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Is living a life filled with distrust and deception the price of achieving professional success?  As we head into another year, it is a query worth pursuing.

Steve Katz, adjunct professor at Northwestern University's Business Institutions Program, points out a bestseller published in 1998 that purportedly draws from centuries of powerful leaders (on the order of Machiavelli, Talleyrand, Bismarck, Catherine the Great, Mao, Kissinger, Haile Selassie, etc.) for the best strategies for achieving business success. 

The problem with The 48 Laws of Power by Robert Greene (designed by Joost Elffers) is that virtually every one of these "laws" are counter to most current notions of business ethics and best leadership practices, and in some cases contravene a number of other generally accepted precepts as well.  Which doesn't mean that there aren't plenty of people out there who nonetheless following these "laws."

Mastering one's emotions and perfecting the arts of deception and indirection are, the author asserts, the essential keys to success. Here are some examples:

•   Law 3:    Conceal your Intentions
•   Law 7:    Get others to do the work for you, but always take the credit
•   Law 11:  Keep people dependent on you
•   Law 21:  Play a sucker to catch a sucker-- seem dumber than your mark
•   Law 27:  Play on people's need to believe to create a cult-like following
•   Law 33:  Use each person's weakness as a thumbscrew you can turn to your advantage
•   Law 44:  Disarm and infuriate your enemies by mirroring their values and their actions

While mastering one's emotions is a worthy and productive goal that few fully attain, recent research shows that using that skill to suppress emotion at the workplace will not produce much success.  Lack of effective use and conveyance of emotion, particularly by the leader, is most likely to produce a working group that is not cohesive and not satisfied. 

Perfecting deception and indirection would hardly seem to be what would distinguish anyone from the crowd these days.  And in a post-Sarbanes Oxley world, wielding deception and indirection as tools of management could possibly lead to the wrong side of the bars .

What is not particularly surprising is that the books that Amazon.com identifies as most often bought along with 48 Laws of Power are Get Anyone to Do Anything; Never Feel Powerless Again by David J. Lieberman and The Mystery Method: How to Get Beautiful Women Into Bed by "Mystery" and "Lovedrop."  (Was that a collective rush to Amazon?)

The point is that these kinds of  "power" plays are most likely the province of people who feel they lack influence, allure, value.  The sorry result of resorting to these tactics is that, whatever success is achieved in the short run (and I'm not assuming there usually is much), in the long run not only is there no success, but the journey to that unsucessful end will have been quite an unpleasant one for both the "power player" and his/her team.   

A better stance would be to do the opposite of what each of these rules suggest: 

• Make your intentions clear
• Give credit to others even when you have done some of the work
• Provide the support that can set your team free
• Be a source of information and inspiration to those working with you
• Give others the gift that you believe in them
• Show how each person's strengths can help them and their team work better and happier
• Take a stand for your values and make sure your actions follow suit

So, let us take the opposite of another of these "power laws", Law 20 (which advises not to commit to anyone or anything), and commit to a new year of achieving the kind of power that results from using both emotions and intellect to effectively and honestly build trust and respect at work.

Happy new year!

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For the first time in six years, law firm expenses in the US and the UK are growing faster than revenues, according to a recent article in The American Lawyer.  For the first six months of 2007, gross revenue grew at a strong 13.1%, well above the compound annual growth rate of 10.5% of the prior three years, while productivity (average hours per lawyer) was flat.  Rate increases were in line with the six-year average increase of 7% and, continuing an upward trend, there was an increase in leverage-- total lawyers rose by 7.4%, significantly above the increase in equity partners.

But there were also big increases on the expense side, with the expense growth rate of 13.7% much greater than the average 9.2% of the last three years and outstripping the increase in revenues (13.1%) for the first time in six years. 

The reasons are pretty obvious.  A 17% rise in compensation costs accounted for the bulk of the increase in expenses.  This last year has seen not only big jumps in associate compensation and bonuses but also the announcement of special additional bonuses yet to come.  Equity partner growth in the first half of 2007 was also up 1.5 percent, over .5% from the prior year, although still not up to the average six-year rate of 2.6%.  Operating costs (occupancy and overhead) also grew close to 12%, in many cases driven by additional new hires.  And poor currency conversions rates relating to foreign office expenses have driven those costs up dramatically.

So what does the crystal ball tell about the future?  With the drop off in transactional work caused by the credit crunch and no up-tick in bankruptcy and litigation, productivity in the second half of 2007 is likely to slow, and those higher salaries and bonuses on top of bonuses will fully hit the books.  Revenue for the entire year is likely to be cushioned by the strong inventory accumulated during the first half of 2007, resulting in still decent increases in profits per equity partner of 6-8%.

But 2008 may be another matter altogether.  If transactions don't come back and other practices don't take up the slack, reduced revenues and even layoffs may be in the offing. 

It's a new year coming.  Let's hope the party hats stay on.

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It is a scenario we in the legal field have come to expect--announcements of associate compensation increases are responded to in waves. First the largest firms rush to match them, then the mid-size firms determine how much they are going to raise compensation, often not in a dollar-for-dollar match, and then there is the soul-seeking by the smaller firms.  Can they afford to raise compensation at all? 

In the aftermath of Cravath's recent announcement of special bonuses this year--bonuses ranging from $10,000 to $50,000 on top of the normal annual bonuses ranging from $35,000 to $65,000--a number of large firms have, as expected, followed suit:  Davis Polk & Wardwell, Debevoise & Plimpton, Sullivan & Cromwell, Milbank Tweed, Paul Weiss and Simpson Thacher & Bartlett.

Presumably the mid-size firms are weighing their options and the smallest firms are shaking their heads.

LOWERING COMPENSATION

What is interesting at this juncture is that there are significant developments at the other end of the compensation continuum as well, particularly among mid-size and small firms. 

Chapman and Cutler, a 220-attorney firm in Chicago, this fall started offering second-year associates the opportunity to choose between two pay plans-- one with lower hourly billing requirements and less pay and the other with higher billing requirements and more pay.  Based on both associate and client feedback, Dallas-based Strasburger & Price has replaced over 400 of its required 1900 annual billable hours for first-year lawyers with training hours devoted to associate development--mentoring, leadership development and pro bono projects, while keeping compensation at the same level. 

Boston-based Lowrie, Lando & Anastasi, an intellectual property boutique launched in 2003, has grown to 27 attorneys in part by requiring just 1,600 hours from associates while starting them at $130,000, $30,000 below what large firms in the area offer.  And Ford & Harrison completely abandoned billable-hour minimums for new attorneys, shocking the legal world that views billable hours as the bedrock of the business model, while also earning it some good publicity with potential clients.

In a particularly dramatic development, McDermott Will, a 1,000-attorney firm, has announced that it is hiring a cadre of attorneys to populate a new track the firm is creating-- one that is not en route to partnership, works less hours (30-40 @ week), is paid less (@25% less) and is evidently billed out at lower rates.  With the escalating volume and cost of e-discovery, contract attorneys have become fairly common, flying mostly below the firm/client radar.  These McDermott Will attorneys, however, are being given a permanent, formal position in the structure of the firm.  "The cost of document review has become intolerable for everyone," according to David Balabanian, head of Bingham McCutchen's litigation group.  In the world of full service firms, adding this track allows McDermott Will to retain both the quality control and the profit margin of work that might otherwise go elsewhere-- to lower-cost attorneys, such as SQ Global Solutions in India, or to outside document review firms.

The coup de grace goes to Washington's Howrey, with 618 attorneys, who earlier this year dropped lockstep completely in favor of a performance-based associate compensation system.  We noted in our entry A Small but Important Step in Associate Compensation? DLA Piper's distinction in paying associates differently based on practice area, and the potential that that raised for other types of compensation distinctions. Howrey has taken that to its logical extreme.  It hasn't been easy.  Modifying evaluation forms, adding training programs and hiring personnel to implement the system has been a "tremendous amount of work," according to Edward Han, hiring and development partner.  But the proof will be in the pudding.

THE IMPACT ON NIMBLENESS

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In a report released October 1^st, Catalyst, a New York consultancy, found that Fortune 500 companies with at least three women on their boards strongly outperformed those companies with fewer or no women. Based on a study of four years of corporate results, the correlation was found to be so direct that the more women who serve on a board, the better the bottom line. 

The companies with the highest percentage of women on their boards had equity returns 53% higher, returns on sales 42% higher and returns on invested capital at least 66% higher than those companies with the least number of women board members. Higher returns kicked in once at least three women served on the corporation’s board, the study found, with companies having only three women board members raising each of those returns an average of 5% over corporations with fewer women.

Why would female board participation produce such concrete financial results? Various consultants and academics speculate that women are better able to understand the customer base, particularly of consumer goods companies, and that showcasing women on the board helps attract and retain women employees throughout the company. 

Another reason may well be women’s often strong collaboration skills, empowering them to better resolve conflict and move boards through the thorny discussions necessary to make and carry through critical decisions.

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