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Post #670 – Friday, June 21,
Compensation Spreads [Guest Editorial by Ed Reeser]
Above the Law is an internet news site that reports on the law profession. It
has grown to become one of the more widely read sources with a wide array of
stories, some technical and academic, some current events and topical, and
still others rather 'sporty' in their subject matter. But, hey, it is
what is happening. Significantly ATL now often breaks news before many of
the traditional services. In no small part it is from the cultivation of
their entire readership to be . . . contributing reporters. That is
pretty tough to beat out no matter how big a traditional news source one may
18 months ago, starting in the fall of 2011 and ending in early
2012, Patrick McKenna and I outlined and then wrote an article (Sliced Too Thin) on the
danger of wide compensation spreads in equity partnerships. It took
awhile to get interest, but when the collapse of Dewey revealed that there were
issues of this type directly relevant, the article gained traction and
eventually was released in the June 1 issue of The American Lawyer (for which
we are very appreciative, as always).
that release, the article has had a steady, if not spectacular interest.
Recently, with the advent of Steven Harper's book The Lawyer Bubble, and now the
AmLaw survey including this as an item in their research on law firm
financial performance, the partner compensation spread issue is gaining more
attention as one of relevance to a host of important issues in law firms,
including governance, stability, etc.
will remember an article that came out in March of 2012, in Fortune Magazine,
in which Dewey states its compensation spread was 6-1. It was actually
more than 30 to 1. Remember, apart from a few editors at The American
Lawyer, nobody else at the time of the Fortune Magazine article would have been
aware of the content of our article on the dangers of wide compensation
spreads, and thus felt compelled to address it as an important issue!
in large law firms is acutely aware of the importance of wide compensation
spreads, and the dangers. So much so that some may have gone to
significant effort, and risk, to conceal it, or perhaps we should say 'spin it'
to portray it as something it was not. Everybody else that hasn't
recognized the issue to date, because they weren't told of it, is
beginning to understand just how critical that factor can be.
happens if you combine poor operating margins with wide compensation
spreads, high capital ratios, large working capital lines of credit used
to pay draws? Should that be a concern to a partner that took
out a loan and a second mortgage on their house to pay in capital to the
firm? If it didn't . . . would you want to have their judgment applied to
the diagnosis and resolution of your complex legal problems?
Post #669 – Wednesday, June 19, 2013
Revisiting Efficiencies Versus Effectiveness
There is an interesting post on LinkedIn amongst the Legal
Innovation group entitled: “Are Project Management and Process Improvement Just
Fads?” It generated a good number of
comments most of which were strongly in favor of PM and PI, claiming that they
were not fads.
I felt compelled to share a few thoughts:
Are these fads?
Good question. I personally don't think
they are but I do wonder whether we have tilted the scale too far and are now
obsessing over finding more efficient ways to produce . . . better buggy whips.
Today, I don’t see any firms of any significant size (over
100 attorneys) who do not have, as one of the top three priorities in their
formal, written strategic plan, to engage in PI and PM - improve efficiencies
(and of course, whether they execute on that plan or not is an entirely
different subject). Concurrently, I see
little effort, investment or attention being given to how they will identify
new areas of opportunity or focus on niches where they will work to become the
dominant /go-to player - effectiveness.
The only shortcoming of every firm chasing efficiencies is
that they all slide inexorably into sameness and mediocrity. Aiming to become more efficient than your
competitors has the perverse effect of making all competitors more alike, as
each tends to define “efficiencies” in identical ways. Alternatively, the essence of developing an
effective strategy is daring to think for yourself, instead of following the
Here is a radical thought:
There is no surer sign of the inadequacy of firm leadership than to
believe that cost efficiency should feature as the overriding issue facing the
firm, and that short-term palliatives should be paraded as the main drivers of
future profitability. Strategy is the
rare and precious skill of staying one step ahead of the need to be
efficient. As soon as your practice
finds that it is attracting competitors and pressures on fees start to build, a
winning strategy is not to find more efficient ways to deliver the service at
cheaper rates. That is the race to the
bottom! A winning strategy is to invest
the time and resources to move your practice into a new and unassailable market
position where demand once again exceeds supply. What I’ve been saying is that time
“over-invested” in strategies of cost efficiency is time stolen from the much
more important, admittedly difficult, but wealth creating activity of
innovation, differentiation and entrepreneurial growth.
When I attempt to define the difference between
effectiveness versus efficiency, I harken back to the advice of one of the
greatest strategist of all time – the late Jerry Garcia, founder of American
rock band, the Grateful Dead, who said –
“You do not merely want to be the best of the best. You want to be considered to be the only one
who does what you do.”
Post #668 – Wednesday,
June 12, 2013
The Outgoing Firm Leader’s Script
In a recent discussion with a soon-to-retire managing
partner, I discussed a number of substantive issues he need to discuss with his
successor including how he needed to handle communications with his various
partners after he passed on the baton.
Here is the script he prepared for himself to communicate to his
“I’ll always be here to help you, but you should expect that
some of our beloved partners are probably going to go around you and come to me
whenever you make an unpopular decision.
And, if you are doing your job as our new firm leader, as I know you
will, this is guaranteed to happen. I
want you to be confident that I am not going to respond, in any way, to any
complaints, so don't let the prospect of my responding, impact your decision
making. Even if you choose to fire
someone who has worked closely with me for many years, you should proceed to
take that action. And rest assured that
if I don’t agree with some course of action or observe you doing something
contrary to the way I did it, I would not go to any partner to voice my
feelings. This is now your firm to lead
and you may call upon me should you ever feel the need for a sounding board.”
If you are facing a firm leadership transition
or even having a new office managing partner taking the reins of one of your
larger offices, please have a look at: www.first100daysmasterclass.com. The next program is scheduled for August 15th at the University of
Chicago and we are now accepting registrations. Have a look at the day’s
agenda, the distinguished faculty, the testimonials, the extensive course
materials, the follow-up support and your total satisfaction guarantee.
Post #667 –
Saturday, June 1, 2013
It’s Time For Law
Practice Management 2.0
Join me September 26
at the University of Chicago where I will be Chairing and Presenting at an
important Conference on how to reach the next level in practice group
Building and maintaining highly effective practice
management structures is perhaps the greatest challenge facing law firms today. Tasked with learning
how to adapt and embrace new economic realities, sophisticated and demanding
clients, constrained fee increases and a real need for practical efficiency -
practice and industry team leaders have an ever-increasingly critical role to
play in the future success and profitability of their firms. Ark Group’s Law Firm
Practice Management 2.0 is about taking practice management to the next
level and reengineering it for profitability - designed to help identify and
implement the structural necessities for effective practice management in
today's complex and competitive environment.
Stephen Pike, Firm Managing Partner, Gowling Lafleur
Kristin Sudholz, Chief Value Officer, Drinker Biddle
John Ferko, Director of Strategic Pricing & Practice
Management, Miles & Stockbridge
Frank LaManna, Chief Operating Officer, Thompson Hine
Patrick Johansen, Director of Business Development, Brinks
Hofer Gilson & Leone
Steven Petrie, Chief Strategy Officer, Faegre Baker
Susan Brelus, Chief Marketing Officer, Thompson Hine
Tea Hoffmann, Chief Strategy Officer, Parker Poe
for full details and registration
Post #665 – Tuesday, May 21, 2013
Efficiency is Not THE Competitive Advantage
My latest co-authored article (with good friend and colleague Ed Reeser)
appeared in last week’s San Francisco Daily Journal. In it we reported that . . .
Efficiency in any firm, in and
of itself, is not the competitive
advantage. There is a big difference
between being efficient and being effective.
It’s not that becoming more efficient
lacks importance, but far too many firms only seem to be investing significant
time and resources about being more efficient – at the expense of being
You may be interested in reading what we have to say about:
efficiency at producing commodity work; efficiency at pricing services;
efficiency in generating net operating income; and efficiency in satisfying
To download your copy – click here
In the final analysis . . . Are
you being efficient or being effective, or do you even know?
Is your efficiency directed to
the operation of the business and generating net revenue gains, or the
consumption of your human resources for redistribution of a stagnant income
pool, and thus hastening the demise of your firm? It isn’t enough to be efficient on the right
things, it is critical not to be efficient at doing the wrong things.
Rant #664 – Friday, May 10, 2013
Critiquing Your Strategic Plan
I recently had the opportunity to review and critique a law
firm’s strategic plan and present my findings to the firm’s management
committee. This was a plan that I had
not been involved in helping formulate and a plan that was about to be
presented to the partnership for approval.
The document I received was essentially four pages comprised of the
firm’s Mission, Vision statement, 5 big-picture Goals with 28 Action steps and
a number of concluding milestones identified to measure performance results.
Whenever I look at some firm’s strategic plan there are usually
three components that I examine:
• The “Process” for how the plan was developed;
• The specific “Content” of the plan – the ‘macro’ big
picture strokes and especially the ‘micro’ specific how-to action plans; and
• The implementation or execution schematic
Now I don’t think it’s fair or effective to simply be a
critic. I think one should offer some
thought provoking stimulation that has the firm assessing their own work to
determine whether it meets expectations. I’m reminded of something the legendary father
of modern management, Peter Drucker once said: “One does not begin with answers, one begins by asking,
‘What are our questions?’” The notion
that questions may at times be more valuable than answers is counterintuitive. But I find that our ability to reflect upon our answers to good questions is an
opportunity to reframe the challenges in front of us.
I therefore posed a number of questions to these management
committee members. Here are some which
you might find helpful for critiquing your own strategic plan.
• To what extent were
partners involved, such that they can see their individual fingerprint
somewhere on the final plan, and thereby enhance buy-in?
• How many clients
(and prospects) were interviewed such that some components of the plan reflect
the current thinking, views, and opinions of your clients?
• What aspects of
your Mission and Vision would stimulate your lawyers to get excited about the
• Where are the specific
growth niches that have been identified and are going to be pursued in each of
your conventional and industry practice areas?
• How does the firm
plan to effectively and profitably respond to clients continually wanting
‘more-for-less’ and transition from pricing differently to working differently?
• What aspects of
this plan are future-oriented in that they look to how the profession might
likely evolve by 2017 and propose specific steps to get to the future first?
• What are you doing
or contemplating that would meaningful differentiate you from your peer firms?
• What are your
non-negotiable standards of performance – what aspects of this plan are you
absolutely prepared to enforce?
• What are you
doing, or contemplating in this plan that you would regard as truly innovative?
• Do your people
really understand what is involved and how long it will take to implement some
of these specific action steps?
Rant #663 – Wednesday,
May 1, 2013
Does Your Practice Group Really Have A Strategy?
read with interest, a guest posting on the Harvard website authored by Freek
Vermeulen a noted business strategy professor at the London Business School
entitled, “Corporate Strategy Is a Fool’s Errand.” In it, Professor Vermeulen claims:
corporations (law firms in our context) consist of multiple divisions (read
that to mean practice or industry groups), which set their own strategy – what
we generally refer to as "business strategy." But more often than not, these divisions have
very little to do with one another. Take
Philips Electronics with its lighting, medical equipment, and consumer
electronics divisions; ThyssenKrupp with its steel, elevators, and engineering
services units; or smaller companies such as Trinity Mirror, which offers
newspapers, printing, and digital services. They may not be like the big
conglomerates of the 1960s — you can see how their portfolio of somewhat
related business came about — but, in reality, the various divisions and
business units do operate completely independently from one another. Yet corporate top management invariably tries
hard to force each unit into an overarching strategy. It endeavors to stimulate cooperation across
divisions, sets up corporate shared services, and gives a lot of lip service to
creating "cross-divisional synergies." I say, don't go there; don't even try.”
Now what is
striking about the professor’s observations is how closely they parallel the
real world of strategic planning as it occurs in most law firms. Few firms recognize that what they are really
managing is not one homogenous firm, but a portfolio of different businesses.
And it logically follows that what you need to do to nurture, market and grow
an employment and labor practice is very different from a commercial litigation
practice – or a health care practice from an energy and natural resources
is that too many law firms develop a firm strategic plan with little real
meaningful input from the various practice groups and then send the partnership
approved document to each of the practice leaders with a request that they
develop some kind of written plan of their own, specifically designed to
support implementation of the firm’s plan.
“Each practice group leader shall
prepare and be accountable to an annual group business plan that establishes
practice group goals and objectives consistent with the firm’s strategic plan.”
worse, in many instances I see the marketing department distribute their
“template” to all of the practice group leaders to help them develop their
plans. I saw another one of these
templates the other day. This one was
being distributed within a fairly sophisticated, 500+ lawyer firm, with offices
from coast to coast, and to be completed by each of their national industry
groups. It included questions like:
• what are the
key objectives for the group?
• what are the
KM / CLE objectives for the coming year?
what are the marketing and business development plans for the coming year?
what resources can the firm provide to assist with these objectives?
what is the competitive environment for the group from a national perspective?
what are the opportunities and the threats that the group sees nationally?
what new ideas is the group considering for the coming year?
what are the longer term goals for the group over the next 3 years and should
anything be put in place now to reach those goals?
successful firms have each of their groups work on developing their own
strategic direction, separate and apart from the firm’s plan but included as
part of the overall firm direction. It may be just my view, but I
think that we have a very long way to go in many of our firms before we get to
anything that even resembles a sophisticated strategic plan . . . and that is
before we have even begun the sad discussion about how much of these plans ever
Post #662 – Wednesday, April 24, 2013
8 Things Consultants Will Never Say
I came across this article today, authored by Jeff Haden (columnist for INC magazine) and which should be required reading for every
managing partner and anyone holding themselves out to be a consultant:
Hiring the right consultant is
tough, especially since in most cases there is no physical “product” to
evaluate. You often have to decide
whether promises like “We can!” and “We will!” are likely to come true. Aside
from due diligence like checking credentials and references, your decision
largely rests on what a consultant says – and on what you believe. Here
are eight things you’ll almost never hear a consultant say, especially during
the wining and dining phase. If you find
one who does, consider it a great sign:
be more disruptive than you hope.” All projects are disruptive. In fact, the best projects are often hugely
disruptive, as well they should — you’re making changes. A consultant who downplays the disruption
factor is inexperienced or fibbing.
A consultant who doesn’t sugarcoat things up
front is much more likely to shoot straight during the rest of the engagement.
“I don’t know.” Consultants love
to know. Can you blame them? A consultant’s job is to provide answers,
especially answers you don’t have. A
consultant willing to say, “I don’t know, let’s figure it out,” is more likely
to take a collaborative approach than one who pretends to be omniscient.
“No solution is ever
are no turn-key solutions unless the consultant is providing very simple
equipment, hardware or applications. Even
then some amount of training and process modification is usually necessary. There will always
be more involved on your end than you expect, so the more you know ahead of
time, the better your plan, and the more likely you’ll end up on-budget and on
“I’m not sure I
understand the requirements.” Some consultants love fuzzy requirements because
“misunderstandings” or “gaps” create wiggle room later. Good consultants want
to know as much as possible since the better they understand your expectations
the easier it is to deliver those expectations. T
“You don’t need us to
do that.” (My Favorite!) Great consultants
are willing to point out ways clients can save money. Losing a little revenue is better than losing
clients who realize they purchased services they didn’t need. Great consultants operate just like you do;
they try to build long-term business relationships.
“Your team is telling
me something different — let’s sort things out.” What you want and
what your colleagues want, can be two very different things. Look for a consultant who tries to reconcile
various perspectives and needs so the project scope is clearly defined. A clearly defined project protects you.
“We’ll want to come
back a month or so later, at no charge, just to see how things turned out.” All consultants
focus on successful project completion. The
problem is some feel “successful completion” means “final payment.” Good consultants care about how the project
turned out for you. The best consultant
I hired stopped by or called every three months to check in. Great for us, but
something in it for him too: Identifying problems helped him improve his
“No.” Rarely can a
consultant provide everything you request for the price and schedule you need. “No” is disappointing but is often the answer
you most need to hear up front. Would
you rather create a plan based on reality or on empty promises?
Some consultants work on the
“agree now, modify later” principle. Find
one who doesn’t.
Rant #661 - Wednesday, April 3, 2013
Spring 2013 Issue of International Review Is Now Available
Here’s my newest issue of International Review – an issue that I hope contains a balanced blend of thoughtful insight and practical contributions on law firm strategy and leadership.
Today, I believe we face a time when doing things fundamentally differently will ultimately trump doing the same things more efficiently. To succeed firms will need to focus increasingly more attention on how they might differentiate themselves in ways that client value. My Six Elements of Meaningful Differentiation is intended to provoke your thinking on this important topic. And you may note that while this may not be the most comprehensive piece on this subject I have deliberately not identified costs as a significant differentiator. For those who engage in predatory pricing, you might win the fee-cutting race . . . right to the bottom - but the real strategic issue is whether you will have a sustainable practice after you get there.
I am delighted to include an article that American Lawyer magazine agreed to publish an excerpt from earlier this year. Malignant Leadership reflects upon some lessons from the Dewey catastrophe and has probably garnered more responses from readers than almost any other article that I’ve written over the years.
Be sure to have a look at the results of my latest research into the dynamics of being a managing partner as conveyed in Inside The Corridors of Firm Leadership. This expose represents the responses from firm leaders of AmLaw 100, AmLaw 200 and other firms on everything from their job descriptions and how they spend their time to their leadership priorities and intentions for when they leave office.
Finally, I am observing a trend wherein more firms are starting to hit the Reset Button on their practice group management efforts and trying to start fresh. Practice Group Leadership 2.0 is my attempt to prescribe some fundamental structural recommendations for what firms absolutely must do to make their practice management efforts successful.
I sincerely hope that you find some practical ideas, tips and techniques here that you can put to use immediately. To obtain your complimentary PDF copy simply click on the cover of the magazine. Please send me your observations, critiques, comments and suggestions with respect to any of these articles.
Rant #660 – Monday,
April 1, 2013
Once More On Cross-Selling
The other day on the Managing Partner discussion site (LinkedIn) I
came across a posting wherein some
member was informing us all
that “cross-selling within law firms is broken” and lecturing the
readers that “If a firm is
truly serious, an organizational system should be put in place, driven
by the management board, to facilitate the process straight from the top.”
contain myself . . . I was compelled to rant:
I could easily wallpaper my offices with all of the articles that
have been written over the past twenty years on cross-selling, and yet the
behavior doesn’t ever seem to change. And firm leadership taking control or
issuing ultimatums hasn’t worked in the past and is unlikely to work going
Here are two observations worth exploring.
One is that I rarely see cross-selling being quite such an issue
within industry groups. Industry groups, by their nature, tend to focus much
deeper into all of the various legal issues that clients face, such that it
never feel like you are “selling” anything; but rather endeavoring to prevent
or solve the client’s problems. But unfortunately, we still tend to structure
our firms based on what we studied at law school rather than what the client
wants – us to really know their business.
The second may lie in understanding how to motivate competent and
conscientious lawyers. The process that is most often used in cross “selling”
is that firm management asks the members of some practice group to go to the
other groups and “tell them what you do” because instinctively we know that
product knowledge (knowing what the other lawyers in our firm actually do for
our clients) is pathetic!
The only shortcoming to this approach is that I do not, frankly,
have the patience to listen to you ramble on about all of the various services
that your group provides. And I don’t really understand most of it either. What
would get my attention though, is if you could:
(1) succinctly identify only
ONE hot, topical legal issue that my clients might be facing now or in the very
(2) identify the type of client (perhaps by number of employees)
that this issue is most likely to impact;
(3) tell me in a very brief manner why and how this issue is going
to impact my client;
(4) tell me what the downside or consequences might be if
my client does not take some remedial or proactive action; and
(5) give me a written cheat-sheet/script on what I should say to my
client to make them aware of this issue (because frankly, I didn’t go to law
school for all those years to now come across like some used-car salesman and I
don’t know what to say to my client so as not to embarrass myself).
In other words, give me the tools to look competent in serving the
best interests of my clients and I “might” be more interested in engaging in
your cross-selling crap!
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