer partners would permit key support professionals like Executive Directors, Financial Officers, Marketing Directors, Training Directors, IT Managers, Knowledge Managers etc etc to have a stake in the business. I am OK with that - especially if it reduces the "us vs. them" attitude that is so prevalent between lawyers and non-lawyers in many firms.

More Good News: Investing in the firms future by enabling it to improve value to clients through training and infrastructure is a great idea.

Final Good News (sort of): A few wealthy people will get much wealthier in the initial deal (it’s called cashing out). Maybe they promise to stay around for a while for cosmetics and even shake a few hands now and then, but let's not be coy, the desire of power partners to get a whopping return is what will drive these deals. Some not-so-senior partners will get some good cash too. (Where were those lake cottages for sale again?)

The Bad News: Selling a stake in the firm, whether to the market or an investor, is suicidal. This investment comes with a built-in poison pill. Here is the progression:

Step One: Senior partners cash out. (Note, Step One of Bad News is borrowed from Good News... as Leonard Cohen sang, "we are locked into our suffering and our pleasures are the seal".)

Step Two: Everyone feels very excited - they will now be a part of something big and supposedly wonderful and corporate - perhaps the firm will even be managed now. There will be champagne and hats and lots and lots of publicity. (Clients will yawn).

Step Three: Reality sets in... these investors want WHAT? ... a return on their investment… off the top? What are you talking about. Profits are for partners. Oh, and those things that we used to do because we thought it was fitting for members of the profession to “give back” are not going to get approved without a business case for how they generate new fee income? The grey area between business development and boondoggles will be grey no more. Fly economy, buster. We have standards of performance that are enforced and your friend in the corner office can no longer protect you (she already cashed out, remember?).

Step Four: “Hey, wait a minute”, say the young Turks, “why should we suffer in a firm where 20% of our profits, off the top no less, go to outside investors? Hmmmm, I could be generating the same income in a firm that does not have outside investors… hmmm, let’s consider this for a nanosecond. [The next sound you hear is the whirring revolving doors as the up-and-comers leave for greener pastures.] (Greener pastures are defined as firms who were not daft enough to get on this bandwagon in a moment of mind numbness.)

Step Five: The remaining productive career-oriented partners say “this isn’t working” and the investors are saying the same. We are losing talent, morale has plummeted, no-one listens to the turn-around CEO you brought in from industry… the future is far from bright if we stay on this path… “better liquidate”.

Step Six: The remaining partners make an offer to buy the firm back from the investors for 10 cents on the dollar (or 10 P on the Pound Sterling) and the episode fades into oblivion.

For those who are thinking: “this story is about the UK – not our jurisdiction” I will simply remind you that the largest firm in the world is based there—along with a number of other global legal powerhouses.

I would like to extend my congratulations to the 9 out of 10 biggest firms who are not contemplating a flotation and the four out of five who are not interested in private capital either. You are the wise ones – you don’t need capital that way – you can generate your own. After all, you are in a people business – you do not compete with Intel. If you did, you might need a few billion for a plant in Asia. All you need is to keep your wits about you as a few of our colleagues proceed lemming-like into the sea… I’ll see you at the Carlton Club and we can lament their tragedies over a cognac.

From the Art of War Blog:

Strategy teaches that we can never see our own position. We need outsiders to give us perspective.

You may want to look at the full article, however, the point is this: law firms rarely have an outside board member or a client mentor - instead we tend to fear the input of non-lawyers. Why? Is it because they really don't understand or we fear they may see us with clarity?

I do not think we fear clarity - I think we fear having to convince our partners that our myopic preconceived notions are sometimes plain wrong.

So Fast Company (which is up for sale if you want a once great publication) is chatting about Tom Peters whom I mentioned recently... look at this sidebar as a teaser and then check out the full article...

Sidebar: The Peters Principles

A sampling of some of the most important themes covered in Tom Peters's new book, Re-imagine!

Destroy to Create

Forget about Built to Last.