Firm Leadership

Rants, Raves, Rebuttals, Reflections, Revelations & Ruminations

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Rant #693 – January 22, 2014

How Important Is Leadership In Law Firms?

I recently received a research report from the folks at Service Performance Insight (SPI), a global research and training organization, entitled “Just How Important is Leadership in the Success of Professional Service Firms?”  For the past seven years SPI has been analyzing leadership metrics, across a number of professions, in their annual benchmarking initiatives.  They ask a number of questions, which are subjective in nature, yet provide insight into the importance of something as difficult to measure as leadership.

The questions include the degree to which:
• the firm’s strategic direction is clearly communicated and well understood;
• partners have confidence in the firm’s leadership;
• it is relatively easy to get things done within the firm;
• leadership communicates effectively;
• leadership embraces change and is nimble and flexible’
• leadership focuses on innovation and is able to take advantage of changing market conditions; and
• everyone has confidence in the future of the firm.

The clear result of their seven years of research is that firms with strong leadership – those scoring highest in answering their questions (on a 1 to 5 scale) evidence far stronger results in areas like: higher revenue growth, client service efficiency, and percentage of new business derived from new clients, among other key performance indicators.  In other words, firms with leaders who truly lead their firms, with higher levels of communication and collaboration, grow their organizations at a much higher rate than those lacking these qualities.

Now this research, to the best of my knowledge, measures leadership in consulting, engineering and other professional service firms, but does not include any law firms.  In law firms, we seem to have a different mind-set towards how important leadership really is.  That mindset was on display this past week within two published news articles.

First there was the Citibank/HBR 2014 Client Advisory, which provided a commentary under the title: The Leadership Challenge.  According to this report, “One development which gives us concern is that some of the newer breed of leaders continue to maintain busy, full time practices.  In this scenario, their clients’ needs are likely to take priority, to the detriment of the management of the firm.  If we could see any change, it would be that firms recognize that to be effective, the firm leader is best performed as a full time role.”  My own surveys have shown that there is a significant reduction in the number of full-time firm leaders since 2004, with many of the new incumbents looking to maintain a minor practice (minimum of 500 to 1200 hours) that they can go back to when their term expires.

At the extreme other end of the spectrum is an AmLaw Daily report, last week, on the defection of a couple of practice group leaders at Dorsey & Whitney.  In any law firm your practice groups constitute the fundamental underpinnings of your organization.  I have long joked with managing partners that what you are managing is not one homogenous organization, but rather a portfolio of very different businesses.  So, when any of your business unit leaders depart, especially if they are going to a competitive firm, it is a pretty significant event.

Asked about the losses, Dorsey managing partner downplayed their impact by saying, “We have more than 60 practice groups here, so we give out a lot of titles.”

Doing a bit of research I find that there are 248 partners at Dorsey, but not sure how many of those are equity partners.  Looking to my latest 2014 issue of the Yellow Book I see entries of 40 practice groups - so maybe only two-thirds of all of their groups.  But 26 of those groups (65%) have co-chairs (and one with three co-chairs) therefore providing for a further listing of 67 practice group leaders.  Projecting these numbers out, one can assume that with “more than 60 practice groups” over 100 of the 248 partners at Dorsey are in practice leadership positions.  But wait, that’s not all!  Then there is the firm management committee, an elected board, and we must not forget the 13 office managing partners.  It looks like the majority of partners at Dorsey are all in some kind of leadership position . . . which leaves us only to wonder who there is left that is being led.

How important is leadership in law firms?  I’ll let you decide.

Post #692 – Friday, January 10, 2014

What Do You Know In Your Heart?

In a recent email exchange amongst a group of firm leaders, GCs and other colleagues talking about the challenges ahead in 2014, my old friend Richard Susskind offered this observation:

This is what the leaders in top law firms know in their hearts:

• the volume of price insensitive work (where the fee is not an issue) is reducing steadily;

• the price insensitive work that remains will be disaggregated;

• there are new players in the market, who are making headway at the low end and are hungry to move up;

• the laundry bills in BigLaw are certainly going up because the party will soon be over, but . . . not that soon because law firm leaders can rely on most of their clients not to push them too hard;

• given the still modest pace of change, the revolution need not happen on their watch so, most GCs remain inexplicably supine; and

• most managing partners are trying to hold out until retirement before all this stuff engulfs them.

What do you think?

Post #691 – Saturday, December 28, 2013

The Irony of Predicting Trends

I’m always amused by the numerous forecasts offered at this time of the year by various journalists, pundits and legal consultants who feel compelled to weigh-in on what they think the coming year’s trends will be and how they are likely to impact our profession.

For example, a story appeared last week in The Triangle Business Journal entitled, “Experts Predict Top 2014 Trends For Law Firms.”  It begins, “Alternative billing arrangements, R&D and lateral hiring will be among the top law firm trends for 2014, according to the experts at legal research firm LexisNexis.”


Now I’m not sure what you mean when you use the word trend, but I tend to think of something that is just “beginning" to show itself as a gradual change or development capable of producing some particular result.  If that accurately captures the definition of trend, then someone needs to inform the experts at LexisNexis that alternative billing arrangements became a trend with the publishing of Beyond The Billable Hour: An anthology of alternative billing methods . . .  in (wait for it) . . . 1989!

Anyway, as coincidences curiously happen, I was clearing out some old papers and came across the outline to a presentation I delivered on legal trends to a meeting of the ABA’s Law Practice Management Section.  In this hour-long presentation I identified eight major trends and then went into some detail on each, as to why they were important and the implications for law firms.  The eight major trends I identified were:

1.         Firms will learn to stop promoting what it is that they have to sell and start giving client what they’re looking to buy.  (I was referring primarily to client’s wanting more specialized industry knowledge)

2.          By the end of the decade 33 to 50% of most firms revenues will come from providing services that they do not currently provide.  (I was making the case that with the pace of change the marketplace was experiencing combined with the challenge for firms to continue growing, more firms would focus their efforts on identifying and dominating lucrative micro-market niches)

3.         Creating a sustainable competitive advantage for the individual lawyer will depend upon continually building skills.  (My premise here was to have lawyers continually assess whether they are learning any new skills that would make them more valuable to their clients or simply spending their days in the office just doing the same old schtick.)

4.         Corporate clients will care only about the total cost of a legal transaction – and not about rates, hours, the geographic location of the service provider or alternative billing procedures.  (I had the audacity to suggest that the balance of power was shifting to legal buyers)

5.         The quiet revolt against the costs of litigation will see business disputes largely adjudicated through the use of advanced technology, the application of artificial intelligence and mandated mediation.

6.         In future litigation clients will be more demanding of their lawyers that they share proportionately in the downsides of a client’s results, just as they have traditionally shared in the upside.

7.         Competition will become ever more intense – from in-house sources, from technology-based self-help programs and from accounting and consulting firms offering substitute services.

8.         Issues of growth, individual lawyer motivation, profitability and practice development will coincide with building strong practice groups and strong practice group management systems.

Now how many of those trends sound somewhat current? 

You see, what caught my attention as I glanced through these notes was the year . . . 1993!

Post #690 – Tuesday, December 17, 2013

2013 Year In Review

I’m often asked about my consulting practice, what kinds of assignments I get called in on, for what sized firms; what I’m currently researching and writing about, and just generally how I spend my professional time.  I looked back over my various activities during this past year.  With some of these items (like clients served) activity is not a sufficient measure; results and the client’s satisfaction are really what matters (and to that end, you can find numerous client testimonials and commentary throughout this web site).  But for purposes of looking at where one’s time is invested, here is what 2013 looked like:


• Geographic Locations:
92% U.S. Based
  8% International

• Nature of Assignments:
37% developing / implementing strategic plans
57% governance and leadership issues
  6% client relations and marketing projects 

• Firm Size Range:
12% firms of over 500 attorneys
25% firms of 300 to 500 attorneys
57% firms of 100 to 300 attorneys
  6% corporate legal departments


• Participated in 5 Workshops & MasterClasses
Conference Chair & Presenter – Practice Management 2.0 Conference (September in Chicago)
Facilitator – Practice Group Leaders Workshop (January in San Francisco, June in New York & November in Atlanta)
Co-facilitator – First 100 Days Masterclass (August in Chicago)


• Authored or Contributed to 26 Articles in Publications including:
ABA Journal
American Lawyer Magazine / AmLaw Daily
Lexpert, The Business Magazine for Lawyers (Canada)
Law 360 – Legal Industry News
Los Angeles and San Francisco Daily Journal
Of Counsel – Legal Practice and Management Report
SLAW – Cooperative Legal Weblawg
Canadian Lawyer Magazine
Above The Law
Managing Partner Magazine [UK]
The Legal Intelligencer – Practice Column
Texas Lawyer
Managing For Success [UK}

• Two new issues (Spring & Fall) of my International Review 24-page glossy magazine were produced and distributed to 2000 firm leaders.

• Contributed Articles and Materials to Four (4) New Books:
- Chapter in Law Firm Strategies For The 21st Century (International Bar Association)
- Introduction for How To Engage Partners In The Firm’s Future - August Aquilla / Robert Lees (Bay Street Group Publishing)
- Chapter in Targeting Profitability: Strategies to Improve Law Firm Performance (Ark Publishing)
- Chapter in Practice Group Leadership for Lawyers (Ark Publishing)


• Participated on Dr. Jim Hassett’s legal project management advisory board.

• DOUBLED the size of my Linkedin site – Law Firm Leaders – to more than 250 members.  Law Firm Leaders is the ONLY social networking site exclusively for the chairs and managing partners of firms of over 100 lawyers in size - with 62% representing leaders from firms of 100 to 300 lawyers; 16% from firms of 300 to 500 lawyers and another 19% coming from firms of over 500 attorneys.

• Received numerous “UNSOLICITED” LinkedIn Endorsements for my strategic planning expertise from firm leaders and senior professionals from major firms including:
Allen & Overy
Baker & McKenzie
Faegre Baker Daniels
Fasken Martineau (Canada)
Gordon & Rees
Jackson Lewis
Linklaters (Europe)
NautaDutilh (Europe)
Nelson Mullins
Norton Rose Fulbright
Shook Hardy & Bacon
Skadden Arps
Thompson & Knight

In spite of the challenges we face in the world, I am extremely thankful for the privilege of doing what I do.  I might call this brief snapshot my Personal Annual Report.
To everyone: I want to say thank you for allowing me to serve and spend time with you; for your confidence and your commitment.
To my valued clients: I look forward to being of service to you again in the future.
To my colleagues and friends: thanks for being a gift in my life.
I wish you and your families the Very Best for 2014.

Post #689 – Sunday, December 1, 2013

Join Our Compensation Think-Tank

On January 30th, I will be joining old friends Mike Roster, co-chair of the ACC Value Challenge; Professor Bill Henderson from Indiana University; Don Lents the Chairman of Bryan Cave; writing collaborator Ed Reeser and numerous others in a “Compensation Think-tank” – a forum for discussion and debate concerning ways to adapt to the emerging procurement environment and design reward systems that will attract and retain key lawyers while also incentivizing them to do more with less and in ways that will accrue to the benefit of the larger partnership.

Does the average rank and file partner understand that the years of ever-escalating compensation have come to an end?  How can firm management address the pressure to deliver on unrealistic expectations?  Of course many see the problem differently - or don't see the problem at all.  No compensation system is perfect.  But any sound compensation system will remove impediments to good management and be flexible enough to address the current and future strategic needs of the firm. 

How do we make sure that the culture of the firm, perhaps the single most important component of a thriving organization, is not only tolerant of change, but in fact complements and is reinforced by it?

For more information on attending a think-tank focused on aligning compensation systems with current and future business realities and the goals and objectives of your firm - go here Compensation [re]Design For Law Firms

Post #688 – Sunday, December 1, 2013

Watch Your Use of Jargon

While corporate speak may make meetings seem amusing it can seriously undermine effective communications.  Reading an excerpt from Flat Army: Creating a Connected and Engaged Organization by Dan Pontefract over the weekend reminded me of how using jargon undermines a person’s ability to lead.

“Spitting out clichés and over-worn vernacular may give you the feeling as though you’re effectively leading, but in reality it brands leaders as shallow and lacking true leadership depth,” Mr. Pontefract said.

By way of a few examples:

• Certain terminology can spur unintended reactions.  Continually harping about "getting your hours up" can send a message and drive behavior that you didn't mean to emphasize.

• And, consider the numerous acronyms that some lawyers throw around.  Those same acronyms can undermine your communications effectiveness, especially when using terms that your clients aren’t familiar with.

Meanwhile, from Glain Roberts-McCabe, founder and president of the Executive Roundtable, the issue is less about jargon and more about juvenile word choices, such as “my bad.”  “Saying ‘oops, my bad’ when you’re in a leadership role makes you sound like an adolescent and, depending on the severity of the situation, can make you look like you’re blowing it off with a shrug.  Cutesy phrases don’t make you sound strategic.

Post #687 – Monday, November 18, 2013

Leadership Succession Done Right

In early 2007 I initiated a survey and asked firm leaders to reflect upon the various Managing Partners that they had met, observed and / or read about, from across the country, and report back their answer to this question:  “Aside from your own law firm, please tell me the name of that law firm Managing Partner / Chair / CEO you most admire for their management / leadership competence?”

Far and away the most admired law firm leader was Robert M. Dell, Chair and Managing Partner at Latham & Watkins.  The announcement this past week that Bob would be retiring after 20 years as Latham’s firm leader reflects a loss that will not be easy to fill.  That said, the steps the firm is taking should serve as a role model for any firm that takes management and leadership succession seriously.  

Let’s take a look at just a few of the steps that Latham’s is doing right:

• Dell gave the firm over 13 months advanced notice that he would be stepping down

• To oversee the identification and election process, Latham has appointed a succession committee that consists of a diverse group of partners from a variety of the firm's offices and practice groups.

• Once the new managing partner is elected, Dell will work with the individual for about 6 months to help ensure a smooth transition.

• Following this transition period Dell plans to leave the firm in order to “get out of the way" of whoever succeeds him.  "When a new person is coming in, following a person who has been doing it for two decades, I think that new person deserves a lot of space," he says. "So, my view is it's best for me to retire and to let that person create his own successes, or her own."

Now contrast this example with the one reported at Reed Smith.  On October 5th, the firm announced that their Global Managing Partner of 13 years, Gregory Jordan was leaving (immediately) to become executive VP and GC at PNC Financial Services.  As a replacement, Sandy Thomas, the firm’s Litigation Department Chair, was anointed (with no opportunity to deal with his personal practice or be properly oriented into a job of this magnitude) to take over.  According to the media spin . . . Besides being an "exciting opportunity" for him to join PNC's leadership team, Mr. Jordan said the time was right to hand over the top job at the law firm to Mr. Thomas.  Asked how he feels transitioning from his role at the top of Reed Smith to be part of a team of executives at PNC, Jordan said, "I feel great about it." 

Now think about you personal investment portfolio.  Imagine the corporation in which you hold the largest number of shares suddenly announcing that their CEO was fleeing the post.  As an owner, stakeholder and investor - Would that he a “buy” signal for you or a “sell” signal?

Post #686 – Tuesday, November 12, 2013

Continuing Anemic Growth

The following is excerpted from today’s Wells Fargo report (as contained in the AmLaw Daily and written by Sara Randazzo) together with the commentary from a former AmLaw 100 managing partner who is interpreting “the story behind this story.”

The bank's report—based on a survey of 125 law firms, including 60 in The Am Law 100 and 45 in The Am Law Second Hundred—found gross revenue up 2.5 percent on average for the first nine months of the year compared to the same period in 2012. At the same time, demand, measured by hours billed, was down 0.75 percent, the report found. The nation's top firms, which Wells Fargo defines as those with profits per partner of at least $2 million, saw their gross revenue increase 5 percent on average during the year's first nine months, group senior director of banking Jeff Grossman says. Among all Am Law 100 firms surveyed, the average increase was a more modest 2.7 percent. The Second Hundred firms polled, meanwhile, eked out a 1 percent average uptick in gross revenue.
(That is a very elite group of law firms.  Removing their performance influence on the average AmLaw 100 firm performance, it means that there will be many firms headed to a year where revenue performance is down from 2012)

The results, Grossman noted, cut against a recent buzzed-about study from LexisNexis that showed work moving from the largest firms to those clients consider "big enough." As The Am Law Daily previously reported, that study found the nation's largest law firms—those with at least 750 attorneys—had seen their share of outside counsel spending slip in the three-year period that ended June 30, 2013, with firms within the 201-500-lawyer range appearing to pick up much of that work. 
(Don't confuse these firms with the elite...the largest firms by headcount tended to be among the lower per partner income platforms in the AmLaw 100, and they did not have a large plate of high value work).

On the demand side, the difference from top to bottom varied slightly, with demand down half a percent on average among Am Law 100 firms and 1 percent among the Second Hundred. 
(We should not lose sight of the survivor bias to reporting in 2013 either.  Remember that the Dewey firm collapsed and at least $700 million of revenue relocated to other firms, most of them in the AmLaw 100.  That was not 'growth' for those firms that took on the refugees with business to buy their new partnership positions.)

The survey suggests that partners, both equity and non-equity, are struggling to find a satisfactory amount of work.  Hours per lawyer were down 1.1 percent across the board through September, to 1,615 on average.  That figure average dropped into the mid-1,500 range for equity partners and to the high-1,400 to low-1,500 range for income partners. 
(The issue here is partly a demand challenge, but also a compensation adjustment task.  Income partners are very easy to price at a profit...a significant profit.  Just because their hours are in this range does not mean that the firm is not making a robust profit from them.  Likewise, the exploding spread in equity partner compensation ranges reflects a compression on lower and middle tier equity partners and a redirection of distributable income to senior levels.  They are converted for the most part to not being true 'partners'.  The compensation adjustment has been made in most firms.  It isn't the management problem that these bankers are saying it is.  Most are being less than they contribute already.)

"The under-productivity is largely centered in the partner level of all the law firms," says Grossman, who notes that associates are logging many more hours than partners.
(Yes, but they are not being billed, or there are significant discounts when they are billed.  The realization rate on associate hours remains typically poor.) 

"It continues to be one of the biggest challenges law firms are facing. ... Not enough partners are being asked to leave."
(It isn't that easy.  Dump a partner with a modest book of $1.5 million....and it probably reduces the distributable income for the firm.) 

Ideally, Grossman says, average hours would be in the 1,800-range based on historic norms.  Meanwhile, the survey shows, firms have managed to somewhat offset the decline in demand by raising billing rates yet again. Blended rates are up 4.1 percent, according to Wells, with effective rates (those actually being paid by clients) up 3.6 percent. 
(Part of the demand problem is that clients stop complaining about rates, and move the work.  If rates are up net 3.6%...but demand is dropping, one is on very perilous ground.  To the extent that associate headcounts are reduced from lower numbers hired and more attrition, relative to higher rate income and equity partners, there will be an average rate increase from that dynamic alone.) 

One concern for firms, in Grossman's view, is that expenses and revenue are rising at the same 2.5 percent rate.
(An expense growth rate of only 2.5% is unexpectedly low) 

That, he says, is in part a result of slight increases in head count—though not on the legal secretary front, which continues to see its share of layoffs. A minority of firms also told Wells they expect to reduce head count in the future, with 15 percent saying they expect to cut partners and just under 10 percent saying they plan to thin their associate ranks.
(The cutting of staff at the levels being reported is a last resort and bespeaks a much lower utilization. Normally a firm will stop hiring, and normal attrition from retirements, moves away, and performance review cuts is satisfactory or close to it.  When partner groups leave, if they don't take their support secretaries, they are now cut rather than redeployed.  When partner groups come, the number of support secretaries taken is severely restricted.  When all that together is still not enough, and group layoffs are required....there is a lot less work, and that suggests there will be a round of attorney cuts to follow.) 

The Wells survey also polled firms on how much debt they are carrying, and found a 6.5 percent drop in line of credit usage. Rather than turning to banks, it appears, firms are keeping their coffers stocked by tapping partners.  
(This was predicted to be the trend in 2013, pushing full recourse debt on capital borrowings at the partner level, in exchange for cutting working lines at the firm level.) 

The survey found average capital levels among the firms surveyed up 4.5 percent, to an average of $285,000 per equity partner (and $335,000 per equity partner in The Am Law 100).
(Basically, firms on average just tapped the partners for an extra $15k-20k.  Expect it to keep happening.) 

There is nothing in this initial report on the WF perspective that is a surprise, or out of trajectory with how the year has gone to date.  Clearly, things picked up a bit for some firms in the third quarter, and that is good news.  But the big question is . . . with so little positive change, what are firms going to do now to readjust to the prospect of what the banks have been saying now for three years . . . the good old days are not coming back, what are you going to do to develop a sustainable profit generating enterprise that partners are happy to be a part of?  It isn't a trick question, and it is not an easy one to address either.

Post #685 – Sunday, November 3, 2013

Law Firm Strategies For The 21st Century

I am delighted to have been asked and contributed to a new book, due to be released later this month, exploring the complexities of law firm strategy.  Published in association with the Law Firm Management Committee of the International Bar Association (IBA), this practical title is the first in a Globe Law and Business series on the business of law dedicated to exploring strategic development in law firms.  

Law firm partners have long resisted the notion that they need a strategy.  However, markets change and the landscape has become increasingly competitive.  Law firms that want to remain competitive need to think about and engage in strategy development; those firms which have done so are now undeniably in a better position than those which have not. 

This book is organized around the market and the resource side of law firm management, and offers new ways to think about strategy and how to discuss it in the context of a partnership.  Whether you are a managing partner of a small, large or international law firm, this book offers points of views which have never before been aggregated in a single volume.  This volume addresses, in a most practical manner, those questions that are of relevance to today’s law firm management

To download and read a sample chapter, have a look - here.

Post #684 – Thursday, October 24, 2013

Attributes That Distinguish CEOs From Other Leaders          

For those who occupy elected law firm boards or executive committees who need to effectively identify and prepare firm leadership successors – knowing which skills and abilities matter most is essential.  In my latest research, conducted at the beginning of 2013, (“Inside The Corridors of Firm Leadership”) leaders from over 100 law firms (all in excess of 100 lawyers in size) confidentially reported to me that when it came to leadership succession, they really had no particular process or desired attributes in mind for their next firm leader.

Today, Russell Reynolds Associates (leading firm noted for helping boards make better CEO succession decisions from 31 offices world-wide) released results from in-depth analysis they conducted of their database of 4000 executive assessments, specifically including 130 CEOs.  They examined test scores measuring a number of leadership competencies including relationship skills, communications skills and decision-making approaches to determine what CEOs have that other leaders don’t.

Their findings: Of the 60 common attributes used to assess leaders, CEOs differ from others in nine (9) of them.  In fact, CEOs differ the most from other leaders in terms of their:
• willingness to take calculated risks
• bias toward action
• ability to efficiently ‘read’ people    

The total of these 9 key attributes fall into three categories:

1.  Forward thinking (a category of one attribute) is simply the ability to plan for the future while focusing on the present.

2.  Intrepid is the ability to perform effectively in complex and difficult environments – and includes such attributes as “Calculated risk taking” (being comfortable with taking calculated but not careless risks); “Biased toward thoughtful action” (focus on execution but not too impulsively); “Optimistic” (actively pursuing new opportunities); and “Constructively tough minded” (thick-skinned and perservering but not insensitive).

3.  Team building is the ability to achieve success through others – and includes being an “Effective reader of people” (understanding different perspectives but not overanalyzing); “Measured emotion” (one who displays intensity but maintains control); “Pragmatically inclusive” (involving others in decisions but also is an independent decision maker); and “Willingness to trust” (comfortable with a variety of people but not too trusting).

Analysis of the nine attributes reveals a number of interesting CEO profile paradoxes, according to Russell Reynolds.  CEOs are strategic yet tactical, tough yet emotionally sensitive; decisive yet inclusive.  Much of this parallels research and a subsequent article that I authored some years ago identifying five different leadership tensions (“The Tensions of Leadership") that all new firm leaders face.

This Russell Reynolds research strongly recommends that boards incorporate these attributes into their success profile and assess future leadership candidates across the nine important attributes.

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