Can Introverts Lead?

Firms are placing their futures at risk if they cannot identify, develop and empower the next generation of leaders.  So it is no surprise that more law firms are investing in leadership development.  For example, according to PaLAW 2009's 14th annual Managing Partners Survey, cited in the November 23, 2009 issue of The Legal Intelligencer, the number of firms surveyed that provide leadership training at any level increased from 40.5% in 2008 to 67.7% in 2009, almost a 60% increase. 

What does it take to be a good leader?  And do we lawyers have what it takes?

There are numerous theories about the best style of leadership--see  Primal Leadership (2002) by Goleman, Boyatzis and McKee for an informative evaluation of 6 major styles. Apart from style, Richard Daft, author of The Leadership Experience, cites numerous studies that have sifted out five recurring personal attributes of successful leaders: openness to experience, emotional stability, conscientiousness, agreeableness and extroversion.

If you look around for potential leaders in your firm, chances are few of your colleagues possess all five of those attributes.  While conscientiousness is something lawyers tend to have in spades, openness to experience (also known as risk tolerance), emotional stability (or emotional intelligence) and agreeableness (aren't we hired NOT to be agreeable?) are all factors that in various studies lawyers tend to fall short on. Certainly, we have clear and robust data that most lawyers (over 70%) are introverts, rather than extroverts. 

So can introverts lead?  Successfully, that is?

There seems to be some hope.  If the concern is that introverts tend not to be charismatic, outgoing personalities, Jim Collins's book Good to Great: Why Some Companies Make the Leap . . . And Others Don't provides some comfort. Collins discovered that glitzy, dynamic, high-profile CEOs are actually a hindrance to the long-term success of their corporations. Charismatic leaders are attractive to others, but they may be less effective in drawing people to the mission and values of the organization itself.

Collins contrasts Lee Iacocca, Chrysler's leader and spokesperson in the 1980s, with Colman Mockler, the CEO of Gillette from 1975 to 1991. While Iacocca almost single-handedly steered his car company away from disaster and put it on the road to prosperity, after his retirement Chrysler's profits faltered, and the company was sold to a German rival five years later. Apparently Iacocca had done little to invest in his successors or build a culture that would ensure the longevity of Chrysler.

In sharp contrast, Mockler made personal sacrifices and took substantial risks for the long-term success of the company and the profits of the shareholders, and he was so effective that $1 invested in Gillette in December 1976 was worth $95.68 in December 1996 and eventually earned a significant premium when the company was sold to P&G in 2005. Laconic and reserved, Mockler labored in relative anonymity for a big-time executive; he was a man who prioritized the success of his company over ego gratification.

Mockler and executives like him are examples of what Collins calls "level 5 leaders," those who are modest, self-effacing and understated, and display a workmanlike diligence—more plow horse than show horse, they set up their successors for even greater success in the next generation.

Leadership guru Peter Drucker goes further to say that "charisma becomes the undoing of leaders. It makes them inflexible, convinced of their own infallibility, unable to change."

So maybe we introverted lawyers, likely to be low on the charisma meter, may have some hope of mastering leadership. Certainly being people who think before we act and listen before we talk can be useful in leadership roles.

Successful leadership may also be enhanced by introspection--a natural for introverts. Leaders who scrutinize every aspect of their leadership and personality (and that of others) may be able to find internal motivations and assumptions that contribute to dysfunction and inefficiency.

Another way that introverts may be able to surpass the traditional leadership attributes is in their ability to "make sense." Wilfred Drath and Charles Palus at the Center for Creative Leadership explain that "most existing theories, models and definitions of leadership proceed from the assumption that somehow leadership is about getting people to do something."  Essentially cheerleading.  That is an effort that requires relish for and persistence in being extraverted.

But Drath and Palus reimagine leadership as "the process of making sense of what people are doing together so that people will understand and be committed." Leadership, in this view, is a matter of providing interpretation. Leaders can give people a lens and a language for understanding their work and experiences in light of larger purposes. They can help shape the mental frameworks of others so that those people see themselves as making contributions to the mission and direction of their organization, working in community for a common purpose.  Here is an opportunity for the thoughtful introvert to make his or her mark.

In the corporate world over the past decades, leaders have produced greater organizational efficiencies by employing advanced analytics and defined metrics and systems. But most organizations that have successfully manipulated these resources are finding it difficult to extract even greater efficiencies from them over time. Many are turning to their human capital as the next source of growth.  Yet many businesses are realizing the difficulty of identifying and developing leaders, particularly those who can lead this kind of productivity growth.  For example, the 2008 IBM Leadership Survey found that over 75% of CEOs lamented their ability to identify and develop leaders to succeed them.

Law firms should take note. 

Leadership involves not just leveraging the collective knowledge and expertise of an organization. Leadership is also about cultivating and nurturing human capital, particularly in such a talent-dependent industry as ours.  Leaders who recognize the perennial needs of individuals to be appreciated, to be part of a community and to feel they are contributing to the greater good are more likely to be able to raise the productivity of their troops.

And even introverts can do that.
 

Muir to Speak on Business Development as Part of Partner Compensation

Ronda Muir is participating as a panelist in CCM's audio conference on "Compensation for Client Development: Tracking, Measuring and Rewarding for New Business Origination" being held at 2pm on Thursday, February 18, 2010. To register, please go to http://www.c4cm.com/lawfirm/compensation_client_development.htm.


 

Barbarians at the Partnership Gate?

The partner smack down has begun.

Here’s the most recent tally for equity partner announcements: Skadden, Arps named 8 new partners, down from 25; Debevoise & Plimpton named 2, down from 6; Weil, Gotshal promoted 3, down from 7; Cleary Gottlieb elected 4 new partners, half as many as in 2008; Ropes & Gray named one-third fewer with 8 new partners; Latham & Watkins cut promotions 25% to 23; Davis Polk & Wardwell named 4 partners compared to 6 a year earlier; Proskauer Rose named 4 to partnership, 1 less than in 2008; Gibson, Dunn & Crutcher named 11 new partners, compared to 13 in 2008; and Wachtell, Lipton, the most profitable firm in the country, named 2 new partners, down from 6 last year. The grand finale is that Cravath is making no new partners this year. Zero.

And it’s not just the firms based in New York and LA that are promoting fewer associates: Mayer Brown named almost half the number of partners compared to 2008, or 14 partners, down from 27, as did Paul, Hastings, naming 6 new partners, down from 11 the prior year. Kirkland and Ellis in October promoted 51 lawyers to non-equity partner (which all partners start out as), constituting a 27% drop from last year.

Clearly part of the reason for the recoil at making new partners is that law firm net income through the third quarter of 2009 was down 6.1 percent industry-wide, according to a survey by Wachovia Legal Specialty Group, part of Wells Fargo Corp, with top-tier firms experiencing a 4.3% decrease.

In reaction, firms have cut expenses, summer and associate ranks, delayed starts, reduced salaries and bonuses and have even cut the compensation of non-equity partners, in some cases clawing back additional capital contributions.

According to The American Lawyer, the number of layoffs stands at more than 2,900 associates since the start of 2008. The average summer class size was 20% smaller this year than last, and of those summers who got offers from Am Law 100 firms, all but a handful are looking at delayed start dates. Most firms have cut back sharply on recruiting for next summer; with at least nine firms, including Morgan, Lewis, Pillsbury Winthrop and Milbank Tweed, having canceled their 2010 summer programs in all or some offices.

Many associates still working have seen their compensation frozen or cut, typically by about 10%, or from $160,000 to $145,000 for first-year associates in major cities.

 For example, Pittsburgh-based Reed Smith is reducing by 20% annual salaries and hourly billing rates for first-year associates and slicing all other associate salaries by 10%. The firm also has introduced merit-based promotion and has had two rounds of layoffs of more than 200 people over the past year. Reed Smith also recently told non-equity partners that they would have to contribute 15% of their base pay to the firm as capital or relinquish their partner status — a move estimated to save the firm $18 million.

Drinker Biddle & Reath has lowered salaries and enhanced training for first-year associates, replaced lockstep promotion with a merit-based program for associates and gone through two rounds of layoffs. Chairman Alfred Putnam notes partners will have made less in 2009 than they did in 2008 and that there will be continued downward pressure on compensation.

But Putnam says firms are loathe to cut partner compensation across the board. “You might have two or three practice groups doing well, and they might say they are not going to take a cut and if the firm makes them, they will just walk across the street [to a competitor].”

So what we have now is the perfect storm for producing class (law class, that is) warfare. Having made all the other conceivable cuts and reductions and clawbacks that partnerships can think of, a number of them are staring at nonetheless reduced partner profits. And those reduced profits look so bad, partners are not willing to cut them further by sharing with additional partners.

The implications of making fewer partners are not pretty, however. Boomers are going to be hanging on longer because of their career-centered lives and their reduced portfolios. Rumbling among the troops will escalate, young turks are likely to go elsewhere because of the uncertainty, new lawyers will have to carefully assess partnership portential before joining a firm and ever-younger clients will find themselves with aging service partners.

Of course, not all firms are cutting the number of partners they are making. Sullivan & Cromwell in October elected 5 new partners, the same as a year earlier. "We're obviously not going to stop making partners because of the financial conditions," said H. Rodgin Cohen, chairman of the firm. Obviously.

And a few brave firms are actually making more partners. Milbank, Tweed recently elected 5 attorneys to partner, up from 4 in 2008. "We certainly pay attention to the economy in making new partner decisions, but we also pay attention to the fact that we're strong enough that we should mostly be focusing on long-term investments," said Mel Immergut, Milbank's chairman.

Fried, Frank named 7 new partners, up from 5 a year earlier. The promotions followed a year where Fried Frank shrank firmwide more than any other law firm, according to data collected by The National Law Journal, with the number of lawyers falling 26.4% to 468 attorneys.

Partners may be tempted to wait out this “downturn” thinking it is a recession and not a reset, but eventually the prospect of lower profitability and therefore lower compensation for partners will have to be confronted and firms are at hazard if they do not deal with the implications. 

What's an Hour Worth Now?

While no one in his or her right mind yet concedes it, let's just assume that the tides have turned and the billable hour is a thing of the past.  What becomes of all the firm procedures and evaluation and promotion and compensation systems triggered or run by billable hours?

How do you tell your associates how much you expect them to work?  What do you do about all those compensation systems--some affecting associate salaries and bonuses, but certainly many determining partner takehome--that require the input of some measure of billable hours--pro bono hours, firm management hours, marketing hours, hours of originated work, hours of work serviced, etc.? 

As a Hildebrandt entry points out: "One thing is for certain... Bonuses based on the number of billable hours will have some unpleasant consequences in a fixed fee environment."  In effect, firms will be caught paying their lawyers for the same inefficiencies that clients are complaining about.  The efficient lawyers, with lower hours, will be the losers.

But changing incentives in an environment where there is no history of change can be challenging.  Author Jim Collins suggests asking this question: "'What is the economic denominator that best drives our economic engine?"  Every firm should be asking itself that question. Is it number of hours? Profit per matter? Profit per lawyer? Profit per dollar spent on labor?

So when that fateful time comes, what will the hour be worth?  Frankly, given the jeers from the client galleries, what's an hour worth now?  

More Accolades for "What the New Law Firm Looks Like"

From Mitt Regan, Professor of Law and Co-Director of the Center for the Study of the Legal Profession at Georgetown University Law Center: "I’m using your piece on 'What the New Law Firm Looks Like' for the Law Firms course that I will be teaching at Harvard Law School this spring. It does the best job I’ve seen of succinctly describing in one place the various trends that are likely to be transforming law firm practice." 

So reassuring to see your offspring make it to Harvard! 

You too can have the benefit of Ivy League-worthy insight. Now is the time to arrange for your managing partner, executive committee, general counsel or partnership to dialogue with Ronda Muir on what the new law firm looks like and where on that continuum your firm is headed. 

Wishing You and Yours the Happiest of Holidays and a New Year of Prosperity and Peace

My sincere thanks to all of you who subscribe to LawPeopleBlog. I hope you have found useful information here this past year. May we prosper from the challenges that the new year brings and remember to be grateful for those opportunities.  Healthy and happy holidays!

 

From Generalization to Specialization and Back Again

If you stay with it long enough, a practice that goes out of fashion will often come back around again.  Those of us of a certain age remember when the first year or more at a big law firm was spent "rotating" around departments to get a good feel for the full range of legal practice.  That quaint practice was drilled out of most firms with the arrival of big ticket associate salaries and the push for faster and higher realization of revenues on their time. 

Now we hear from across the pond that Linklaters is proposing countering  "damaging over-specialisation" by having junior associates spend time in different practice areas in their first few years, a practice that Allen & Overy is also considering and Slaughter and May has already adopted.

“There was an awareness that people are specialising too early and there’s a desire to see people get a more rounded experience in their early years,” a senior partner at Linklaters was quoted as saying. However, it was noted that the move "should not be seen as a reaction to the economic climate."

With due regard to that  Linklaters partner's opinion, whenever this "new" practice is discussed at the law firms we advise stateside, it is raised expressly in the context of the current economic climate--one of the reasons being to position associates to be able to move more quickly out of and into practice areas depending on the firm's needs.

Non-equity partnership tiers have been the fastest growing population segment of law firms during the past decade, but those partners are sometimes specialists in areas where firms can no longer reliably provide sufficient work.  And, like specialized associates, those non-equity partners are often difficult to re-deploy quickly to where the firm's work is.  Many firms are therefore considering limiting or eliminating entirely that tier, moving to an all-equity partnership like back in the old days. Addleshaw Goddard intends to put that reversion in place next year. And a similar noise is being made as DLA Piper reviews its entire firm structure, with unattributed partners saying that the firm could move toward a single tier of partners, eliminating both tiers of income partners in its current model.

The wheel goes round and round.

Making it Personal

Following up on our November 1 entry "The Importance of Glue" is an article by Patricia Gillette, a partner at Orrick, Herrington & Sutcliffe, published December 9 in The American Lawyer, and reproduced below in its entirety.

"The Message That Will Seal Law Firms' Doom: 'It's Nothing Personal'

It's not personal.

This is the current mantra of law firms with regard to their staff members, associates and partners.

"Sorry, first-year associate, you won't be starting work when we said you would. Come back in a year."

"After careful consideration, tenth-year associate, we just can't make you partner yet. Maybe next year."

"We're sorry to do this, twenty-year legal secretary, but we have to cut back on costs and so we're letting you go."

The messages all inevitably are followed by the exculpatory: "It's not personal, it's business."

There is no question that change is coming to the legal profession -- in the way firms are structured for advancement, in the career expectations of associates and in how work gets done. But law firms have yet to come to terms with the fact that these changes might also impact profits, in the same way that changes to the medical profession affected the profit margins of physicians. As such, in many law firms, change is embraced as long as equity partners can continue to earn salaries that will be reflected positively in the almighty profits per partner competition. (And make no mistake that it is a competition, as are most things with lawyers. Thus, we see firms stretching the definitional limits of "profits per partner" as they vie for the top spots on the "list.")

In the resulting wreckage, personal connections are lost. Because what these firms fail to realize is that managing only to the bottom line is a short-term strategy. And while that might be OK with the megafirms that want to see their shadows cast further into the global market and higher up on The Am Law 100, it is not strategic and it ignores the reality of the changing market. Still, large law firms continue to march down this path. And that is the path that has led to the depersonalization of large law firms.

Depersonalization is what allows big-firm associates to come and go freely (no question, when the economy comes back, they'll start moving again). It allows powerful partners to take large books of business to competitors so they can make more money. And, in many of these firms, depersonalization means that quality work plays second fiddle to realization, and good citizenship and mentoring are trumped by profitability.

This phenomenon doesn't stop at the entrance to the law firm. It has spilled over to the clients. The lack of a relationship-driven business model permits clients to be arbitrary and fickle. Historical relationships are traded for "what have you done for me lately" and "how much did it cost." Years of good work and great results are thrown out for the low-cost leader, or a change in the general counsel. Because it's not personal ... not for you, not for anyone, not anymore.

Law firms used to be about relationships. Relationships between partners and partners, associates and partners, clients and lawyers. Law firms used to be about retention and growth of lawyers and client relationships, mentoring and development, loyalty to the institution and to each other and respect for those who came before. Law firms used to be about trust.

That trust, however, has been broken. Witness the demise of giant firms like Heller Ehrman, Thelen and Brobeck -- all big firms that appear to have traded their culture for currency. As a former partner of Heller, I saw our firm, with its rich culture of consensus and collegiality, collapse in part because some partners thought it would be OK to trade core values and firm identity for a moment at the top of a list; because some partners favored the elusive "global reach" over more realistic ambitions; and because some partners chose more immediate returns over the history and tradition of the firm. In big firms that have survived, loyalty is too often defined by the portability of a partner's business, associates are seen (and see themselves) as fungible commodities in whom no one has a stake, and fudging numbers of women and minority associates and partners is justified, if it gets the firm to its rightful place on yet another list.

Is this bottom line/list-driven model sustainable? The answer has to be "No." Because, it ignores what law firms need to fuel their engines: associates who are invested in the firm and the future of the institution. There is no question that the new generation of lawyers is relationship-driven -- social networks define their reality; connecting with others and sharing experiences is their passion. Money is important, but community is more important. Loyalty from young associates cannot be bought with law firm logo-emblazoned swag and big pay checks. It must be earned by good and meaningful work assignments, team approaches and a feeling of being an integral part of the firm.

If Big Law wants to have a sustainable and renewable model, these law firms will have to re-engineer their models. Some law firms are making efforts to do just that by:

Reconnecting with clients for the broader and longer relationship.

Looking at associates as valuable assets that have to be mentored, developed and retained by the firm incentivizing firms to deepen their relationships with associates through active mentoring programs, investing in training and instituting career development programs that recognize and support a nonlinear path to partnership.

Developing a skills-based evaluation and compensation system that rewards teamwork, productivity, quality work, loyalty and competence.

Valuing institutional maturity, diversity and historical contributions along with immediate returns by crediting nonbillable hours spent on broadening client relationships, rewarding partners for retaining associates and increasing diversity, recognizing the need to pass the baton through institutionalized succession planning on client relationships.

Finding ways to truly partner with clients so that law firms and clients have shared risks and rewards by encouraging and supporting alternative billing arrangements, knowing the client's business and recognizing its needs and seconding associates when needed.

Big law firms simply cannot continue to trade relationships with their associates and clients for the prospect of raising profits. In fact, firms that ignore this do so at their own peril. Firm leaders need to recognize that it is relationships and culture that bind people to their firms -- because, for the best and the brightest lawyers in big firms and for the clients who want quality legal work, it is personal."

 

Thanks, Patricia.  Couldn't have said it better.

  

Muir to Advise in Patrick McKenna's ENABLE Program

Muir has been selected by Patrick McKenna (co-author of First Among Equals and Herding Cats) as one of a select group of law firm consultants available to advise law firm leaders under McKenna's ENABLE program--Executive Network of Advisory Boards for Leadership Excellence, which McKenna describes below. 

"Now, more than ever, being a Firm Chair or Managing Partner and leading a professional service firm is a monumental task. Even more critical, how do you handle sensitive or strategic challenges when your previous experience has not adequately prepared you?

Corporate CEO’s who have used Advisory Boards rate them as "very effective" as sounding boards and sources of management mentoring. They also give these boards high ratings for offering ideas, influencing strategy, sharing business contacts, and providing business or industry intelligence.

The primary challenge to making Advisory Boards work for professional service firm leaders lies in recruiting and assembling a group of talented confidants willing to serve on these boards and then having an experienced resource available to help firm leaders get their Advisory Boards up-and-running effectively. The ENABLE program is dedicated to those two objectives."

For additional information, contact Muir at RMuir@RobinRolfeResources or McKenna at patrick@patrickmckenna.com.

Hiring into the Future

Hiring the right people is the first and most important goal in recruitment.  And these days firms do not have the luxury of over-hiring and waiting a few years for the "keepers" to rise to the top. 

A speech at the International Bar Association conference in Madrid last month reiterated the importance of an often-neglected part of recruiting:  determining the personality and other personal attributes, such as emotional intelligence, communication skills, resilience and rainmaking ability, of potential hires to make sure they "fit" a firm as well as a firm's clients.  In anticipation of that presentation, Janet Moore said: "I have been thinking how (most) law firms do not fully assess lawyers before hiring them... What if, as part of the hiring decision, law firms objectively and thoroughly assessed their potential hires?" 

Or, we might add, if firms worry about scaring off recruits with such a sophisticated approach, what if firms used assessments as part of the orientation and integration process to better place new attorneys in practice groups and firm roles?  Or used assessments to help their lawyers build individual career development plans and to inform professional development programs?  Or used them to steer leadership development programs and succession plans?

There is a long list of assessments that have been successfully used for decades by corporations and consultants to the corporate world.  Some shed light on business development propensities, others highlight personality attributes that help position a person in his or her most productive role and others predict and shape delivery and management style.

At a time when law firms are turning more aggressively to business schools for management programs to help their lawyers become better businessmen, it should be pointed out that business schools fairly uniformly require that their graduates complete some sort of personal assessment and take a class on how those attributes influence their team participation and management style--and can help them be more effective.

But an important step is doing the upfront work of identifying what attributes a firm is looking for in hires and how the firm can support the development of those attributes.  “We want bright people, but we’re also looking for other qualities, like a sense of responsibility and a willingness to go the extra mile for clients,” as Cynthia Pladziewicz, Chief Development Officer at Dallas-based Thompson & Knight says.  “We need to understand who succeeds here..." and  “make sure we integrate our recruiting with our development process.”