Managing Partners should have 3 priorities as confidence index drops to record low

From the Sacramento Business Journal today:

Law firm confidence index drops to record low

Excerpt:

Confidence in the economy among managing partners at large law firms nationwide hit new lows in the first quarter, according to the latest research from the Citi Private Bank Law Firm Group in New York City.

I recommend three priorities to Managing Partners:

  1. Bulletproof existing clients (complacency is deadly in light of the predator-like behaviour you can expect from your competitors as their revenues diminish)
  2. Concentrate Business Development training and strategic assistance on your best rainmakers (Train the rest later - for now, you need results)
  3. Coach all partners on how to deal with fee resistance (Your partners will be divided and conquered unless you give them the tools and confidence to effectively deal with the inevitable fee resistance that accompanies a recession.)

PUNCHLINE: There is so much more to do, but I have seen these three initiatives making an immediate palpable difference. NOW is when you need these benefits most.

Cravath Swaine & Moore Killing the Billable Hour?

Evan R. Chesler is a Presiding Partner at Cravath, Swaine & Moore LLP.  He has offered his thoughts via Forbes in a piece called: Kill The Billable Hour.  There is no suggestion that he is articulating a new policy for the entire firm but he is clear on his own views and given that he is the presiding partner, his words may very well represent some strategic thinking within the firm.  

Here are some excerpts from Evan R. Chesler's views:

"I bill by the hour... This needs to be fixed. Yes, you read that correctly."

"Clients have long hated the billable hour, and I understand why."

"So what am I proposing? For reasonable periods of time during the life of a lawsuit, say three months at a time, I should... identify the client's objectives, measure, calculate, build in a contingency and come back with a price. Once the price has been agreed upon, the billable hour should be irrelevant.

PUNCHLINE:   Evan R. Chesler is not the first lawyer to understand this.  Visit the firm founded by awesome litigator Patrick Lamb and you'll see he and his partners have been living without the billable hour for some time at Valorem.  Are Evan Chesler and Patrick Lamb (and those few who think like them) right?  My money is on YES - the proof will be how sophisticated clients vote with their choice of counsel.

Patrick Lamb

Photograph of Evan Chesler by Fred Marcus Photography as it appeared in the referenced Forbes article.  Image of Patrick Lamb (with hammer and clock) from the Valorem firm's website.

Read the entire Evan Chesler story here: Kill The Billable Hour and visit Valorem here and Cravath, Swaine & Moore LLP here.

Hat tip to Larry Bodine's ListServ for alerting me to the story.

 

Bravo Pepe & Hazard for demonstrating what "client driven" really means

Pepe & Hazard has had the courage to decide to freeze its rates for existing clients for 2009 and to go public with that information. 

Managing Partner Al Turco

Managing Partner, Al Turco, said [Pepe & Hazard] is in the process of formulating a 2009 budget to manage its own revenues and expenses.  However you can see the firm’s concern for clients in this statement:

“Our will was to reach out to our clients first. We can manage our own adjustments later”

Firm co-founder Lou Pepe

Firm co-founder and construction law international superstar Lou Pepe demonstrates his sensitivity to the plight of the firm’s many prominent and long standing clients in confirming:

“It’s an economic crisis unlike any we’ve seen before…”

If you are not familiar with Pepe & Hazard, it has national and international prominence that it’s four office locations (including Hartford and Boston) may not make obvious.   In addition to its strength and fine reputation serving businesses and financial institutions, Pepe & Hazard has an unexpectedly broad construction practice mainly representing general contractors, construction managers, and EPC (Engineering Procurement Construction) contractors in a variety of power, infrastructure, heavy industrial, and commercial projects in places from New England to New Orleans, the Middle Atlantic to the Middle East, and Argentina to Australia.

PUNCHLINE:  In these unprecedented economic times, no Managing Partner has enough information to make the right decision.  Making a decision is risky because events can make your choices look bad in hindsight.  Going public with a fee decision is an extremely courageous move because it alerts competitors as well as clients.  Pepe & Hazard’s Managing Partner Al Turco is therefore an exemplar.  He and his firm are putting the interests of their clients ahead of their own and publicly committing to their bold initiative without undo regard to competitors.  There is no seminar for Managing Partners (even my own) that teaches this lesson better than seeing Al Turco “just do it”.

When are you meeting with your Landlord

 

 

Negotiating is a question of power. The Chicago tribune reported today that:


Layoffs at Chicago law firms have sent a shudder through the commercial real estate market.

 

The article, Cutbacks at firms worry landlords, quotes Bill Rogers, managing director of commercial real estate firm Jones Lang LaSalle:

 

"I do have a sense that you may see some landlords get a little more aggressive and push rates down"

The articles continues:

That is likely to push firms into the real estate market. Sonnenschein, whose lease in Sears Tower doesn't expire until 2014, has retained Jones Lang LaSalle to test the market on a possible move. 

PUNCHLINE:  Managing Partners - you may not want to participate in the negotiation yourself for tactical reason but think about your timing for raising the prospect of more favorable terms with your landlord and perhaps some other folks on your payables list.

 

Lehman Liquidation? Merrill Acquisition? Greenspan: "worst economy I've ever seen"?

Managing Partners, you may have a disaster plan for fire, perhaps for terrorism - do you have one for the economic train coming off the tracks?

Listen (and watch) what Greenspan said yesterday Sept 14th (50 seconds)

Punchline:  You are getting fair warning - are you acting on it?  This is not a time for traditional strategic planning - it is time for scenario planning that will create "dynamic resilience" that may become the life support system your firm will need should the economy worsen. 

It's time, as Nike would say, to "Just Do It".  

Push the button. (click it) then let's talk about this privately.

 

 

 

Oh my Darling - 60 years!!!

Britain is facing "arguably the worst" economic downturn in 60 years which will be "more profound and long-lasting" than people had expected, Alistair Darling, the chancellor, tells the Guardian today in a story called: Economy at 60-year low, says Darling. And it will get worse

Wall Street returns from vacation season to enter what is historically the most perilous period of the year amid conflicting signals about the US economic outlook according to Breitbart in a story called: Wall Street enters month of peril with outlook clouded

In the face of these stories, I am disappointed to report that this is the most common management style I am observing among law firm leaders globally:

If this resembles you, give me a call or email me and we can discuss this off the meter.  Managing Partners and members of their immediate senior teams only please.  (You might be even more inclined to call if this does not resemble you.)

Reference my post one year ago: Doom and Gloom for the legal profession - it's coming

and Weather the Storm Article Available from Canadian Bar Association's The National

 

Answer Your Outsourcing Questions



Answer Your Outsourcing Questions
  • Why do some corporations and law firms outsource legal work while others do not?
  • What ethical issues arise in outsourcing legal services?
  • Who is doing the outsourced work and what qualifications do they have?
  • What type of legal work is being outsourced? What are the concerns regarding the outsourcing of patent drafting and patent searches?
  • What impact, if any, will legal outsourcing have on the elite guild nature of the U.S. legal profession?

The International Out-Sourcing and the Legal Profession conference will be held on April 25, 2008 at the UC Berkeley School of Law.

I suggest you decide whether your firm can afford not to have someone attend.

For more information, contact The Institute for Global Challenges and the Law at  the University of California, Berkeley School of Law:
Telephone: 510.642.7830
Fax: 510.643.2362           
email:GCL@law.berkeley.edu
Registration is a modest $150.

For questions or to register by phone, please contact Emily Arntz: 510-642-7830

To see a full description on line, go to the Institute for Global Challenges and Law

Recession-Proof your Law Firm


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
Managing Partners should consider these SEVEN KEY STRATEGIC FACTORS in order to “recession-proof” the firm:

  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.
The Chinese character for “crisis” consists of two symbols. One means “danger,” the other “opportunity.” While strategy may be more challenging during recessions, if you grasp the nettle, opportunities will arise to enhance your client mix and your talent base.

Thanks again to Robert Millard for his collaboration on this. 

As always I appreciate your feedback.


The Edge International Managing Partners Strategy Summit



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.


If you had been in White and Case's NY boardroom last Thursday...

...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

In Memory of the Billable Hour

“Ford & Harrison, a 190-attorney labor and employment firm, has tossed out billable-hour requirements for first-year associates. The program aims to close the practical-skills gap of law school education and increase value to clients. The firm also hopes it will enable associates to handle meatier matters more quickly.“ according to Leigh Jones of The National Law Journal.

I have the privilege of knowing C. Lash Harrison (pictured) and his remarkable stature within his firm.  When I read about this bold initiative I was in no way surprised that it was Lash who had the gravitas to pull this off.  It may be prophetic that the tag line on the Ford & Harrison firm’s website reads:  “THE RIGHT RESPONSE AT THE RIGHT TIME”

"Everyone sits around and complains about the problems," said C. Lash Harrison, managing partner of the law firm. "I figured, what the heck, maybe we can try something."

Observation:  The issue of newer lawyers recording time on files is a bit of a hornet’s nest in most firms.  If the time is billable, it detracts from the billing partner’s realization rate and perhaps even hours billed.   Carefully measured associates steer away from files where they can’t record billable time.  This creates a tension that is based on economic reality but serves neither the associate’s training objectives nor the client’s desire to optimize value.  Thank goodness for fresh thinking and bold initiatives.  That makes C. Lash Harrison a hero to me.

Thank you to LAW.COM for its post Firm Kills Billable Hour for First-Year Associates

Doom and Gloom for the legal profession - it's coming


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-

Seduced by Success


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: