Law People : Law Practice Management, Organizational and Personal Dynamics; Talent Management : Ronda Muir of Law People Management, Inc.

The reports are in for 2011 on mergers and acquisitions in the law firm biz-- the pace is picking up-- and the prospects for 2012 look to be the same.  

US Mergers

Hildebrandt reports that 45 mergers that involved U.S. firms were completed last year, a 67% increase over 2010, with the Midwest being a locus of activity,  With 11 U.S. mergers already announced by the first week of 2012, almost double the number (6) announced at the same time a year ago, "merger activity appears to be heading back towards pre-recessionary levels which typically saw 55+ mergers per year... [W]e predict this trend will continue in 2012." Hildebrandt notes that by their tally mergers outside the U.S. jumped to 54 in 2011 compared to 44 and 48 in 2010 and 2009, respectively.

Altman Weil counts 60 law firm mergers and acquisitions announced in the United States in 2011, up 54% from 2010 and at the highest level since 2008, according to Altman Weil MergerLine, while the number of cross-border mergers involving US firms declined in 2011 after increases in 2009 and 2010.  “We think the trend toward larger deals will continue and the pace of mergers could accelerate in 2012.” 

The largest merger in 2011 between two U.S.-based firms was the combination of Kilpatrick Stockton and Townsend Townsend and Crew to create Kilpatrick Townsend & Stockton, followed by the acquisition by Edwards Angell Palmer & Dodge, a 500-lawyer Boston-based firm, of Wildman, Harrold, Allen & Dixon, a 160-lawyer Chicago firm, creating Edwards Wildman Palmer effective October 1. 

Faegre & Benson, headquartered in Minneapolis, merged with Indianapolis-based Baker & Daniels to form nearly-800-lawyer Faegre Baker Daniels on January 1.  Bryan Cave, a 900-lawyer firm based in St. Louis, acquired 59-lawyer Denver-based Holme Roberts & Owen as of January 1.  Ice Miller in Indianapolis also combined with Schottenstein Zox & Dunn in Columbus, Ohio effective January 1. Bingham McHale, an Indianapolis-based law firm, merged with Louisville-based Greenebaum Doll & McDonald to form 250-lawyer Bingham Greenebaum Doll effective January 2. 

So the industry must be starting to take off again, right? 

What is not always apparent from the data is why those mergers are taking place. In some cases,  the acquisitions are of law firms that were in deep trouble. For example,  Bryan Cave acquired Holme Roberts & Owen after it suffered a string of partner defections and staff layoffs, while Arnold & Porter merged with San Francisco’s Howard Rice after Howard Rice had lost nearly half its lawyers over the preceding decade. The negotiation of the Edwards Wildman Palmer merger has been scrutinized recently for having been tainted by the personal agenda of a managing partner, since replaced, rather than having been executed with the best interest of the firm in mind.

So when the predictions are for more mergers in 2012, one has to wonder if that is an indication of further distress as much as growth in the industry. Dissolutions of law firms took place throughout 2011, starting with Howrey LLP and continuing with smaller and midsize firms throughout the year. Clearly a lot of firms are having a tough time adjusting to the new marketplace, with some firms not even making it to the acquisition stage.

Asia Arising

Perhaps the greatest event in the law firm merger market recently is one that has largely gone unheralded-- the announcement of the merger of China’s King & Wood and Australia’s Mallesons to be effective March 1. Becoming the largest law firm based in the Asia-Pacific region, with more than 1,800 lawyers, King & Wood Mallesons will be a combination of one of China's largest law firms with one of Australia’s biggest, most innovative firms. But that is not where the Chinese are stopping. The two largest law firms in China, Dacheng and Yingke, are opening offices in London and a small Chinese firm, Broad & Bright,  is in merger discussions with Clifford Chance. Has the rest of the international legal world taken note of this wave of Chinese competition starting to lap at its shores in this year of the Dragon, the most auspicious of all of the Chinese years to start a business or execute a strategy?

Where does all that leave us?  As Patrick Lamb of the Valorem Law Group reminds clients: "The turmoil in law firms created by merger talk, rumors of merger talks, rumors of departures, rumors of de-equitization or personnel reductions DOES affect the work on your matters.  Don’t be naive enough to think your work is immune!"

Where we are is in a quickly expanding legal services universe that no longer revolves around the pyramid that you grew up with.  It is a universe that requires innovative, forward-thinking strategies to first identify your market, build an effective delivery system to keep and expand your client list and finally adapt your practice to the ever-changing future.

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In a new CareerBuilder survey of more than 2600 hiring managers and human resource professionals nationwide, 71% said they value emotional intelligence in an employee more than IQ and 34% said they are placing even greater emphasis on emotional intelligence when hiring and promoting employees post-recession.  And 59% said they would not hire someone who has a high IQ but low EI, while 75% said they would promote a high EI worker over a high IQ candidate.

Why do these hiring managers value EI so much?  Because, they said, the high EI employees:

• are more likely to stay calm under pressure
• know how to resolve conflict effectively
• are empathetic to their team members and react accordingly
• lead by example
• make more thoughtful business decisions

What behaviors do these managers look for that indicate high EI?  Employees who:

• admit to and learn from mistakes
• keep emotions in check
• have thoughtful discussions on tough issues
• listen as much or more than they talk
• take criticism well
• show grace under pressure

Another recent announcement was the inauguration of the USF SELECT program, in which a small group of incoming University of South Florida medical students are being admitted into an elite program based on an evaluation of their emotional intelligence.  The SELECT program is based on the expectation that "students with higher emotional intelligence can become more engaged, compassionate physicians who work effectively with teams and can lead change in health care organizations." Although this is the first time USF has used emotional intelligence as a gauge of leadership potential, the goal is to eventually incorporate EI training into the curriculum for all medical students, a trend in medical school education that is spreading rapidly.  

The SELECT program will include peer and faculty "coaching" groups intended "to help them cultivate this skill set of emotional competence," according to the USF Vice Dean Dr. Alicia Monroe. 

In order to choose the incoming SELECT class, faculty submitted applicants to a 90-minute "behavioral event interview," a method of interviewing that is often used in the business world and is starting to be used by some law firms, but is rarely part of academic medicine applications. Students were asked to recall how they reacted to specific quandaries or important events in their lives and what they learned from each situation. Teleos Leadership Institute staff trained the SELECT faculty to look for "a grounded explanation in students’ lived experiences," Dr. Monroe said. "To see, through this, how the students articulated the way in which they reason, problem-solve and use self-awareness to interact effectively with others, to communicate empathy and to manage relationships.."

In asking how he viewed the relevance of the EI screening, one of the successful candidates stated that "Once we become more aware of how we interact on an individual level, we will be prepared to collectively lead efforts for systemic changes in healthcare delivery. This is the big picture and it is still abstract, but I hope this program sets us up to do just that."

Halfway around the world, the new Australian Prime Minister Julia Gillard's department is providing emotional training workshops and personal coaching to her cabinet and staff.  "The fundamental purpose...is to foster enlightened and responsible leadership," according to one of the providers.

What is the common thread here?  Emotional intelligence is no longer a "squishy" concept that starry-eyed granola eaters and new agers proselytize.  We lawyers are about to be set back in our perennial competition with doctors by their realization that EI conveys real advantages, something corporate managers are already well aware of.

Will lawyers get the message?  Or are we too smug in how enlightened we are already?

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One of the more interesting findings in emotional intelligence research is that people who read emotional cues in others are generally good at reading their own emotional states and vice-verse—those who read themselves well are likely to read others well also. Conversely, an inability to read either oneself or others signals the corresponding inability. These findings are so well-established that most EI assessments only test a person’s ability to read external cues—knowing that the results will apply to that person’s ability to read their own emotions as well.

While this correlation may seem logical, we know that the experience of emotions is often different from what that experience looks like from the outside. A number of explanations have been offered for this linked phenomenon—perhaps it is simply a matter of having the vocabulary to describe emotions generally, or having actually experienced the emotions in question.  

A new study sheds some light. “Embodied Emotion Perception: Amplifying and Dampening Facial Feedback Modulates Emotional Perception Accuracy” by David T. Neal, a psychologist at the University of Southern California, and Tanya L. Chartrand, a professor of marketing and psychology at the Duke University Fuqua School of Business, published in Social Psychological and Personality Science, reports that not only do those who have had Botox injections not express facially what they are feeling, they also have very little idea what others are feeling as well.

According to the study, an observer unconsciously mimics another person's expression, and it is the experience of feeling that facial expression that leads the person back to understanding the emotion that produces such an expression. In the experiment, women with Botox injected 2 weeks prior to the assessment were significantly less accurate at decoding both positive and negative facial expressions than those who had been injected with a facial filler that did not impact muscle function.

In a second related experiment, participants with a gel on their face (similar to a facial mask) that required them to work their muscles harder to make facial expressions could more accurately identify emotions in others.

What does this mean for us in law practice?

Lawyers consistently score lower than the general population on emotional intelligence. The base of emotional intelligence requires the ability to “read” emotions—which information is then analyzed as to how to best manage those emotions. If the underlying “read” is not accurate, then we are caught in a “garbage in, garbage out” situation that makes any analyses and management decisions (skills that lawyers are not deficient in) nonetheless invalid.

The stoic lawyer who does not express emotions may be the very paradigm of the inaccurate reader—unable to express these emotions him/herself, s/he cannot identify the emotions others are feeling.

The good news here is that a short intervention may well be all that is needed to improve the situation—while two weeks can dampen one’s ability to express and therefore read others’ emotions, a similar period of concentrated training in expression can result in a significant improvement.

As part of our high-potential coaching program, we are able to offer that training to your best business development and leadership prospects.

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In connection with the American Lawyer's announcement of the 2010 Am Law 100, Amy Kolz, a reporter there, wrote an article about profit margins of those firms over the last five years, to which I contributed. To summarize the article's main points:

• Not only for the past 3 recession years but also for the final two years of the boom (and we would argue even before that), associates in highly-leveraged firms were "underutilized assets with high fixed costs."  Thus, the majority of firms with profit margins higher than the average (38%) reported leverage ratios lower than the average (3.45), with firms in the bottom profitability quartile (32% and below) showing leverage 22% higher than the average. 
• In spite of significant growth in nonequity partners over the last 5 years, single tier firms and those with the fewest nonequities consistently reported higher profit margins--averaging @45%-- than that of firms with a majority of non-equity partners--27%. Part of the answer lies in the fact that since at least 2007 average hours billed by nonequities are lower than those of both equity partners and associates (a distinction which might become less relevant in the fixed fee marketplace).
• Firms within the highest quartile of profitability hired the fewest laterals--comprising less than 4% of their equity partners, compared with firms in the bottom quartile who hired in an average of 18% of their partners. Part of the explanation continues to be in rich up-front compensation packages for laterals, 60% or more of whom don't work out. 
• Real estate also took a bite out of profits: firms with more than 20 offices had an average margin of 34% compared to 46% for those firms with less than 7 offices. Nonetheless, truly international firms enjoyed slightly higher profit margins than their more domestic peers.

There were a number of issues we discussed that didn't make this and related articles (see also "Living on the Margins"). For example, an additional and ongoing drag on profitability is the steadily declining rate of realization, in both billing and collecting, over the last ten years or so, which may abate as the economy picks up but has hit some firms hard. Better intake procedures, client relationship management and billing follow-up can help improve realization.

The practices within a firm--whether it's bond work at Weil Gotshal or Cravath-style deals--also impact profitability, so much so that it makes the firm-wide information less valuable than the practice group information, according to Steve Roster, formerly managing partner at Morrison & Foerster.  

On the real estate side, when a firm negotiated its lease, how prime the space is and how much was spent on building-out and furnishing can have a long-term impact on firms profits.

Many firms have tried to improve profitability by radically reducing expenses--renegotiating big-ticket costs, firing staffers and associates and under-performing partners, with a resultant up-tick in profitability.  The problem is that many firms are running out of expense reductions and those they have made have not been focused on long-term benefit.

As to the oft-asked question as to whether profit margins will recover or continue to be erratic/decline, my guess is that there will be a fake toward returned profitability as revenues general pick up, which will be most deleterious to those firms who have not done some serious thinking about retooling their delivery model and internally aligning with that—they will assume all is back to “normal.”  For those firms, that comfort will get them through a few years of bumpy but fairly steady profitability that will eventually decline as more forward-thinking firms with more sophisticated internal processes and management make inroads into the revenue pie.  And it will be hard for them to catch up. 

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Perhaps your mother's adage about what makes for beautiful is not entirely correct.  It was recently announced that economists at the University of Texas-Austin analyzed data from five large surveys of more than 25,000 people conducted between 1971 and 2009 in the US, Canada, Germany and Britain and came up with what may or may not be a surprising conclusion:

Physical beauty gets you both money and happiness.

Participants in the top 15% of people ranked by looks were more than 10% happier than those in the bottom 10% of looks and the extra economic benefit that resulted from beauty accounted for at least half of that extra happiness--evidently better-looking people generally earn more money and marry people both better-looking and also higher-earning.

Another economist at the University of Texas-Austin, Daniel Hamermesh, a leading researcher of beauty and success,  presided over a series of surveys in the United States and Canada just over a decade ago which showed that for men the ugliness “penalty” was -9% in earnings while the beauty premium was +5%.  For women, perhaps surprisingly, the effect was less marked: the ugliness penalty in earnings was -6% while the beauty premium was +4%.

An article in the Economist a few years ago entitled "To Those That Have Shall Be Given" reported on research finding that as a general matter physical attributes associated with beauty also "give clues about intelligence, and that such clues are picked up by other people."

So where do we lawyers stand on the good looks=happiness/earnings/intelligence calculation?

Fortunately, Dr. Hamermesh has looked into that question also.  In his paper  "Beauty, Productivity and Discrimination: Lawyers' Looks and Lucre," examining the careers of graduates of a large, unnamed American law school (University of Michigan), he found that

• Those rated attractive on the basis of their matriculation photographs went on to earn higher salaries than their less attractive classmates.
• Better-looking attorneys who graduated in the 1970s earned more after 5 years of practice than their worse- looking classmates, other things equal, an effect that grew even larger by the 15h year of practice. There was, however, interestingly enough, no impact of beauty on earnings among 1980s graduates.  
• Women who graduated from law school in the 1970s were better looking overall than women in the 1980s.
• Attorneys in the private sector were judged better-looking than those in the public sector.
• Attractiveness may determine which practice group you are in--regulatory lawyers were the worst looking and litigators the best looking.
• Male attorneys' probability of attaining an early partnership rose with beauty, which was not true for female attorneys.  

Or, as the question was posed by Above the Law: Are Attractive People Better Lawyers? According to that entry, quoting Hamermesh: “They’re not necessarily better lawyers. They just get paid more.”

Hamermesh also found evidence that beautiful people bring more revenue to their employers than the less-beautiful, at least in the advertising industry.  Among Dutch advertising firms, those with the most beautiful executives had the largest size-adjusted revenues—a difference that exceeded the salary differentials of the firms in question.

Hamermesh conceded that he could not determine from the data whether the beauty effect occurred because clients discriminated in favor of the good-looking or because better-looking lawyers were able to obtain greater financial gain for their clients.

Even more recent research seems to support these findings--such as the role that beauty at a young age may play in making people extroverted, and therefore more likely to have higher earnings and enjoy more happiness-producing relationships, and the advantage that physically attractive children of both sexes have in being seen by their peers as socially skilled (Vaillancourt & Hymel, 2006).

There may also be some anecdotal support for these findings. The looks of attorneys at DavisPolk, one of the more profitable firms in the country, have long been lauded, and started getting extra attention when photos began appearing on the firm website.

However, not everyone is convinced of the reliability of Hamermesh's and others' data--for a sampling of the responses ranging from dismissal to skepticism to giving the benefit of the doubt, see comments at the ABA report.

In sum, as the Economist article points out, "sadly reminiscent of the biblical quotation to which the title of this article refers... there is a feedback loop between biology and the social environment that gives to those who have, and takes from those who have not."

By the way, are there any odds in investing in the improvement of our looks?

In Shanghai, where the difference between the ugliness penalty and the beauty bonus was greatest, Dr. Hamermesh looked at the relationship between women's spending on their cosmetics and clothes and their income.Higher beauty expenditures did correlate with a small increase in earnings, but not enough to pay for them in a strictly financial sense--the beauty premium generated earnings worth only 15% of the money expended.

What about the benefits of plastic surgery? Soohyung Lee, an assistant professor of economics at the University of Maryland in College Park, found by studying before and after photos of members on a dating website “that plastic surgery is not profitable in a monetary sense.” “I can’t comment on the happiness,” she added.

So what do we do with this information?  Hamermesh points out that it is not illegal to discriminate on the basis of looks, and, all else being equal, it might be a perfectly legitimate business strategy to hire the more beautiful candidate.  In these times of continuing economic pressure on law firms, being attractive may be more important than ever for gaining employment and hiring attractive lawyers may be just the kind of hedge that law firms can live with--at no cost added.

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The words being thrown around were trust, intimacy, empathy, vulnerability, honesty, transparency, communication, emotional intelligence, teamwork, forgiveness, feedback, collaboration, connectedness, courage, relationship-building.  It would be understandable if you thought that you had walked into a marital counseling conference or some new-age event.  

In fact, the setting was Georgetown University Law Center’s March 9th conference entitled "Welcome to the Future: Trends in the Delivery of Corporate Legal Services," led by Co-Director Mitt Regan.

After presentations on survey data showing how firms attract and keep potential clients (more on this in later entries), the attributes that were identified as being most conducive to outstanding client service were those listed above that make all types of relationships good and better.  And it was acknowledged that it can take only a few individual lawyer behaviors to destroy a client's trust, and in a startlingly short time.

Jeff Emelt, GC at GE, was quoted as saying that empathy is the quality he wants in his lawyers, which is particularly important when he gets legal advice he doesn't like.  While his predecessor valued his favored lawyer for being the best listener he'd ever met. 

Susan Hackett of the ACC Value Challenge said all the metrics used by firms and clients to capture data and set and meet goals need to be discussed with a lot of transparency and vulnerability--so clients can see how firms make their profits and even what those profits are.

Lisa Damon, member of the Executive Committee at Seyfarth Shaw, was instrumental five years ago in designing and promoting a firm culture that emphasizes "standing in the shoes of the clients," relying on transparency, communication and collaboration to weld strong bonds. While only into the first year of that program, Damon says that they already have delighted clients who are more engaged in the entire client/lawyer process.

Amy Schulman, Executive Vice President and General Counsel at Pfizer, was the featured speaker, discussing the Pfizer Legal Alliance, a program in its 3rd year that limits the number of firms that Pfizer uses to 20 for the bulk of its work. Pfizer requires that the firms use another value device other than the billable hour to determine fees ("If what you use to anchor the relationship is money, you’re going to lose, because it's not motivational at some point," according to Schulman), that they help Pfizer achieve an overall 15% reduction in legal spend, and that they work cooperatively with each other, as needed, to staff and manage projects. 

Each firm has an in-house relationship partner at Pfizer and Pfizer encourages secondments and sharing associates, even recruiting at law schools together with some firms. Twice a year Pfizer grades each law firm on performance issues ranging from substantive knowledge to responsiveness to willingness to collaborate, as well as how well they take the feedback they are given. This is, of course, a challenge for most lawyers--they are often highly defensive to anything that smells of criticism.

"We learned a lot about firms," Schulman says, "by whether they welcomed the feedback or responded by saying, 'You got it wrong.'" 

According to Schulman, making the PLA work is like developing other intimate relationships--it takes hard work, vulnerability and bravery--and ultimately requires a leap of faith. "Relationship-building requires a certain kind of emotional courage and confidence."

Most speakers acknowledged that feedback from clients is necessary to improve relationships--proactively asking for and acting on client evaluations should be the starting point of sophisticated client service.  But once the feedback is received, understanding how to respond at the time and in the future requires a panoply of skills that firms must identify, develop and support from the top down.  Inculcating these skills and values into the DNA of a firm becomes geometrically more difficult as the size of the firm increases.

As J. Warren Gorrell, Co-CEO of Hogan Lovells, pointed out, there is "a lot to be learned by firms from organizational behavior theory."

There were a couple of provocative questions.  Are women lawyers more likely to have some of these skills and therefore be able to deliver better service?  And if so, why aren't they being recognized and rewarded for those abilities?

And in the end does expertise always trump empathy or any of these other touchy, feely skills?  The conclusion seemed to be that regardless of the legal arena or degree of subject matter difficulty, quality of advice is considered a given from all firms, with clients repeatedly going to the qualified law firm that provides them with the better relationship as well.

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In addition to establishing metrics for demonstrating, for instance, who in the firm does what and how for project management or other purposes, there are metrics out there that track what individual firms charge for various units of work, so that inside counsel can compare value among firms in a more finely calibrated way.  

A survey by CT TyMetrix Inc. and The Corporate Executive Board, The Real Rate Report, culled through $4.1 billion invoiced by over 3,500 law firms and 90,000 individual billers in 51 metropolitan areas over three years (2007-2009) to companies ranging in size from 1-1,900+ attorneys, and in 16 industries, including energy, entertainment, finance, insurance, healthcare, manufacturing, pharmaceutical, retail and technology. Key topics they were looking at include:

• Actual rates charged to corporate clients by law firms by geography, work and matter type, matter phase, and timekeeper (partner, associate and paralegal) role, practice area and experience level.
• Law firm staffing trends, including staffing profiles for different matter types, timekeeper billing patterns, and a breakdown of how billing has changed in the past three years.
• Portraits of typical corporate legal matters across law firms by type, length and cost of specific matter phases, and timelines from service to billing.

The results?  First, apparently lawyers nationwide have variable rates for the same work. The survey found that 85% of lawyers change their rates for the same work depending on the client, with median variations in some practice areas averaging as high as 17+%.   

So in case you've been wondering why clients keep going next door looking for a better deal, they evidently have good reason to.  Not only did the survey find that firms charge different rates to different clients, it found that the longer clients stay with a law firm, the more likely they'll pay more than newer clients coming through the door. Yes, you read that right. We don't seem to offer frequent flyer programs.

According to Steven Williams, a Corporate Executive Board managing director, "jumps in partners' and associates' rates outpaced increases at four-year private colleges, blue- and white-collar hourly wages, and producer and housing price indexes since 2000,"  and experience has little correlation with rates. Over the three year period of the survey, nearly one in 5 lawyers increased their hourly rate by $100 or more, with percentage increases for associate hourly rates rising the most.

What is more important to rates than expertise or experience is where the lawyer works and how big the firm is. A big city firm--located in Chicago, LA, NYC, San Francisco or Washington, DC--adds an average of $131 to an hourly rate, although firms in the metro South racked up the largest increases. 

New York City law firm partners charge the most in the US at about $700 an hour, with Washington, DC partners coming in at a close second at $600 an hour.  DC lawyers raised their rates an average of 10.5% between 2007 and 2009.  In comparison, lawyers in Detroit only raised their rates 2%, the least in the country, and Dallas invoices rose the highest, at 21.9%.

And size matters: for every 100 lawyers in a firm, clients pay another $10 an hour for the associates and about $100 more per hour for a partner.

Apart from having this more global information, one wonders how long it could possibly take companies to assemble and process this type of information in their increasingly sophisticated proprietary databases, if they have not already done so.

What do your rates say about your firm? Do you understand your rate structure?  Who has the authority and for what reason to vary rates?  Are your rates insensitive or even downright greedy when it comes to the work of your most loyal clients?

Clients are going to compare rates of different firms for similar work and make a value judgment--where are we getting the most bang for our buck?

One interesting side effect of this particular metrification may turn out to be that it puts firms in the position of claiming that their hourly rates are not really indicative of the value of their work--contrary to the last few decades of billing babbling. That the rates are simply a revenue metric determined by the firm to make sure they cover their costs and produce a profit. 

Are you looking forward to that conversation?

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Muir will speak on Law Practice in the 21^st Century:  What It Means for You at the Women Lawyers Alliance annual meeting in Chicago on Friday, May 20.  Muir will review the massive changes that law practice is undergoing globally in this new century and what it means to individual lawyers and their law departments and firms in terms of competition, recruitment, staffing, client development, compensation, professional training and personal career management.  Join the Women Lawyer's Alliance and register for the annual meeting here.

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The article “Pay Gap Widens at Big Law Firms as Partners Chase Star Attorneys,” published in The Wall Street Journal last week, reported on the increasing spread in partner compensation at large law firms, setting many in the industry talking.  In fact, the article understates the extent of the spread, the factors driving it and the impact that spread is having on both the firms in question and throughout the industry.

As discussed in my CCM audio conference on partnership compensation trends last month, the spread 10 years ago at most firms was 3 or 4 to 1, with partners moving up the pay scale based either on performance or tenure or some combination of the two.  That spread has grown in the last few years to over 20/1 at some firms, more than twice what the WSJ cites, which obviously didn’t find any firms with record spreads willing to fess up publicly.  Unfortunately, many times, thanks to lack of transparency, the partners themselves don’t realize the extent of the spread and therefore aren’t able to tattle. 

Why the increase?

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The Value Advisory issued a press release today announcing the formation of a veteran group of advisors to provide law firms with strategies and resources that align firm offerings and operations with their clients' objectives.  At a time of increasing client demands for value at a reduced cost, The Value Advisory works with firms to assess their clients' changing standards and deliver services that meet those standards--in a way that honors the firm's historical values and reputation and also profitably sustains its future.   

The Association of Corporate Counsel, the country's largest organization of corporate counsel, has identified six critical measures of value in the delivery of legal services and has already rated over 5,000 lawyers on those factors. 

Where do you stand with your clients?

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After literally years of bad news, recent reports have sparked a flurry of hope for an uptick in demand for legal services in 2011.  Let's look at the data for some indication of whether that optimism is justified. 

According to the Citi Private Bank report issued for the first 3 quarters of 2010, while demand in 2009 was down an average of 4%, for the 1st 3 quarters of 2010 demand was down only 1%.  But Citi predicted that the demand picture showed "no signs of improving any time soon," with average demand in the next few years continuing to stay flat.

So when the 2010 4th quarter results were recently announced, showing that demand went up 1% for the quarter, the news was greeted with whoops of prospects "bouncing back."

The fourth quarter improvement does sound significant, given the turnaround from the prior years' rates of lowered demand.  But a look at the 3rd quarter of 2010 results makes for a more nuanced comparison.  That quarter showed an overall increase of 0.5% in demand, ranging from the AmLaw 51-100's most significant decline to those firms smaller than the AmLaw 200 showing demand up by 1.5%--an indication of the middle firms' risk of being squeezed by changing fees and the redistribution by clients of their work.  [Look for more in the next few blog entries on the positioning of large and small firms in whatever recovery occurs.] 

Further, in the 3rd quarter, expense reduction, including a reduction in lawyer head count, is starting to slow, with average productivity increasing, while remaining at historic lows (@1650 average hours per lawyer compared to 1700-1800 in prior years) and average equity partner hours higher than that of their associates.

The fourth quarter results do indeed included a half-percent rise in demand from the prior quarter and a full1% rise from the prior year. Direct expenses fell another 4.5% and productivity also rose 0.7%.

We will leave to another day the discussion of why firms are still committed to calculating "productivity" on the basis of hours billed per lawyer--AFAs are making the lie of that metric.  But using the data as we have it, the future picture still looks troubling.

Much of the increase in profits continues to be due to cutting costs, although those opportunities are getting fewer, and lowering leverage.  And even when the work was performed and the bills were out the door, realization rates, both billing and collection, went down throughout 2010, continuing a problematic trend.

The proof of this analysis is in the spate of recently announced firm results, with the exception of outstanding results from Quinn Emmanuel and Wachtell.  Clifford Chance cut costs by $65 million last year, including a head count cut of 12%, yet saw revenue go down 5% and profits down 3%.  Shook, Hardy reported a slight rise in PPP but flat revenues, making it clear where the profits came from. Patton Boggs reported a slight rise in PPP and Wilmer Cutler showed negligible revenue growth but PPP up 17%--all by reason of lower head count and fewer equity partners.

The writing on the wall is pretty clear.  Profits are unlikely to come from general demand in the market.  And there is only so much of your expenses and partners that you can cut and still survive as a thriving firm. 

So where will profits come from?  Profits will come from solidifying the relationships you have with existing clients, determining ways to provide greater value in more areas for those clients and aligning your internal people and processes so that you do in fact deliver that value, and growing your client base--into related industries, new industries and new service areas.

We and the team at The Value Advisory are expert at helping you do just that.

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Muir's "Emotional Intelligence for Lawyers" reviews the history of the development of emotional intelligence and how it applies to lawyers.

Muir's "The Importance of Emotional Intelligence in Making Partners" was awarded the Edge International Law Practice Magazine Award for excellence in writing. 

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At this year's Annual Meeting of over 2000 general counsel and senior in-house counsel, the Association of Corporate Counsel continued its promotion of the Value Challenge--i.e., making sure outside counsel understand what corporate counsel expect from them. So far, over 5000 lawyers have been rated on their competence in six critical areas.  And ACC hopes to double that number soon.

Janine Dascenzo, a member of the ACC Value Challenge Steering Committee and chief litigation counsel at GE, noted that her CFO expects legal spending to be reduced by 25% year-on-year, which far exceeds the savings some firms propose by holding rates for 2011 to 2007 levels. She advocated for lawyers adopting skills business has long used to realize profits on fixed-price contracts. 

Aileen Leventon of QLex Consulting, Inc. led the basic skills session on Legal Project Management, with three firms--Shook Hardy & Bacon, McDermott Will & Emery and Kilpatrick Stockton--demonstrating how they use project management principles and technology applications to profitably manage work priced at fixed fees or other value-based fees.

Leventon has learned a lot about client expectations in the course of teaching project management skills to more than 200 General Counsel over the past year.

According to Leventon, here are the six things GCs want their law firms to know:

1. Law firms fundamentally do not understand that legal spending is corporate overhead and has to be managed aggressively - consistent with every aspect of the corporate budget. Expenses are scrutinized by many internal stakeholders: CFO, Controller's, Investor Relations, and Procurement.

2 .Legal is not only not exempt, but is held to a higher standard because of the widely-held business perceptions that law firm lawyers make too much money and that legal work is rarely revenue-producing for the client.

3. Law firms must recognize that legal work is not an end in itself. Law firms are engaged because there are business problems - not legal issues. Business problems need results. Legal issues are only one of many factors that are brought to bear in addressing client matters.

4. Law firms must learn how to manage their work better. They need ongoing communication within their firms about how specific work links to the client’s budget so that matters are properly staffed. Firms must learn how to use planning and forecasting tools, just as the general counsel have learned to use matter management systems and e-billing.

5. Law firms should communicate at the beginning of the matter about assumptions supporting budgets and then initiate conversations when matters are coming in over budget. Too many law firms think that if an interim bill is paid, they do not have to discuss being over budget with the client. "They paid my bill so they know what is going on" isn’t sufficient.

6. Predictability is key. Even if a matter is coming in under budget or additional resources will not be required, the client needs to know that as soon as possible. The client's budget is a portfolio of matters--not just those handled by a particular law firm--and the surprise of coming in under budget at the end of the year is not received as favorably as a law firm might think.

How is your firm doing?

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As a followup to the previous entry's reference to law practice restrictions that exist in the US and are considered or being put in place in important new economies like Brazil and India, a recent article in The Economist discussed the significant drag such restrictions have on countries' attempts to improve productivity. Following are among the most relevant bits, as the Brits say.

"[T]he politicians’ current focus on fostering productivity growth via exciting high-tech breakthroughs misses a big part of what really drives innovation: the diffusion of better business processes and management methods. This sort of innovation is generally the result of competitive pressure. The best thing that governments can do to foster new ideas is to get out of the way. This is especially true in the most regulated and least competitive parts of the economy, notably services."

"[F]or many rich countries the quickest route to faster productivity growth will be to use the crisis to deregulate the service sector. A recent study by the Bank of France and the OECD looked at 20 sectors in 15 OECD countries between 1984 and 2007. It found that reducing regulation on 'upstream' services would have a marked effect not just on productivity in those sectors but also on other parts of the economy. The logic is simple: more efficient lawyers, distributors or banks enable firms across the economy to become more productive. The size of the potential gains calculated by the Bank of France is stunning. Getting rid of all price, market-entry and other competition-restricting regulations would boost annual total factor productivity growth by one percentage point in a typical country in their sample, enough to more than double its pace... [E]ven the more modest goal of embracing “best practice” would yield large benefits. The IMF has calculated that if countries could reduce regulation to the average of the least restrictive three OECD countries, annual productivity growth would rise by some 0.2 percentage points in America, 0.3 percentage points in the euro area and 0.6 percentage points in Japan."

It may be time for US policies such as banning non-lawyer investment in legal practices and even requiring state-by-state bar qualification to become relics from a less productive past.

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In an effort to profit from the demand for more cost-effective legal services, law firms are considering offering a broader range of services themselves and/or entering into collaborative endeavors with other organizations--law firms, legal providers or non-lawyers, in some cases even servicing other law firms.

For example, some firms are entering the market for unbundled, separately-priced litigation support services by adding specific expertise and staff as an adjunct to the firm's existing practice.  Other firms have done so through a wholly-owned vehicle. King & Spalding does document review and other litigation prep work not only for its own clients but for other firms' clients as well by a separate team that is also hired and housed separately (although still in Atlanta).  Baker & MacKenzie has a wholly-owned subsidiary entirely separate from the firm's practice that does litigation prep and management . Taylor Wessing has created an affiliated but separately-staffed corporate services business in its Cambridge location that offers clients, including other law firms, lower-cost options for standardized legal work, such as corporate due diligence. And Eversheds announced this past week the launch of its in-house consulting business specializing in legal department management.

Groups of firms are also working together to efficiently service specific practice areas, industries or clients. LegalOnRamp, built on that principle, is probably the largest town square meeting of lawyers available on-line.  Some firms are banding together independently to accomplish a comparable result.  For example, there is a Banking Legal Technology Group composed of five law firms that provide industry-related  on-line elearning, document templates and document assistance.  

This approach can be counter-intuitive--in a competitive marketplace it feels like fraternizing with the enemy. But that is what GCs will want--and will benefit from. The relinquishment of pride of exclusive ownership required by these kinds of arrangements is made in exchange for work from clients who want the considered viewpoints and resources of a diverse group. And, frankly, a better product.

Collaborations with outside outsourcers, litigation management firms, and paralegal resources also require a relinquishment of at least part of the profit margins a firm might have historically realized on that work, but with the anticipated result of a happier, more efficiently served client and usually without the costs required to house, feed and manage those troops.

How to move from the traditional business model to one that embraces some of these new approaches?  Christensen, in his seminal Harvard Business Review article, "Meeting the Challenge of Disruptive Change," suggests essentially running two businesses at once: one with the old business model (which is usually still viable while disruptive change is emerging in a marketplace) and one with the new business model.

As an example, one of the more innovative new firms is Axiom, which places lawyers in law departments to perform high level work, not as a placement service or temp agency but as a provider of legal services not saddled with the infrastructure of a large firm. With the firm's 100% utilization model (attorneys are only paid when they are engaged) and minimal overhead,  Axiom's clients can realize significant cost savings over traditional legal services.  Evidently without any knowledge of Axiom's business, Berwin Leighton Paisner (BLP), a London-based firm, essentially took Christensen's advice by piloting under the BLP umbrella a new business, Lawyers on Demand, which is very much like the U.S.-based Axiom. 

The founders of this new service, also partners in BLP, acknowledged their initial concern about eroding the firm's traditional business, but decided that "even if it does start taking work from traditional BLP, we can’t bury our head in the sand. If we don’t do that work, someone else will."

That may be the ultimate justification for exploring new services and various ways of offering them.

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Muir will co-present with Peter Zeughauser an audio conference hosted by Center for Competitive Management (CCM) on Thursday September 30, 2010 from 2:00 pm to 3:15 EST.  "Origination Credit and Partner Compensation for the New Legal Landscape" will include discussions of what origination is and how to measure it, what role origination plays in changing compensation systems, the impact of the recession and other factors on compensation, and specific compensation challenges, including dealing with succession, laterals and motivating leadership.  Dozens of firms have already signed up. Don't miss this chance to review your firm's approach to partner compensation in light of current market conditions. 

For further information and to register, go to http://www.c4cm.com/lawfirm/origination-credit-and-partner-compensation-for-the-new-legal-landscape.htm.

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Back when we were all focused on raising our retention rate of associates, I also waved the flag about the poor retention rate we have with the lateral partners we hire--a musical chair game that has been in full swing for a number of years and seems to have survived or at least is being revived after the downturn. 

What data we have implies that, while only about 40% of new hire associates last longer than 3 years, an even lower percentage of lateral partners do.  Anecdotally, one can find rates that are astoundingly low--in some firms only one in 4 or more lateral partners work out.  

These are particularly humiliating statistics because, in spite of the ethical constrictions on gaining client and current firm information, we still have MUCH more information about lateral partner candidates than we have about law school graduates: if we haven't personally practiced law across from these lawyers or on the same side of the table with them, we usually have friends, clients or colleagues who have.

I was recently in a roundtable discussion with lawyers addressing this issue.  One managing partner said that both the spectacular successes and the miserable failures of lateral hires seem like random events--how is one to guess? Another managing partner answered that he found that the reasons for a lawyer not working out are often right there in the pre-hire information--but no one paid adequate attention at the time.

Here are a few tips for improving your lateral partner hiring outcomes:

1.  Don't bother to proceed with lateral candidates who want to discuss compensation during the first conversations.  Very few successful lateral changes are made on the basis of a step-up in compensation--those who make a move for that reason will find a reason to move again.

2.  In making your financial calculations, don't assume that the lateral's book will materialize.  Yes, that means you are primarily hiring the person for their expertise and not their client list.

3.  Look for candidates who want a better platform and more support than they currently have, and make sure you can provide it.  The primary reason for laterals leaving these days is failure to find the level of firm support for their practice that they expected.

4.  Be careful of lawyers coming from an entirely different background--small firms, government or corporate counsel if, for example, yours is a big firm.  There are many administrative and procedural differences in these environments, as well as substantive differences (conflicts are not something most of those lawyers have had to think about) that can wreck havoc.

5.  Avoid the institutional drive to hire.  Set up some roadblocks that require a stop and re-think or the momentum of the hunt will result in a hire whether it ultimately makes sense or not.

6.  Plan carefully all aspects of a lengthy, detailed integration.  Think summer associate program, but more substantive.  Where the lateral sits, who the mentor(s) are, how your clients are introduced to the lateral, how the lateral's clients are introduced to the firm, how the lateral will meet other firm attorneys and visit other firm offices, who will work for the lateral, which committees s/he will sit on, what type of specific training the lateral will need and when and by whom it will be provided--these are just the beginning of the long list of considerations. Feeling like an outsider is the second major reason that laterals leave firms.

7.  Make someone accountable for the lateral's success.  This should be a partner of significant rank; it should not be a young partner or someone in the HR department.  Make sure that this person also gets support and recognition, including having their role taken into consideration in the determination of their compensation.  If you don't pay for it, you don't value it.

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There are only two bases on which most legal services are ultimately judged: 1) outcome and 2) interpersonal interaction.  Of course, price is important but a wide range in price is tolerated as a function of 1 and 2.

It can be very difficult for a client to judge outcome -- what part of the results in a particular trial or deal was achieved due to one's own lawyer's competence and what might be due to weak or strong witnesses or deal terms, the client's role, poor or great opposing counsel, a sympathetic or simply mistaken judge or just pure luck? Even, perhaps particularly, lawyer clients are not particularly good at determining the interplay of those factors.

Add to that complex situation that lawyers often sabotage themselves. As we noted in the last entry, there is good data indicating that lawyers as a general matter do not themselves judge well the likelihood of success in matters--usually (and increasingly) conveying unrealistically high expectations to their clients. Thus, clients may in fact be disappointed because of their over-enthusiastic lawyers setting too high a bar, rather than because of any real incompetence of those lawyers in conducting the matter.  But how's a client to know?

So let's stipulate that judging the quality of counsel by outcome is difficult.

The other most common basis for evaluating legal counsel is their interpersonal skills. While we are notorious among the lay public for our abilities in that area being held in low regard, even lawyers don't see much to applaud in many of their brethren.  According to a study by BTI, "personality issues" is one of the four main reasons general counsel fire outside counsel. Surprised? The same survey found that general counsel often keep an "arrogant" list--lawyers who, no matter how appropriate they might otherwise be, the GCs wouldn't be caught dead hiring just because interacting with them is so maddening.  Of course that doesn't say anything about those particular lawyers' skills.  But if those lawyers are in fact arrogant because they are very, very good, as more than one lawyer has contended, my bet is they are not getting the result in terms of new business that they were looking for. 

In a fascinating study recounted in Malcolm Gladwell's book Blink, the way doctors talked to their patients predicted which doctors were most likely to be sued.  A very short verbal interaction between doctors and their patients were recorded.  The doctor's actual words were obliterated, but the tone, cadence, and pitch were retained.  When participants rated these doctors for various attributes, one attribute was highly accurate in predicting the likelihood of a doctor being sued.  The attribute was dominance, which easily translates into the arrogance, or I-know-better-than-you, that those general counsel in the BTI study, and many other clients, complain about.

Why do we come off so poorly in this area?  Data from the Meyers Briggs Type Indicator gives some insight. The majority of the American public works to create harmony in relationships, while most lawyers are bent on demonstrating that they are right.  Americans are largely concrete thinkers, while most lawyers are conceptual, which can come across as "head in the clouds".  Lawyers have a lower tolerance for "process" than most Americans, wanting to get to the bottom line as quickly as possible, and as a group they tend to talk less and listen less as well.  Other trait data reinforces that picture--we are likely to be combative if a conflict arises or otherwise simply walk away to avoid it.  We don't rebound easily from a mistake and therefore both project our "rightness" and become highly defensive if questioned.  In short, as a group, we are not naturally gifted relationship builders.

Personalities are not easily if ever changed.  What can be improved, however, are specific behaviors. We can teach our young lawyers to manage client expectations carefully, to help the client understand the complex interactions at work which affect the outcome of matters, and to replace some of those "lawyerly" interaction styles with more client-friendly ones.  And your professional development, performance evaluation, promotion and compensation systems should all recognize and reinforce the importance of those behaviors. 

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David Brooks’ editorial in the Friday, July 23^rd New York Times was on morality, in particular the type which naturalists view as another outcome of evolution. The naturalist position is that, much as we have over time developed receptors for sweetness and saltiness, we have also developed receptors that recognize fairness and cruelty. 

At a recent conference organized by the Edge Foundation, researchers attested to the evidence for that inborn moral sense. Paul Bloom of Yale reported on experiments in which babies were shown a figure struggling to climb a hill, another figure trying to help it, a third trying to hinder it and then the hindering figure being either punished or rewarded. Babies as young as six months clearly preferred the helping figure over the hinderer and by eight months preferred the punishing of the hinderer over rewarding her. While Bloom doesn’t pretend that this implies that people are born “good,” he does claim that it shows we are all born with an ability to distinguish basic right and wrong. 

But since we homo sapiens as a group don’t seem to suffer from a surfeit of morality, how do we each arrive on our moral path? 

There was some disagreement at this conference over how much we rationally control our moral behavior. The role of emotion has recently been emphasized as a critical part of decision-making (see our upcoming entry on decision-making).  Some have even suggested that emotion is the real basis for a decision with moral reasoning following simply to justify the decision, much like the proverbial man on the elephant who tells himself that he is the one moving the beast but is in fact only along for the ride. 

Studies done during the last couple of decades, which Brooks doesn’t mention, inquired as to why some gentiles, under no external compulsion, risked their and their families’ lives to protect Jews during the holocaust. The studies found that the gentiles in question viewed themselves as “just that kind of person,” people who had been raised with the sense of obligation to do whatever they could to help others in need, a morality which they practiced without a whole lot of forethought. That is, they performed those heroic acts essentially out of habit.

With the pressure of the economic downturn, the temptation to bypass ethical constraints is evident.  Bill-padding and double-billing have increased dramatically this decade over last, as have frauds and conversions of trust and other third-party funds.

Is there also a laxity in morals, as opposed to ethics?  Professional lapses not expressly prohibited but simple failures to be fair and straightforward?

Perhaps there is no mandate for lawyers to act morally or even room for moral considerations in our profession.  We are, after all, supposed to be zealous advocates, and no doubt many (possibly emotion-based) ethically close calls are strenuously defended as being in clients' best interest. 

But  it is also possible that high standards of morality may be a obligation owed to our clients in the interest of providing them with the best result.  As reported in our entry "What's Morals Got to Do With It?,"  a study by the Consortium for Research on Emotional Intelligence found that financial advisors who demonstrated high levels of “moral and emotional competency” nearly doubled the return on their client portfolios over the S&P 500 average. “Results showed that Integrity was the key behavioral competency which predicted the most positive returns for clients."  Integrity was seen as someone who "walked the talk."

If morality can change a financial advisor's returns, might not a lawyer armed with morality sway judges and opposing counsel? 

Then there is the matter of how we treat each other in our law firms and law departments, where we are less burdened by the goad of zealous advocacy. The Project for Attorney Retention and the Minority Corporate Counsel Association recently reported that nearly one- third of the 700 women partners surveyed had been “bullied, threatened, or intimidated out of origination credit.” This is not a backwoods phenomenon--three-fourths of these women are in firms of over 250 lawyers.  A frequent complaint is that their partners trot out women for client pitches and then exclude them from the work (and of course the origination credit).   "Clients will be surprised that the attorney that they think [is working on the matter] is not getting the credit," says Roberta Liebenberg, chair of the ABA Commission on Women in the Profession.

One of the more interesting points made at the Edge conference is that “people who behave morally don’t generally do it because they have greater knowledge; they do it because they have a greater sensitivity to other people’s points of view,” otherwise known as empathy.  Marc Hauser of Harvard reported that bullies—people clearly not acting morally-- are surprisingly sophisticated in the ways of interpersonal commerce, particularly in reading others’ intentions, but they are not able to "feel their pain." Which makes them good manipulators and strategic operators for their own benefit without the drag on their trajectory of caring about the impact of their actions on others.

Empathy is one of the traits that lawyers often score low on--all the better to not deter us from surging onward on behalf of our clients, certainly some would say.  But firms might consider steps to counter that tendency by adopting compensation and other encouragements to "feel each others' pain."

As Brooks says, it is good to ground virtue in the day to day. 

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In a recent interview about her book, Mindset: The New Psychology of Success, Dr. Carol Dweck, the Lewis and Virginia Eaton Professor of Psychology at Stanford University, explained how a person's mindset can account for success. 

She identifies two major mindsets--fixed and growth.  In a fixed mindset, we think we know our strengths and weaknesses, believe that they are "fixed" and think we should only attempt undertakings that use those strengths.  This type of person often cites genetics or background as limiting factors to their productivity.

With a growth mindset, we believe that we can grow into the skills needed for success. That is, we have the attitude that with analysis and persistence and feedback, we can stretch and extend our abilities over time.  The basis of these differences in mindset lie in one's sense of control and optimism--attitudes that have long been associated with greater success and sense of well-being.

Dr. Dweck's research on athletic performance is intriguing--the more athletes believe that their success is a function of effort and practice (as opposed to "natural talent"), the better they do.  Even more importantly, the more they believe that their coach thinks their success is a function of effort and practice, the better the athletes do.  

She also points out that in India and Asia, the common belief that children are blank slates at birth who can learn anything help people there succeed.

Her research also has relevance to those of us practicing law.  As measured by various assessments, lawyers are highly pessimistic and also have low resilience to setbacks (an indication of low sense of control). When gauging ourselves, and particularly in mentoring others, it is important to focus on the process--how much time and energy is being put into the effort and how persistent the person is.  Encouraging those traits will pay off with better performance over time than praising how "smart" someone is or how "natural" they are at something.  In fact, that type of praise is shown by Dr. Dweck's research to actually lower productivity--trapping the person in the narrow range of their perceived ability and making them fearful that they can't always live up to that talent or go beyond it.

Lawyers are also not inclined to take risks and therefore are less likely to proceed, whether personally or as a firm, when they are not certain they are likely to succeed.  In this time of fast-paced changes, however, Dr. Dweck points out  the disadvantage of such a fixed mindset.  With law practice undergoing tremendous transition, that reluctance can put both a person and a firm at the back of the evolutionary process that will produce better services. 

Dr. Dweck has developed an assessment to determine one's mindset and strategies for changing a mindset from a fixed one to one of growth, both of which we can offer as a part of your complete professional development plan, whether for one attorney or a large group.

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Muir participated in a panel discussion last week at the Women Lawyers Alliance first Annual Conference, held in Chicago.  Muir and fellow panelists author Shaunti Feldhahn, eminent psychologist Dr. Florence Denmark and psychologist/coach Karen Kahn identified some of the challenges and facilities women have in making their mark as leaders in law firms, and also addressed specific questions on how to improve rainmaking skills, solve the perennial work/life dilemma, and give effective feedback to junior lawyers. 

Attendees had this to say:

• "Ronda Muir is terrific." 
• "Frank and pragmatic." 
• "Ronda knows so much--I would like a substantive presentation from her alone."

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Muir recently led an Introduction to the Business of Law seminar for junior associates at an AmLaw 100 firm. The presentation is customized to the firm and is gauged to bolster associates'  engagement and loyalty and to improve their productivity. 

Topics include a definition of terms, such as utilization, realization and cash management, and a discussion of what drives the economics of law firms, the impact of current marketplace trends, as well as how all these factors influence every associate's career, and what they can do to benefit themselves and their firm.

Director of Professional Development: "Associates called me specifically to thank me for setting this up; others said that the topic answered a lot of questions they wanted to know about (but probably wouldn't have asked). Several who didn't make it called to ask if I had recorded it because everyone said it was a good presentation...plus I appreciate that you were great to work with."

Partner in charge: "This was a very helpful presentation--a number of associates came up to me afterward to say how thought -provoking it was. It is difficult at times, particularly with the most junior associates, to get them to ask the questions they want to ask. You answered many of them in your presentation. We look forward to doing this again."

Firm Consultant: "The presentation was excellent. Law is a business like any other business. Every attorney, particularly at these large firms, should know about what you discussed in your presentation."
 

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The recent upsurge in the financial well-being of small and mid-sized firms, and their lower hourly rates, has left some wondering if the Age of Convergence is waning.  The eponymous DuPont Model, developed in the 1990s, started a consultant-fed surge of mergers and consolidations of firms in pursuit of making or remaining on the preferred provider lists that major corporations were furiously winnowing. Only by offering a broad range of expertise could firms hope to produce the economies of scale--efficiency, cross-pollination, etc--that corporations were after, or so the party line went. 

Never mind that not a single metric showed that bigger firms produced any such economies for the corporations.  The burgeoning size of those firms, and the costs of supporting them, meant that hourly rates kept going up. 

Nor did the hoped-for economic wins for the firms themselves come through.  "Cross-selling" says Mark Chandler, innovative and outspoken GC of Cisco, "is my enemy."

It is then somewhat surprising to see the 2009 ACC/Serengeti Managing Outside Counsel Survey report a record number of inside counsel citing their commitment, in the interest of reducing legal fees, to implementing... convergence. 

Perhaps we have overlooked the biggest advantage to corporations of having fewer law firms in the bullpen--the ease of leveraging them into lower fees.  Take away a $20,000 contract review and few firms would flinch.  Threaten to take away a cross-firm client generating millions in revenue and even the sassiest firm would sit down at the negotiating table.

So put one in the clients' column--sure, fewer law firms to deal with, so inside counsel may achieve some modicum of efficiency, but the real coup is in putting themselves in a position to dictate fees. As the report  "Law Firm of the 21st Century: The Clients' Revolution," prepared by Eversheds, concludes, the economic recession has shifted the balance of power in the legal marketplace toward general counsel (according to 3/4th of those surveyed).  And the shift is here to stay, 78% believe.

Oh, by the way, the 2009 ACC/Serengeti Survey reports that, for the first time in nine years, inside counsel anticipate no rise in billable rates in 2010.  They should know.

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It was my great pleasure--something I don't often say about a conference-- to attend this invitation-only gathering last week, March 21-23, of both august and up-and-coming law industry professionals as they prognosticated the future of our practice and what that might in fact look like up close for a broad array of providers and clients. 

While I will digest and relay over the next few weeks a number of interesting findings and tantalizing predictions that were discussed, let me summarize a few currents that are of particular interest to me.

One, notable is the influx and rising success of non-lawyer services in this emerging marketplace, whether those services are provided by in-house specialists in law firms, wholly-owned subsidiaries of firms, or independent companies.

Two, changes making their way into law firms are both reducing incoming associate classes and also raising the ante for efficiently training and promoting those associates, with the result being that firms are experimenting with more discriminating approaches to hiring and more sophisticated methods of providing professional development.

Three, perhaps as a corollary of at least the first point above and probably the second point as well, law firms are becoming truly more diverse workplaces that respect and rely on the contributions of non-lawyer sociologists, MBAs, IT specialists, project managers, psychologists, accountants and other professionals to more efficiently analyze, structure and deliver services responsive to client needs.

Stay tuned for the  review of this conference's exciting topics.

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Muir will be a panelist at the Women Lawyers Alliance's (WLA) Inaugural Spring 2010 Conference: Rainmaking Equals Influence to be held May 13 and 14, 2010 at the Wyndham Hotel in Chicago, Illinois. The conference is designed to help women achieve their full potential and will focus on equipping them with the skills to help them reach their individual rainmaking goals.

Muir will participate in the panel entitled "Is It All in My Head?" with two other experts discussing how gender and gender differences affect women and their aptitude for developing business and becoming successful leaders in their firms.

For more information, visit WLA’s website at http://www.wlalliance.org/conference.html.

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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.

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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. 

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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.

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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.

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Muir led an inter-active limited-attendance roundtable on Law Practice Management for Current and Prospective Law Firm Leaders at the 12th Annual Meeting of the Association of Patent Law Firms (APLF) in Chicago, Illinois on Thursday, September 17, 2009.  Topics discussed included the distinction between managers and leaders, the importance of values-driven firm identity, the role of practice group leaders in moving the firm forward, and transitioning from consensus-led management to more executive approaches.

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Here's some more data that puts into question our reliance on high scores and law school credentials in determining which lawyers we want to populate our firms with.

LSAT Scores

According to a chart prepared by the Tax Prof Blog, math or physics majors are likely to score the highest on their LSATs, theoretically making them the best candidates for law school and the best lawyers.

Or maybe not. As one blogger commented, "At a prior AmLaw 100 firm, I was chastised for not getting the chair of the IP department 'out there more,' writing, doing press. My response, 'The guy has an undergrad in chemistry, then went off to law school. I’m lucky if he opens his door.'

But this blogger goes further: "The BUSINESS of law, and the success of any given individual lawyer, is becoming more dependent on the development of personal relationships, the ability to reach out and promote one’s self, and SALES, [so] we need to remove the barriers that keep those who are so predisposed out of law school."  Or, as one article recently proclaimed: "Emotional Intelligence a New Hiring Criterion."

Following that prescription--matriculating and then hiring candidates based on something other than hard scores or law school credentials--would require a much more sophisticated method of discriminating, such as personality testing, as part of law school entry requirements or firm recruitment considerations.  Are we ready for that? 

We know that rainmakers and managing partners show a different array of personality traits than most lawyers--they are more social, more extroverted, more resilient, more empathic and more persistent--in total, more emotionally intelligent.  Should we be populating our firms from the bottom up with more of those traits?  Particularly now that one of the survival strategies for practicing law requires successful marketing, business closing and relationship building? And if so, what are the best procedures to insure that we identify a high percentage of the kinds of lawyers we want to hire?

Screening for these rarer combinations of traits might also require firms to look at a broader range of law schools than they typically have--at the very time that the pendulum appears to be swinging back to hiring only from the most prestigious schools. 

Premier Law Schools

A recent study entitled "After the JD" by the American Bar Foundation points out some of the benefits of broader recruiting.  The study concludes that graduates of non-elite law schools who work at the top 200 firms are happier than their colleagues from top-tier schools and also last longer in their jobs.

Why would that be?  It makes sense that lower-tier law school grads would work harder to nail the few BigLaw positions available to them, and, as a result, would be both more grateful for their jobs and also likely to have fewer opportunities to leave.  Other pundits have suggested that student who opt for regional law schools are more likely to have stronger family and community relationships that they want to maintain.  And that they are also more likely to have financial considerations that militate in favor of attending a less expensive law school with the possibility of working part or even full time.  Strong relationships, financial savvy, self-regulating drive--maybe our kind of candidates?

But regardless of how good it is for us, recent market pressures may in any event make firms drop the broad-barreled recruiting approach.

As Aric Press in The American Lawyer points out: "I fear that we will look back at the exuberant spree of the last few years as the high-water mark of non-elite law school hiring. There simply weren't enough bodies to go around, so the Big Law machine was willing to expand its recruiting pool. The fact that some of those hired performed well, or were happier with their lots, or possessed the drive and emotional intelligence that clients crave will not be enough to change old habits. When it comes to preserving the prestige patina, sometimes the rules of cognitive dissonance are suspended."
 

Press also reminds us of the opportunity these kinds of findings afford those firms who are thinking about their future and trying to insure its success--"an opportunity for the firms wise enough to seek first-class talent no matter what brand is on a diploma. Putting that attitude into practice would be an important part of an effort to take hiring more seriously, of not relying on admissions officers to do the work of hiring committees, to actually define attributes that firms and their customers need--and then try to recruit for them. Rather than retrench, this is a moment to put your partners to work on the future of your firm. As it happens, they have plenty of time to devote to the project."

Informal Survey

Let us know what you and your firm are doing in two areas of recruiting: 

1. Have your target law schools broadened or narrowed and why?

2. Have the attributes you are looking for changed?   In which ways?  And how do you identify those attributes in candidates? 

Stay tuned.

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An article this summer in the New York Times Magazine describes the launch by Hyatt Hotels of a customer relations program that CEO Mark Hoplamazian describes as "random acts of generosity."  Prompted by years of behavioral science research and months of consumer research, the program charges Hyatt employees with occasionally picking up bar tabs and other obligations of customers free of charge. The point?  To generate gratitude.  Which ultimately "increases... sales growth," as the Journal of Marketing quite bluntly puts it. 

Unlike frequent stay programs with specific qualifications that reward customers with an extra night or an upgrade, these Hyatt freebies are not "earned," and are therefore theoretically more likely to be truly appreciated.  Although there is a risk.  There is, after all, as the Times article points out, a thin line between promoting gratitude among the favored and creating resentment among those left out. 

So is this a viable relationship-building model for us in the legal business?  Is there any possibility that some sort of generosity extended to our clients could engender the type of gratitude that would fall to the bottom line?  And even if it were possible, how specifically are we supposed to be generous in the context of what sometimes amounts to cut-throat dances with resentful clients who are convinced they are being taken advantage of ?

While a young associate at a big firm, I was charged with the closing of a deal that had been a nightmare from beginning to its not-too-soon end.  The client had originally chosen another firm that had been conflicted out, hiring us begrudgingly and making sure we knew through the entire timeline that we were not their first choice.  The General Counsel was young--an interim replacement for the GC who had taken a better position--and afraid of losing his job.  Aggressive questioning of our strategy and reasoning was a daily event, followed by further questions rechecking the initial explanations, followed by very obviously running past us the reasons unnamed others (lawyers from the favored firm?) thought we were making an error.  It wasn't a major transaction we could boast about, we were certain not to be able to recoup the time we were investing, it was a client we obviously were unlikely to hold onto--we all longed for the closing to put us out of our collective misery.

The closing followed of course, as night the day, the same pattern of dysfunction.  Late in the night the GC called to complain about our printing of a report, which was commencing as we spoke, to be distributed with a collection of other documents--an important Senior Vice President had that day located sufficient copies of that very report boxed away in the corporate basement.  Had we no concern for expense?  Canceling the new run would have involved a lengthy and not inexpensive transition, of course--but.  I was looking for some small way to connect with this company.  We got the printer, the SVP and the GC on the line and as the most senior lawyer left standing, I     negotiated what we all knew would be a cumbersome and more time-consuming but ultimately somewhat less expensive solution using the found reports.

The partner in charge questioned my judgment after I straggled in the next day--primarily on the grounds of throwing more good time after bad.  My only defense was that our two main company contacts--the GC and the SVP--really wanted the face-saving, if nothing else, and, with primarily the investment of a few more hours, we could accommodate them.

There is, of course, a happy and relevant ending.  The matter closed.  The interim GC quickly announced that he was moving to a GC slot at another company.  The SVP became the one responsible for approving our bill and recommended that the company use us instead of the other firm as its ongoing counsel.  The GC, in his new position, brought us his next major deal, evidently with the intent to use our firm on a consistent basis.  The partner called me back into his office and praised the judgment he had earlier found wanting.  All because we figured out how to use the reports in the basement.

So sometimes the incidental gesture produces a gratitude that rewards.  Particularly in this economy, I would say it is worth the try.

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Now is the time to really get to know your clients. What are their budgetary constrictions?  What are their priorities for the next two years?   What do they want more of and less of from their outside counsel?  What keeps them awake at night? 

Do you not only know the answers to all of these and other questions but are also proactively doing something about each of them?

In a recent article in The Legal Intelligencer entitled "Firms, GCs Starting to Talk the Talk," Gina Passarella reports on the growing awareness of law firms of the necessity to dialogue with their clients about their delivery of legal services. 

As Lorraine Koc, general counsel of Deb Shoppes, notes, "the idea of communicating with clients is something that virtually every business does except for law firms."

Some firms realize the importance of addressing that, particularly in the context of this economy.  "If you don't have communication and [clients] can't tell you what they like and dislike, then you're leaving them one choice and that's to leave," Flaster Greenberg managing partner Peter Spirgel says of the reasoning behind their hosting client panel presentations.

Reed Smith has held a client panel at every one of its firmwide meetings since at least 2000. The firm also surveys clients at the conclusion of large matters and survey its largest clients regularly. Managing partner Gregory Jordan also meets with clients regularly to learn more about their businesses and get feedback on the firm's work.

What is the best approach to determining client feedback and where do you start?  Which clients do you include?  How do you format the inquiry? In a forum or with each client individually?  Who inquires and what questions do you ask?  What technology best assists the inquiry?  And, most importantly, how do you translate the information you get into substantive improvements in client delivery?

Our firm provides unparalleled expertise in assessing and cementing relationships between law firms and their clients.  Now is the time.  Let us help.

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Innovation may be coming to law firms the hard way—prompted by crippling economic conditions. As pointed out in our entry “Fearing Fear“ on February 9, a natural reaction to the downturn is fear, which often neurologically prompts “pencil counting,” or furiously holding on to whatever you still have. Fortunately, if you push through the fear, there is the possibility of another response, and that is creative innovation. So far there are not any major revisions to the business model, to be sure, but at least there are some spasms of change.

Law firms are notorious lemmings, hesitant to do anything everybody else isn't doing.  But in this downturn firms are starting to take more individualized approaches to managing their businesses, particularly with respect to reducing their largest expense: compensation.  Reducing compensation costs through across-the-board associate salary and bonus freezes, delays, or cuts, jettisoning practice groups that are not deemed profitable or imposing layoffs have been the most common steps taken.  Another approach is a reduced hours work week--targeted, across-the-board, or by invitation to those who want a period of work-life balance that errs on the "life" side.  Even “furlough,” a fancy corporate word for temporary unemployment, is appearing in the downturn vocabulary of law firms, with the promise of holding on to talent for when business returns.

Pillsbury, one of the firms whose layoffs were outed by Above the Law because of a partner's indiscreet cell phone conversation on a commuter train, has preempted those layoffs with a “voluntary departure plan” for lawyers who want to leave of their own accord.

But some firms are also paying new associates to arrive later, to work at public or non-profit organizations, or to be seconded to clients, a move that can cement wobbly client relationships.

Another approach is to manage compensation by changing or expanding tiers. A number of firms have de-equitized partners and quite a few are considering thinning their non-equity partner ranks by moving those attorneys into different tiers. 

WilmerHale is putting more steps firm-wide on its attorney ladder. To the titles of associate, counsel and partner will be added senior associate, special counsel, senior partner (for those approaching retirement) and senior counsel (for partners practicing beyond normal retirement age). Co-managing partner Bill Perlstein hopes the move will increase flexibility and allow attorneys a greater choice for their career path. Given increasing attorney preferences, particularly among Gen Xers and Yers,  for more personal control over their schedules, additional tiers, if announced and managed thoughtfully, can help create a more satisfied, productive team.

Partner compensation is often the “untouchable” at firms, but even there, change is in the offing. Chicago firm Much Shelist Denenberg has announced a temporary across-the-board 10% pay cut for all lawyers, partners as well as associates, through the end of its fiscal year. Sharing the pain can promote those firms that pride themselves on their egalitarian treatment of all lawyers.

Patton Boggs recently announced that it is replacing its “eat-what-you-kill” partner compensation system with one that also rewards cooperation and firm-wide business development, associate mentoring and training, and moving clients to the next generation of client managers. The compensation review will look back three years instead of two to give partners longer to realize on business development efforts.  Under this system, a partner’s income cannot fall in any given year more than 25%. Over 90 percent of equity partners voted for the change, which managing partner Stuart Pape called an “incentive for doing things that are supportive, collaborative and productive…In bad times, a meritocratic system is absolutely the best model.” 

On the other side of the pond, similar tactics, and innovation, prevail.  Allen and Overy, when axing 450 attorneys and staff, announced that it was spinning off part of its practice, imposing a pay freeze and asking remaining partners to each contribute an average of about $50,000 in additional capital to the firm.  That move is expected not only to boost the firm's coffers but to raise the commitment to the partnership and its success of those partners willing to put their dollars there.

Doing It Right

The way that these initiatives are both announced and carried out have a major impact on firm culture and morale. Latham & Watkins’ stunning announcement recently of layoffs of 12% of its associates was accompanied by very generous (six months compared to three months) separation payments and health insurance, as well as interim salaries for new associates who delay their entry a year. In spite of the severity of the layoffs and questions about what the firm will look like in the future, the street buzz on the firm's handling of the layoffs has been positive—“classy” is Bruce MacEwen’s assessment. Similarly, the Philadelphia District Attorney's Office rescinded offers to its incoming attorneys only after several attempts to cut costs, and, when the inevitable occurred, actively sought jobs at other DA offices for those dis-invited, hoping to preserve relationships with lawyers who they might one day want to extend offers to again.

Latham and others have also received kudos for making the cuts in one whack instead of dribbling them out, as Dechert, for example, seems intent on doing.  Although the realities of the downturn may drive some firms to second and third whacks. In one of the largest cuts of this layoff season to date, Orrick sent home 12 percent of its nonpartner lawyers on Tuesday, the second cut after a November 2008 one that promised to be the one and only. Those laid off Tuesday didn't fare as well as those cut in November: they got three months' severance instead of five.

Sign of the Times or Window into the Future?

Are these fairly modest innovations we are seeing now simply a sign of these difficult times, or do they signal a growing snowball of changes that could well roll far into our future? 

These changes are not in and of themselves going to make any major inroads on the broken business model that now exists, but hopefully they signal a greater willingness (ok, motivated by a gun to the head) to get out there and slog through the swamp of uncertainty until we find firmer ground.

Experimentation is what will drive innovation, and up till now law firms have been fat and sassy enough to be able to afford not to experiment. But the old "one size fits all" attitude about how firms should be run is beginning to fray.  Unusually bad market conditions have freed firms to stop copying what everyone else is doing and look more carefully at and respond more creatively to who they specifically are, where they are headed and what resources and skills they need to get there. 

Given the layoffs across the country, if a recovery is not in motion soon, the next issue for firms to grapple with creatively may well be the dissonance between recruitment and retention that the current structure produces.  How long can firms withstand waves of painful and expensive "forced attrition" at the same time they are undertaking time-consuming and expensive recruitment and training of new incoming associates, who may well then be forced to move on in a few years?   

After arrival dates, compensation, bonuses and tiers have been manipulated, we can then start facing the decisions that will direct innovation toward the very structure of our firms and the traditional lawyer life-cycles there. 

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On February 18, 2009 Muir will lecture students at Northwestern University's Business Institutions Program on how to improve management decision-making. Based in part on the article "Promoting an Effective Board or Management Group," the discussion will explore, among other subjects, optimal personality traits for good decision-making, constructing effective teams and avoiding extreme decisions.

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The news is out:  "Law is becoming more of a business."  That was the headlights line by David Lat, founding editor of AboveTheLaw.com, in a January 25, 2009 New York Times article about the salary freezes, layoffs and dropping profits in the legal marketplace. Lat adds, "And you will see more of an emphasis on results than in the past."

Surprisingly enough, that realization seems to be downright radical, and a gathering consensus to that effect may mark a tipping point, pushing the conception of legal practice into a brave new future.

Certainly some firm managers will respond by taking out their calculators and trying to quantify their way to results--slashing salaries, reducing pencil-count.  Jones Day partner Mickey Pohl advocates refocusing legal services on providing "business-focused solutions." The job of a law firm is not to solve "a legal problem," he contends. "It's to approach a client's legal situation with an eye toward the overall health and strategy of an ongoing business, a business that has to worry about remaining in existence; satisfying customers, shareholders, and stakeholders; staying acceptably profitable; protecting its reputation; and resolving litigation disputes in a cost-effective manner." In short, brilliant legal strategy, at least in isolation, can make for poor business solutions for a client.

We counsel both our law firms and individual lawyers that "getting the right answer" is only a small factor in the successful practice of law.  Getting it right in a timely manner, getting it right in a way that best serves the client from a holistic viewpoint, getting it right so that the client understands and appreciates the answer, and getting it right in the method of delivery and followup are other critical parts of providing valuable professional services.

According to a pundit at Law and More, "there is a downside to recognizing that law is a business and that it should be focused on the business of its clients. For one thing, the specialness of this profession ends... it loses its protective aura... Instead, it stands out there like, well, any other brand, competing for attention...In addition, lawyers, even the most legally adept, will be called upon to put a human face on new business development, ongoing client interaction, and being influential with all other constituencies, be they judges or government agencies."

"Yet, this [skill] remains alien to many prominent lawyers...They address me in legalspeak or, worse, in the top-down tone and content of those who know far more than I but are patiently taking the time to bring me along. They lack more than a conversational mindset. They are downright deficient in Emotional Intelligence [EI].  Boosting EI of the individual lawyers, the law firm, and the classes in law schools seems like it's job-one in the business of law." 

The data demonstrating the challenge most attorneys face in emotional intelligence is already in. Fortunately, emotional intelligence, unlike IQ, can be improved through training, but most law firms have not considered it worth the investment.  But not only will the type of interpersonal style described above fail to obtain, keep and develop business, we also know that it clearly risks alienating the client to the point of litigation. Research shows that more than 80% of malpractice lawsuits against doctors can be predicted by examining not the doctor's education or skills, but simply the tone of the doctor's interchange with his/her patient:  a tone of "dominance" places the doctor at extremely high risk for a lawsuit.  And who but lawyers know how to pitch dominance to an off-the-charts level.

We are being pushed to explore taking bold new steps on every front that has historically defined our profession.  Compensation is being overhauled, partnership structure is adapting to the demands of the times, the billable hour is under siege, real estate is being reevaluated and leverage is under scrutiny.  But perhaps one of the most radical steps that may come from considering legal practice to be, after all, a business is the one that pushes us to educate ourselves and our attorneys in the fine, perhaps once known but now lost art of providing service.

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This is the time of year when many of us take stock of our direction and goals and make plans to step up our effectiveness.  This particular year, 2009, many lawyers are facing an extremely difficult once-in-a-century marketplace for which no one has been truly prepared.  So we may also find ourselves questioning our ability to successfully grapple with the challenges ahead.  

How to acquire the skills that will improve your practice and advance your leadership in such a disorienting environment?

The old adage of two heads being better than one is born out by the data available on the results of coaching.  According to a January 13, 2009 article by Susan Letterman White in The Legal Intelligencer, "a research report by Diane Coutu and Carol Kauffman in the January Harvard Business Review found that coaching is a business tool most often used to develop the capabilities of high-potential performers or facilitate leadership transitions," and one which produces quantifiable benefits. "The Journal of Occupational and Organizational Psychology has reported that coaching leads to higher interview ratings for individuals. Telecommunications Weekly reported in November that a change program, which included coaching, improved customer satisfaction by 10 percent and call resolution rates by 56 percent at Motorola. And according to a 2008 article in The Chronicle of Higher Education, coaching of university faculty improved the writing process of professors who were under pressure to publish."

As Ms. White states, "coaching is to a lawyer what organizational development is to a law firm; they both foster intentional change toward particular goals through a collaborative process. The goals are those that move the client to a higher level of professional effectiveness...Most importantly, a good coach is paid to ask the right questions."

In addition, a good coach is one who listens.

Sheryl Axelrod of Hepburn Axelrod & White, a Philadelphia firm, was quoted in the article as extolling the benefits of coaching in a law firm context. "We worked with a coach who had an uncanny ability to not only listen to our needs, fears and desires for our firm, but our own internal dilemmas and concerns about each other."

Of course, after listening, a coach must also be able to help coachees arrive at and implement beneficial changes.  And those changes are sometimes unexpected.  In the Hepburn Axelrod case, "one of our partners...reach[ed] the difficult decision to leave the partnership."

But the proof is in the pudding.  "The result of the coaching is that our firm, on our own, and our former partner, on his own, are each thriving in a market in which most firms are doing worse, not better, than the year before, " Axelrod said.

Quantitative evaluations of coaching are rare, but those that have been done demonstrate conclusively its effectiveness and bottom-line contribution.  In an evaluation by MetrixGlobal of an executive coaching program provided by the Center for Performance Excellence in 2004 to Booz Allen partners and principals, results indicated that "all leaders readily applied what they gained from their coaching experiences to make significant strides in self-development, while over half (53%) made significant improvements in their relationships with peers and team members and some  leaders (19%) went on to significantly improve client relationships; gaining greater clarity about how their behavior impacted clients and being better able to respond to client issues."

Of eight business areas senior leaders expected executive coaching to impact, "two were found to be positively impacted by at least half of the leaders who were coached: teamwork (58%) and team member satisfaction (54%). Three other areas were selected by 31% of the leaders as having been impacted: quality of consulting, retention and productivity."

Monetary benefits were rigorously documented in this evaluation. "The total monetary benefits were $3,268,325 with four impact areas each producing at least a half million dollars of annualized benefit to the business: improved teamwork ($981,980), quality of consulting ($863,625), retention ($626,456) and team member satisfaction ($541,250). Given a total, fully loaded cost of the coaching of $414,310, the ROI was 689%."

Coaching can provide to all lawyers the simple but valuable assistance of a supportive yet out-of-the-law-firm-box perspective that can be critical when steering through dangerous waters--and that can positively impact the bottom line. That perspective can help you become a more effective  partner, develop individual business, expand your expertise, master management responsibilities and otherwise plan and implement the next step in your career (whether you are motivated to do so proactively or reactively).

At RRR, we offer confidential high-performance coaching programs of six to eighteen months that are tailored to your objectives and your schedule.  Contact us for a consultation on how we can help you achieve your goals in 2009.

Happy new year!

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Results from two surveys show growth at the country’s largest law firms to be down significantly in 2008 although employment is generally still on the rise. The National Law Journal’s 31^st annual survey of the NLJ 250 reports that those firms added 4.3% more attorneys in 2008, consistent with increases in 2006 and 2005 but at a lower rate than 2007’s 5.6%.  Partner growth in 2008 averaged 3.5%, which was down from 4.6% in 2007 and 5.1% in 2006. Non-equity partners increased 9.2% compared to 2007, when their ranks increased 8.2% compared with 2006. The average number of women partners stayed stable.

The West Peer Monitor Index, a measure of legal market conditions, reported in late November that large law firms had the lowest productivity during the third quarter of 2008 since keeping records, on average down 4.5%. Productivity at the largest firms, the AMLaw 100, was down even more--6.5%, largely as a result of continued increases in hiring at a time when there is less (particularly transactional) work for those associates to do. Often it takes two years for large firms to respond to market conditions in their hiring practices.

According to the Index, average associate hiring at all firms declined 6% in the 3rd quarter of 2008 compared to 2007, with firms offering equity partnerships to half as many attorneys as they did last year (including mega-firm Mayer Brown, which recently announced making 27 partners worldwide compared to 43 last year). Average lateral growth remains comparable to 2007.

Billable hours for all firms dropped 2.5% in the 3^rd quarter after declining 2% in the second quarter. Overhead expenses grew 6% compared to 8.3% in the 3rd quarter 2007 and direct expenses grew 8% compared to 9% last year. 

The short-term tact many firms are taking now is to lay off lawyers. According to the U.S. Bureau of Labor Statistics, 7,300 lawyer jobs were lost nationally between June and October, with an expectation of far more shrinkage when November and December numbers are tallied.       

Big firms, and particularly the big New York-based firms who draw much of their work from transactions for or financed by Wall Street financial institutions, have been particularly hard hit, and are responding accordingly.  The tally of recent attorney layoffs from New York offices includes 96 lawyers dropped from Cadwalader, Wickersham & Taft, 20 from Clifford Chance, 40 from Orrick, Herrington & Sutcliffe, 35 from Proskauer Rose, and 70 from White & Case.  Clifford Chance attorneys have been quoted questioning whether it's worth having a New York office at all. The fact that major transactional firms--Heller, Thelen, and now Thatcher, Profitt--have already folded this early in the recession may well presage more big firms collapsing in 2009.

Freezing salaries, as Latham & Watlkins has announced, and cutting bonuses in half and eliminating special bonuses, following the lead of Simpson Thacher, Davis Polk, Skadden Arps, Cravath and others in the US and Allen & Overy and Clifford Chance in the UK, are among the other responses to all this bad news, as well as cutting staff, reevaluating off-shore back office services, and trying to offer more flexible fee arrangements.  The recent explosion of non-equity partners is also being scrutinized for its impact on firm finances during these difficult times.  

Hard-pressed law departments are taking another look at the pros and cons of outsourcing, as well as insisting on more accommodation from their firms on staffing and pricing. 

There are a few benefiting from the downturn. The work of outplacement firms has expanded exponentially and attorney recruitment firms have had an influx of talent.  In recognition of this growing pool of lawyers, LegalOnRamp, among others, has added a legal positions component to its site. So those firms looking for talent are at an advantage now.   

Is there any silver lining?  Firms can take this time to experiment with different fee arrangements and also to shore up organizational fundamentals--enhancing performance evaluations, professional, leadership and business development training, and succession plans--so as to be better able to weather the continuing storm, and to be poised to take advantage of the economic improvements that will eventually come.  

Although some pundits are claiming that the economic impact on the law business hasn't been as disastrous as first expected (which we may have to wait a while longer to fully evaluate), there is no denying even at this stage a sea change of sorts---if only that the current fear and trembling in the legal community, historically one of the most economically stable professions, will cast a long shadow over firms as they embark on 2009 and the years to come.

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There is no denying that Gen X and Y are most comfortable interacting via technology--IMing, texting, emailing--possibly to the detriment of their face-to-face skills, as some contend.  Employees in large corporations have come to use this technology, particularly on line social sites, as a way to form community and communicate within vast, impersonal organizations.  IMing with the Senior Vice President about favored jazz albums instantly creates up-and-down-the-ladder rapport and also an enhanced commitment to the organization. 

Associates at most law firms are also making use of these technological avenues of communication.  Most firms have official or unofficial firm social groups on MySpace, Facebook and other sites. Ning is a private interactive social networking site that several IT consultants recommend as a good site for law firms to use.  It allows participants to chat real time and also post documents, and the software is free. 

Some firms have banned these social groups while others have embraced them.  On the positive side are the potential gains in networking, which Paul Lippe, CEO and co-founder of Legal OnRamp, claims "is the number one predictor of a lawyer's income," as well as an increased sense of community and therefore commitment.  Curtis, Mallet-Prevost, Colt & Mosle uses Facebook as a recruiting tool and an "I'm in Love with MoFo" site probably hasn't hurt Morrison & Foerster's recruiting either.  Of course, these sites, largely unsupervised and unsupervisable, also provide renegade employees with the perfect weapon to embarrass a firm.  As do the multitudes of privately run, individual blogs that comment on particular firms or corporations.  See, for example, our February 26, 2008 entry entitled Decorum, Virtue and Other Values in the Age of the Internet, which recounts Skadden Arps public shaming of two Skadden employees for their (unofficial) blog contest for the "Hottest Female Associate."

Microblogging offers an alternative to these social networking sites, with entries that can be relayed not only on line and by email, but also as text messages over cell phones. The degree of privacy varies as to both the individual's information and that of friends or followers.

Twitter, the leading microblogging network, has become a household name with its contribution to the Obama political campaign and its on-the-spot reports on tragedies like the Mumbai terrorist attack.  Started in 2006 and with over 3 million people using its free service, Twitter has no revenue, even from ads.  When you log on, the question that first appears and that you can use 140 characters to answer is "What are you doing?"  Twitter boasts such regular "twitterers" as Benjamin Netanyahu, the leader of the Likud Party in Israel and Kevin Rudd, Prime Minister of Australia, as well as Shaquille O'Neal, Center for the Phoenix Suns and John Cleese, the actor and comedian.

Yammer is a new and smaller microblogging site aimed at business customers with the stated goal of making offices more productive--when a user logs on, the first question is “What are you working on?”  Yammer charges $1 per user when a company joins, although anyone with a business email address can use Yammer free.  Membership gives the business administrator the decided advantage of some control over security and how the site is used. 

Apart from the networking, communication and recruiting advantages, these constant technological interchanges among a growing group of contacts offer a glimpse into the business model that is likely to become more and more the norm for lawyers and their clients.  In a global age that threatens individual anonymity, social sites and microblogging permit personal, even intimate relationships to form and thrive around the world, regardless of where the individual IPs or mobile devices are geographically located.  And it is relationships, however they are formed, both within law firms and with their clients, that will drive the future of the legal business.

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At the meeting of the American Bar Association's Law Practice Management section today in Tucson, Arizona, Muir was presented with the 2007-2008 Law Practice Magazine Edge Award for Bronze Feature Article for her article in the July/August 2007 issue of the magazine entitled "The Importance of Emotional Intelligence in Law Firm Partners." The Edge Awards are sponsored by Edge International, and each year recognize excellence in writing for the magazine.

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It isn't a tardy response to Dick the Butcher's rallying call in Shakespeare's King Henry VI to "kill all the lawyers" that may end it for us, according to the forthcoming book The End of Lawyers? Rethinking the Nature of Legal Services.  Richard Susskind, Emeritus Professor of Law at Gresham College, England, IT adviser to Britain's Lord Chief Justice, recipient of an Order of the British Empire award, and consultant to a number of leading law firms in Great Britain and abroad, contends it is rather our own stubborn resistance to the metamorphosis of the business and technological world that will do us in.

"I write not to bury lawyers but to investigate their future...in the face of challenging trends in the legal marketplace,"  Susskind assures.

Let me paraphrase a few of his points from excerpts of his book.

Ignoring The Future and Its Technology

Susskind, also author of The Future of Law (1996), says that during the more than 15 years he was Executive Editor of the International Journal of Law and Information Technology, not once did he receive a submission of an article on the nature of legal practice in the long term.  Governments, managing committees and law schools are not worrying about the fate of the profession for the next generation, in his opinion.  The assumption is that the profession will continue to look like it does today-- skilled professionals dispensing consultative advisory services on a one-to-one basis. While major oil companies have strategic plans in place for the next 50 years, very few lawyers look beyond the next five. 

But the profession is on the brink of a fundamental transformation, in Susskind's opinion.  Within the next 10 years, he contends, all manner of legal guidance and resources, barely imaginable 10 years ago, will be at everyone's fingertips.  The last 10 years intimates the kind of progression that can be expected in the next 10.   Technology today already makes the expanding web of hyper-regulation--vast interconnections of complex regulations--manageable.  They become search-able, reportable and the questions raised resolvable in microseconds compared to the old system of researching and reviewing regulations and case law. Commoditization and technology will likewise reshape 21st century legal services, making conventional legal advisers less prominent, even to some extent invisible. 

The market is increasingly unwilling to tolerate legal expenses born out of inefficiency. So the challenge is to identify lawyers' distinctive skills and replace the rest by advanced systems or less costly workers.  The already apparent tendency of lawyers now to point to their negotiating, deal-making, counseling, risk management, even therapeutic skills, over their mastery of black letter law shows the great tide of recognition of the sinking value of black letter lawyering, which can be increasingly standardized, systematized, packaged and even commoditized without the bespoke handling of an expensive lawyer.  New age lawyers will combine law with some other substantive expertise (like IP, for example) and there will be a new cadre of legal knowledge engineers, whose specialty will be to access, manipulate and package relevant law.

The Potential Impact of Non-Lawyer Investors

For the first time in England, non-lawyers will soon be able to invest in law firms. Delivery of legal services will be a very different business when financed and managed by non-lawyers.  It is improbable that investors would put money into the traditional law firm business model, with its hourly billing, expensive premises, pyramidic organizational structure, etc. 

Savvy business people will surely find that traditional law firms are over-resourced, with enormous duplication of effort, and with too many smart lawyers and too few smart systems.  A revolution in delivery will quickly take advantage of the most profits to be rung from high-volume, low-margin consumer legal work. It has been determined that of 10 billion pounds of consumer-based legal services business in Britain, 6 billion could easily be captured by common consumer outlets, like supermarkets and banks. 

Companies are starting to decompose the components of their spending into high value, big ticket and other matters.  With $40 billion currently being spent on engaging the top 100 US law firms alone, there is likely to be some potential for savings.  Big law firms feel smugly secure in their bet-the-ranch niche, but among general counsel it is clear that if new legal businesses emerge offering quicker, more convenient, less costly alternatives, their companies will embrace them.  And the incentive is there for those businesses to emerge.

Confident In Our Naivete

Lawyers' confidence that "disruptive legal technologies," such as document assembly and review, personalized alerting, on-line dispute resolution and open-sourcing, will not impact their practice is only matched by their lack of familiarity with these trends and their naivete.

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The American Bar Association has announced that Ronda Muir's cover article in the July/August 2007 issue of Law Practice magazine, entitled "The Importance of Emotional Intelligence in Law Firm Partners,"  has been awarded the 2007-2008 Law Practice Magazine Edge Award for Bronze Feature Article. 

The Edge Awards are sponsored by Edge International, and each year the awards recognize excellence in writing for the magazine.

Muir will be presented with the award at the Tucson, Arizona October 16-18, 2008 meeting of the Law Practice Management section.
 

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Lawyers are introverts, big time.  According to Myers Briggs Type Indicator (MBTI) results, almost 3/4th of lawyers, compared to only 1/4th of the general public, are introverts.  That means they go inward to charge their batteries-- preferring internal introspection to external interaction. 

On the Caliper Profile personality test, lawyers also rank astonishingly low in the sociability trait--which measures how comfortable a person is initiating and building close relationships. Low sociability scorers are less inclined to enjoy interacting with others, preferring to spend more time with information. 

Of course, we know that lawyers are thinkers--they think, analyze documents and deals, edit and write, all loner tasks.  In a recent study, lawyers ranked sixth overall on a list of the 200 best jobs for introverts, just behind the loner braniacs who work as computer software engineers and accountants. 

The question for management becomes how to integrate these loners not only into a coherent, committed organization but also into the 21st century vision of service delivery:  coherent, committed teams.  How do you overcome/compensate for the introverted nature of lawyers in day-to-day management, business development endeavors, client service?

Slowly.  Start by using the strengths of introverts--such as their tendency to (appear to) listen and to deliver well-thought-out opinions-- and proceed from there logically to the overwhelming consensus from research that collaboration improves productivity and satisfaction. 

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At a time of some idling in the legal industry, a good use of lawyer time may be to spiff up the old pro bono program.  Davis Polk & Wardwell recently announced the addition of Ronnie Abrams, former Manhattan US Attorney's Office prosecutor and daughter of renowned First Amendment litigator Floyd Abrams, as its first Special Counsel for Pro Bono.  She succeeds a former associate of the firm who oversaw the program and is being made a partner.  For a firm with historically good standing on the American Lawyer's pro bono A-list, one might wonder what prompted the star power addition.

"[Pro bono] is becoming much more important in terms of client relations, recruitment and marketing," says Esther F. Larfent, president of the Pro Bono Institute, which, since 1995, has urged large law firms to commit 3-5% of lawyer hours to pro bono work.  Hiring someone of stature to oversee the pro bono effort "is a very fast growing trend, there's no question."  And having an inhouse partner can fill a talent void at firms that have historically relied on public organizations to oversee lawyer work.

As we all know, pro bono has been around for decades.  Pro bono was what firms long offered to do for pet projects of friends and clients that could also fill young lawyers' time when real work got a little slow.

It has, however, become a much more complicated matter.  Feeding into the equation are various factors:  public perception (falling) of lawyers' civic mindedness; the motivation of many who enter law school to "do good" followed by those same graduates going to big, bad corporate firms and suffering the resultant identity crises; the escalating dissatisfaction of law practitioners and correspondingly escalating attrition rates (perhaps related in part to the previous observation); inspired in part by the expanded transparency that Sarbanes Oxley has imposed on corporations, the increasing client demand (often with teeth) for their law firms to also demonstrate their bone fides in social agenda areas, such as diversity and community service.  There is even the prospect of using pro bono work as a marketing device to tether a firm to a new client or strengthen existing ties.

What Law Firms Are Doing

Some law firms have moved to adopt firm-wide programs that identify them with select non-profits or cause campaigns. Cravath, Swaine & Moore attracted widespread attention a few years ago when it became the primary sponsor of the Urban Assembly School for Law and Justice in Brooklyn, one of 200 small schools that Mayor Michael Bloomberg created to overhaul public education in New York City. Cravath took ownership of this visionary community program, vowing “hands-on” involvement on an “in-school” basis. Throughout the firm, partners, associates and administrative staff work to develop and build an initiative that they believe can lead to real, systemic social change. 

Cravath’s community venture was sufficiently distinctive to merit feature news coverage. According to Stuart C. Ross, partner in ross+price communications, a public relations and marketing services agency that advises professional services firms, “What Cravath did, and how it was reported by the news media, represents an important shift... Clearly the press will cover effective and innovative corporate citizenship, but only if those efforts go well beyond simply writing a check or donating a few hours of legal expertise.”

Skadden had a 38% increase in pro bono hours in 2007 after it assigned Douglas Robinson, a longtime partner devoted to defenses in death penalty cases who was considering early retirement, to become its first pro bono partner. 

What are the Benefits for Law Firms? In addition to the obvious good these programs do for the community and the favorable public relations they can generate, these programs also have a positive impact on a firm’s retention and recruitment effort, producing real bottom-line results.  A study by the Center for Corporate Citizenship at Boston College revealed that 73% of employees involved in volunteering through work said their employers’ support of these initiatives had made them more committed to their jobs.

David Sirota, co-author of The Enthusiastic Employee: How Companies Profit by Giving Workers What They Want (Wharton School Publishing), argues that employees, regardless of industry focus or experience, have three basic goals in their work. First, they want to be treated “equitably,” with competitive pay, benefits, job security and respect. Second, employees want a sense of achievement from work and to feel pride in both their own position and in the organization of which they are a part. And third, employees want to experience camaraderie. As a Cravath partner phrased it, “This [camaraderie] is not mentioned much in our field, but it's key – not only in the sense of having a friend, but working well together as a team. That is a tremendous source of satisfaction for people…. Working with the School for Law and Justice has been great for Cravath. Having one firm-wide project involving the entire staff builds office morale.” 

WilmerHale committed both financial support and a broad range of administrative and in-kind assistance, including active volunteer service, to six community youth and education organizations in Washington D.C. and Boston, which it reports “has made our lawyers and staff part of the fabric of these community organizations.” The firm takes pride in the striking results produced by its Youth and Education Initiative in terms of student morale, student and staff retention, college acceptance rates, child literacy, improved communication skills and community building. And, it reports, “our non-profit partnerships are a rich source of fulfillment—an internal glue that unites lawyers and staff through their volunteer service to inner-city children.”

According to James H. Quigley, CEO of Deloitte & Touche USA, “What we have seen at Deloitte & Touche is that one of the benefits of contributing to the community is that it helps employees develop leadership skills and business acumen. A [recent external] survey [we conducted] revealed a strong link between volunteering and professional success. Among other findings, the data showed that 86% of employed Americans believe volunteering can have a positive impact on their careers and 78% see volunteering as an opportunity to develop business skills, including decision-making, problem-solving and negotiating. Community service matters.”

From a recruiting perspective, both established professionals and young people from Gen X and Y are seeking more than a paycheck. Candidates are increasingly concerned with work/life balance opportunities, the existence and influence of a diversity committee and the extent of a firm’s involvement in the community. 

Fried, Frank, Harris, Shriver & Jacobson, the sole law firm sponsoring the inaugural conference in 2005 of the “Clinton Global Initiative," as the former president called it, had eleven associates participate in serving as personal aides to the heads of state, corporate chiefs and academics from around the world who attended.  As one associate explained, "I wanted to do something with my life besides chasing greenbacks, and so I chose Fried Frank in order to have a balance between serving clients and doing pro bono work." 

In terms of charitable giving and community good, law firms’ pro bono programs have long produced positive returns in the legal and broader community. However, most pro bono efforts are individual donations of time and expertise that don’t necessarily coalesce to make a major impact or project a firm identity, and therefore fail to provide not only the optimal amount of good but also the optimal public relations punch as well. 

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Law firms are often bedeviled by the on-line shenanigans of their young (and sometimes not so young), who can carelessly leave a footprint permanently in cyberspace.  While these irritations don't often rise to the level in titillation value or PR devastation as some of the old-tech crimes perpetuated by errant employees/partners, like the Cravath tax lawyer who solicited children for sexual favors, those types of cases are (thankfully) fairly rare and have a limited media shelf life.  Blogs and social networks, on the other hand, seem to just keep on giving and giving, although often an unwelcome PR black eye. 

Here's some recent developments for law firms in the cyberspace sandbox. 

Allen & Overy's London office recently issued a ban on accessing the social networking website Facebook in light of concerns that the impact of downloading videos from the site could compromise the firm's IT performance.  Within days, complaints forced a turn-around by management, nominally on the grounds that the site is used for business as well as social reasons.  Currently there are 932 members on the A&O network on Facebook, a nice bump over the 600+ when the firm tried to shut it down. Internet comments related to the episode ran the gamut from condemnation of the firm's leadership for being so easily swayed to one person's plea for more such bans so that work could get done.  

Arguments for/against law firm blogs/social networks usually include claims that they are useful/extraneous for business development in the internet age, that other businesses do/don't (investment banks often don't, for example) allow workers to access them, that social/work boundaries should/should not be imposed, that the sites are time-wasters/efficiency drivers.

Reflecting these mixed feelings, evidently approximately one-third of law firms have Facebook networks, and two-thirds of law firms have blocked them.  Big firms with networks on Facebook include at least eight of the largest: Skadden, Arps (with 379 members), Baker & McKenzie (728), Jones Day (286), Latham & Watkins (291), Sidley Austin (199), White & Case (370), Shearman & Sterling (225), and Kirkland & Ellis (192).  While Mayer Brown and Weil, Gotschal, among others, have apparently banned them.

As a cultural matter, these kinds of social networks can be a very useful tool in building community and connection at firms that have long been known for neither.  Their availability resonates with Gen Xers and Yers, who are most comfortable with an open technological stance.  And there are at least nascent efforts to truly use these types of networks for business development purposes.

LegalOnRamp, a relatively new site being developed in conjunction with Cisco, envisions an  interactive brainstorming locale involving in-house and outside lawyers, who can meet and discuss substantive legal topics, as well as management and personnel issues.  Mark Chandler, GC at Cisco, touts this type of technological meeting ground as the model for how law will be conducted in the future.  Instant access to not only profiles, expert articles and form provisions, but also substantive issue forums and interactive document building certainly make it a useful tool.  Another feature, being able to see who each party is connected with-- their "friends," in Facebook parlance, also efficiently builds reliable connections and makes for more informed referrals.

As to independently run "insider" blogs, most firms have no ability to influence what is on them other than by using their bully pulpit.  The latest controversy involves a blog run by two unnamed Skadden Arps employees-- with admittedly no authority to speak for the firm-- that held a "Hottest Female Associate" contest, with photos of the candidates included.  The contestants were neither notified nor asked for permission to post their names/photos and a few photos were of an obviously personal nature (don't rush to Google it now--the photos have been taken down). 

Much to the apparent surprise of the blog-minders--"Damn, we feel like we were called to the Vice Principal's office today and had our knuckles wrapped (sic)."-- Henry Baer, chairman of Skadden, wrote an email to the firm recognizing the prevalence of blogs but weighing in on the inappropriateness of the contests, which "does (sic) not reflect our values and standards of behavior... We urge the authors of the blog to consider both the privacy and feelings of the affected attorneys and to discontinue the contests." 

Several points seem worth noting regarding this particular standoff.  While the female contest had already been decided, the still outstanding "Hottest Male Associate" contest was promptly cancelled by our erstwhile bloggers. Also, it is interesting that Baer's objections were confined to the impact of the contest on the attorneys involved and other attorneys at the firm, who were concerned and embarrassed.  No doubt he had good counsel on the necessity to counter any appearance of a hostile workplace.  But several comments on the blog make it clear that there is potentially another kind of  financial downside:  the bloggers risked turning off clients and employment candidates as well.

A retort to Baer's letter by the bloggers--"We're not quite sure what Skadden's "values" are (or, for that matter, the Firm's "standards of behavior")"--is perhaps the most troubling aspect of this little imbroglio.  See our upcoming entry Joining the British in Hunting for an Identity on the importance on both sides of the pond of knowing who you are and what you stand for as a firm, and effectively inculcating that into the culture.

A corporate real estate lawyer at Jenner & Block, Jennifer Sara Levin, recently founded  Legal Intelligence, an online platform connecting law school students with top-tier firms.  A pilot program involving three law firms and her alma mater, Northwestern University School of Law, is running online at http://www.legalintelllc.com. The idea is to help students find the law firm that fits them best, partly through online video conferences.

"It's like a Match.com for law students," Levin said of her start-up.

Law firms pay to participate, Levin said, because they want to find law school graduates who aren't just qualified but who also share their firm's values. Often, Levin said, top-tier law firms end up with graduates who don't fit their culture. "There's no way to do it in a 20-minute interview. You can't get enough information to know if this person is the right cultural fit," she said.

There's that "v" word again.

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