Muir will participate in a webinar entitled “Think Like a Lateral—How to Hire and Retain Quality Lawyers” to be presented on Tuesday, March 9 for the members of the Attorneys' Liability Assurance Society (ALAS).
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.
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.
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
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."
Muir is leading an inter-active limited-attendance roundtable on Law Practice Management for Current and Prospective Law Firm Leaders at the 12th Annual Meeting of the Association of Patent Law Firms (APLF) in Chicago, Illinois on Thursday, September 17, 2009. For more information or to register, go to http://www.aplf.org.
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.
Not only do lawyers score very differently from the rest of the population on the Myers-Briggs Type Indicator (MBTI) (see Muir's article "The Unique Psychological World of Lawyers"), but it appears that a lawyer was responsible for the development of the assessment in the first place.
According to the Center for Applications of Psychological Types, Inc. (CAPT), the organization Isabel Briggs Myers established to research and maintain the assessment, the MBTI was developed by Katharine Cook Briggs and her daughter Isabel in the middle of the 20th century because of questions they had about Isabel's husband, who was a lawyer.
Katharine’s father (Isabel's grandfather) was on the faculty of Michigan Agricultural College (now Michigan State University) and her husband (Isabel's father) was a research physicist who became Director of the Bureau of Standards in Washington. Isabel had a bachelor’s degree in political science from Swarthmore College, where she met and later married Clarence Myers, who became a lawyer.
Katharine first became interested in types because her son-in-law Clarence was so different from the rest of the family, CAPT reports. To try to help them both better understand Clarence, Katharine introduced Isabel to Jung’s book, Psychological Types, which was published in1921.
As they worked on the indicator during World War II, Myers' and Briggs' goal became “to show how our differences... can be valuable rather than divisive, and can be used constructively . . . to promote personal development . . . manage conflict and . . . increase human understanding worldwide,” and specifically to help women who were entering the industrial workforce for the first time identify the sort of war-time jobs where they would be "most comfortable and effective."
The Myers' marriage was by all reports happy and long-lived, so Isabel's inquiry into types may have proved productive not only for the greater world--where over 50 million MBTI assessments have been given, making it the oldest and most widely used personal style instrument.
Ronda Muir will be a featured panelist at the annual general meeting of the Attorneys' Liability Assurance Society (ALAS) in Quebec City, Quebec to be held June 25-26. ALAS is the premier provider of professional liability insurance for large law firms in the United States, currently insuring 237 firms. Muir will discuss lawyer personality, firm culture and other aspects that impact risk particularly in the context of mergers and lateral hires. Over 250 loss management and managing partners are expected to attend.
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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Muir Lectures on Improving Management Decision-Making
On Wednesday, February 17, 2009 Muir will lecture students at Northwestern University's Business Institutions Program on improving management decision-making, using law firm management committees as a case study. Based in part on the article "Promoting an Effective Board or Management Group," the discussion will explore, among other subjects, optimal personality traits for good decision-making, how to construct effective teams and the challenge of avoiding extreme decisions.
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