In April, Shearman & Sterling's entire Mannheim office packed up and reverted back to its original form, Schilling Zutt & Anschutz. What prompted the schism?
"There are some great lawyers at Shearman & Sterling," one former partner is reported to have said. "I just don't think they are particularly happy."
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.
On Wednesday, March 12, 2-3:15 pm EST, Muir will be conducting an audioconference for the Center for Competitive Management on Associate Compensation: Remain Competitive Without Breaking the Bank. 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.
On February 12, 2008 Muir is scheduled to discuss with students at Northwestern University's Business Institutions Program how to improve decision-making. Based in large part on the information contained in "Promoting an Effective Board or Management Group," the discussion will explore, among other subjects, optimal personality traits for good decision-making and how to avoid extreme decisions.
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.
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.
For the first time in six years, law firm expenses in the US and the UK are growing faster than revenues, according to a recent article in The American Lawyer. For the first six months of 2007, gross revenue grew at a strong 13.1%, well above the compound annual growth rate of 10.5% of the prior three years, while productivity (average hours per lawyer) was flat. Rate increases were in line with the six-year average increase of 7% and, continuing an upward trend, there was an increase in leverage-- total lawyers rose by 7.4%, significantly above the increase in equity partners.
But there were also big increases on the expense side, with the expense growth rate of 13.7% much greater than the average 9.2% of the last three years and outstripping the increase in revenues (13.1%) for the first time in six years.
The reasons are pretty obvious. A 17% rise in compensation costs accounted for the bulk of the increase in expenses. This last year has seen not only big jumps in associate compensation and bonuses but also the announcement of special additional bonuses yet to come. Equity partner growth in the first half of 2007 was also up 1.5 percent, over .5% from the prior year, although still not up to the average six-year rate of 2.6%. Operating costs (occupancy and overhead) also grew close to 12%, in many cases driven by additional new hires. And poor currency conversions rates relating to foreign office expenses have driven those costs up dramatically.
So what does the crystal ball tell about the future? With the drop off in transactional work caused by the credit crunch and no up-tick in bankruptcy and litigation, productivity in the second half of 2007 is likely to slow, and those higher salaries and bonuses on top of bonuses will fully hit the books. Revenue for the entire year is likely to be cushioned by the strong inventory accumulated during the first half of 2007, resulting in still decent increases in profits per equity partner of 6-8%.
But 2008 may be another matter altogether. If transactions don't come back and other practices don't take up the slack, reduced revenues and even layoffs may be in the offing.
It's a new year coming. Let's hope the party hats stay on.
In a report released October 1st, Catalyst, a New York consultancy, found that Fortune 500 companies with at least three women on their boards strongly outperformed those companies with fewer or no women. Based on a study of four years of corporate results, the correlation was found to be so direct that the more women who serve on a board, the better the bottom line.
The companies with the highest percentage of women on their boards had equity returns 53% higher, returns on sales 42% higher and returns on invested capital at least 66% higher than those companies with the least number of women board members. Higher returns kicked in once at least three women served on the corporation’s board, the study found, with companies having only three women board members raising each of those returns an average of 5% over corporations with fewer women.
Why would female board participation produce such concrete financial results? Various consultants and academics speculate that women are better able to understand the customer base, particularly of consumer goods companies, and that showcasing women on the board helps attract and retain women employees throughout the company.
Another reason may well be women’s often strong collaboration skills, empowering them to better resolve conflict and move boards through the thorny discussions necessary to make and carry through critical decisions.
As many of the biggest law firms are concluding, “professional development” has become the preferred vehicle for addressing diversity attrition. Professional development encompasses enhanced orientation, mentoring, assignment and delegation processes, leadership training, career planning, diversity training, management skills, feedback training, business-development training, affinity groups and other tactics aimed at recruiting and keeping a diverse associate group.
The concept of professional development or talent management did not exist in law firms 20 years ago, and the data shows a clear pattern of women and minorities historically reporting less assistance with professional development, as well as lower job satisfaction, compared with white males.
Now most large law firms have some sort of professional development program and recent data from the NALP Foundation shows that this trend toward formalized programs is paying off. In 1998, 20% of associates left their positions at or near the end of their second year of employment. This year, entry-level lawyers are more likely to make their first move at the end of their third year of employment, staying 30% longer.
The ABA Commission on Women engaged the National Opinion Research Center at the University of Chicago to examine why retention rates for white men are so much higher than those for women of color, and women of color retention rates are higher than those for men of color and white women. Consistent with the NALP’s data, the study found specifically that women of color felt excluded from networking opportunities, felt they were denied desirable assignments, and had limited access to client development opportunities, thereby making their billable hours targets harder to achieve.
The NALP found that white men are more likely to report a consistent workload, regular feedback and intellectual challenge in their work, and they also report the intention of staying longer at their firms.
A consistent workload, regular feedback and intellectual growth are matters within the control of each firm, and are geometrically enhanced with the involvement of a person charged with professional development.
What specifically can firms incorporate into their processes to improve diversity retention? For starters, here is a short list.
But the best way for firms to systematically enhance diversity retention is to establish a professional development department/person/consultant who can provide benchmarks to identify areas for improvement, formulate goals and then work with the diversity committee, the associate recruitment committee and associate managers to realize those goals.
A recent article in the New York Times on young 20-something Internet mega-millionaires quoted one as saying “You ask yourself, ‘Why am I not happier given how lucky I’ve been?’”
While we as lawyers, being supremely circumspect, would rarely verbalize this sort of “squishy” sentiment out in the open, given the levels of unhappiness in our profession, it is a question we should be asking ourselves.
So here are some of the findings about "happiness," which has exploded as a subject of research over the last few years. Let’s start with the data on the current state of happiness in the US.
Recent surveys point to a relatively high “happiness quotient” these days:
· 86% of Americans are content with their jobs (General Social Survey)
· 76% are satisfied with their family income (Pew Research Center Survey)
· 62% expect their personal situation to get better over the next five years vs. only 7% who expect it to get worse
· 65% of Americans are satisfied over all with their own lives—one of the highest personal satisfaction rates in the world.
As the query of that Internet mega-millionaire illustrates, happiness is not correlated with financial resources or even political stability: countries like Nigeria, El Salvador, Columbia, Mexico and Puerto Rico (along with Switzerland, Denmark and Canada) register higher rates of happiness than the US in the World Values Survey. Other countries, such as Romania, Russia and other former Soviet countries, consistently score at the bottom.
This fairly rosy picture in the US becomes decidedly darker when we factor in the “happiness” data on lawyers:
· Lawyers generally have one of the highest dissatisfaction rates with their work of all industries/professions, with 65% of young associates surveyed by the ABA last year intending to change professions within two years.
· Lawyers also have the highest “personal distress” rates of any industry, exhibiting dramatically higher incidences of suicide, mental illness, divorce and substance abuse than other industries.
Women lawyers seem particularly effected by these developments:
· Fewer women are seeking law degrees: from 1963 through 2001 female enrollment at law schools climbed nearly every year, from 3.7% to a peak of over 50%; since 2002, however, the percentage of women in law schools has declined each year, currently down to 46%.
· At a time of very high attorney turnover generally (over 20% leave their jobs every year), the highest drop-out-of-the-profession-entirely demographic is women.
· In spite of many years of women in the "pipeline," only a small proportion of women stay to become partners in law firms (17%) or senior legal counsel in corporations (18%).
The message seems to be that, in spite of Americans' general glee, few lawyers are happy living the lawyer's life.
What Makes Us Happy?
As it turns out, over the last few years a wave of books on happiness, primarily written by academics, have been published. Among them are:
The Pursuit of Happiness, by David G. Myers
Happiness, The Nature and Nurture of Joy and Contentment by David Lykken
Happiness, A History by Darrin M. McMahon
Authentic Happiness by Martin Seligman
The Art of Happiness by the Dalai Lama and Dr. Howard C. Cutler
The Happiness Hypothesis by Jonathan Haidt
Stumbling on Happiness by Daniel Gilbert
Happier: Learn the Secrets of Daily Joy and Lasting Fulfillment by Tal Ben Shahar
Most of these books are based on David Lykken's findings that there is an individual “set point” of happiness to which most people revert, regardless of their life circumstances—illness, financial concerns, family problems. Lottery winners and paraplegics, those both accepted and rejected as partners or general counsel, all on average return to their baseline levels of happiness within a year.
If health and other circumstances don't impact our happiness, what does? Jonathan Haidt compares our emotional life in The Happiness Hypothesis to a small, conscious monkey riding a large, unconscious elephant: in many ways we are estranged from the great bulk of our own inner feelings. The running commentary in our minds about what we feel and why is often simply wrong, he contends. For example, research subjects unknowingly hypnotized to react in a specific way to a cue quickly come up with rational, and in their mind truthful, “explanations” of why they acted that way, even though those explanations are causally entirely beside the point: their reaction was programmed in their unconscious by the hypnosis.
Not only are we not able to access a great part of our inner feelings, evidently we are not very good at analyzing the happiness data that we do have access to. Daniel Gilbert in Stumbling on Happiness explains that we are very bad at remembering what made us happy in the past and in predicting what will make us happy in the future, often overestimating the bang we will get and how long it will last. For example, people often list children as a source of happiness, yet the data indicates that children in fact are "extremely negative," "mildly negative" or have no effect on overall happiness. (More about this later.)
Could We Be Happier?
Continue Reading...What is the most important attribute to be looking for as you groom your young lawyers for management?
A 2006 study reviewed in the Leadership and Organization Development Journal assessed the relationship between emotional intelligence and managerial effectiveness, confirming what you might expect. A total of 38 supervisors (37 males and 1 female) and 1,258 subordinates from a large manufacturing organization participated. Data analysis found that the total MSCEIT score (an emotional intelligence assessment that I consider most reliable) displayed a strong positive correlation with supervisor ratings; that is, the more emotionally intelligent the supervisor, the more effective and productive s/he was rated by others in the organization.
First, I would point out that this study doesn't tell us whether these emotionally intelligent supervisors who were rated more effective actually were more effective than their lower EI colleagues. All we know is that they were perceived to be more effective. The implication being that even if those high EI supervisors weren't quite so great in the accomplishments department as advertised, their loyal team still saw them in the best possible light.
This distinction is particularly important in environments such as law firms and law departments, where dramatically high skepticism (averaging in the top 10% of the American population) creates hurdles that make it hard for managers to establish rapport and trust, much less garner appreciation for a job reasonably well done. Second- and third-guessing is often standard procedure, regardless of how demonstrable the accomplishment might be. While emotionally intelligent managers may be in fact most effective, this and other studies demonstrate that they are in any event going to have the interpersonal skills to align legal staff and professionals on the same side. Given the challenge of creating supportive cultures for growth and accomplishment in law organizations, identifying these kinds of leaders becomes imperative.
Two major subscores make up the MSCEIT total score. In the study above, Experiential EI, which includes perceiving and using emotions, was found to be very highly correlated with high supervisor ratings, whereas the Reasoning EI subscore, which includes understanding and managing emotions, displayed no significant correlation.
Our study of emotional intelligence and lawyers (also using the MSCEIT) indicates that lawyers' scores in EI are generally a standard deviation below the general population (that is, 85 compared to 100). In addition, lawyers score significantly lower on the Experiential subgroup than on the Reasoning one. Their ability to "read" their own and others' emotions is notably low compared to the general population, and they also are not facile at "using" emotions, i.e., moving from a less appropriate emotion to a more appropriate one. Their Reasoning scores are usually significantly higher than the Experiential ones, lawyers being evidently well-suited to logically analyze even the emotional realm. The problem is that weakness in reading emotions creates a garbage-in, garbage-out result when that reasoning horsepower is applied to inaccurate information. So lawyers often get blind-sided by what they hadn't originally correctly perceived .
This finding as to the importance of Experiential EI to effective management can be critical in the case of managing lawyers. Not only should we be grooming our young lawyers to be emotionally intelligent managers, but we should also be specifically rewarding those who are expert at recognizing and using emotions, an item I would bet is not currently on any evaluation form.
"We evaluate 'courage' as a behavioral characteristic of our lawyers, and we link this evaluation to compensation," says John P. Donahue, Senior Vice President, General Counsel and Secretary of Rhodia Inc., in the July 2007 issue of InsideCounsel. Rhodia has "embraced professional objectivity of its in-house lawyers as a core value" and Donahue wants to make sure that "our lawyers can deliver bad news to clients," with whom they are often closely aligned.
Valuing Courage
Given the data we have about the strong tendency of lawyers to avoid rather than confront conflicts (yes, even those feisty litigators, oddly enough) (see my article "The Unique Psychological World of Lawyers"), Donahue's goal is one that can't be lauded enough. Hospital administrators contend that a ratio of 1 conflict avoider in 4 employees results in a "dangerous workplace"--think: "I don't want to get so&so in trouble over reusing needles" or "Maybe she'll start writing down dosages after she gets used to our procedures".
Left to their own proclivities, lawyers' much higher rate of avoidance than hospital workers risks being just as dangerous. Avoidance not only fails to resolve firm and client issues, but at the extreme, failure to report and confront violations of Sarbanes-Oxley, insider trading and discrimination laws, to name a few, can not only crater a career, but also a firm or a company. Add in malpractice, fraud and the range of criminal possibilities (see, for example, Enron and other corporate demises and the unfolding saga of Milberg Weiss Bershad & Schulman) and silence should never be considered golden.
Hence Donahue's laudable efforts to support and promote courage.
Which is where our thought for today could end.
Evaluating Courage
But Donahue goes further than suggesting putting in place environmental supports like "constantly talking" about maintaining objectivity, creating a culture that embraces bearers of bad news and rotating lawyers among client departments. He wants his lawyers' courage to be evaluated and then to compensate them accordingly.
Evaluating courage or any other personal characteristic as it relates to their work is a radical idea to many lawyers. Basing compensation on that evaluation is outlandish. They don't know what a "behavioral characteristic" actually means, don't trust the evaluation process, and certainly don't think their compensation should be linked to so un-rigorous a process. They are, after all, good lawyers, and good lawyers average in the top 10% on the characteristic "skepticism" in personality assessments (see again my article "The Unique Psychological World of Lawyers").
In this case, they should get over it. Whether Donahue is using structured assessments or more unstructured evaluation techniques, these behavioral and personality evaluations are likely to be the key for law firms and law departments to break their recruitment and retention quandaries and, as icing on the cake, help solve the diversity dilemma. (See my January 5, 2007 blog entry "KPMG Model Delivers Risk Management, Teamwork, Client Satisfaction and Diversity Too," reporting on KPMG's use of the Birkman Method assessment to revamp its business model and achieve retention and diversity goals.)
This is not a new position, at least for me. (See my article "The Case for Assessment: Using Discrimination for Better Hiring," which outlines all the uses of assessments in the non-law firm world and how law firms might profit from them.) And now the tipping point is in sight as more law departments and law firms inch towards greater use of evaluations and assessments-- and trumpet the benefits.
General Counsel Scott Terrillion, of Boehringer Ingelheim Pharmaceuticals Inc, uses an "evaluative selection method" to find the best attorneys for his company, with diversity being a natural consequence. Roland Dumas, director of diversity for the legal recruiting firm Major, Lindsey & Africa, points out that "if a law firm screens candidates based on what law school they went to and how well they did there, it won't achieve much diversity. There simply are not enough African-American and Latino law students in the top law schools who would survive the 'top quarter' cut." Instead, Dumas recommends "capabilities" interviews, which use rich conversations to probe candidates to find those who have the talents the firm values.
Struggling to complete with bigger firms, Kansas City, Mo.-based Blackwell Sanders developed a system for selecting and assessing associates that is more behaviorally evaluative than most firms use, and it found that using these behavioral evaluations, starting with the initial interview, enabled the firm to spot talent it might otherwise miss. The firm has documented its efforts in a handbook, From Classes to Competencies, Lockstep To Levels, which, according to the foreword by Ida Abbott, is "an act of remarkable candor and leadership ... [that] will enable law firms to expedite the design and implementation of competency-based evaluations and performance-based advancement."
The proof, as they say, is in the pudding. Blackwell Sanders doubled the total number of minority associates, tripled the number in recent incoming classes, and increased by 22% the number of females associates. Perhaps even more notable, a "high" minority attrition rate declined to "0" within four years.
Jeffrey N. Berman, managing partner at Berman Fink Van Horn, says that for the last 10 years his firm has taken an even more radical step--using individually administered psychological assessments as part of their hiring process. Determining assessment traits important to the firm has given the firm "a handle on the type of attorney that is going to be happy and successful here," Berman says.
The firm tells all prospective hires, lawyers and staff, that they will be required to take a personality test if an offer is made. Contrary to the fear of many hiring partners, Berman reports that no one has ever objected to the assessment or refused to proceed, in part, he believes, because everyone in the firm has participated and also because it has been so accurate in predicting success. "It never ceases to amaze me how accurate the testing is," he adds, noting that it has never proved inaccurate with anyone they've hired, even when the results contravene the impression of interviewers.
So diversity is not the only benefit firms can expect from the targeted use of evaluations and assessments--law turnover and high satisfaction and performance result as well.
Our firm offers law departments and law firms state-of-the-art advice on identifying the characteristics that produce happy, productive lawyers in your environment and designing evaluations and assessments to use in hiring and promoting those candidates. Don't be left in the backwash. This is a wave that can do much to move you forward.
According to Steve Davis, it all went pretty smoothly and quickly: negotiations in July and August, a preliminary agreement the last week of August, votes last Wednesday, September 26, and on Monday of this week, he became chairman of Dewey & LeBoeuf, the newest megafirm in the global law firm firmament, with 1300 lawyers, 26 offices in 12 countries, and a billion dollars in revenue.
So what accounts for this dramatically better outcome, compared to the Dewey/Orrick debacle-in-the-making that first hit the press last year this time?
For starters, Davis credits the two firms’ long-standing familiarity with each other. No East Coast/West Coast mystique to decipher and reconcile in this case: the two firms were only two floors apart at 140 Broadway for years and had dealt with each other on myriad matters. With good relationships long established, people at both firms, Davis contends, “quickly understood the underlying strategic rationale” for a combination.
Davis also believes Dewey & LeBoeuf enjoys another advantage that other recent megamergers did not. Both Dewey and LeBoeuf had high concentrations of lawyers in the same key markets—New York, London and Washington D.C. That’s an advantage? The beauty of the Dewey/Orrick merger was thought to have been little overlap, promising to produce that far-flung “globalness” instantly. Overlap, Davis contends, works in the firm’s favor. Unlike the “Noah’s Ark” that some combinations are left with—two of everything, with 1 in LA and 1 in Boston--Dewey & LeBoeuf’s geography is more likely to force the people and cultures at each key location to mesh.
D&L's executive committee of 22 is composed of 11 partners from each firm, and includes Morton Pierce, Dewey’s Managing Partner, with Davis in the chairman’s seat. After the Dewey/Orrick talks failed, Pierce’s management style was the subject of some bruising commentary, with particular notice given to the fact that he billed 3300 hours that year. See our February 7, 2007 entry “Talking to the Troops.”
So what will management at Dewey & LeBoeuf be like? Davis is often described as managing “like a CEO,” a role which, perhaps in a reflection on the famous independence of lawyers, one LeBoeuf partner characterized as an “elected dictator.”
Continue Reading...A grand old firm has gone through a rough patch recently—one of its associates not only sued for sexual orientation harassment and discrimination, but also proceeded to file partnership documents and communications that S&C certainly would prefer to not have circulating publicly. Further, an article in the legal press lampooned a memo S&C sent around to its partners exhorting them, among other things, to say "thank you," in case their mothers had forgotten to instill in them that finer point of social intercourse. The legal blogosphere enjoyed batting that one around.
But S&C may have gotten the last laugh. In the Midlevel Associates Review released last month by The American Lawyer, New York law firms (as defined there to mean firms with more than 45% of their lawyers in New York) were once again roundly denounced, with this year only 7 firms making it into the top half of the 162 firms surveyed. The New York associates registered their dissatisfaction particularly regarding relations with partners, training, communication about what it takes to make partner and openness about firm finances. While New York firms have always performed poorly in these ratings, several firms fell precipitously since last year's survey—Cravath Swaine slid 27 places, Paul Weiss was down 59, Debevoise Plimpton fell 64 slots and Wachtell Lipton plummeted 74 places.
Thumbing its nose at the rest of the straggling New York herd was Sullivan & Cromwell, which vaulted from number 153 on the list up to number 48.
So now that all the chortling has died down, was it the "thank yous" that worked? Perhaps. But also, for the first time this past year, S&C leaders gave associates a series of briefings about firm finances, business strategy and the road to partnership. Chairman H. Rodgin Cohen and vice-chair Joseph Shenker, among others, made in-person presentations and took questions.
On those two most damning survey questions for New York firms, "communication about what it takes to make partner" and "openness about finances," S&C's ratings this year were 3.48 and 3.64 respectively, out of the ballpark compared to their prior year's ratings of 2.14 and 2.13, and even much higher than this year's average New York firms' ratings of 2.59 and 2.94.
So it looks to me like Mom was right. Talking it out—even those tricky financial matters and partnership issues that several New York firms said, and continue to say, were either too confidential or essentially none of the associates' business—creates rapport, incentive and even, get this, trust in an environment that sorely needs all three. And it does so quickly—with the results showing up in the first survey!
Mom would be so pleased.
On Thursday, September 21, at 2:00 pm EST, Ronda Muir will lead an audio conference on Associate Compensation: Where Do We Go From Here? Included in the discussion will be a review of current trends and out-of-the-box ideas for dealing with the impact of escalating associate compensation, how to find the best strategy for your own law firm and overcoming the problems and pitfalls in making that strategy work.
The audio conference is sponsored by IOMA, which publishes Law Office Management & Administration Report, as well as other legal publications, and provides research, educational and training products to lawyers. To register, go to www.ioma.com/law_firm_management/.
"Think of a succession plan as life insurance for a law firm."
An article in the August 24-30 issue of the Puget Sound Business Journal entitled "Firms Make Plans to Carry on When Leaders Go" quotes Ronda Muir on the subject of succession planning and describes the services that she and Robin Rolfe Resources performed for a Seattle law firm.
"Senior Attorney Jay Derr of Seattle firm GordonDerr said that nearly three years ago his firm decided to hire Muir and company to put together a succession plan... Thus, the preparations were in place when founding attorney Peter Buck decided to leave... to start his own firm...' We felt no economic blip from it at all,' said Derr."
"Succession is especially critical to the survival of so-called first generation 'founder firms,'"said consultant Muir. 'It involves finding a dynamic leader who can transition into a new role... and moving the founder to a different level...'"
Behavioral science is not often invoked in the halls of law departments, but maybe it should be. Two recent articles highlight the importance to a GC's success of understanding why people think and act as they do.
General counsel are in the position of having to reconcile two jobs: being both a business partner in the management of the company's business and the guardian of the company's integrity. One aspect of their work requires creativity, risk-taking and far-sightedness. The other requires careful scrutiny of every corporate action in the short and long term for potential regulatory, liability and just plain reputation pitfalls. Achieving high productivity with high integrity might strain even Superman's talents.
An article in Corporate Counsel by Ben W. Heineman Jr, former GE senior vice president-general counsel, entitled "How GCs Can Avoid Being Caught in the Middle" recites some of the recent scandals that attest to how difficult that balancing act can be: the fraudulent financial practices at Enron, the pretexting at Hewlett-Packard Corp, and the wave of options backdating.
Perhaps what chilled GCs to the bone most recently were the guilty pleas by Purdue Pharma L.P., its president, GC and former chief medical officer to misleading the public about the drug OxyContin's risk of addiction. They have agreed to pay a total of $634.5 million in fines. Rather than relaying focus group concern about potential for abuse, Purdue Pharma gave false information to its sales representatives that the drug was less addictive than other painkillers.
Heineman mentions a number of attributes that can help GCs successfully straddle their two roles. Vis-a-vis the other corporate managers, the GC must have the ability to stand his/her ground on clear illegalities and to make sure he/she has enough time to assess those situations that are not clear cut. And GCs must be able to take those stands in the pressure-filled environment of a board meeting where the CEO is likely to be a ferocious skeptic and many board members will side with the CEO. See our July 18, 2007 entry on Promoting an Effective Board about the importance of personal attributes in good decision-making.
The Texas Lawyer article "It's All in Your Head: Cognitive Theory Can Help GCs Lead Organizations to Better Decisions" by Michael Maslanka, a managing partner at Ford & Harrison in Dallas, contends that a GC's real power--the ability to influence decisions-- comes from understanding the way people think, which requires tapping into cognitive science.
Maslanka lists a number of biases that people in general and managers specifically can suffer from if they aren't on the alert:
Maslanka encourages GCs to be open to all possibilities and to question rather than dictate. Heineman also points out the importance of maintaining within the law department a culture that welcomes, even requires, lawyers to raise concerns about financial, legal, ethical or reputational issues. We refer to this as a "culture of dissent"-- one that invites concerns, follows up on them and does not punish anyone for raising them, but rather praises them. See our March 16, 2007 entry on the article Handling Conflict and Dissent in Law Practice (and Life).
While it may not be mind reading, being cognitively aware of your own personal attributes and biases, as well as others', can help steer you toward that Superman performance to which all GCs aspire.
Ronda Muir's article "The Looming Associate Crisis" leads the July 2007 ALM Law Firm Partnership & Benefits Report, Volume 13, Number 6.
After reviewing statistics that show an ever-tightening supply, and potentially less qualified pool, of associates who are paid more yet leaving earlier than in years past, Muir recounts some of the tried (and perhaps less currently true) strategies for coping, and also identifies some more radical solutions that innovative, forward-looking firms can benefit from.
Burnishing an image that is bankable is what every professional tries to do--both for him/herself individually and for the profession as well. Doctors take bed-side manners lessons, the NYPD are being instructed on common courtesies. What about lawyers? What do they do to bring out the gold?
From the looks of things, not much.
A Harris Poll annually asks the question “Who would you trust?” about various professions. Doctors, teachers, scientists, police officers, professors, clergymen and military officers routinely end up at the top of the trust chart, garnering more than 70% of the votes.
Lawyers are usually found settled at the bottom, where members of Congress, pollsters, trade union leaders and stockbrokers rank above them with 35% or less of the vote. There, in next-to-last place in 2006, lawyers sport 27% trustworthiness, one notch above the bottom-feeding actors, over whom lawyers are able to boast a one percentile advantage.
The recent portrayals of lawyers in mass media are evidence of how low the reputations of lawyers are sinking. Long gone is Perry Mason reassuring the wronged and bringing evildoers to justice. Last season’s TV series about a lawyer was titled “The Shark,” which pretty much says it all from an image standpoint. That series has been one-upped by this summer’s arrival of a lawyer drama entitled “Damages,” starring Glenn Close, who will always be remembered as one of our generation’s scariest persona—the man-eating, marriage-dashing, family unfriendly “Fatal Attraction” psycho. Legal advice, anyone?
Then there are the real-life reports that manage to make these fictional scenarios look reasonable: the senior partner who throws law books at associates, the criminal defense attorney found naked with an adolescent in the court's conference room, the litigator who admitted to altering documents in a consumer class action, the tax lawyer who bribed IRS officials to accept tax positions, the partner whose language in court was so egregious the head of the firm flew in to apologize.
Into this combustible scenario comes the question of whether law firms should be able to advertise in mass media, as do other professions, and if so, what they should be able to say.
The recent back and forth in New York, New Jersey and other states about whether law firms should be allowed to tout their "Super Lawyers" or other commercially recognized stars on their websites, use testimonials from prior or existing clients in their marketing materials, use unidentified actors in their ad campaigns or even send emails that don't clearly identify themselves as "soliciting" are no doubt reflections of the growing role that image marketing is likely to play for lawyers.
A recent article in the New York Times heralded the arrival of professional-looking canned law firm television commercials that are affordable to "the smaller, more local firms for whom the most important thing is the message to their communities," according to Spot Runner, who is working together with Martindale-Hubbell to market the commercials. While that approach may benefit a local firm whose clients and potential clients are individuals in the community, as the article notes, it is unlikely to be useful to large corporate firms. And the unseemly associations with ambulance chasing still prevail.
So, other than mass advertising, how do we burnish our image in this modern era?
Perhaps in the most old-fashioned of ways: by building relationships, one at a time. It does not produce a quick fix or an instant cache. It takes time-- both immediately and over the long run, so it's not very efficient. But building individual relationships is effective.
Clients say repeatedly that the quality they most want in their counsel is trustworthiness. Not just someone who gets the answer right. Or gets the answer right enough for the price. But someone who the client can count on to look out for their best interests, provide honest feedback and reliably follow through.
It's an image worth the investment.
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.
Oddly enough, where it is most needed, Boards and other management groups may be the last frontier for achieving enhanced performance management.
Historically, the perceived advantages of relying on a managing group, instead of one individual, include access to the group's collective wisdom –"several heads are better than one"–as well as the ability to spread an increasing management workload over a number of people.
A recent Center for Creative Leadership study identified an additional advantage. Effective management these days requires the resources of several people, rather than the lone hero, in order to meet the global challenges of collaboratively connecting across boundaries of all kinds—geography, language, culture and expertise.
Avoiding "Extreme" Group Decision-Making
Yet there is a well-documented propensity for groups to drift toward "extreme" decisions, that is, a committee often makes a decision that none of the individual members of the committee, acting alone, would make. These group decisions can be extreme by being either extremely risky or extremely conservative, and you see lone Directors routinely disavowing their cohorts’ actions after the fact. There seem to be a number of reasons for this tendency:
Diffusion of Responsibility. An individual's part in a group's decision evidently weighs less heavily on him/her than an individual decision would, the implication being that not as thorough an evaluation of the issues is made when the decision is attributed to the group.
Ignoring the Lone Voice. Often groups do not properly take into account the most relevant expertise in the room. Most small groups tend to make decisions based on the information all members share about a topic, overlooking important facts that one or several people bring. Although management committees are usually looking for creative, out-of-the-box strategies, a solitary opinion is often taken lightly or ignored in the flow of debate within the group.
Social Pressure. The more bonded the group, the more committed they are likely to be to reaching a decision, particularly one that pleases most of the members, even if a decision should be delayed or a less pleasing one would in fact be best.
Competition. When committee members agree on the parameters of an issue, individuals may try to one-up each other by suggesting more and more extreme solutions, then promoting their solution as the best.
Stress. Groups under pressure act very much like individuals under stress, only more so. They often procrastinate, calling for further information, or become committed to bad decisions primarily to protect themselves and each other against criticism. This effect may account for the popular notion that committees tend to "split the baby," resulting in a less controversial solution that does not in fact work very well.
Seeing What Others Say
The impact of psychological factors on group decision making may go even further, to actually alter each person’s perceptions. A study using advanced brain-scanning technology shows that, in effect, group members often in fact see what the group tells them they see. In an exercise involving mentally rotating images of three-dimensional objects to determine if the objects were the same or different, subjects were assured of an incorrect conclusion by confederates and then agreed with those wrong answers 41% of the time. The brain activity of those who went along with the group was markedly different from those who took independent positions. When subjects concurred with wrong answers, activity increased in the area of the brain devoted to spatial awareness, meaning that their actual perceptions were being influenced. Those who made independent judgments showed activity in the region of the brain associated with conflict management, signifying an emotional toll for going against the group's perception.
Based on the results of this study, one of the potential major advantages of a group decision—"several heads are better than one"—can disappear if the group successfully, even if unintentionally, co-opts individual insights. The most problematic aspect of these results is that not only does the group lose the "lone voices," but also the lone voices lose their very awareness of their differing perspectives. The change in their perception makes them incapable of raising their idiosyncratic flags.
Continue Reading...Ronda Muir will be making a presentation on managing the people risks that arise in law firms at a conference for Managing Partners in Chicago on Thursday, June 21. Sponsored by ARK Group, the conference, entitled “Developing a Risk Conscious Culture in Your Firm,” explores the relationship and interdependence of ethics, risk management and legal compliance.
Herewith a short but concise history of the twisted path that has led to billing by the legal hour, and the consequences of its tyranny.
During the 1800s, US legal fees were capped "per service" by state law, and litigation fees were usually paid by the losing party. Some lawyers were able to collect "bonuses" or charge retainers to circumvent the limitations of capped fees.
In 1908, the ABA declared contingency fees to be ethical, which opened a new source of revenue at least for litigation matters.
By the 1930s and 40s, however, the nature of legal fees was set on its head: what had been a capped system turned into a base system. State bars began publishing minimum fees, in most cases providing that those lawyers charging less than the minimums were to be punished. Similarly, the ABA Model Code, which stayed in effect until 1969, declared it unethical to "undervalue services."
Helping fuel this change in attitude was the expansion in 1938 of the Federal (and many states) Rules of Civil Procedure, which made litigation potentially more complicated and therefore also less amenable to flat fees.
Over time lawyers complained that dentists and doctors were out-earning them. A 1958 ABA pamphlet contended that lawyers were bad businessmen in comparison to other professionals, the remedy being to better track time and to keep more detailed records. That pamphlet also suggested that lawyers work 1300 hours a year-- or 5-6 hours @ day, five days @ week in a 48-week year.
In 1975, the Supreme Court, outlawing both the capped 1800s practice and the base system from the 40s, held that set fees for legal services constituted price-fixing, and was a violation of the antitrust laws. In response, by the late 1970s, most lawyers charged for their services based purely on hourly billing.
In 2001, the ABA asserted that too much emphasis was being placed by firms on billable hour requirements, which was leading to bill padding and general inefficiency, as well as damaging firm culture. This time, the ABA recommended billing expectations of 2300 hours annually, composed of 1900 hours billable to clients plus a total of 400 additional hours for: firm service (100 hours), pro bono (100 hours), client development (75 hours), training and professional development (75 hours) and professional service (50 hours).
Those expectations translate into a total 9-10 client and other hours @ day, five days @ week, 48 weeks @ year. The standard guideline for billable hours is that it takes approximately 10-12 hours to bill 8 hours. In which case, to achieve the ABA expectations, lawyers would be expected to work 12-15 hours daily.
In April of this year, a group of more than 100 law students from several of the nation's most prominent law schools--Yale, Stanford, NYU, Berkeley-- sent an open letter to law firms on the AmLaw 100 requesting that they improve working conditions at law firms. Students Building A Better Legal Profession called for law firms to reduce billable hour requirements and to make their billing expectations of attorneys clear. The group offered to exchange lower salaries for fewer hours.
The group also promised that prior to the fall recruiting season it would post a list of firms that have and have not agreed to these principles.
Touche.
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!”
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.
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.
“Under the entity model, as individual attorneys cede decision-making authority to the firm, including authority for decisions regarding professional responsibility and ethical behavior, they tend to renounce (at least implicitly) personal responsibility for moral decision making. Law firms as entities, however, have no inherent mechanism for replacing personal moral responsibility with institutional moral responsibility. In consequence, morality can fall through the cracks, allowing corruption to ooze into the enterprise. “