In April, Shearman & Sterling's entire Mannheim office packed up and reverted back to its original form, Schilling Zutt & Anschutz. What prompted the schism?
"There are some great lawyers at Shearman & Sterling," one former partner is reported to have said. "I just don't think they are particularly happy."
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.
The use of assessments worldwide is rapidly expanding and lawyers are still lagging at the back of the pack--way back.
An article by Lisa Belkin in yesterday's New York Times notes that there are 2,500 "profiling instruments" that companies rely on more every year when deciding whom to hire or promote. Sixty-five percent of companies surveyed reported using assessments in 2006, up almost double from the 34 percent reported a year earlier, according to Staffing Industry Report, a human-resources newsletter.
To paraphrase her article, the content of tests has stayed more or less constant for three decades. What has changed is the workplace. The cost of losing experienced employees now represents a tremendous lost of investment. "Employers want a guarantee that a new hire will stick — and the best way to do that is to make sure that job and candidate are a good fit in the first place."
Globalization that separates performance and accountability/review across continents has further complicated the process of finding and training the best person for the job. So offering on-line testing across those continents makes these assessments not only appealing but also fast.
I am often asked by potential clients, particularly those who have been in corporate settings, if we either offer or recommend simple, cost-effective assessments for them to use in attorney recruitment, training and development. While we can recommend and administer a number of good assessments that can be highly useful -- Myers Briggs Type Indicator (the most popular test in the country, used by 89 of the Fortune 100 and taken by 2.5 million Americans each year), Caliper's Personality Profile, Birkman Method, MayerSaloveyCaruso Emotional Intelligence Test, Thomas Kilmann Conflict Instrument, among others--they are not inexpensive and they are not targeted to lawyers.
A recent college graduate friend took a Johnson O'Connor aptitude assessment, a common test for teens and young adults to help determine career possibilities. Since her father and grandfather are lawyers and she is considering going to law school, she was surprised to find that "lawyer" was not one of her designated career possibilities. She was told that a few years ago Johnson O'Connor stopped offering "lawyer" as an option for any of their test-takers. The reason? They are no longer able to reliably correlate attributes or aptitudes with the successful practice of law.
And therein lies one of the problems with assessing attorneys. While research has indeed identified a number of attributes that lawyers exhibit to a greater degree than others-- for example, high pessimism, skepticism, urgency and autonomy, and low resilience, sociability and collaboration-- the problem lies in the data that shows the impact these characteristics are having on practitioners. These very attributes present in so many lawyers are also the attributes contributing to the dissatisfaction and distress that the legal profession exhibits: astonishingly high rates of depression and other mental illness, substance abuse, suicide, and divorce, for starters. High rates of dissatisfaction that are also contributing to the staggering drop-out and attrition rates.
In addition to the challenge of identifying what makes for a good (as well as well-adjusted lawyer), there is also the expense of doing that well. The testing often done at corporations is highly individualized, developed after an extensive review of what attributes in fact produce productive and satisfied employees at that particular company, and sometimes at that particular location. Google hires over 10,000 new employees each year and enjoys the amazingly low attrition rate of 4%, but to accomplish that.it invests in a highly detailed questionnaire and assessment that is developed from extensive employee data That process is not inexpensive.
Not only is it the individual lawyers who have complex and sometimes hard-to-read attributes. Law firms and law departments, often in spite of their studied denial, also have "personalities." Understanding those personalities is critical in determining the type of person who will thrive or fail there.
Our unique expertise in understanding the attributes of individual lawyers, as well as each legal workplace, makes us ideally suited to help you enter the challenging world of 21st century attorney assessment, development and retention.
Of the gallons of ink dedicated to analyzing the eye-popping follies of Eliot Spitzer, by far the most trenchant view is contained in the March 14 New York Times OpEd piece by David Brooks. Permit me to quote whole sections of his article.
"Our social structure seems to produce significant numbers of people with rank-link imbalances. That is to say, they have all of the social skills required to improve their social rank, but none of the social skills that lead to genuine bonding. They are good at vertical relationships with mentors and bosses, but bad at horizontal relationships with friends and lovers.
[In school,] they rack up great grades and develop that coating of arrogance that forms on those who know that in the long run they will be more successful than the beauties and jocks who get dates.
Then they go into one of those fields like law, medicine or politics, where a person’s identity is defined by career rank. They develop the specific social skills that are useful on the climb up the greasy pole: the capacity to imply false intimacy; the ability to remember first names; the subtle skills of effective deference; the willingness to stand too close to other men while talking and touching them in a manly way.
And, of course, these people succeed and enjoy their success.
They treat their conversational partners the way the Nazis treated Poland. They crush initial resistance, and the onslaught of accumulated narcissism is finally too much to bear.
[But] then, gradually, some cruel cosmic joke gets played on them. They realize in middle age that their grandeur is not enough and that they are lonely. The ordinariness of their intimate lives is made more painful by the exhilaration of their public success. If they were used to limits in public life, maybe it would be easier to accept the everydayness of middle-aged passion. But, of course, they are not.
And so the crisis comes...
These Type A men are just not equipped to have normal relationships. All their lives they’ve been a walking Asperger’s Convention, the kings of the emotionally avoidant. Because of disuse, their sensitivity synapses are still performing at preschool levels.
So when they decide that they do in fact have an inner soul and it’s time to take it out for a romp ... . Well, let’s just say they’ve just bought a ticket on the self-immolation express. Some desperate lunge toward intimacy is sure to follow, some sad attempt at bonding. Welcome to the land of the wide stance."
Now that the British are doing it, maybe even law firms should consider giving it a try. Articulating an identity, that is. According to an article in the New York Times last month, Prime Minister Gordon Brown's new government has announced an effort to formulate a British "statement of values" defining what it means to be British, much as the Declaration of Independence sets out what Americans stand for. But it is an undertaking that has produced exasperation in a number of corners.
In a fitting tribute to British independence (or recalcitrance, depending on your point of view), the winning entry in a contest sponsored by The Times of London, inspired, if somewhat cynically, by the identity campaign, is: "No Motto Please, We're British." Pity that so many law firms come to a similar conclusion.
While the British are looking to articulate their Britishness, law firms should consider figuring out who they are as well. Establishing an identity has long been implicit (though often short-changed) in the process of strategic planning. Strategic planning involves the projection of a firm forward into new (hopefully better) circumstances based on assumptions about existing and future conditions.
While the vagaries of accurately assessing current and (certainly) future conditions are evident, the ingredient that law firms often neglect is the "who." Who is this firm? What is the firm like that is moving through these assumed conditions? What are its values and goals? Whom would it like to become? Because the "who" will be in many cases the determining factor in the outcome of strategic planning. Is the firm a nimble, highly technological, thinly leveraged outfit that offers its attorneys immediate responsibility or one that enjoys great depth of expertise, long-standing client connections and is a well-respected resume-builder? Does the firm pride itself on collaboration or aggressiveness? Does it offer its lawyers a premier training ground or a sustainable life style?
Lawyers often look askance at these types of evaluations. As a million websites point out, firms aim to be "responsive to our clients' need" and "highly experienced in ..." and be done with it. But those are not the things that young applicants in the competitive recruiting and retention bullpen are saying about firms. They are finding ways to distinguish firms, whether we like it or not.
A recent entry referred to an unauthorized Skadden blog that was terrorizing the firm with its "most attractive associate" contests. Management made it clear that "the 'contests' on one of these blogs is (sic) inappropriate and does not reflect our values and standards of behavior." It is the "insider" response that seems to us fairly shocking: "We're not quite sure what Skadden's 'values' are (or, for that matter, the Firm's 'standards of behavior')." It's the "we're not quite sure..." part that should send chills down management's spine. Not just because of the likelihood of errant contests in poor taste, but because of the wide spectrum of activities-- ill-considered to illegal--that a lack of common values invites.
In an increasingly stratified marketplace, it is more and more important for each law firm to make sure it knows what it stands for and why, and to thoroughly communicate those values from top to bottom. There are few forces as powerful as smart, ambitious Type A personalities committed to a cause. And the only way your law firm can become your lawyers' cause, particularly for your Gen Xers and Yers, is for the firm to stake out itself in the law firm firmament.
A law firm's values, evident in how it functions on a daily basis, not only in what it talks about, are what associates and laterals will come for and what they will stay for. Those values are what will keep your partners from being plundered and your staff loyal. And they are what will make your firm most productive.
One of the reasons this British identity search is necessary, according to Vernon Bogdanor, professor of government at Oxford, is that "Britain was something that just happened. No one's ever sat down and thought about what it means to be British." He points out that having an identity bespeaks a confidence that there is a place in the global realm for the British. Without a common identity that links its members into a community, he says, the country becomes a hotel, where individuals check in and out but don't have a common connection. Sound familiar?
From the historically great gray uniformity of law firms has blossomed a broad range of attitudes and actualities on many subjects-- gender and minority diversity, life-balance, training, client service, management involvement, even whether the practice of law is done from dedicated real estate or virtually.
No longer is the slogan "We're Lawyers" sufficient.
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.
On February 12, 2008 Muir is scheduled to discuss with students at Northwestern University's Business Institutions Program how to improve decision-making. Based in large part on the information contained in "Promoting an Effective Board or Management Group," the discussion will explore, among other subjects, optimal personality traits for good decision-making and how to avoid extreme decisions.
Baby-boomers are making their mark on the demographic frontier again--this time valiantly fending off the mandatory retirement that generations of law firm partners before them submitted to.
The Sidley Austin age-discrimination case, which arose when 32 partners lost their full partner status, ended last fall after two-and-a-half years and seven court decisions (all lost by Sidley Austin) without a decision on the merits. It did end with a large payment of cash, $27.5 million to be precise, to the aged-50-something+ lawyers, and an uneasy feeling in the pit of many legal bellies. Left unanswered was the question of whether and when law partners are employers or employees for purposes of the EEOC, a determination which may be even thornier with the proliferating partner tiers in partnerships.
Even if they don't sue, baby boomers don't have to take being put out to pasture lying down--they can usually find a firm that will appreciate their talents. Barry Bryer left Wachtell, Lipton for Latham & Watlkins in 2005 to escape a mandatory retirement policy, and antitrust specialist A. Paul Victor left Weil, Gotshal for Dewey & LeBoeuf for the same reason.
So what's the right tact for law firms to take today? Over half of law firms have age-mandated retirement policies on the books, with a majority of those requiring retirement at 70. An Altman Weil study found that only 38% of lawyers in management roles agree with having age-mandated retirement policies, although given that nearly 60% of law partners are now over 55 years of age, there's a good possibility that the disapproving 62% may have their own self-interest in mind.
Many firms argue that these policies are necessary for the transitioning of client relationships, firm leadership and firm profits to more productive, younger partners. The policies also, of course, automatically trigger firm action, avoiding the firm having to find the will and the muscle to individually evaluate older partners and confront those who are not productive.
Advocates for dropping these age-driven policies point out that, at a time when firms have been bemoaning recruitment and retention challenges, 80% of the growth in the U.S. workforce over the next 15 years will be in the "over 50" age bracket. And nearly 80% of all baby boomers, according to the US Census Bureau, want to continue to work during retirement. Why isn't retaining lawyers who are healthier at their ages than earlier generations, who have proven capable and dedicated, and whose experience makes them highly valuable in a global market, a win-win solution for all involved?
But even without the impetus of a court declaring such a retirement policy illegal, the trend toward dropping aged-mandated policies is clear. The American Bar Association House of Delegates passed a resolution in August 2007 calling for law firms to end age-based retirement policies. A special committee of the New York State Bar Association concluded that mandatory retirement within law firms at an arbitrary age is not an accepted practice and sent a letter to major law firms in New York asking them to pledge to end those plans, which a number of firms have signed.
Last year Pillsbury Winthrop announced the abandonment of its mandatory retirement policy and instead supports partners in developing an individual approach to transition. Senior partners build three-to-five year career transition plans, receive financial planning services to make sure financials don't drive the decisions and consult professional career consultants for additional support and advice.
According to Holland & Knight, "We do not have a mandatory retirement policy, although our partnership agreement now requires a conversion from equity or nonequity partner to senior partner status at age 70. We have many active senior partners in their 70s and 80s and greatly value their contributions."
So are we ever going to get rid of them?
In the era of the global law firm comes (wisely, in our view) the introduction of the position of Global Chief People Officer into law firm senior management . Reed Smith announced last week that its creation of the position underscores the increasing importance the firm places on running itself as a business.
"You see more of this in global companies," said Gary Sokulski, Reed Smith's chief operating officer. "Since we're a people business, it's only natural to have someone who focuses on the people aspect. It's similar to a human resources officer, but focused more on employee concerns such as work-life balance, better managing and evaluating talent, and creating higher-level training programs."
Since 2001, Reed Smith has consolidated with firms from around the world, including in New York, California, Chicago, London, Abu Dhabi, Greece, Dubai, Paris, Hong Kong and Beijing, increasing in size from 600 attorneys based in the U.S. to more than 1,500 worldwide. Meeting the challenges of that much lateral integration alone would merit a full-time professional.
DLA Piper, with more than 3,600 lawyers over 64 offices in 25 countries, and arguably (depending on which moment you're counting) the second largest law firm in the world, has had a Global Chief People Officer for several years, Robert Halton, headquartered in London.
"Unlike other organizations, the cliche of people being the best asset is completely true in law firms. We don't have any machinery or stores, so it's the people providing the competitive edge in the market. Getting the right people is crucial to the success of a law firm, and keeping that pipeline of talent flowing is also crucial," Halton says.
Small and mid-size firms face equally critical people issues as do the new behemoths, but for them, adding a dedicated full-time professional to firm overhead in order to address those issues often is unrealistic.
We at RRR offer an Outside/Inside Consulting arrangement whereby we will spend a designated number of days per week or month as your Chief People Officer. Our experience brings efficient expertise to your people concerns in an affordable format.
Make way for a Global Chief People Officer at your firm, whatever the size.
For the first time in six years, law firm expenses in the US and the UK are growing faster than revenues, according to a recent article in The American Lawyer. For the first six months of 2007, gross revenue grew at a strong 13.1%, well above the compound annual growth rate of 10.5% of the prior three years, while productivity (average hours per lawyer) was flat. Rate increases were in line with the six-year average increase of 7% and, continuing an upward trend, there was an increase in leverage-- total lawyers rose by 7.4%, significantly above the increase in equity partners.
But there were also big increases on the expense side, with the expense growth rate of 13.7% much greater than the average 9.2% of the last three years and outstripping the increase in revenues (13.1%) for the first time in six years.
The reasons are pretty obvious. A 17% rise in compensation costs accounted for the bulk of the increase in expenses. This last year has seen not only big jumps in associate compensation and bonuses but also the announcement of special additional bonuses yet to come. Equity partner growth in the first half of 2007 was also up 1.5 percent, over .5% from the prior year, although still not up to the average six-year rate of 2.6%. Operating costs (occupancy and overhead) also grew close to 12%, in many cases driven by additional new hires. And poor currency conversions rates relating to foreign office expenses have driven those costs up dramatically.
So what does the crystal ball tell about the future? With the drop off in transactional work caused by the credit crunch and no up-tick in bankruptcy and litigation, productivity in the second half of 2007 is likely to slow, and those higher salaries and bonuses on top of bonuses will fully hit the books. Revenue for the entire year is likely to be cushioned by the strong inventory accumulated during the first half of 2007, resulting in still decent increases in profits per equity partner of 6-8%.
But 2008 may be another matter altogether. If transactions don't come back and other practices don't take up the slack, reduced revenues and even layoffs may be in the offing.
It's a new year coming. Let's hope the party hats stay on.
In a report released October 1st, Catalyst, a New York consultancy, found that Fortune 500 companies with at least three women on their boards strongly outperformed those companies with fewer or no women. Based on a study of four years of corporate results, the correlation was found to be so direct that the more women who serve on a board, the better the bottom line.
The companies with the highest percentage of women on their boards had equity returns 53% higher, returns on sales 42% higher and returns on invested capital at least 66% higher than those companies with the least number of women board members. Higher returns kicked in once at least three women served on the corporation’s board, the study found, with companies having only three women board members raising each of those returns an average of 5% over corporations with fewer women.
Why would female board participation produce such concrete financial results? Various consultants and academics speculate that women are better able to understand the customer base, particularly of consumer goods companies, and that showcasing women on the board helps attract and retain women employees throughout the company.
Another reason may well be women’s often strong collaboration skills, empowering them to better resolve conflict and move boards through the thorny discussions necessary to make and carry through critical decisions.
As many of the biggest law firms are concluding, “professional development” has become the preferred vehicle for addressing diversity attrition. Professional development encompasses enhanced orientation, mentoring, assignment and delegation processes, leadership training, career planning, diversity training, management skills, feedback training, business-development training, affinity groups and other tactics aimed at recruiting and keeping a diverse associate group.
The concept of professional development or talent management did not exist in law firms 20 years ago, and the data shows a clear pattern of women and minorities historically reporting less assistance with professional development, as well as lower job satisfaction, compared with white males.
Now most large law firms have some sort of professional development program and recent data from the NALP Foundation shows that this trend toward formalized programs is paying off. In 1998, 20% of associates left their positions at or near the end of their second year of employment. This year, entry-level lawyers are more likely to make their first move at the end of their third year of employment, staying 30% longer.
The ABA Commission on Women engaged the National Opinion Research Center at the University of Chicago to examine why retention rates for white men are so much higher than those for women of color, and women of color retention rates are higher than those for men of color and white women. Consistent with the NALP’s data, the study found specifically that women of color felt excluded from networking opportunities, felt they were denied desirable assignments, and had limited access to client development opportunities, thereby making their billable hours targets harder to achieve.
The NALP found that white men are more likely to report a consistent workload, regular feedback and intellectual challenge in their work, and they also report the intention of staying longer at their firms.
A consistent workload, regular feedback and intellectual growth are matters within the control of each firm, and are geometrically enhanced with the involvement of a person charged with professional development.
What specifically can firms incorporate into their processes to improve diversity retention? For starters, here is a short list.
But the best way for firms to systematically enhance diversity retention is to establish a professional development department/person/consultant who can provide benchmarks to identify areas for improvement, formulate goals and then work with the diversity committee, the associate recruitment committee and associate managers to realize those goals.
Growing future leaders at our best business schools increasingly involves teaching "softer" skills, and often using personal style assessments. One of the more rigorous and long-standing low-residence courses at Harvard Business School is the nine-week Owner President Management Course (OPM), which spans three years. Roughly 120 business owners, only half of whom are usually from the US, are enrolled in this course.
Last year, one of the course professors, Dr. Linda Doyle, included The Birkman Method in her "Leadership and Organizational Effectiveness" classes for the OPM, a class that examines leadership styles through case studies. The Birkman Method is a personal style assessment that identifies a number of traits, and also how those traits manifest in an organization and morph under stress. Using the Birkman assessment, OPM participants are able to identify and analyze their own authority styles, and the strengths and problems that might develop from those styles. Harvard has decided to continue the use of the Birkman in this course and is considering including it in other MBA courses.
Yale School of Management has also introduced personal style assessments into its curriculum. All MBA candidates are now required to take an assessment to help identify leadership styles, strengths and potential problems.
Heidi Brooks, Director of the Leadership Development Program at YSOM and a lecturer in Organizational Behavior, is convinced that these assessments are avenues to self awareness and interactional intelligence that can only improve management effectiveness. Since most major corporations hire and promote at least in part on the basis of similar types of assessments, having MBA candidates familiarize themselves with the testing process and the information it provides also gives them an early advantage.
Besides Harvard and Yale, Dartmouth University's Tuck School of Business, University of Southern California's Marshall School of Business, Massachusetts Institute of Technology's Sloan School and Stanford's Graduate School of Business are among the business schools that have heard from alums and companies across the country that it is the softer skills--communication, brokering compromises, managing conflict, developing relationships and leading groups--rather than strategy or financial analysis that are missing in MBA graduates. And are doing something to address those weaknesses.
Stamford's B School revamped its leadership-training curriculum this fall, now requiring all first-year students to take personality tests, participate in teamwork and management-simulation exercises and critiques of their people skills. Professional executive coaches will watch the simulations and offer advice.
At Tuck, the leadership-development program, modeled on corporate programs, that was launched in 2004, puts all first year students in teams of five. The groups complete coursework together, help each other with assignments and then rate themselves and each other on how well they operate in a team, including how well each of them "solicits feedback and acts on it" or helps "manage conflict." Reports on their performance are used to inform the coaching sessions the students attend and to design personal development plans.
Says Warren Bennis, professor at USC's Marshall School: "It isn't just nice--these interpersonal skills. It's the stuff that's necessary to lead a complex organization."
It is only a matter of time, as they say, before law schools recognize the impact of "people skills training" and follow suit. Not only are lawyers less educated both in school and in the workplace on the importance of developing these skills and the methods of doing so, the data shows that they are as a group psychologically and behaviorally more challenged in achieving results. Which makes this sort of training--whether at law school or on the job-- even more critical.
What is the most important attribute to be looking for as you groom your young lawyers for management?
A 2006 study reviewed in the Leadership and Organization Development Journal assessed the relationship between emotional intelligence and managerial effectiveness, confirming what you might expect. A total of 38 supervisors (37 males and 1 female) and 1,258 subordinates from a large manufacturing organization participated. Data analysis found that the total MSCEIT score (an emotional intelligence assessment that I consider most reliable) displayed a strong positive correlation with supervisor ratings; that is, the more emotionally intelligent the supervisor, the more effective and productive s/he was rated by others in the organization.
First, I would point out that this study doesn't tell us whether these emotionally intelligent supervisors who were rated more effective actually were more effective than their lower EI colleagues. All we know is that they were perceived to be more effective. The implication being that even if those high EI supervisors weren't quite so great in the accomplishments department as advertised, their loyal team still saw them in the best possible light.
This distinction is particularly important in environments such as law firms and law departments, where dramatically high skepticism (averaging in the top 10% of the American population) creates hurdles that make it hard for managers to establish rapport and trust, much less garner appreciation for a job reasonably well done. Second- and third-guessing is often standard procedure, regardless of how demonstrable the accomplishment might be. While emotionally intelligent managers may be in fact most effective, this and other studies demonstrate that they are in any event going to have the interpersonal skills to align legal staff and professionals on the same side. Given the challenge of creating supportive cultures for growth and accomplishment in law organizations, identifying these kinds of leaders becomes imperative.
Two major subscores make up the MSCEIT total score. In the study above, Experiential EI, which includes perceiving and using emotions, was found to be very highly correlated with high supervisor ratings, whereas the Reasoning EI subscore, which includes understanding and managing emotions, displayed no significant correlation.
Our study of emotional intelligence and lawyers (also using the MSCEIT) indicates that lawyers' scores in EI are generally a standard deviation below the general population (that is, 85 compared to 100). In addition, lawyers score significantly lower on the Experiential subgroup than on the Reasoning one. Their ability to "read" their own and others' emotions is notably low compared to the general population, and they also are not facile at "using" emotions, i.e., moving from a less appropriate emotion to a more appropriate one. Their Reasoning scores are usually significantly higher than the Experiential ones, lawyers being evidently well-suited to logically analyze even the emotional realm. The problem is that weakness in reading emotions creates a garbage-in, garbage-out result when that reasoning horsepower is applied to inaccurate information. So lawyers often get blind-sided by what they hadn't originally correctly perceived .
This finding as to the importance of Experiential EI to effective management can be critical in the case of managing lawyers. Not only should we be grooming our young lawyers to be emotionally intelligent managers, but we should also be specifically rewarding those who are expert at recognizing and using emotions, an item I would bet is not currently on any evaluation form.
"We evaluate 'courage' as a behavioral characteristic of our lawyers, and we link this evaluation to compensation," says John P. Donahue, Senior Vice President, General Counsel and Secretary of Rhodia Inc., in the July 2007 issue of InsideCounsel. Rhodia has "embraced professional objectivity of its in-house lawyers as a core value" and Donahue wants to make sure that "our lawyers can deliver bad news to clients," with whom they are often closely aligned.
Valuing Courage
Given the data we have about the strong tendency of lawyers to avoid rather than confront conflicts (yes, even those feisty litigators, oddly enough) (see my article "The Unique Psychological World of Lawyers"), Donahue's goal is one that can't be lauded enough. Hospital administrators contend that a ratio of 1 conflict avoider in 4 employees results in a "dangerous workplace"--think: "I don't want to get so&so in trouble over reusing needles" or "Maybe she'll start writing down dosages after she gets used to our procedures".
Left to their own proclivities, lawyers' much higher rate of avoidance than hospital workers risks being just as dangerous. Avoidance not only fails to resolve firm and client issues, but at the extreme, failure to report and confront violations of Sarbanes-Oxley, insider trading and discrimination laws, to name a few, can not only crater a career, but also a firm or a company. Add in malpractice, fraud and the range of criminal possibilities (see, for example, Enron and other corporate demises and the unfolding saga of Milberg Weiss Bershad & Schulman) and silence should never be considered golden.
Hence Donahue's laudable efforts to support and promote courage.
Which is where our thought for today could end.
Evaluating Courage
But Donahue goes further than suggesting putting in place environmental supports like "constantly talking" about maintaining objectivity, creating a culture that embraces bearers of bad news and rotating lawyers among client departments. He wants his lawyers' courage to be evaluated and then to compensate them accordingly.
Evaluating courage or any other personal characteristic as it relates to their work is a radical idea to many lawyers. Basing compensation on that evaluation is outlandish. They don't know what a "behavioral characteristic" actually means, don't trust the evaluation process, and certainly don't think their compensation should be linked to so un-rigorous a process. They are, after all, good lawyers, and good lawyers average in the top 10% on the characteristic "skepticism" in personality assessments (see again my article "The Unique Psychological World of Lawyers").
In this case, they should get over it. Whether Donahue is using structured assessments or more unstructured evaluation techniques, these behavioral and personality evaluations are likely to be the key for law firms and law departments to break their recruitment and retention quandaries and, as icing on the cake, help solve the diversity dilemma. (See my January 5, 2007 blog entry "KPMG Model Delivers Risk Management, Teamwork, Client Satisfaction and Diversity Too," reporting on KPMG's use of the Birkman Method assessment to revamp its business model and achieve retention and diversity goals.)
This is not a new position, at least for me. (See my article "The Case for Assessment: Using Discrimination for Better Hiring," which outlines all the uses of assessments in the non-law firm world and how law firms might profit from them.) And now the tipping point is in sight as more law departments and law firms inch towards greater use of evaluations and assessments-- and trumpet the benefits.
General Counsel Scott Terrillion, of Boehringer Ingelheim Pharmaceuticals Inc, uses an "evaluative selection method" to find the best attorneys for his company, with diversity being a natural consequence. Roland Dumas, director of diversity for the legal recruiting firm Major, Lindsey & Africa, points out that "if a law firm screens candidates based on what law school they went to and how well they did there, it won't achieve much diversity. There simply are not enough African-American and Latino law students in the top law schools who would survive the 'top quarter' cut." Instead, Dumas recommends "capabilities" interviews, which use rich conversations to probe candidates to find those who have the talents the firm values.
Struggling to complete with bigger firms, Kansas City, Mo.-based Blackwell Sanders developed a system for selecting and assessing associates that is more behaviorally evaluative than most firms use, and it found that using these behavioral evaluations, starting with the initial interview, enabled the firm to spot talent it might otherwise miss. The firm has documented its efforts in a handbook, From Classes to Competencies, Lockstep To Levels, which, according to the foreword by Ida Abbott, is "an act of remarkable candor and leadership ... [that] will enable law firms to expedite the design and implementation of competency-based evaluations and performance-based advancement."
The proof, as they say, is in the pudding. Blackwell Sanders doubled the total number of minority associates, tripled the number in recent incoming classes, and increased by 22% the number of females associates. Perhaps even more notable, a "high" minority attrition rate declined to "0" within four years.
Jeffrey N. Berman, managing partner at Berman Fink Van Horn, says that for the last 10 years his firm has taken an even more radical step--using individually administered psychological assessments as part of their hiring process. Determining assessment traits important to the firm has given the firm "a handle on the type of attorney that is going to be happy and successful here," Berman says.
The firm tells all prospective hires, lawyers and staff, that they will be required to take a personality test if an offer is made. Contrary to the fear of many hiring partners, Berman reports that no one has ever objected to the assessment or refused to proceed, in part, he believes, because everyone in the firm has participated and also because it has been so accurate in predicting success. "It never ceases to amaze me how accurate the testing is," he adds, noting that it has never proved inaccurate with anyone they've hired, even when the results contravene the impression of interviewers.
So diversity is not the only benefit firms can expect from the targeted use of evaluations and assessments--law turnover and high satisfaction and performance result as well.
Our firm offers law departments and law firms state-of-the-art advice on identifying the characteristics that produce happy, productive lawyers in your environment and designing evaluations and assessments to use in hiring and promoting those candidates. Don't be left in the backwash. This is a wave that can do much to move you forward.
According to Steve Davis, it all went pretty smoothly and quickly: negotiations in July and August, a preliminary agreement the last week of August, votes last Wednesday, September 26, and on Monday of this week, he became chairman of Dewey & LeBoeuf, the newest megafirm in the global law firm firmament, with 1300 lawyers, 26 offices in 12 countries, and a billion dollars in revenue.
So what accounts for this dramatically better outcome, compared to the Dewey/Orrick debacle-in-the-making that first hit the press last year this time?
For starters, Davis credits the two firms’ long-standing familiarity with each other. No East Coast/West Coast mystique to decipher and reconcile in this case: the two firms were only two floors apart at 140 Broadway for years and had dealt with each other on myriad matters. With good relationships long established, people at both firms, Davis contends, “quickly understood the underlying strategic rationale” for a combination.
Davis also believes Dewey & LeBoeuf enjoys another advantage that other recent megamergers did not. Both Dewey and LeBoeuf had high concentrations of lawyers in the same key markets—New York, London and Washington D.C. That’s an advantage? The beauty of the Dewey/Orrick merger was thought to have been little overlap, promising to produce that far-flung “globalness” instantly. Overlap, Davis contends, works in the firm’s favor. Unlike the “Noah’s Ark” that some combinations are left with—two of everything, with 1 in LA and 1 in Boston--Dewey & LeBoeuf’s geography is more likely to force the people and cultures at each key location to mesh.
D&L's executive committee of 22 is composed of 11 partners from each firm, and includes Morton Pierce, Dewey’s Managing Partner, with Davis in the chairman’s seat. After the Dewey/Orrick talks failed, Pierce’s management style was the subject of some bruising commentary, with particular notice given to the fact that he billed 3300 hours that year. See our February 7, 2007 entry “Talking to the Troops.”
So what will management at Dewey & LeBoeuf be like? Davis is often described as managing “like a CEO,” a role which, perhaps in a reflection on the famous independence of lawyers, one LeBoeuf partner characterized as an “elected dictator.”
Continue Reading...There is no substitute for face time, as people in my business are wont to insist. But maybe there is.
During an interview with Mark Chandler, General Counsel of Cisco, to discuss the evolving legal marketplace, see Leaving Behind the Medieval Model, he demonstrated for me Cisco's newest entry (competing with Hewlett-Packard, Polycom and Tandberg, among others) into the web conference market— a small meeting room that boasts an IP (Internet Protocol) phone, three broadcast-quality cameras, three ultra-sensitive mikes, three 60-inch plasma screens, a crescent-shaped table that seats six and soft back-lighting. The result, as one satisfied client related, is that "you can literally see and hear a pin drop a continent away." The sensation is of simply being in a small conference room with well-lit colleagues across the table--I admit to the eerie feeling of being able to reach out and touch someone, only I couldn't.
At $300,000+ for each of these pods (and it takes two, of course) and monthly maintenance costs in the thousands, it would require a lot of deferred traveling to pay for the luxury of not having to sit on tarmacs. Nonetheless these systems seem to be enjoying brisk demand, with prices down from $550,000+ two years ago and double digit increases in sales annually.
There are a number of circumstances that might prompt law firms to take advantage of these technospheres. In light of how time-consuming air travel has become, the need for rapid decision-making and the globally far-flung nature of more and more law firms and their clients, they offer a reasonable and efficient tool in law firms' management and delivery arsenals.
But my interest in this product (in case you've been wondering why I, a techie manqué, am going on about this) relates to something one of the true techies touting this system remarked when I saw it. "The name of the game today is collaboration," he said, and went on to discuss the myriad tech tools now available that promote collaboration—web-conferencing, intranets, extranets, wikis, individual attorney blogs, etc.
Unfortunately, as we all know, the name of the game at many, if not most, law firms has not historically been collaboration, whether we are talking about firm management, practice group, committee or even client and document issues. Lawyers are notoriously independent and skeptical/untrusting of others. The impact of many firms' broad dispersal of offices and lawyers has not necessarily been to produce more of what wasn't much there in the first place. Compounded with the arrival almost daily of lateral lawyers from different work and culture environments, cities, and even countries, the tendency among lawyers towards isolation is often only magnified.
So here comes the possibility of virtual face time, whether you think you need it or not. While we can agree that what needs face time, and what that term means, is often subjective, the absolute necessity of it among lawyers, their staff and clients is indisputable. I concede that web conferencing still lacks a certain something—building a critical relationship, hiring and firing, and even congratulating might still best be done in person. Real person. Where a shoulder to cry on, a slap on the back or a firm handshake can make a difference.
But if a firm determines to include one of these technologies amongst its tools or toys, it should not forget to put introducing, acknowledging, appreciating, recapping, explaining, consolidating, networking, socializing, rewarding, giving feedback, even gossiping and complaining on the list of things they are used for. It is an efficient way to build rapport and community and the productivity associated with that cost assuredly drops to the bottom line faster than whatever productivity associated with paying for either lunches at everyone's desks or sitting on the tarmac does.
A grand old firm has gone through a rough patch recently—one of its associates not only sued for sexual orientation harassment and discrimination, but also proceeded to file partnership documents and communications that S&C certainly would prefer to not have circulating publicly. Further, an article in the legal press lampooned a memo S&C sent around to its partners exhorting them, among other things, to say "thank you," in case their mothers had forgotten to instill in them that finer point of social intercourse. The legal blogosphere enjoyed batting that one around.
But S&C may have gotten the last laugh. In the Midlevel Associates Review released last month by The American Lawyer, New York law firms (as defined there to mean firms with more than 45% of their lawyers in New York) were once again roundly denounced, with this year only 7 firms making it into the top half of the 162 firms surveyed. The New York associates registered their dissatisfaction particularly regarding relations with partners, training, communication about what it takes to make partner and openness about firm finances. While New York firms have always performed poorly in these ratings, several firms fell precipitously since last year's survey—Cravath Swaine slid 27 places, Paul Weiss was down 59, Debevoise Plimpton fell 64 slots and Wachtell Lipton plummeted 74 places.
Thumbing its nose at the rest of the straggling New York herd was Sullivan & Cromwell, which vaulted from number 153 on the list up to number 48.
So now that all the chortling has died down, was it the "thank yous" that worked? Perhaps. But also, for the first time this past year, S&C leaders gave associates a series of briefings about firm finances, business strategy and the road to partnership. Chairman H. Rodgin Cohen and vice-chair Joseph Shenker, among others, made in-person presentations and took questions.
On those two most damning survey questions for New York firms, "communication about what it takes to make partner" and "openness about finances," S&C's ratings this year were 3.48 and 3.64 respectively, out of the ballpark compared to their prior year's ratings of 2.14 and 2.13, and even much higher than this year's average New York firms' ratings of 2.59 and 2.94.
So it looks to me like Mom was right. Talking it out—even those tricky financial matters and partnership issues that several New York firms said, and continue to say, were either too confidential or essentially none of the associates' business—creates rapport, incentive and even, get this, trust in an environment that sorely needs all three. And it does so quickly—with the results showing up in the first survey!
Mom would be so pleased.
On Thursday, September 21, at 2:00 pm EST, Ronda Muir will lead an audio conference on Associate Compensation: Where Do We Go From Here? Included in the discussion will be a review of current trends and out-of-the-box ideas for dealing with the impact of escalating associate compensation, how to find the best strategy for your own law firm and overcoming the problems and pitfalls in making that strategy work.
The audio conference is sponsored by IOMA, which publishes Law Office Management & Administration Report, as well as other legal publications, and provides research, educational and training products to lawyers. To register, go to www.ioma.com/law_firm_management/.
One of the requirements of the Sarbanes-Oxley rules for publicly traded companies is that they demonstrate that they are promoting an "ethical culture" in the workplace. What does that mean?
"The Manager's Book of Decencies: How Small Gestures Build Great Companies" by Steve Harrison, chairman of Woodcliff Lake, N.J.-based Lee Hecht Harrison, the employee outplacement arm of Adecco Human Capital Solutions, a division of Adecco SA of Glattbrugg, Switzerland, is an attempt to answer that question.
Mr. Harrison's contends that an ethical culture is the result of many small, and sometimes large, gestures made over a long period of time, with the driving force coming from the top.
"Being decent isn't about being nice... or spending more money-- it's about treating people fairly," Harrison claims. He also believes that good role models at the top have certain common traits. Those Harrison acknowledges as outstanding role models are Colgate-Palmolive Co. chairman Reuben Mark, Nucor Corp.'s former CEO Kenneth Iverson (who died in 2002), Campbell Soup Co. president and CEO Douglas R. Conant, Southwest Airlines Co. chairman Herbert Kelleher, and Dial Corp.'s former president and CEO, Herbert Baum.
These five leaders exhibit what Harrison calls a high level of "moral intelligence," which is marked by humility and honesty during both good times and bad.
If employers can pay attention to the issues that matter to their employees, "like finding some kind of fulfillment in the job they come in to day after day...then they're on their way to creating a culture of decency which is critical to attracting, retaining and engaging employees."
"Think of a succession plan as life insurance for a law firm."
An article in the August 24-30 issue of the Puget Sound Business Journal entitled "Firms Make Plans to Carry on When Leaders Go" quotes Ronda Muir on the subject of succession planning and describes the services that she and Robin Rolfe Resources performed for a Seattle law firm.
"Senior Attorney Jay Derr of Seattle firm GordonDerr said that nearly three years ago his firm decided to hire Muir and company to put together a succession plan... Thus, the preparations were in place when founding attorney Peter Buck decided to leave... to start his own firm...' We felt no economic blip from it at all,' said Derr."
"Succession is especially critical to the survival of so-called first generation 'founder firms,'"said consultant Muir. 'It involves finding a dynamic leader who can transition into a new role... and moving the founder to a different level...'"
Behavioral science is not often invoked in the halls of law departments, but maybe it should be. Two recent articles highlight the importance to a GC's success of understanding why people think and act as they do.
General counsel are in the position of having to reconcile two jobs: being both a business partner in the management of the company's business and the guardian of the company's integrity. One aspect of their work requires creativity, risk-taking and far-sightedness. The other requires careful scrutiny of every corporate action in the short and long term for potential regulatory, liability and just plain reputation pitfalls. Achieving high productivity with high integrity might strain even Superman's talents.
An article in Corporate Counsel by Ben W. Heineman Jr, former GE senior vice president-general counsel, entitled "How GCs Can Avoid Being Caught in the Middle" recites some of the recent scandals that attest to how difficult that balancing act can be: the fraudulent financial practices at Enron, the pretexting at Hewlett-Packard Corp, and the wave of options backdating.
Perhaps what chilled GCs to the bone most recently were the guilty pleas by Purdue Pharma L.P., its president, GC and former chief medical officer to misleading the public about the drug OxyContin's risk of addiction. They have agreed to pay a total of $634.5 million in fines. Rather than relaying focus group concern about potential for abuse, Purdue Pharma gave false information to its sales representatives that the drug was less addictive than other painkillers.
Heineman mentions a number of attributes that can help GCs successfully straddle their two roles. Vis-a-vis the other corporate managers, the GC must have the ability to stand his/her ground on clear illegalities and to make sure he/she has enough time to assess those situations that are not clear cut. And GCs must be able to take those stands in the pressure-filled environment of a board meeting where the CEO is likely to be a ferocious skeptic and many board members will side with the CEO. See our July 18, 2007 entry on Promoting an Effective Board about the importance of personal attributes in good decision-making.
The Texas Lawyer article "It's All in Your Head: Cognitive Theory Can Help GCs Lead Organizations to Better Decisions" by Michael Maslanka, a managing partner at Ford & Harrison in Dallas, contends that a GC's real power--the ability to influence decisions-- comes from understanding the way people think, which requires tapping into cognitive science.
Maslanka lists a number of biases that people in general and managers specifically can suffer from if they aren't on the alert:
Maslanka encourages GCs to be open to all possibilities and to question rather than dictate. Heineman also points out the importance of maintaining within the law department a culture that welcomes, even requires, lawyers to raise concerns about financial, legal, ethical or reputational issues. We refer to this as a "culture of dissent"-- one that invites concerns, follows up on them and does not punish anyone for raising them, but rather praises them. See our March 16, 2007 entry on the article Handling Conflict and Dissent in Law Practice (and Life).
While it may not be mind reading, being cognitively aware of your own personal attributes and biases, as well as others', can help steer you toward that Superman performance to which all GCs aspire.