Monday, March 8, is International Women's Day. So how are we doing?

Bain and Company recently released results of a survey, reported in the Harvard Business Review, of 1,800 business people worldwide. 80% believed that companies benefit from a gender diverse workforce; 75% reported having initiatives in their workplace to improve gender parity; but less than 25% felt those initiatives were effective.

When it comes to the law, women have been in the law practice “pipeline” for over three decades now; there are currently more women than men graduating from law school, where women have for some time made better grades than their male counterparts, which has resulted in women joining the ranks of prestigious firms in large numbers over the years. Whether for culture or client reasons, women's initiatives abound.

Yet women leave the practice of law  (not just change jobs) much faster than men—although not because of low performance—and constitute a mere 16% of partners in major law firms. 

How have women done in the current recession?  Better than might have been predicted.  According to a National Law Journal article entitled "Bad Times Could Have Been Worse for Women," "women lawyers have not suffered more in the current recession than their male counterparts. At least not when it comes to headcount at NLJ 250 firms."  According to The National Law Journal's 2009 survey of the nation's 250 largest law firms, the number of women lawyers at those firms decreased overall by 2% during 2009, compared to an overall headcount loss of 4%. And while the average number of female associates fell to 112, compared with 124.7 in 2008, the average number of women partners went up slightly, to 41 from 39.4.

Nonetheless, the National Association of Women Lawyers’ November 2008 report "The Third Annual National Survey On Retention And Promotion Of Women In Law Firms" reveals an alarming difference between the amount of power and money men and women have in large law firms: “At every stage of practice, men out-earn women lawyers… Male equity partners earn on average over $87,000 a year more than female equity partners. In 99% of large firms, the most highly compensated partner is a man.” The report also notes that women have no presence at all on 15 per cent of the nation’s largest firms’ governing committees.

And to further complicate things, one managing partner of a large firm claims that in spite of beefing up its diversity credentials and trotting them out in response to every RFP a socially conscious potential client has submitted, he believes that those credentials have not gotten the firm one piece of business.

What's going on here? Are women not up to the heavy lifting that firms require?  Are we as firms doing a poor job of delivering and following through on those diversity initiatives?  Or are the initiatives out of touch with want women are looking for? Are law firms, clients and others paying lip service to a bigger umbrella that in fact they don't put their money (and matters) behind?  If clients and firms resolve to be gender blind, shouldn't all this work out fairly to both genders in the end?

Or, in other words, what do women want?

A lot of ink has been spilled over that question. In and out of the arena of practicing law.

The authors of the Bain and Co. survey mentioned above urged firms to develop "less rigid promotion processes and career paths" in order to better accommodate women.

“If companies want to help more women climb the corporate ladder, they have to go beyond flex jobs or flex hours. Instead, they need to develop less rigid promotion processes and career paths — and actively promote and ‘de-stigmatize’ flexible career arcs within the organization. For companies, the pay-off can be huge: not only will they double their talent pool of leaders as more women return to the workforce in senior positions; they will also retain more male and female employees in the long-run and slash retraining costs.”

In a study conducted by Rutgers’ Center for Women and Work, more than 70% of the women lawyers who had left their jobs during the previous five years said their previous employer was not supportive of full-time flexible alternatives, while only 30% described their current employer as unsupportive of such arrangements. 

“An important new finding of this study is that women lawyers often choose an exit strategy when faced with the dilemma of choosing between work and family obligations,” the study said. “The business case for more family-friendly approaches to the practice of law could not be more clear.”

A study of thousands of associates using Westlaw throws some interesting light on the question. 80% of the associates worked in AmLaw200 firms and  the remainder worked at firms with more than 80 attorneys. The gender split was 50/50.

Four types of associates emerged.  The group dubbed Career Practitioners, who are driven, aspire to partnership, and will take on as much work as a firm gives them, constitute 23% of the associates and are 60% male.  Flexibility Seekers, about 23% of the associates and 60% female, are looking for a satisfying career that allows work-life balance and become less interested in partnership over time.

The 3rd group, Called Lawyers, 24% of the total, have the highest percentage of females (63%) and the highest percentage of non-Caucasians (35%). This group is the most satisfied with compensation and the most passionate about the practice of law. Called Lawyers are as willing as the Career Practitioners to volunteer for committees or other firm work, but for different reasons. They also significantly value their personal and family time, and in this are more closely aligned with the Flexibility Seekers than with Career Practitioners. The 4th group, the Willing Workers, representing about 30% of the associates, have no particular passion for the law, but are willing to work hard and follow directions – unusual for attorneys who are typically highly autonomous. Willing Workers will become partners as a means to higher income, but they are loath to sacrifice quality of life. Their motto is: "Work hard, play hard, retire early." 

Note that three of these four groups place a high value on lifestyle or family obligations.  And that women are most populous in those groups.  Doesn't that support the sneaking suspicion more than a few have had that women aren't really in it for the long and hard haul, like the grizzly senior partners they are meant to succeed?  Doesn't that kind of information make a myth out of the vaunted value of diversity?

A critical finding here is that according to survey respondents, the same proportion of lawyers in all of these groups are rated satisfactory or above on performance reviews.  That is, no one group is more likely to be better lawyers than the others.

If performance is – and it should be – the primary criteria, there is essentially no difference among the four groups. Therefore, if firms promote the first and familiar group (with a larger male population) over the second and third groups (with larger female populations) or even the fourth group in the hope that they will be the best associates and partners, firms would be unnecessarily reducing their pool of candidates by up to 75% for no good reason.

Yet in fact Career Practitioners tend to hire other Career Practitioners, whether they are men or women, black or white, just as MBTI "Thinkers" tend to hire other Thinkers, resulting in law firm environments that are extraordinarily well suited for only one stripe of lawyer, forestalling every advantage that real diversity might bring.  

The real diversity challenge becomes accepting that excellence can be achieved in (and should be expected of) a truly diverse workforce--not only diverse in terms of gender and race, but diverse in attitudes and expectations about their practice and lifestyle.  In other words, excellence doesn't just come in the "driven" package--that package looks dedicated and workaholic and even macho--but that's not what is necessary to get the job done...well, very well. 

One challenge may be to offer our firms as a home to all lawyers, regardless of any attribute other than excellence.

And this might be the ideal time to start experimenting with different approaches to law practice.  Larissa Glubb made these observations in my "Women In Law--For Us and By Us" blog on LegalOnRamp:

"Most women are prevented from reaching partnership or management positions because the organisations they work for value time, not results. Female lawyers, especially those with family responsibilities, desire and require control over their work and their work choices, which is very difficult to achieve if 'time' is the main measure of success... Lawyer’s bonuses and opportunities for promotion are more often than not linked to meeting or exceeding a set number of billable hours per year, rather than the quality of the work performed or the results achieved for the clients."

In his book Drive: The Surprising Truth about What Motivates Us, Daniel H. Pink challenges traditional assumptions about what motivates us to achieve at work. In a chapter on the benefits of self-direction in the work place, Mr. Pink has this to say about lawyers and the traditional legal workplace:

“…at the heart of private legal practice is perhaps the most autonomy-crushing mechanism imaginable: the billable hour. Most lawyers – and nearly all lawyers in large, prestigious firms – must keep scrupulous track, often in six-minute increments, of their time…As a result, their focus inevitably veers from the output of their work (solving a client’s problem) to its input (piling up as many hours as possible). If the rewards come from time, then time is what firms will get. These sorts of high-stakes, measurable goals can drain intrinsic motivation, sap individual initiative, and even encourage unethical behavior”.

According to Ms. Glubb, "If legal organisations were to trust that the professionals they have hired can get the work done to the satisfaction of the client, it should not matter whether this work is done at home or in the office, in the morning, before the school run or in the evening once kids are in bed. These legal professionals have years of experience and are being trusted to complete transactions worth millions, yet are not trusted to balance their commitments."

A Results-Only Work Environment (ROWE), advocated by Cali Ressler and Jody Thompson in their book Why Work Sucks and How to Fix It, is how Best Buy successfuly changed from an hours to outcomes work environment. The message Best Buy promoted is: “It doesn’t matter where you work, or when you work, as long as the work gets done.”

“There’s a misperception out there that just because a manager lets an employee go to a dentist appointment, that’s flexible working. That’s not flexible working at all. ROWE is really putting the freedom and the power back in the employee’s hands to determine what and how and when they work best. A Results-Only Work Environment is about recognizing and acting on people’s need to have more control over their lives to meet all the demands in their lives.”

Glubb says that Latitude-South, a legal outsourcing company she works for, has built a business model around this concept. "Many detractors will say that client demands preclude such a significant organisational change. We disagree. Our experience has been that our clients value expertise and experience and recognise that it is these inputs that produce the results they require. The work must still be done, yes, but it does not always need to be performed between the industrial age hours of 9am – 5pm, in the traditional setting and in a traditional way."

Whether it is legal outsourcing or more women in high places that you are after, an attitude less fixated on comparing accrued billable hours might be the place to start, and now might be the time.

So what women want may well be what over 75% of the legal workforce wants: control over how they get the results that are expected of them.

 

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Back in 1998 management guru Peter Drucker suggested that the capability to operate productively when change is the norm would be critical in the 21st century. Much has been said of late on this issue of managing change when change is the norm, including articles in the Harvard Business Review and from McKinsey.

There are big differences in approach and execution between, on the one hand, bringing about a change and making it stick and, on the other, embedding into an organization the capability to grow in a business environment where change is constant. The first attempts to bring about a single change in an organization that is sluggish and resistant. The second is about developing within an organization a comfort with ongoing change and the ability to leverage that comfort for its own ends. The suggestion from Drucker and all those that have commented since on this subject is that this ‘agile and preemptive organization’ is the future--a place where a change management program, at least as we use that term today, is not necessary.

There are challenging aspects in attempting to change an operation to an agile and preemptive organization. Many conventional values and beliefs about what is, or is not, best practice must change. These two bear mention: The underlying acceptance of hiding or burying bad news and/or spinning accountability to avoid blame must be seen as entirely unacceptable, even if things ultimately turn out for the best. Defensiveness and avoidance of conflict are both attributes that are central to many lawyers’ work style. The logical consequences of those attributes are self-and-other deceiving and justifying behavior, and in the old paradigm often produced a negative result—blind spots in client service, lack of responsiveness to colleague and client feedback, and ultimately exposure to malpractice claims. These behaviors now must be seen as a greater sin than not achieving expected base-line performance. Although frustrating to senior management in stable times, this behavior can have a disastrous impact in times of turbulence. This change is very difficult to bring about in real terms, and the solution is not just a no-blame culture, because people justify and deceive not just to avoid blame.

Another example relates to the conventional view of planning. Making long term plans in times of change is forecasting in fog. Visions are fine as long as they remain visions. The kind of planning that is now required is the type that adapts, flexes and is capable of responding to new opportunities on a continual basis. The fact that only 12% of strategies are ever executed may help in a perverse way, but this change requires a whole new attitude to feedback and accountability.

Peter Senge, author of The Fifth Discipline: The Art & Practice of the Learning Organization, also contends that in a rapid-fire, information-driven, technology-powered world, success is contingent on our individual and corporate abilities to adjust, adapt and learn. The organization, therefore, must incorporate processes of reflection and evaluation into its organizational systems, he says. Leaders must commit to their own personal learning as well as fostering an environment of learning in their organizations. We lawyers are often on a “drive to closure” escalator that makes it hard to step aside and undertake that sort of reflection.

Chris Argyris, emeritus professor at the Harvard Business School, advocates "double-loop learning." He takes the position that most people define learning too narrowly as mere "problem solving," so they focus on identifying and correcting errors in the external environment.  If learning is to persist, managers and employees must also look inward to reflect critically on their own behavior, he says, identifying the ways they often inadvertently contribute to the organization's problems, and then change how they act. In particular, they must learn how the very way they go about defining and solving problems can be a source of problems in its own right.

There is much of this accommodation to a new constant-change climate that falls into what is essentially an emotional category—how to appeal to and acclimate people who are not by their natures or histories comfortable with change. For example, lawyers are notoriously risk-resistant. Change is therefore anathema because it is by definition taking a risk. How do we effect a change in so fundamental a trait? A trait that is useful when advising our clients yet perilous if allowed to shape our practices? And not only must our approach understand and appeal to our deepest inclinations but it also demands that we put into place more objective, operational changes in the shape of a whole new set of specific working practices.

The problem is that so much of the solution to achieving this new business model of accommodating, no, even encouraging and celebrating, change will not be found in our practices of the past. 

It is a brave new world--one which we would prefer to avoid.  But can we afford to?

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

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

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

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

So can introverts lead?  Successfully, that is?

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

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

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

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

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

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

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

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

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

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

Law firms should take note. 

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

And even introverts can do that.
 

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

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

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

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

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

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

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

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

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

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

The wheel goes round and round.

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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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The IOMA Law Firm Leadership Alert on November 19, 2009 calls Ronda Muir this month's Thought Leader, saying she "...presents as cogent an expression of what the future of law firms and law practice will look like as we have yet found." Her article is published in the December issue of the IOMA Partner's Report - a Monthly Brief for Law Firm Owners and will be the featured cover-page article in December's Compensation & Benefits for Law Offices newsletter.

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One of the important implications of Muir's article "What the New Law Firm Looks Like: The Reinvention of a Reluctant Industry" is that going forward firms will require the close involvement of sophisticated management professionals who are not necessarily or even preferably lawyers to help design and manage change.  These critical players will not only assist in initially envisioning the goals of the firm and its related programs and in easing the various players toward them through the transition period, but will also remain important in ongoing firm management in order to make those initiatives fully operational and successful over the long term.

In the past many law firms have often taken a pass when it comes to building the depth and quality of their non-lawyer professional staff.  For the most part we aren't that focused on these "unseen" professionals--there are going to be complaints about them within the firm anyway and rarely does a client interact with them.  So the firm librarian could be a dud, and the head of recruitment simply cheerful. 

We seem to realize marketing and technology advisers (and at the bigger firms, the professional development directors) have some importance, but still we often opt for less sophisticated, less expensive personnel who act more as placeholders than change agents, undercutting their potential effectiveness from the start. We tend to hire them young and tell them what to do and even sometimes how to do it.  After all, lawyers are the ones who really head all of these areas: the non-legal staff are simply assistants and overhead to boot.

The problem is that lawyers are no longer the experts in all the areas that law firms need expertise in. 

For example, Muir notes that firms will develop "serious project management skills that focus on evaluating and reviewing client goals (both fee-related and outcome-related) and managing matters to reach them."  Such skills include the technological capacity and human expertise to analyze, bid on and track client matters, including producing interim progress analyses to manage staffing and expenses and keep the client up to date.  Lawyers working on those projects need to be spending their time doing what they do best--providing legal services, and should rely on non-legal professionals to fine tune the timing and extent of those services. 

Similarly, "staff managers" acting like purchasing managers are likely to be responsible for engaging and managing a complex and highly changeable array of lawyers and services for specific and often fixed-term projects.  They will need the technology and expertise to manage a large database of information on individual lawyers, temp providers and outsourcers, produce contracts, evaluate performance and follow up complaints and contract violations.

Making "frequent and accurate evaluations of lawyers and staff and effectively using targeted training" are not only complex processes in themselves requiring careful analysis but become critical to morale and retention as these evaluations and trainings impact compensation in the new merit and competency models (see, for example, "The Issues in Moving From Law Firm Lockstep to 'Levels' Compensation").  And those charged with determining compensation based on multiple indices and complex formulas applied across numerous parties similarly need to have reliably sophisticated expertise.  The mid-level partner who doesn't have a lot of client work these days isn't the best choice to run with these valuable, exacting tasks.

Finally, "building relationships, which is key to exerting leadership influence, will be more challenging," and firms are likely to require more leadership time from their leaders--whether firm-wide or practice group leaders--which implies more time diverted from practice to firm management and more reliance on professional assistance.  Work assignment evaluation and management, leadership development, diversity compliance, client succession planning--these tasks can be taken on or assisted by non-lawyer professionals with the appropriate skills.

Of course, these professionals mean a rise in overhead--whether you obtain your expertise by in-house personnel or from outside consultants, another reason profits are likely to be diluted going forward.

But we lawyers can't effectively do all these jobs.  We can't because we are not diverse enough in our approaches and talents (see "The Unique Psychological World of Lawyers").  We not only haven't been trained in the relevant areas--project management, talent  evaluation, competency testing--but we also aren't likely to be naturally inclined toward or good at the process, patience and attention to the types of details that are required. Or if per chance there are lawyers among us who are so inclined or talented, we are not likely to know who they are.

There is the problem of overcoming the legal ego--it's not important if we can't do it well, and conversely, if it's important, then we can do it--but don't let that attitude be what keeps your firm from moving ahead.  Good management these days lies in identifying and locating needed expertise, not in attempting to be it.

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We spend our days advising law firms and law departments about the changing landscape for their professional services.  But just as the legal industry is in a state of transition, so is the industry that consults with the legal industry. 

We at Robin Rolfe Resources are retuning our services in order to offer you cost-effective updates on the fast-paced corrections and counter-corrections occurring daily in the legal world.  And we are going to do so without killing a lot of trees or landing in your bottom file drawer.

We can meet with your general counsel or managing parter, executive committee, planning committee, a practice group or the whole department or partnership to discuss trends and innovations--both successes and bloopers--in many realms of practice management: governance, client service, compensation, recruitment, lateral integration, retention, performance evaluation, motivation, promotion, training and development, leadership, morale, diversity, and succession, among others. Our own years of experience in practicing law and then advising practices of all sizes, coupled with an expertise in lawyer psychology, make us uniquely capable of providing sophisticated, up-to-date and practical advice.

We can meet for a morning, a day or regularly on a quarterly or other basis.  If you need more extensive research or written advice, we can provide it.  Regardless of the extent of our role, we are on your side of the table when you are analyzing the tough calls.

A much-heralded business author is working on a new book about reinvention and has concluded that both law and consulting fall into the category of needing to be reinvented.  In both of our businesses, tomes on best practices should be relegated to the last century.  Ours certainly are.

 

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Muir points out in her article What the New Law Firm Looks Like that building bigger firms does not necessarily produce better bottom lines.  Of course for many firms long-term client development or other factors beside profitability fuel growth.  And then there are some growing firms which in fact achieve greater profitability in spite of the odds.

K&L Gates is one of the firms that has managed to accomplish that.  The product of a 2007 merger of Kirkpatrick & Lockhart with Preston Gates & Ellis, and then mergers with Nicholson Graham of London, Washington's Hill Christopher and Boston's Warner & Stackpole, the firm has completed since the beginning of 2008 three additional mergers -- one with Texas-based Hughes & Luce, a second with Charlotte, N.C.-based Kennedy Covington Lobdell & Hickman and the third with Bell Boyd, which took effect March 1, 2009, bringing together a total of over 1,800 lawyers. Over the same period, the firm opened offices in Paris, Shanghai, Frankfurt and most recently Dubai, among others, and established a relationship with Taiwanese firm J&J Attorneys at Law, for a total of 33 offices.

This astounding growth trajectory is true to Chairman and Global Managing Partner Peter Kalis's express intention to "grow aggressively," taking advantage of the firm's lack of short-term and long-term debt. Not only has growth been achieved but in this case the approach has so far proved profitable--revenues for 2008 were up 27% over 2007, while profits per partner for that year rose almost 7%, with first half 2009 continuing to show significant increases, again meeting Kalis's stated goal of increased profitability every year. 

So if a firm like K&L Gates manages to do the difficult if not impossible by growing aggressively while increasing profits, what are the challenges?

Of course the firm has been through a few clouds, as there always are around silver linings.  No firm, regardless of its size, can escape them.  Microsoft Corp.'s list of preferred legal providers did not include Bill Gates's father's firm this year. While Microsoft GC Brad Smith had welcomed the original merger of the Gates firm and Kirkpatrick & Lockhart, former Microsoft GC William Neukom left K&L Gates last year, perhaps signaling something. Or perhaps it was simply time for a change.  The firm did not add another DuPont "Meeting the Challenge" Award this year to those accumulated over the past few years.  And K&L Gates has had its share of difficult client relations--MTV Networks noisily canned the firm as defense counsel a few months ago.

One insight into the challenges that the firm's success raises may be in a comment from K&L Gates' most senior trademark lawyer Mark Peroff, who left the firm last year for a smaller firm.  "In my experience at K&L Gates," he was quoted as saying in explanation of the move, "the focus was entirely on making money.  There was no glue among the partners."  (Peroff also pointed out that in a smaller firm he could significantly lower his billing rate.)

There might be some who would question the importance of glue, both as to whether it significantly colors one's experience at a firm and also whether it adds to the bottom line, a discussion we will take up in a later entry. But Peroff 's comments raise the conundrum that many growing firms in fact face, and often without the benefit of rising profitability. 

Every year the ranks of new hires, lateral hires, and various contract, counsel, income, equity and other lawyers shift, while there is simultaneous shifting among personnel at various offices. How to add so many bodies to various locations and still keep a sense of commonality if not collegiality among the players?  

And similarly, if a firm hopes to improve profitabiliy, can it push bottom-line results persistently, making each person accountable for their own production, and still maintain strong relationships?

In other words, do our goals and policies bind us or divide us?

Sometimes glue is simply a commonality that keeps all the various firm systems running in decent working order.  Sometimes glue produces real revenue through cross selling and enhanced relationship building.  Sometimes glue is just that ineffable bond that keeps people from leaving.

It may sound pretty fuzzy, but it's important to consider the glue in your firm.

 

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Yes, Virginia, there is a future for law firms, but it is a strikingly different one from the law firm of the past. 

Not Your Grandfather's Firm

What would have been bombshells ten years ago, and maybe even five years ago, continue to drop from the legal firmament: Double digit reductions in revenues and profits; big shops--Bingham McCutchen, Howrey, Orrick, DLA Piper, Morgan Lewis--shelve or reduce their reliance on lock-step promotions; many firms cut back or eliminate summer programs; salaries are frozen or reduced; behavioral interviewing becomes the newest buzzword in recruitment at Vinson & Elkins and elsewhere; old-line English firms Slaughters, Linklaters and Clifford Chance all acknowledge engaging outsourcers for their clients' low-level legal work, in some cases after years of deriding the practice; and English firms Addleshaws and Linklaters take steps to convert to all equity partnerships, while a number of American firms secretly consider it.

What the New Law Firm Looks Like

Muir's article What the New Law Firm Looks Like: the Necessary Reinvention of a Reluctant Industry reviews some of the areas where changes are sure to appear, and are often already in motion: the rise of merit compensation, multisourcing, non-lawyer stakeholders and the demands made on leadership generally and practice group management specifically; the decline of mergers, hourly billings, big real estate holdings, compensation generally, and fixed levels of staffing. 

In other words, transition is the keyword.  Your competitors are leaving no stone unturned in their search for an edge in a difficult market--neither should you. 

Let us know what steps your firm or your outside counsel are taking to better position themselves for the road ahead.  We will compile these results and pass on the best to you.

 

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One of the more interesting developments in the law industry over the last couple of decades is the emergence of the mega-firm.  Or what might be called the strange case of the temporary triumph of the delusion of efficiency.

"Convergence," the short-hand name of the corporate model for managing outside legal fees by reducing the number of preferred firms, was developed originally in the early 1990s by DuPont and then trumpeted by interested advocates--primarily consultants--who benefited from advising both sides of the aisle. Law departments needed to know how to evaluate firms for their preferred list, and law firms needed to know how to get on those lists.

The theory was that dealing with fewer law firms meant that a company would have more leverage in negotiating fees and conditions with those few that they did hire, that the company would no longer pay repeatedly for bringing firms up to speed on its business, and that this more holistic global legal approach would benefit the company in both concrete and intangible ways. 

Leading the way, DuPont reduced its 350 outside law firms to 41 and its 150 legal vendors to 4.  Five years after the program's introduction DuPont reported that

• Legal service expenses were reduced 39 percent from 1994 to 1997.
• Litigation savings amounted to over $30 million in the last four years of the program.
• Cycle time dropped from 39 to 22 months in two years and the docket was cut in half.
• Legal staff requirements can be forecast accurately.
• Purchasing power was leveraged.
• More women and minorities are employed in the PLF and supplier firms.
• True partnering was achieved: work is usually performed so seamlessly that outsiders have trouble distinguishing between DuPont's outside attorneys and in-house counsel.                     

Over 200 other major companies followed suit--General Electric's hundreds of outside firms were reduced to 140.  Pfizer slashed its outside litigation counsel from 200 to 52.  Pfizer eventually designated only 1 outside law firm to advise them nationally in some practice areas, a bold step again followed by others, such as Tyco and Honeywell.

Law firms were told that more types of business from a single client would guarantee a more consistent flow of work, again reduce the embedded cost of getting up to speed repeatedly and, with the more rounded view of a company's issues, ultimately make better lawyers of us all. 

So law firms geared up to offer companies a broad range of legal services and it was only a short step from there  to offering those services at locations all around the world.  Whatever you need, we can do.  Wherever you are, we are there.

Law firms started acquiring IP, land use and employment departments and boutiques to supplement their usual expertise. They opened offices in Hong Kong, Abu Dhabi and Omaha.  

In 1992, an admittedly lean year because of a financial downturn, there were 9 law firm mergers, which accelerated into a record high of 75 mergers in 2001.  By 2008, also a year of financial downturn, there were 70 mergers.  And those numbers don't reflect the many acquisitions by firms that don't count as a "merger"-- acquisitions of groups of lawyers, practice groups or other pieces of firms. A 2007 Law Firm Inc. survey of AmLaw 200 COOs found that evaluating merger possibilities was the single matter on which COOs collectively spent most of their time. 

Top US-based firms (NYLJ 250) grew from an average of 100 lawyers in 1985 to today's behemoths, topped by DLA Piper's 3,785 lawyers with 2008 revenue of $2.26 billion. As to profitability, before the current downturn, law firm revenues (along with expenses) had been ticking upward for years at double digit rates, fueled by pass-along billing practices that also rose without fail each year, resulting in compounded average growth in profitability of over 9%. 

Corporations and big law firms seemed to be on to something.  Consultants were in hog heaven. 

But the economic slowdown has hit big firms particularly hard. Clients are turning increasingly to small and mid-sized firms who charge hourly rates 20-50% lower for large swaths of work that don't require legions of associates, firms which are also less likely to dump them because of the complicated conflicts arising from a global presence.  

So where is the mega-firm now?

More than half of the 50 largest US firms have fired associates and staff in anticipation of or reaction to revenue declines and some firms, such as DLA Piper and Dewey & LeBoeuf, have cut year-end payouts to partners as well.  Star partners at the country's biggest firms--DLA Piper, Skadden Arps--are leaving for smaller firms in order to offer clients more reasonable rates and avoid the thicket of conflicts. Regardless of the economy, the promise of cross-selling did not materialize and no one's sure if they are better lawyers for the mega-firm experience, or just poorer ones.

So did the DuPont Legal Model of convergence and its virtues fail? 

If you ask DuPont, "the keys to the legal model’s success have been its ability to streamline legal representation through its designation of primary law firms (PLFs) and its commitment to the utilization of paralegals."  And you should note that DuPont's current roster of Preferred Law Firms includes eight of the 100 biggest U.S. law firms but four times as many smaller firms, which General Counsel Thomas L. Sager says he prizes for their “flexibility and creativity” in billing.

Perhaps the real bottom line is, as was clearly stated in an analysis of law firm mergers done by Vanderbilt Law School back in 2005: “There are no obvious economies of scale or scope for law firms in a merger, where productivity is largely a result of billings by individual professionals.”

That conclusion has been born out by the financial statistics kept by Dan DiPietro of Citibank’s Law Firm Group, who said flatly at a recent conference forecasting future growth that "bigger has not yet proved to be more profitable."

 

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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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The recent 5-4 Supreme Court ruling on the New Haven Fire Department vocational advancement exam in Ricci v. DeStefano once again stirs the waters on the question of how to choose the best from among a crowd. (See our entry "The Outliers of Law--Embracing Heresy".) The "best" in this case was determined to be simply the highest scorers, even if those scores seem to imply discrimination against a particular group. 

What's Sonia Got to Do With It?

A lot of press has been devoted to parsing whether Sonia Sotomayor's vote with the majority at the appeals court, which affirmed throwing out the test results, implies her personal position on affirmative action.   

A look at Sotomayor's own test scores gives an interesting gloss to the discussion.  She was, by her own admission, an "affirmative-action baby" who did not do well on her SATs  and LSATS, or at least not as well as her fellow students at Princeton and Yale.  Yet she went on to graduate from Princeton with highest academic honors and has reached the upper echelons of law practice.  As Walter Kirn said in a recent New York Times article about his own experience at Princeton, "the poorer and browner of my classmates — particularly the women — seemed to study twice as hard as I did, clocking endless hours in the library and forgoing weekend parties for late-night cram sessions. Maybe their SAT scores were lower than mine, but they ranked higher than I did on the effort scale. And on the bravery scale too." 

So was this a case of retrospective justice-making by Ms. Sotomayor? 

Regardless of what Sotomayor was doing in the public sector, the glaring lesson to be taken from her own story is that aptitude assessments are not the last word on potential for achievement.

The Texas Experiment

In 1997, Texas House Bill 588, better known as the "Top 10 Percent Law," was passed, guaranteeing high school graduates who ranked in the top 10% of their senior class, regardless of their SAT or ACT scores, admission to a state institution.  While hotly contested at the time as risking the influx of less able students, it is a law that school administrators and legislators agree "by any measure of public policy is a success."

Not only did the 10% plan in Texas get more minority students into top public universities with race-neutral criteria, it spawned similar programs in California and Florida and the consideration of many other states. (Due to its immense popularity, last month the Texas Legislature agreed to limit to 75% of its freshman slots the number from the program that their flagship school, the University of Texas at Austin, had to admit.)  According to the most recent issue of Inside Higher Ed, "every internal study that... the UT system conducted and every external study has shown that the 10 percent students, relative to others, have done better by any measure -- lower attrition rates, graduate in shorter time periods," etc.

As Malcolm Gladwell wrote in his 2001 New Yorker article "Examined Life": "Critics of the policy said that it would open the door to students from marginal schools whose SAT scores would normally have been too low for admission to the University of Texas—and that is exactly what happened. But so what? The 'top ten percenters,' as they are known, may have lower SAT scores, but they get excellent grades. In fact, their college GPAs are the equal of students who scored two hundred to three hundred points higher on the SAT [emphasis added]. In other words, the determination and hard work that propel someone to the top of his high-school class—even in cases where that high school is impoverished—are more important to succeeding in college (and, for that matter, in life) than whatever abstract quality the SAT purports to measure. The importance of the Texas experience cannot be overstated."

Predicting the Best Lawyers

A number of studies have looked for what might predict eventual success as a practicing lawyer. Evidently LSAT scores, and not undergraduate grade point averages, are the best indicators of academic performance in the first year of law school, and academic performance in the first year of law school appears to be the best predictor of whether the new graduate will pass his/her state bar exam on the first attempt. There is also a very strong correlation between the personality attribute of pessimism and law school grades, i.e., the higher the pessimism, the higher the grades.

But none of these factors--undergraduate grades, LSAT scores, law school grades--gives us the key to determining who is likely to be at the top of the lawyering heap. 

A New Kind of Test

Continue Reading...

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In the current stressful marketplace, the rate of lawyers' incidence of impairment has been ratcheting up from high (see, for example, our September 5, 2008 entry "The Depression Demon Coming Out of the Legal Closet") to even higher.  See "Employment Woes Fuel Uptick in Lawyer Depression."  Firms suffer losses in productivity, morale and recruitment because of impaired lawyers, and also risk client desertions, losses to their reputations and malpractice liability. 

Firms can take several approaches to both assist their lawyers and protect their bottom line.  Thomas & Knight attorney Peter Riley, as managing partner, instituted an extensive program to address lawyer stress caused from depression, substance abuse, anxiety, etc. in order to provide help fast, without worrying about insurance authorization or long waits for appointments, and with complete confidentiality.  Even with the costs of the program, Riley finds it cost-effective to the firm.  "When a lawyer or lawyer's child or spouse is in crisis, that is going to be the focus of their attention," he says.  "If we can provide assistance for them quickly, we have not only done the right thing for our lawyers, we have done the most economic thing.  It's the perfect intersection of what is right and what is profitable."

Let us draw from our extensive experience in this area to help you spot and support critical talent confronting personal distress.  We can assist on an individual-by-individual basis or by helping you set up a confidential, effective program attuned to your goals and budget.

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Malcolm Gladwell's latest book Outliers, the Story of Success argues that what accounts for success is often not what we expect.  High IQs or a prodigious ability in computers or exceptional musical talent is not sufficient to explain Nobel Prize winners and Bill Gates and the Beatles.  While a certain level of intelligence, skill or talent may be a necessary ingredient for success, it is not sufficient.  Luck, opportunity, hard work, support and training all play important roles.  Raw ability--intelligence or talent--is only a threshold.  When faced with a class of clever boys, as Gladwell repeatedly points out, knowing one boy's IQ is of little help in determining his standing among the group.  Extensive research validating that attitude has led psychologist Barry Schwartz (full disclosure: he was my psych professor at Swarthmore) to suggest that elite schools could give up their complex admissions process and simply hold a lottery for everyone above a certain threshold of eligibility--the "good enough candidates"--without producing a loss in their graduates' accomplishments.

In April 2008 the Indiana University School of Law-Bloomington issued a research paper entitled "Are We Selling Results or Resumes?: The Underexplored Linkage Between Human Resource Strategies and Firm-Specific Capital" by William D. Henderson, a respected authority on lawyers and law firm management who may be in need of better title-writing skills.

Henderson describes the "Cravath system" that Cravath, Swaine & Moore developed in the early 20th century in order to distinguish its legal services:  "Hire the best graduates from the best law schools; provide them with the best training, and at the end of a six-to-ten-year apprenticeship, promote the best associates to partner."  Ironically, instead of distinguishing Cravath's brand, in fairly short order that system became standard industry practice, hence the run-up in associate salaries when increasing demand over the last 20 years from all those wannabe premier law firms outstripped the stagnant supply of premier graduates.

Included in the "peculiar market dynamics" that Henderson notes as a result of the widespread adoption of the Cravath model is 1) the resistance of clients to having those escalating salary costs passed on to them, resulting in their request that junior associates not work on their matters, and 2) the inability of a large proportion of firms who use this model to simply absorb pay raises that can't be passed on to clients. 

So-- Voila, the current standoff between valued-centered clients.and expense-laden firms.

What does Outliers and that very long, obscurely-titled paper have to do with one another?  Henderson makes the point that law firms able to deliver high quality legal services at a fixed cost are in a position to reap enormous financial rewards.  How to do that?  He cites empirical evidence that "within a certain range, differences in cognitive ability, such as I.Q., are uncorrelated with contributions to organizational productivity, and that among knowledge workers, organizational productivity is primarily a function of work strategies that are teachable and trainable."  Those conclusions were drawn after evaluating engineers and other high-level service providers.

Henderson points out that young lawyers with slightly less elite credentials are willing to work very hard for less than elite salaries, particularly if they are being trained.  These lawyers provide firms with the opportunity through knowledge management, business processes, lawyer training and teamwork to develop "firm-specific capital.--i.e., an asset whose value is unique to the firm because it cannot be removed by departing partners nor easily duplicated by competitors."   That is, by engaging "good enough" lawyers and aggressively managing them using the tools that other industries employ to provide high-quality, fixed-price services, a firm can make a name for itself and profitably escape the Cravath model.  Both Gladwell and Henderson point to the enormous financial success of Wachtell Lipton and Skadden Arps in the 70s, firms started by unmarketable lawyers who addressed underserved niches. 

Howrey has just announced that starting this fall it will be paying first and second year associates reduced salaries in connection with a program of limited billing requirements and supercharged career development.  During those years, associates will have intensive training opportunities and be seconded to clients, judges and not-for-profit organizations in order to ramp up their skills.  Managing Partner Robert Ruyak "said the new approach is not a way to save the firm money. In fact, he said, it's going to cost between $3 million and $4 million to implement once training costs and the unbilled hours the associates work are thrown in."

"The way we see it though is that it's going to cost more in the beginning because we're creating something from scratch, but once we get going and we start having a group of young, experienced lawyers coming out ready to handle client matters, we're going to turn a profit much more quickly than we would under the old model."

Howrey and the few other firms who have introduced a version of this approach have not said that part of their plan is to hire "good enough" lawyers, instead of the most highly-credentialed, but the effect remains similar--they are paying less for their incoming talent on the theory that those young lawyers will be bright enough to learn the types of skills and service that the firms intend to pin their reputations on.

What's the biggest hurdle here?  The hurdle that may keep some firms hesitating is the feared implication that by not paying the top entry salaries, which for decades has signaled the pecking order of firms in recruitment, firms adopting this kind of approach do not have "the best" lawyers. 

Perhaps now is the time to embrace the heresy that having "good enough" lawyers is in fact good enough to be successful.

 

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Muir's September 5, 2008 entry on "The Depression Demon Coming Out of the Legal Closet" has been published in the Spring2009 newsletter of Virginia's Lawyers Helping Lawyers, a 20-year old non-stock corporation endorsed by the Virginia State Bar, The Virginia Bar Association, the Virginia Trial Lawyers Association and the Virginia Board of Bar Examiners.

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"In times of drastic change, it is the learners who will inherit the earth.  The learned will be perfectly positioned for a world that no longer exists."  Swarthmore College's 2009 Lax Conference's keynote speaker Richard Teerlink started his presentation with this quote from Eric Hoffer.  

Teerlink led Harley-Davidson's fabled turnaround, fueled in part by his belief that people are the most important resource in any company.  Teerlink was CFO, CEO, and Chairman of the Board of Harley-Davidson during the time it went from the stepchild of a public company to private ownership by 13 managers carrying $40 million of debt to its reemergence as a public darling again.

How did they do it?  At the time of HD's privatization, the Japanese dominated the motorcycle industry, and HD's board had to make some tough decisions: they laid off 40% of the workforce--all at once, Teerlink points out, so that fear would not weaken the remaining group; cut compensation of the rest of the employees; killed an expensive new development project; reduced their dealer network; asked suppliers for reductions; eliminated all the Senior Vice-Presidents so that responsibility would be pushed down further in the ranks, with more direct reporting to top management and fewer silos; and collaborated with employees, dealers and customers to enhance the HOG experience. 

Teerlink says that as with all major shakeups HD made some dumb decisions but learned to reverse course quickly.  An advertising campaign was launched that honestly acknowledged past weaknesses and promised owners a different experience.  And the company delivered. 

Teerlink emphasized to HD employees that they were not selling machinery, but an emotional experience, one that offered entertainment and a community.  Thus the HOGS--Harley Owners Group--was born, with networking, social events and riding support (fly and ride, for example) offered nationwide. 

The premise that "people are an organization's only sustainable competitive advantage" drove Teerlink's transformation of HD.  His book, "More Than a Motorcycle: The Leadership Journey of Harley-Davidson," chronicles how he brought that premise into reality.

At a time when law firms are facing some of the most challenging marketing conditions of all time, we might do well to learn a few things from the people who brought us the HOGS.

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Collaboration in the form of teamwork may be the 21st Century's technology, in that it promises strides in greater productivity--but only when done well.  It can also veer from chaos to constipation. David Maister's famous article Are Law Firms Manageable? questions whether lawyers can make the transition from "a managerial approach based on partner autonomy to new approaches that can create a well-coordinated set of team players." Well, can we?

After seeing double digit increases in firms that have implemented team systems--management, marketing,  industry and client teams--and an increase in work satisfaction among team members, an initial question many interested law firms have is how to go about setting up and managing teams.  Luckily, research provides some guidance that can help firms successfully achieve productive teamwork.  The following is a summary of Muir's presentation on effective teamwork at Swarthmore College's 2009 Lax Conference.

In 1965 Bruce Tuckman, an organizational psychologist, established modern team theory, refined most recently by Dr. Susan Wheelan, professor of Psychological Studies and Faculty Director of the Training and Development Center at Temple University.

The stages of teamwork, according to these models, are 1) forming, 2) storming, 3) norming, and 4) performing.  The forming stage, even among lawyers, can be marked by tentative and polite accommodation.  Unsure of their roles and the leader's competence, team participants need the leader to be clear, directive and highly structured during this first stage. This is not the time for a consensual  "Well, what do you think we should do?" approach.  Also, if you have the luxury of choosing team members, choosing those who are different from each other in their attitudes and skills and who are able to articulate and, when appropriate, stick by their opinions produces the best mix for a team. See our entry Promoting an Effective Board or Management Group for additional discussion of what attributes to look for in team members and how to promote their best contribution.

During the second, storming stage, the politeness wears thin and team members, particularly lawyers, will test the leader and stake out their positions with each other to determine what their authority and parameters will be.  Conflict is often a result.  This is a positive development.  Handled well, the team will learn from experience that it is safe to engage in conflict, and that issues can be settled without lasting acrimony or division, even if it requires agreeing to disagree.  This is the basis on which trust and respect is established.  Leaders are often criticized during this stage (and sometimes asked to step down) as much because of their role as because of their personal attributes or performance.  Leaders who can keep from reacting defensively will avoid exacerbating and prolonging this stage, which, being awkward and uncomfortable, helps propel the group to resolve their differences and move forward into the next stage.  Leaders should emphasize during this stage the importance of keeping debate, which is useful, focused on the issues and not the personalities involved.

During the third, norming stage, based on the higher level of trust achieved during the 2nd stage, the group's goals are revised and a division of labor, with clear roles, is determined. The problem in law firms is that often lawyers don't make it out of stage 2.  Tenacious about protecting their authority and unwilling to trust those in a leadership role or those to whom work must be delegated, these lawyers can keep the team locked in unnecessary meetings and conflict, which may feel to them more like sport than discomfort.  Yet it is only in stage 3 that delegation becomes effective and the individuals are freed up to do their part of the team's work.

Stage 4 is performing, which is the highly productive stage that teams are made for.  At this point, if members are added or removed, or the goals or delegation changes significantly, the team may regress back to an earlier stage and have to work its way through the process again.

Goals that are most amenable to team accomplishment are ones that require collective action, i.e. those which no one person could accomplish on his/her own, and that are meaningful, even inspiring.  The most effective teams have an emotional commitment to the goal, so framing goals as being in the individual team members' interests is vital. 

Team goals should be specific, measurable and attainable, with a real deadline that allows the team's work to culminate in a completed project.  Ongoing timeframes make it difficult to maintain team motivation and momentum.

Ideally, team members spend about 75% of the team time on accomplishing their tasks and 25% on participating in the team process, i.e. attending status meetings, maintaining group relations and performing housekeeping tasks. Procedure can be important.  For example, lawyers are largely introverts who need time to formulate their opinions, so distributing an agenda in advance of a meeting and not requiring decisions to be made at the meeting allows them to both prepare for discussion and come to a reasoned conclusion afterward.

OK everyone, team up!

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In the final tranche of a triad of bad news over the last few weeks, two recent reports--one about associates and another about partners--point out how, despite the current abysmal employment market, there are still lawyers of various stripes who, given the chance, would choose to jump overboard rather than hang on to their position.

In a recent New York Times article, it was reported that Skadden Arps had offered all of its 1300 associates worldwide the option of taking a year off for one-third pay, with no pro-bono obligation.  One hundred twenty-five associates opted in, a number that a partner was quoted as describing as "in excess of our expectations."

The Lawyer reported April 14 that CMS Cameron McKenna, a large English firm, in a makeover termed a "Magic Roundabout" because of its spiral design [the English are into monikers: Linklaters calls its remake "New World" and Clifford Chance has settled on the term "size and shape review"], offered all of its 160+ equity partners the opportunity to move to non-equity status.  Sixteen partners stepped forward, more than managing partner Duncan Weston said he had expected.

There is no denying that much is changing in the structuring of firms on both sides of the pond, and these two firms are among those riding that wave.  The interesting note in both of these reports is that management remains surprised at the number of lawyers who, in spite of perilous times, would rather step away or down than stay at the helm.  Unfortunately, it speaks to the still prevalent but now less obvious dissatisfaction that was manifest in the massive attrition rates of only 18 months ago.

When things get back to normal (yeah, right) and probably even before then, firms still have to tackle the issue of how to attract and keep the loyalty of their talent--since that is what in the end makes for a successful law firm.  In spite of, and perhaps also particularly in the midst of, the rush to distribute pink-slips, let's not let that particularly item fall off our "to-do" list.

 

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An article by psychologist Amy J.C.Cuddy in the February 2009 issue of the Harvard Business Review reports that we make fast assessments of people on two bases:  their intentions and their competence.  And more importantly, we assume one is related to the other.  This response is evolutionarily linked, she argues, to the advantage of quickly determining whether an unknown person 1) is friendly or hostile and 2) can follow through on their threats or promises. 

Unfortunately our assessments are often marred by biases that produce faulty judgments.  For example, we have a bias towards the elderly as being incompetent but non-threatening.

In the business world jungle, these instant assessments can carry long-term consequences, particularly if they are inaccurate because of poor perception skills (a common problem area for lawyers) or individual biases.  Inaccurate assessments can lead managers to trust untrustworthy associates or undervalue potentially important people.  They can also undermine efforts to build effective teams and retain valuable employees. 

Which One Are You?

For our work with lawyers, the more important finding of the research is that people see "warmth" and "competence" as inversely related:  a surfeit of one ("She's SO nice") is believed to imply a deficit in the other ("She probably can't stand up to a board").  For example, employees who are  consistently perceived as "warmer" are also viewed as less competent, with the practical result that employees who are mothers are often demonstrably underpaid and under-promoted.

While lawyers as a group are not usually at risk for being rated high on the warmth scale, leaders who know the importance of interpersonal relationships, and particularly women, often struggle with portraying to clients and colleagues the "right mix" of warmth and competence, fearing, just as the research tends to show, that too much of the former undercuts the perception of the latter. 

There is some trepidation in telling lawyers not to be too warm--certainly there are those who would argue there is little risk there.  Yet, particularly at a time when, rightfully, the legal world is exhorted to value and praise and build relationships, knowing how to do that practically without impairing the legal product produced, either in actuality or in the perception, is important.

Our advice has long been to bifurcate these two parts of leadership:  warmth is important and should be directed toward individuals, while critical analysis should be directed toward issues, not people.  

Whether with clients or colleagues, inquire about the kids, rib them about their  diet and praise them for their recent efforts, but when you review the business product, do not stint on hard analysis.  In both conflict resolution and decision-making research, similar findings make it clear that too pervasive an effort to build cohesion can overwhelm the validity and productivity of the underlying endeavor. The hard but important work of critical give-and-take can be mortally blunted by attempts to be "nice."

In order to improve our judgments and others' perceptions of us, Cuddy suggests that we also spend time working to reeducate ourselves and our employees away from the savannah influence:  don't be too quick to make judgments in these two areas, and do not assume that kindness and competence are mutually exclusive.

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Ronda Muir will participate as a panelist and breakout leader in the Jonathan R. Lax Conference on Entrepreneurship on Sunday, March 29, 2009 at Swarthmore College in Philadelphia.  The topic of the conference is "Building a Strong Enterprise: Critical Skills for Successful Entrepreneurs."

Keynote speaker Richard Teerlink led Harley-Davidson's fabled turnaround, fueled in part by his belief that people are the most important resource in any company. Muir will address "Developing High Performance Teams: understanding the dynamics and characteristics of high performance teams and the critical success factors needed to take teams from forming to performing status."
 

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On Thursday, March 26, at 2:00 pm EST, Ronda Muir will lead an audio conference sponsored by the Center for Competitive Management entitled "Turning Lawyers Into Leaders: How to Survive the Economic Slide."  The discussion will cover who leaders are, what skills and attributes they should have in this economic climate and how to develop them.  For more information and to register. 

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On Wednesday, March 25, at 12:30 pm EDST, Ronda Muir and Robin Rolfe will lead a round table discussion of  "How Progressively Managed and Adaptive IP Firms Can Gain an Advantage in a Down Economy."  Sponsored by the Association of Patent Law Firms (APLF) as part of its Brand of Excellence series, this program is offered at no charge and to members only. Additional information can be obtained by contacting admin@plf.org.

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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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Teamwork may be the 21st Century's technology, in that it promises greater productivity--but only when used well.  After seeing double digit increases in firms that have implemented team systems--management, marketing,  industry and client teams--an initial question many interested law firms have is how to go about achieving teamwork.  Luckily, research provides a clear "life cycle" of teams that can help firms successfully reach team goals.

The stages of teamwork, according to the established models, are 1) forming, 2) storming, 3) norming, and 4) performing.  The forming stage, even among lawyers, can be marked by tentative and polite accommodation.  Unsure of their roles and the leader's competence, team participants need the leader to be clear, directive and highly structured during this first stage. This is not the time for a consensual  "Well, what do you think we should do?" approach.

During the second, storming stage, team members, particularly lawyers, will stake out their positions to test what their authority will be.  Conflict is often a result.  This is a positive development.  Handled well, the team will learn from experience that it is safe to engage in conflict, and that issues can be settled without lasting acrimony or division, even if it requires agreeing to disagree.  This is the basis on which trust and respect is established.  Leaders are often criticized during this stage, as much because of their role as because of their personal attributes or performance.  Leaders who can keep from reacting defensively will avoid exacerbating and prolonging this stage, which, being awkward and uncomfortable, helps propel the group to resolve their differences and move forward into the next stage.

During the third, norming stage, based on the higher level of trust achieved during the 2nd stage, the group's goals are revised and a division of labor, with clear roles, is determined. 

The problem in law firms is that often lawyers don't make it out of stage 2.  Tenacious about protecting their authority and unwilling to trust others to whom work must be delegated, these lawyers keep the team in unnecessary meetings and conflict.  Yet it is only in stage 3 that delegation becomes effective and the individuals are freed up to do their work.

Stage 4 is performing, which is the highly productive stage that teams are made for.  At this point, if members are added or removed, or the goals or delegation changed significantly, the team may regress back to an earlier stage and have to work their way up again.

Ideally, team members spend about 75% of the team time on accomplishing their tasks and 25% on participating in the team process, i.e. on maintaining group relations. Goals that are most amenable to team accomplishment are ones that require collective action, i.e. that no one person could accomplish on his/her own and that are meaningful, even inspiring.  The most effective teams have an emotional commitment to the goal, so framing goals as being in the individual team members' interests is vital. 

Finally, team goals should be specific, measurable and attainable, with a real deadline that allows the team's work to culminate in a completed project.  Ongoing goals make it difficult to maintain team motivation and momentum.

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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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Citibank's Law Firm Group has recently issued its mid-year financial assessment of the legal industry and it is not a pretty sight.  But that bad news is based on results as of June 30, 2008, well before the takeover of Freddie and Fannie, the bailout of AIG, the disappearance of WaMu and Wachovia and Merrill, and the bankruptcy of Lehman, not to mention the failure of the Congressional rescue plan, all of which portends even worse carnage to come.

The first half of 2008 looks very different from the previous six years.  Revenue growth was the weakest it's been in seven years--averaging 4.8% compared to the 10.6% 7-year average. With law firms continuing to add lawyers to their ranks (up 5.6%), a slowdown in productivity comparable to mid-2001 is taking hold, with expenses (up 10.1%) increasing faster than revenue.  Compensation costs are up 15%, well above the 7-year 10.1% average increase.

Practice areas like restructuring and bankruptcy that have been anti-cyclical in the past have not yet helped cushion the fall. 

Profits per Equity Partner dropped 9.1% during the first half of 2008 even though the 1.8% increase in the number of equity partners is substantially down from the 2.9% seven-year average.  Top tier firms suffered the most, falling from a 11.7% increase in PPEP in 2007 to a 11.8% drop, victims of the languishing deal/financings markets and an inability to be nimble in changed circumstances--the big firm head count increase doubled that of smaller rivals, which is in part why smaller firms had only half the drop in PPEP (5.3%) for the first half of 2008.

Interestingly, "international firms," those who have 10-15% of their lawyers overseas, have been subject to the same downturn, while "global firms," with 25% or more of lawyers overseas, have fared much better.  However, it may just be a matter of time before the global economy starts to throw out the same challenges to those firms.

Projections as of June 30 of PPEP for the year 2008 are flat to down 10%, indicating top-tier firms risk up to a 15% decrease, putting 2008 on track for the worse year since at least 2001 and maybe earlier.

Unfortunately, those numbers are likely to be rosy.  They do not take into account the recent paralysis in the credit markets, the enormous financial burden the government (and ultimately taxpayers) has taken on and the disappearance of several major banking clients.  Word of mouth indicates that many firms are holding back distributions to a level as much as 30-40% below last year's. Given the fall of Heller Ehrman and the teetering of a number of other law firms, those who register a 15% decrease in profits this year may be the winners. 

How to make the best of a difficult situation?  Tying associate bonuses to their and/or the firm's profitability may help motivate young lawyers and limit expenses.  Attrition has recently dropped dramatically so firms can winnow out unproductive lawyers and cherry-pick lateral hires that are consistent with their strategic plan, making sure they really know why those lawyers are leaving their old firms.   Making sure collections are current is also critical.  And this is the time to clamp down on administrative and other non-essential expenses. Finally, robust business development is more important than ever.

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Sonja Lyubomirsky, Professor of Psychology at the University of California, Riverside, admits being surprised by the results of the research she conducted on how to permanently increase happiness, funded by a 5-year million-dollar grant from the National Institute of Mental Health.  She conducted a meta-analysis (a "study of studies"), along with Ed Diener and Laura King, two well-known names in positive psychology, of 225 studies and concluded by writing The How of Happiness (Penguin Press, 2008).  

Lyubomirsky expected, consistent with a number of previous, more limited studies, that relationships would emerge as the over-arching key to well-being.  Contrary to those expectations, she found that, more than any other variable, including relationships, work was both a cause and consequence of happiness.  

"The evidence demonstrates that people who have jobs distinguished by autonomy, meaning and variety - and who show superior performance, creativity, and productivity - are significantly happier than those who do not," she concludes.

"Why does our work make us happy? Because it provides us a sense of identity, structure to our days, and important and meaningful life goals to pursue. Perhaps even more important, it furnishes us with close colleagues, friends and even marriage partners."  So the relationship piece is not lost, but plays a supplemental role to work itself.

The story doesn’t end there, however. Her studies reveal that the causal direction between happiness and work runs both ways. Not only do creativity and productivity at the office make people happier, but happier people have been found to be more creative and productive. They are better “organizational citizens” (going above and beyond their job duties), better negotiators, and are less likely to take sick days, quit or burn out.

One interesting finding was that people who express more positive emotions on the job receive more favorable evaluations from their supervisors as much as 3.5 years later.

"The more successful we are at our jobs, the higher income we make, and the better work environment we have, then the happier we will be. This increased happiness will foster greater success, more money, and an improved work environment, which will further enhance happiness, and so on and so on and so on."

What does this have to do with our legal business?  Of autonomy, variety and meaning, autonomy is the one we have nailed.  Autonomy is often an attribute of the legal job, one that research shows lawyers embrace, sometimes to the detriment of collaboration.  Variety is worth noting, given the rush to specialization.  In light of high salaries, many firms have retreated from the first-year rotations through departments and later year department-wide assignment systems that used to give young lawyers some claim to it.  Carefully reinstating some opportunities for variety may be greatly appreciated.

Meaning can be harder to come by, being the trickier piece to consciously engineer.  Information we have on why young people, particularly Gen X and Yers, go to law school, and what they hope to achieve in their careers, reinforces the importance of meaningfulness.  As a practical matter, that is often assumed to be measured by the amount of public or pro-bono work available to them.  Reinvigorating your pro bono program, and involving young lawyers in the process, is a good first step but also articulating and reaffirming the firm's values vis-a-vis those within the organization (for example, "we provide premier training and career support") and its clients ("we build long-term relationships based on superior industry expertise and unparalleled service") helps young lawyers place themselves in a framework of meaning.

Creativity is a skill not as often singled out for recognition by law firms, and even productivity is usually rewarded only on a single level minimum-billed-hours-required-for-the-bonus formula.  Fine-tuning both salaries and bonuses so as to reward specific behaviors, such as business development activities or developing a specific expertise, offers eager Type As the opportunity to both increase their compensation and distinguish themselves from the pack, while achieving firm goals.

Providing positive feedback is an important part of evaluations that firms often overlook, so set in their problem-solving mode that they forget to reinforce what's working.  This study points out the importance of encouraging evaluees to crow or compliment too, for the firm's sake as well as theirs.

In short, this meta-study flags as important some of the same things we hear from lawyers going out the door:  provide a more meaningful, personally relevant work experience with supportive personal relationships in order to increase satisfaction and earn loyalty.

Now, back to work...

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Muir will be participating in an IOMA audio conference presentation entitled "Associate Compensation: New Alternatives for a Difficult Economy" on July 22, 2-3:30 pm EST.  For more information or to register, go to www.ioma.com/audioconferences/1053.html. 

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Is a four-foot tall robotic standin the next step in telecommuting?  And what use would such a fellow be in a law firm or law department? 

Currently telecommuting is often an adjunct to an employee's presence in the home office-- three days in, two days telecommuting, or three weeks in, one week telecommuting--and poses its own challenges:  how to condense complicated discussions into an email, how to make sure everyone gets enough face-time.  Some telecommuters supplement their emails with Skype-type individual cameras at their remote desks and/or interact via sophisticated video conference equipment housed in the main office.

A new alternative is becoming available, if you don't mind stubbing your virtual shins on very real brick and mortar wall.

The robot looks like a coatrack on a four-wheeled box, with a tablet computer that exhibits the telecommuter's face halfway up the central metal pole, two speakers below, and a webcam and microphone above.  An attached digital camera  takes photos of critical documents or board presentations.  With the ability to move the robot at will, the telecommuter can participate in discussions and meetings throughout the office, even those that are closed-door to others.

Developed by California-based Sybase Inc., a prototype costing $9,000 is roaming the halls of its subsidiary SybaseiAnywhere in Waterloo, Ontario as the representative of a valued employee whose wife was transferred thousands of miles away.  Sybase notes that expertise is becoming so valuable and recruiting and training so lengthy and expensive, that extraordinary measures to keep talent pay off.

Minneapolis-based company PowerObjects uses robots to bring into the home office those in their Islamabad office.  "With offices halfway around the world, you have to to take advantage of whatever can help the team work together.  We no longer have to fly them back and forth or meet in a specific conference room or office for the remote person to hear all parts of the discussion --that person can move from office to office as if he/she were here," a representative explains.

With more companies and firms locating outposts in Asia and the Middle East (such as Latham & Watkin's recent announcement it was expanding its Dubai office and establishing Abu Dhabi and Doha offices), the challenges of maintaining law department / firm and team cohesion will compound. 

There are shortcomings in the prototype, of course:  a time lag in conversations and the inability of the person on the tablet to look like s/he is looking his/her companion in the eye--the webcam position scews that. 

And of course there are those times when the robot crashes into a wall and has to be rebooted.  But I assume there are days when we can all relate to that.

Robots, anyone?

 

 

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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.

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What's the route to higher efficacy and productivity?  Might that be by staffing with "messy" groups?  So suggests a recent book entitled The Difference:  How the Power of Diversity Creates Better Groups, Firms, Schools and Societies by Scott E. Page, professor of complex systems, political science and economics at the University of Michigan. 

Using mathematical modeling, Dr. Page shows how variety in staffing produces organizational strength-- and bottom line results.  In his models, diverse groups of problem-solvers outperformed groups made up of similar individuals with high problem-solving ability.  The diverse groups got stuck less often that did the smart individuals, who tended to think similarly.

According to Dr. Page, different talents and perspectives, which he calls "tools," bring more and different ways of seeing a problem and result in faster/better ways of solving it.  Diverse cities are more productive, diverse boards of directors make better decisions, diverse companies are more innovative.  Interdisciplinary work is the biggest trend in scientific research, he says, and should be the route that business and the professions pursue.

So what does this have to do with lawyers?  Law departments that stretch across many countries are often diverse by necessity.  And by going global, many firms are diversifying by circumstance.  In both cases different cultural, personality and economic perspectives come into the mix.  While trying to preserve the benefits of diversity, these departments and firms are also confronted with the morass of confusion that many different people doing things differently can make.  Molding those differing perspectives into the "BigLaw" firm or department way of doing things--either purposefully, by circulating the administrative memo or lecturing the new recruits, or inadvertently, perhaps by unconsciously discouraging lawyers from ringing an alarm when they spot missteps, can leave you with unintended consequences. 

KPMG's program to test all US partners (see our KPMG Model Delivers Risk Management, Teamwork, Client Satisfaction and Diversity Too) and then use that information to balance various teams--marketing, client, industry and management, to name a few--is a shining example of the usefulness of diverse approaches to every type of issue facing professional services firms.  KPMG is affirmatively pursuing and integrating diversity in their business model to great benefit.

Finding the right balance to both capitalize on the benefits of diversity and to minimize the administrative and management fallout produced by those differences is a modern law firm's challenge.  There is every reason to believe that getting it right is worth the effort.

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Muir is participating in a business development program for new partners of a global law firm.  The program involves small group training and individual coaching to produce individual business development plans that can help put new partners' careers on a productive course. 

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Lawyers have been making it into the big-time news lately.  That is, not just into the AmLaw publications, where spots about closely-argued decisions vie for those on the merger of the month, but onto the front page of  the New York Times SundayStyles section in early January  ("The Falling Down Professions") and more recently the front page of the NYT ThursdayStyles section ("Who's Cuddly Now?").  And they're not talking about what celebrity lawyers are wearing, or about those errant lawyers taking their clothes off in the conference room or screaming obscenities at the judge. 

What's making the news these days are regular law firms and the vast universe of everyday lawyers--and the bedeviling challenges that they face:  declining law school applications over the last few years, plummeting retention rates, rising dissatisfaction among lawyers and clients.  But while some law firms have been bemoaning how hard it is to get lawyers to stay in place, just doing their job, servicing their clients, it is occurring to a number of other firms that--drum roll--some tweaking of the business model might be in order.

So it is, as persistently promoted here, and now even trumpeted in the style sections of the news, that law firms, they are a'changin'. 

Why are they changing?  Richard Florida, the author of “The Rise of the Creative Class: And How It’s Transforming Work, Leisure, Community and Everyday Life” (Basic Books, 2003) says the old grand professions have “lost their allure, their status. And it isn’t about money.”  The money, as firms contemplate a $200,000 salary for a brand new law school graduate, is still pretty good. But especially among young people, according to Mr. Florida, professional status is now inextricably linked to ideas of flexibility and creativity, values not traditionally nurtured by the legal industry. 

But exactly how are law firms changing?  They are experimenting with different fee structures for their clients, and experimenting with different compensation and engagement arrangements with their associates and even partners (see our The Fracturing World of Lockstep Compensation).  They are contracting, out-sourcing and e-commuting. They are introducing sensitivity, transparency and flexibility not only into their vocabulary (see our entry Sullivan & Cromwell Proves Mom Right?) but also into their culture, providing professional development that promotes leadership skills and career planning in addition to CLE mastery, and reworking their retirement, work sharing and required billable hours policies.  In fact, there are so many changes afoot, that there is a good chance that not only will law firms of the mid-21st century look very different from their 20th-century antecedents, but they may also not look much like each other.  See our Leaving Behind the Medieval Model.

Lawyers are well-known for their risk aversion, and personality assessments bear out that propensity on the individual level.  But ruminating over these forays in experimentation brings one to the conclusion that the biggest change amongst us lawyers is that we are becoming demonstrably capable of, and willing to, change.  Ok, maybe only after a short walk past the gangplank, but still, at least when prodded, able to change.  Or at least willing to try to change.

And that's how we are going to get better at this business.

 

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

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

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

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

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

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

 

 

 

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

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

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

LOWERING COMPENSATION

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

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

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

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

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

THE IMPACT ON NIMBLENESS

Continue Reading...

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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.

• Exit interviews
• Coaching for partners to improve associate management and feedback techniques
• Formal mentoring program
• Color-blind assignment program
• Sophisticated evaluation and feedback forms and procedures

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. 

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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.

 

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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.

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"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.

 

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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.

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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/. 

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An article by Ronda Muir entitled "The Importance of Emotional Intelligence in Law Firm Partners" appears in the July/August 2007 issue of the ABA Law Practice Management Section's Law Practice Magazine. 

Among the attributes that emotionally intelligent partners bring are better judgment, higher productivity, enhanced business development skills and better client relationship management.  Most importantly, high emotional intelligence fuels the kind of leadership-- one which promotes collaboration and teamwork-- that is critical to excellence in the 21st Century, and that can provide firms with a competitive edge.

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Should lawyers “do the right thing” in addition to “being right”?  

A favorite cartoon depicts two lawyers at a desk evidently discussing strategy. One lawyer says to the other: “Is it right?… Is it fair?  Get a grip, Carlton—we’re a law firm!”

Integrity

In an interesting study issued recently, the Consortium for Research on Emotional Intelligence found that financial advisors who demonstrated high levels of “moral and emotional competency” nearly doubled the S&P 500 return on their client portfolios in the years 2001 through 2004, delivering an average return of 25%. 

Of the various attributes studied, integrity had the single strongest impact on client returns. “Results showed that Integrity was the key behavioral competency which predicted the most positive returns for clients." 

Integrity was defined as acting consistently with what one says is important, in other words “walking the talk.”  An example was an advisor willing to give up a lucrative client rather than compromise his/her principles, such as ultimately recommending that a client seek advice from another advisor because the advisor could not in good conscience implement a plan believed to put the client at significant financial risk.

Ethics

In the process of updating his 1996 book The Honest Hour: The Ethics of Time-Based Billing by Attorneys, William George Ross determined that lawyers in 2007 are significantly more likely than a decade ago to pad their bills with unnecessary hours or bill two clients for the same time. Almost 55% (up from 40%) of associates and partners surveyed report performing unnecessary work, and 35% (up from 23%) say they bill two clients for the same time. The number of lawyers who believe double billing is ethical also rose from 35% in 1996 to 48%, and more than two-thirds of lawyers say they have specific knowledge of bill-padding by others.   

Morals

In a May 2, 2007 Law.com article entitled “From Moral Partners to a Moral Firm”, Gregory S. Gallopoulos, the managing partner of Jenner & Block, suggests that the integrated enterprise model that many successful law firms are adopting now, in which strategy and vision belong to the entity as a whole rather than to individual partners, risks producing a vacuum in the area of firm morals. 

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Ronda Muir, Senior Consultant, has been asked by UNICEF's Armenia office to lead a two and a half day retreat at the end of May to help improve teamwork, communication and conflict resolution. Through the use of individual and team MBTI reports and emotional intelligence assessments, Muir will help the team identify personal and office strengths and challenges and determine strategies for improved communication and conflict management in order to better serve the country's children.

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In connection with the 129th annual International Tradmark Association meeting in Chicago, Ronda Muir, Senior Consultant, presented a program on Wednesday, May 2, at Robin Rolfe Resource's Women's Power Breakfast for seventy senior corporate and law firm women in intellectual property.   Her presentation focused on what makes lawyers, and women lawyers, different from other professions and how to use those differences to make good lawyers better.  This year INTA welcomed over 8,500 registrants from around the world.

 

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Give yourself the advantages that insights from sophisticated behavioral science tools and informed collaboration can produce.  Out of ideas for how to motivate your team?  Can't take another day with a difficult boss or colleague?  Strung out from too many committments and not enough time?  Looking for a meaningful way to both practice law and live your life?

Achieve improvements in your professional and personal life, including progress in leadership and management skills, work/life balance, conflict management, business development and time and resources management. 

Our experienced lawyer coaches use their expertise and assessments to give you the tools to maximize your strengths, raise your emotional intelligence and social IQ, as well as benefit your bottom-line results.  You choose the program that best suits your needs and schedule.

For further information, contact RMuir@RobinRolfeResources.com. 

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Do we have a deal?  An easily-missed recent entry in the legal press noted that DLA Piper had decided to award the latest round in starting salary increases to entering associates in only one practice area--patent litigation.  The article noted that patent litigators often have science and engineering degrees and that clients are willing to pay premium billing rates for these services.  DLA's co-managing partner for the US, J. Terence O'Malley, said the move was in response to "listening to the marketplace."

Partner compensation at law firms usually differs depending on seniority, origination, productivity and whatever else goes into the formula, and individual compensation arrangements, at least for a trial period, are often negotiated with lateral hires, including associates.  According to an Altman Weil Survey, however, nearly 2/3rds of firms with more than 100 lawyers have some sort of lock-step feature by class for associate compensation, and that proportion must approach 100% when it comes to first-year associate entering salaries. 

DLA's small step is remarkable in several respects.  Given the traditional associate compensation structure, hiring entering associates at varying salaries, particularly in this competitive recruiting environment, is a real departure.   This proposal must have provoked lengthy discussion at DLA about whether, regardless of its usefulness in snagging more patent types, the move would also turn off high-quality associates not interested in patent litigation.  Isn't DLA saying that some associates are more valuable to them than (most) others? 

But if there is premium billing to be had, why not pay premium compensation?  There is something to be said for sharing the wealth with the associates who are doing that work.  It's just that that is not how law firms have reasoned in the past.  Call it a "professionalism ethic," or maybe something else, but there has been a widely-recognized premise that at least all young lawyers in any given firm are created, and paid, equal. 

Further, for a law firm to have gone through the process of officially determining that some corporate legal services--in this case, bet-the-ranch patent cases-- are more valuable in the marketplace than others, and that they are going to pursue those, is notable, the critical word being "officially."  Firms have long been able to bulk up bills in areas where they own the field, using an implicit what-the-market-can-bear standard.   What is the client's alternative? 

But this announcement publicly acknowledges parsing the demand for legal services in a way that law firms have traditionally not owned up to--we intend to take advantage of the demand for a specific type of particularly profitable work.

The correlation drawn in the article between premium billing and the associates' salaries makes it look like DLA's analysis was based on the old-line cost-of-production concept--since we will charge a higher hourly rate for this work,  we can afford to pay these associates more as well and still retain our profitability margins.  But in fact, these facts can also support a newer type of value pricing-- we can pay these associates more because this work is worth more to the client, regardless of how much time it takes to perform. 

This announcement may also be part of a shifting in the wind away from the convergence rage. There has been much made of the convergence trend among corporations, no doubt the brain-child of a legal consultant hoping to reap the law firm M&A bonanza that the announcement of such a trend has in fact put in motion.  But this bit of DLA's market analysis, if true, may put the lie to the contention that  firms should do it all.  IP boutiques have in part managed to ratchet up hourly rates because of the uniform nature of their hotly-demanded business.  In short, they are the antithesis of the general service law firm and they are profiting from that status.  Large law firms, burdened with years of the convergence message, currently sport a blended, averaged or standard-per-class billing rate that applies to both more and less profitable work.  

According to last year's survey, 28 of the AMLaw 100 law firms shrank in size.  All but two of those also improved their RPL.  For example, Akin Gump shed 25-30 lawyers as they found asbestos defense work to be increasingly commoditized and price-sensitive.  That  move raised RPL nearly 5% for 2005.  Managing Partner R. Bruce McLean noted that  "In the 1990s we tried to build a national firm, and we grew from 450 lawyers to 1,000 lawyers."  The firm now has 794 lawyers.  "Since 2000 we have tried to focus on doing what we do well, so we can compete at the top of the market in those practices."  In other words, they are no longer trying to be all things to all clients.

DLA's move looks to be in response to clients who, at least in this particular patent litigation area, want the best in the business, wherever that is, and further, whatever that costs. 

Where this type of reasoning could take law firms is wide open:  carefully drawn billing rates (and salaries) that differ among practice groups, and possibly even among types of work within practice groups, as well as over time, all based on the latest market analysis.

Regardless of whether DLA's analysis is right, the important step taken may be in their acknowledging publicly, however quietly, that engaging in this process, "listening to the marketplace" and then attuning your firm's economics to what you hear, is a respectable way to run a law firm.

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Ronda Muir, Esq., Senior Consultant at Robin Rolfe Resources, was featured as a speaker at a conference on Risk Management for the Modern Law Firm, sponsored by ARK Group. The conference was held in Chicago on April 17 and 18, 2007. 

Muir's presentation was on the risks that arise in managing a law firm's greatest asset: its people. She pointed out the ways in which lawyers are different from all other professionals, the challenges and risks that those differences pose to management, and how to use those differences to make good lawyers better. 

Participants raved:

• "Innovative, new information!"
• "Excellent, new material of real value.  I would love even more detail and time on this topic."
• "Great presentation!" 
• "Great speaker!  Knowledgeable and forward thinking."

ARK Group also lauded Muir's participation: "Your involvement was pivotal to the success of the program… and brought a fresh perspective to the agenda."  

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An extraordinary and convincing vision of a revolution in big law's future was presented by Mark Chandler, SVP and General Counsel of Cisco, in a speech in January at Northwestern School of Law's 34th Annual Securities Regulation Institute.  I would like to join other legal commentators in paraphrasing Chandler's comments and commending him on his far-sightedness.

Driven as are other GCs to realize productivity improvements in his department, Chandler is committed to reducing Cisco's legal expenses as Cisco gets bigger.  Chandler points out that information, a law firm's stock in trade, will only get easier, and therefore cheaper, to access over time.  Already standardized on-line legal data is available, with residential leases and individual tax returns now largely done by software.

But even Cisco's first tier corporate legal work is being drilled down to a cost-effective, accessible product.  Contracts are drafted, executed and archived by employees using on-line software. Cisco pays a fixed fee for patent prosecution and intends to pay at least 5% less each year, requiring its firms to find ways to lower costs.  It also pays a fixed fee for the review of license offers, which Baker & Botts has been able to make profitable by developing a more efficient systematic approach.   In the corporate secretarial area, Cisco has replaced a group of outside firms with a one-firm solution that aims for a 20% reduction in legal expenses in part by using standardized forms and open interfaces. 

In litigation, Cisco has a fixed fee arrangement with Morgan Lewis to manage all of its US commercial litigation, which has made litigation avoidance the firm's key goal, aligning perfectly with Cisco's interest.

Counseling will be the next frontier, Chandler believes, as online tools like tax counseling via www.taxalmanac spread to other legal areas, such as export regulations, human resources and employment and eventually securities law compliance.  Cisco is already working with eight other Fortune 500 companies and a number of law firms on a site called Legal On Ramp to allow direct access to search law firms' knowledge management systems.  See www.legalonramp.com.

And in each instance, what was novel in Cisco's legal management strategies five years ago has become more commonplace among its peers today and may well eventually become available for purchase as packaged software.

The current law firm business model, according to Chandler, reflects a fundamental misalignment of interest between clients who are driven to manage expenses and law firms compensated by the hour.  Clients are not in the market of buying time, he points out, but value.  The current system not only mis-serves clients, but also the lawyers themselves, particularly associates, who Chandler says are beating down his doors because they don't want to work for law firms any more--enslaved by a billable hour-based compensation system that is inefficient in producing a valuable product and that offers them little chance of making partner.

Chandler recognizes that law firms are currently profitable as structured.  Clay Christensen of Harvard Business School calls large American law firms "the most profitable businesses in the world.  Speedier information-gathering capabilities allow large law firms to increase utilization of less experienced lawyers without passing cost savings on to their customers."  But Chandler is convinced that the very source of success for firms today--the ability to control client access to expertise, requiring 1:1 delivery--will be the source of their failure in the future.  It is top quality boutiques that Chandler is betting will change and survive, and it is in Cisco's interest to help make them profitable while doing so.  Chandler views slower-moving, cost-heavy large centralized firms to be at risk. 

"If the economic system of law firms is frustrating to associates and even some partners, I can tell you that from the standpoint of a metric driven general counsel, it is more than incomprehensible.  It looks like the last vestige of the medieval guild system to survive into the 21st century."

 

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Ronda Muir has been asked by Yale Law School to conduct a seminar in April for law students on the economics of law firm practice and how associates can add to the bottom line. 

In the highly competitive legal market, associates benefit from understanding the underlying financial considerations that shape law practices and their policies, and how to quickly become a productive contributor to their firms' financial success.  

Yale Law School was acknowledged in the Carnegie Foundation's Advancement of Teaching two-year study of the North American legal education system, published in 2006, as one of only three law schools offering a balanced curriculum.

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The linchpin to forging a solution to the associate recruitment/retention/compensation issue may be getting partners to acknowledge that partner profits, hotly negotiated, carefully calculated and closely compared, have to take a hit.  Accounting firms have managed to significantly lower their attrition rates and achieve strikingly higher diversity than their law firm cousins in part by sacrificing some portion of partner profits.

The Logic of Lower Partner Profits

Lower partner profits seem almost logical when today's associate pay is compared to historical ratios of partner profits, according to a recent National Law Journal article.  As a percentage of average profits per partner, the starting salary at top law firms is at its lowest level in a decade.  In 2005 new associates at 500+ lawyer firms made 11.7% of the amount partners earned, the smallest proportion over the last 10 years.  By contrast, new associate salaries at the AmLaw 100 were 15.4%of partner profits in 2001, the highest percentage over that same time.  While new lawyers at smaller firms earned a higher proportion of profits, their percentages have declined in recent years as well.  (The article notes, however, the methodological challenges posed by combining different sources of data to reach these conclusions.)

Surely no one is arguing that some set ratio should be rigorously maintained regardless of the larger economic scenario.  Or even if they are, that it could be.  Associate salaries are set for the year ahead, and are paid regardless of the legal industry's or the individual firm's profitability that year.   Partners, on the other hand, ride the wave of  what could be a banner year, like 2005, or a financial dog, like 2001.  No one asks associates for money back when the firm's economic projections have turned out to be too rosy, and few would argue that associates should be entitled to the same degree of additional compensation that partners realize in an unexpectedly good year.  So the variations cited above may well be left as just that-- the vagaries of profitability.

The general consensus is, anyway, that without any further ado the gap between associate salaries and profits per partner will narrow over the next few years as a result of an anticipated plateau in overall law firm profitability, which is being negatively impacted by the escalating race for qualified law school graduates, among other things.  See our February 20, 2007 entry "The Looming Associate Crisis and What It Means For Your Firm."  Salaries will have to rise for firms to stay competitive and partners will be the ones who finance them.  Simpson Thatcher, for example, the firm that started this latest round of raises, will, because of those raises, reshuffle approximately 2% of the firm's anticipated net profits for 2007, or at least $8 million, to its 520 associates, for a minimum contribution of $50,000 per equity partner.  And there is no anticipated increase in demand for legal services.  In fact, there are credible arguments that the legal business, like nearly every other industry, may well see a concentration of demand and streamlining of delivery over the next decade or so.

The Necessity of Lower Partner Profits

But still firms may have to contemplate even lower partner profits.  Hiring associates and keeping them are two different matters.  After high salaries have landed associates, it might be that only rejiggering the traditional law firm business model can make them stay for what seems to be the increasingly unattractive partnership prize.  Higher associate salaries put more pressure on productivity and hours, exacerbating precisely the quality-of-life issues that apparently make junior lawyers so unhappy.  See our February 14, 2007 entry "What All That Money Is Buying You."  Particularly for Generation Xers, Yers and beyond, the benefits and lifestyle that are their stated priorities may not only be a matter of steadily higher (and expensive) compensation, but, just as intrusive to partners' pockets, also require hiring more bodies to accomplish the same amount of associate work.

Leverage statistics often get bandied around in the discussion of associate salaries and partner profits.  Leverage has always been a two-edged sword: both an engine for producing more revenue when business is plentiful and an albatross around the neck when business turns south.  Interestingly enough, according to the (possibly skewed) NLJ statistics, over the last decade, law firms of all sizes turned out to be the most highly leveraged in some of the least profitable years-- 2001 and 2002.  But the kind of leverage we are talking about possibly evolving is the worst of both worlds-- leverage that produces no more additional revenue and, once again, higher expenses.

So it is partner profits that will suffer.  This is a difficult pill to swallow.  No one likes to see their compensation heading south, least of all the lawyers in your firm making the most money, i.e., those with the most seniority, the highest productivity and the strongest ties to clients:  the very ones who may well be billing more hours than the associates whose salaries they are being asked to subsidize.  The pundits say that firms will continue to raise either associate hours or hourly rates before they ask partners to pony up.  The alternative is too risky.

Firms are Already Lowering Partner Profits

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A number of corporations are taking steps to restrict which of the associates at their outside firms work for them, according to the Managing Outside Counsel Survey Report prepared by the Association of Corporate Counsel and Serengeti Law of Bellevue, Washington in late 2006.  In some cases, corporations specify that only attorneys with at least five years of experience be assigned to their matters.

Given the billable-hour fee structure that most firms retain, if such requests become a trend, it could play havoc with the traditional law firm business model. Currently, firms hire three times or more the number of associates that the firm expects to stay, immediately putting those young associates on clients matters in order to push down less complicated work, provide training and make a proving ground to determine who should stay and who shouldn't.  OK, let's admit it:  and also maybe sometimes to plump up some of those thinner bills.

If clients start demanding only more senior lawyers on their matters, the high cost of young associates would immediately become much higher, since it would be even longer before they could reasonably be expected to produce a return on the firm's investment in them.

Of course, one way to counter such a trend would be to use a more carefully calibrated hiring process that relies less on "where ever the outstanding offer chips may fall," and more on knowing the best fit for the firm.  We at RRR advocate the use of culture and personal style inventories as a way to fully understand your firm's prevailing attitudes, values and attributes and also to identify the areas where it needs to grow or broaden.  

Aggressively pursuing those candidates who meet that profile not only results in spot-on hires more likely to contribute from day one, but also produces a mountain of "I'm special-- you really-really-like-me" feelings in your incoming class that could make even Sally Field shed a tear, and also produce the kind of we're-made-for-each-other associate loyalty that not many firms currently enjoy.

Targeted hiring should then be followed by an equally targeted training program of the sort that few firms currently offer.   Information gleaned from the inventories would make this training much more efficient, so as not to necessarily require more time.   We at RRR also offer targeted associate training in the areas of understanding the business of law, professional performance and career development, business development, client relationship management and communication, among others.   

Together, these two strategies--targeted hiring and targeting training-- are likely to produce young lawyers who are valuable to clients and profitable to their firm.

 

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The legal industry's current strategy for hiring and keeping lawyers seems to be to throw more and more money at them, a strategy which has succeeded to date in producing unprecedented attrition and dissatisfaction rates.

Major law firms around the country just upped the ante for hiring a baby lawyer to $160,000 @ year, before bonuses, or roughly what seasoned federal judges in our country make.

Why more money?

Jack Nusbaum, Chairman of Willkie Farr & Gallagher, says "We expect our associates to work hard… maybe this will make them feel better about the Saturdays and Sundays."  

Has anyone taken note of the American Bar Association survey conducted just this past November?   Of the 2,377 respondents (most of whom were between 26 and 35 and had been practicing law for five years or less), 84.2 percent said they'd prefer to work fewer hours for less money.  More than 30 percent would like to work 20 percent less and said they'd give up between 25 and 30 percent of their pay in exchange.  The next largest group-- 27.8%--would settle for a 10% cut in hours.  Did you get that?  Associates would prefer to give up proportionally more money for incrementally less work.

So are we paying these high salaries--surprise!--for the clients? To show them that our firm can attract the best players?  

"When I saw the announcement about the raises, I said ‘Oh God,” says Michael Roster, executive vice president of World Savings, a subsidiary of Wachovia Corp.  But maybe not for the reasons you would expect.  Salary raises mean law firms will put more pressure on associates to bill, but paying more for legal services, Roster says, is less bothersome to him than associate turnover.  He says he and other general counsel prefer to work with associates with whom he has a history and who know his business well.  "It hurts when firms can’t keep qualified people.”

“From my standpoint, I would view [lowering billable hour requirements] as a creative and enlightened way to reduce associate turnover and keep the best and brightest young lawyers,” says Barry Nagler, who chaired in 2006 the Association of Corporate Counsel’s board of directors.

Susan C. Robinson, associate dean for career services at Stanford Law School, also thinks that lowering billable-hour requirements could be a great recruiting tool, particularly for attracting lateral associates.

There is no question that firms are struggling with the phenomenon of associates not wanting to work as hard as generations past.  Many studies indicate, in fact, that partners often bill more hours than their associates, turning the law firm pyramid model topsy-turvy. 

And attracting and retaining associates over the next decade may be even harder. The standard characterization of “millennials”—those who graduated from high school after 2000 and will be graduating from law school starting in 2008--is that they are unwilling to compromise life and family for work.

The obvious hit from reducing billable hour requirements would be to partners' bottom lines.  See our upcoming entry "The End of Profitability as We Know It?"  But there are some countervailing tactics that can help improve profitability.  Ida O. Abbott, former partner at Heller Ehrman White and McAuliffe, contends that billable-hour requirements could be lowered without cutting partner profits if the change involved more planning and better management.  And law firms have not yet even begun to explore the types of management strategies that have produced the super-sized profits recounted in the newly released Firms of Endearment: How World-Class Companies Profit from Passion and Purpose by Rajendra Sisodia, David Wolfe and Jagdish N. Sheth.  See our January 31, 2007 entry "Firms of Endearment."

Steve Susman, whose 85-lawyer Houston/New York litigation firm Susman Godfrey gave 2006 associate bonuses of up to $125,000, contends that "Any lawyer who is unhappy with their compensation should check into a mental institution."

Based on the adage about the mental state of people who keep doing the same thing but expecting a different result, there may be a few managing partners who should be joining those associates there.

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Firms of Endearment: How World-Class Companies Profit from Passion and Purpose
by Rajendra Sisodia, David Wolfe and Jagdish N. Sheth contends that companies with more emotionally intelligent employees have stronger bottom line performance than those who don't.  David Wolfe can be a controversial adviser, and some have suggested that being recognized as a good corporate citizen should be sufficient reward for conscientious organizations, without having to convince themselves that both their individual psyches are above par and that their bottom line improves as well.

Regardless of the sniping, the underlying research makes the FoE claims believable.  High EI clearly hits the bottom line. Ninety percent of top individual performers across industries have high EI whereas only 20% of low performers do. Those who raise their EI are roughly 25% more productive than before.   Insurance agents who score high on EI sell twice as much in policy premiums as agents who score lower. Managers at American Express Financial Advisors who complete a training program focusing on one's own and others' emotional reactions achieve significantly higher rates of growth in funds under management than their untrained peers.

Plus, data suggests that employees who are emotionally intelligent are more likely to access and profit from feedback, helping them achieve more over time.

So the logic of companies who have more emotionally intelligent employees out-performing their lower EI brethren (and sisters) certainly makes sense.

The application to law firms and law departments, where checking one's emotions at the door is standard procedure, is obvious-- more emotional intelligence--whether hired, trained, or promoted-- will not only improve culture but produce bottom-line results.

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The 100 Best Employers

From over 400 organizations surveyed, five law firms, down one from last year and with most of the survivors heading down the list, made Fortune magazine’s 2007 list of the best 100 employers to work for: Alston & Bird, Arnold & Porter, Nixon Peabody, Perkins Coie and Bingham McCutchen, with Morrison & Foerster having dropped off.

The list is based on two criteria: an evaluation of the policies and culture of each organization, and the opinions of the employees, which is given more weight. Two-thirds of the total score comes from responses to a 57-question survey, on attitudes towards management, job satisfaction, and camaraderie, sent to at least 400 employees from each company. The remaining one-third of the score is based on demographic makeup, pay and benefits programs, and culture.

It's a tough competition, with No. 1-rated Google providing employees free gourmet meals, a swimming spa and free doctors on site.

But apart from offering outsized bennies, there are some lessons Google may be able to offer us legals.

Hiring for the Right Reasons

Google has doubled the number of employees in each of the last three years, and now with 10,000 employees, expects to double in size again this year, resulting in about 200 hires a week. It also enjoys an attrition rate of 4%, low by Silicon Valley standards. Historically, much like law firms, Google has relied on grade requirements and interviews to make hiring decisions. The challenge is to continue to find valuable employees at such an astounding rate of growth.

A recent review of over 2 million data points made it clear that Google's hiring criteria were not necessarily correlated with success at the company. So Google has revamped its hiring process, using assessments of existing personnel to produce a more quantitative measurement of success in terms of skills, intelligence, personality and integrity. All incoming applicants will now take a personal survey, which Google is already finding produces better matches for its work and culture.

Lessons for Law Firms

Law firms with spiraling growth requirements are competing to hire from the same number of law graduates with good grades from the same number of top-rung law schools as 20 years ago. The lesson from Google, the best company to work for and possibly the hiringest company as well, is that grades and an interview don't do it anymore. Now is the time to identify your real indicators of success and hire candidates with those.

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Accounting firms have long been ahead of law firms in innovative management strategies for personal service firms-- and as law firms head toward numbering thousands instead of hundreds of lawyers, there is much we can learn from how accounting firms manage people.

At a two-day ARK Group conference in December on Women in Professional Service Firms, Sandra Bushby, KPMG's national director of Women's Initiatives and other Workplace Solutions, recounted how KPMG uses workstyle assessments, particularly the "color-coded" Birkman Method, to put together successful client and project teams.  The firm-wide assessments were undertaken primarily as a risk management strategy-- to build teams that have the varied talents to insure that everything from technical details to interpersonal skills to long-term visionary considerations are fully dealt with.  But by balancing teams with accountants with red, green, yellow and blue workstyles, KPMG is finding that it is also achieving an unexpected bonus:solving the diversity puzzle-- creating culturally, gender and racially diverse teams.

Law firms, whether big or small, have a world of insight available to them from the use of assessments, which they often do not take advantage of.  Lawyers will contend that law is too "technical" or "expert' a service for personal or work styles to have any impact on success.  Yet accounting is no less technical, and accounting firms have had to become expert in drilling down to the most effective risk management tools available-- which style assessments unquestionably are.  To have the additional bonus of effectively producing diverse teams without resorting to "affirmative action" add-ons is ground-breaking-- a one-assessment-for-all-purposes bonanza.

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In a December 13, 2006 Legal Times article extolling the energy and talents of Pamela Rothenberg, the managing partner of Womble Carlyle Sandridge & Rice’s Washington D.C. office, Rothenberg stressed how much she relies on The Gallup Organization strengths, an assessment that is described in the book First, Break All the Rules: What the World's Greatest Managers Do Differently, in managing the firm. 

Martin Seligman, the Fox Leadership Professor of Positive Psychology at the University of Pennsylvania, has worked with The Gallup Organization to expand and refine their strengths assessment to make it particularly relevant to lawyers. Seligman is so certain of the usefulness of the Gallup strengths assessment in raising productivity, that he has issued a challenge to assess free of charge the members of any firm willing to participate, on the condition that he be paid 10% of their increased profits. 

We have used the Gallup strengths assessment in a number of client projects for law firms and law departments. If you are interested in participating in Seligman’s challenge, or simply want to know more about these strengths and how they could be useful to improving productivity in your firm, contact us.

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Mayer, Brown’s New York office opened in 1978, was one of the most profitable in the Mayer, Brown orbit over many years, and from 1995 to 2003 grew by more than 100 lawyers.

Since January 1, at least eight partners have left for other firms - including litigator Dennis Orr, one of Mayer, Brown's top rainmakers. Reports are that revenue in the New York office is flat this year, and the relationship with the home office in Chicago is tense.

So what happened?

The New Yorkers contend they have little say in the firm's decision-making process and that the financial reporting system that breaks down profits and losses by location has created an office-versus-office dynamic, inciting Mayer lawyers from Chicago to fly to New York to meet with Morgan Stanley's general counsel without inviting anyone in the New York office.

Firm managers lay the blame on the compensation system, where origination was everything. Under a new regime, they promise less emphasis on the performance of a partner's practice group or office and more on a partner's potential contributions.

Compensation is a powerful motivator, and lawyers shrewdly respond to explicit and implicit incentives in the system. But it is almost impossible to eliminate gamesmanship from compensation. The only chance of elevating firm dynamics above the compensation games is to raise the level of trust among the partners, a daunting challenge, but one that pays off enormous effort with firm harmony and productivity.

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In April 1955, Dean of Harvard Law School Erwin Griswold noted, "Many lawyers never seem to understand they’re dealing with people and not solely with impersonal law” -- a comment that unfortunately continues to ring true today, when the legal profession’s reputation suffers from an image characterized by a lack of interpersonal sensibilities. 

One of the first law school courses in the nation to apply human relations training to law was taught by Professor Howard Sacks at Northwestern Law School during the 1957-58 school year. The two-week course, entitled "Professional Relations," was offered without credit. Professor Sacks appealed to other law teachers to join in his experiment, both by offering stand-alone courses and integrating human relations training into the regular law curriculum. But a law review article written by Harvard Law Professor Alan Stone in 1971 noted that "law schools . . . have largely ignored the responsibility of teaching interviewing, counseling, negotiating, and other human relations skills." 

Legal academics continue to take the position that lawyers must learn to be more effective interpersonally. As Vanderbilt University Law Professor Chris Guthrie summarizes it, "Lawyers are analytically oriented, [and] emotionally and interpersonally underdeveloped."

It’s more than just a matter of being “nice.” Our survey of Emotional Intelligence and Excellence in Lawyering shows lawyers who are listed in Best Lawyers in America score significantly higher in emotional intelligence than the average lawyer. There’s excellence in that intelligence.

To participate in our study, see our entry “Emotional Intelligence and Excellence in Lawyering” under the topic Emotional Intelligence.

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Part of the growing managerial team at law firms over the last decade or so has been the addition of the Professional Development or Career Development Officer. The goal, according to one firm, is happier, more productive attorneys who in turn are less likely to leave. The trend began several years ago, when large firms, such as Paul Weiss, whose current Director of Professional Development is David Cruickshank, realized the benefits of actively directing and supporting their attorneys' career development. 

Over time more firms have signed on to the concept, such as Chicago’s Gardner Carton & Douglas (soon to merge with Drinker, Biddle & Reath), which in 2004 appointed their first Chief Career Development Officer, responsible for the summer associate program, orientation of new associates, assignments and feedback, mentoring, training and formal performance reviews. Sonnenschein Nath & Rosenthal also hired at that time its first Chief Learning Officer, as have Holland & Knight and Arnold & Porter. Each position is tailored to the individual firm’s goals and requirements-- some focus primarily on providing targeted training to associates and partners, some attempt to manage quality assurance or reach out to alumni, while others take a more free-wheeling approach. Cordell M. Parvin, the lawyer at Jenkens & Gilchrist who became their first official Attorney Development Officer a few years ago, said at the time that his firm was moved to formalize the position in order to help their lawyers make for themselves a career that they love. “We’re in an era where young lawyers have never been paid more money, and they’ve never been more unhappy.”   

Adding Internal Coaches

A recent twist has been the inclusion of individual coaching responsibilities in the Professional Development officer’s role, or, as in the case of some firms, such as Orrick, Herrington & Sutcliffe (soon to merge with Dewey Ballantine), Arnold & Porter and Fenwick & West, the addition to the team of an internal full-time coach. Like the Career Development position, the coach's role can be defined in many different ways, depending on the values and goals of the firm. And the coaching methodology could differ significantly depending on which of the myriad coaching approaches are used.

The Challenges of Coaching Lawyers

Dr. Martin Seligman, the Fox Leadership professor of psychology at the University of Pennsylvania, founded the school of Positive Psychology, which focuses on factors that make for professional and personal success, instead of following the traditional diagnostic model of addressing weaknesses. His work identifies optimism particularly as producing sizeable psychic benefits. A widely successful coaching program based on Marty's positive psychology model encourages “learned optimism.”  

According to Marty's research, however, lawyers are strongly pessimistic-- so much so that law appears to be the only career where pessimism is a career enhancing attribute. So the question arises as to whether changing lawyers' pessimism to optimism will kill the goose that lays the golden egg. Ideally, such coaching would give lawyers the ability to switch out of their day-job mindset, not only when socializing or in family situations, but also when engaging in non-lawyering professional activities like managing their firms and courting their clients, producing bottom-line benefits. 

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