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Post #496 – Wednesday, October 13, 2010
Are law firms prepared for the next wave of globalization? The developments in emerging markets is old news. Tom Friedman discovered that the world was flat back in 2005. But even as much of the developed world is struggling with weak consumer demand and stubbornly high levels of unemployment, the emerging-market countries are writing a new chapter in the story of the global economy. Today, it's about China and India and Brazil. But, there is also another wave of similarly sweeping changes and growth in other parts of the world. For example, take a look at Vietnam. It is a market of 86 million people - more than half under 25 years of age.
In the book, Vietnam: Rising Dragon, BBC correspondent Bill Hayton explains: "Vietnam is in the middle of a revolution. Capitalism is flooding into a nominally communist society, fields are disappearing under new industrial parks, villagers are flocking to booming cities . . . It's one of the most breathtaking periods of social change anywhere, ever."
The money is pouring in. The factories are going up. Samsung has a $700 million plant in Hanoi. Intel has a billion-dollar chip plant outside of Saigon. Canon, Hon Hai, NEC and many others are already there. Yet ports are congested and roads are poor. It reminds one of the early years of Japan or South Korea . . . or China.
If you listen to what companies are saying - especially some of the big multinationals or some of the small players with operations overseas - these kinds of markets get them excited. They think about all the razor blades and beer they can sell. They will have hundreds of millions of people that can buy simple things.
Take Proctor & Gamble, a huge consumer products company. It estimates that if people in China and India spent at a level comparable to that in Mexico, P&G's sales would grow by $40 billion. That's huge for a company that generates $79 billion in sales today. That potential $40 billion prize has sharpened the attention of P&G's top brass. And it's a lure for competitors as well. What will drive these sales is the bulging global middle class. That middle class gets more than 70 million new members a year - on its way to 2 billion in two decades.
Meanwhile, there are now approximately 35 American law firms in Tokyo, 34 in Hong Kong, 23 in Shanghai and 23 in Beijing – but only 6 U.S. law firms in Vietnam. Watch and see what happens next.
Post #495 – Friday, October 1, 2010
The Fall 2010 Issue of International Review Is Now Available
The latest issue of my International Review 24- page magazine is hitting the desks of law firm managing partners everywhere. Once again this issue contains a number of pragmatic articles on law firm management and strategy:
• Evaluating Your Performance As A Managing Partner - by Patrick J. McKenna
Working with your colleagues, early in your tenure, to formulate an evaluation process is a great opportunity for you to manage everyone’s expectations.
• The Managing Partner's Speech - by David H. Maister
In the event your managing partner is in need of a speech, here’s one written for the leader of a large, national professional firm who asked what he should say upon his election to the role.
• Building An Environment of Trust - by Managing Partner LAB
How do you ferret out the truth when well meaning partners edit themselves, staff are not naturally inclined to disagree with you, and the information you receive is, so often, being filtered?
• Rules of Engagement - by Patrick J. McKenna
Rules of engagement are working guidelines which a group consciously establishes to help individual members determine how they will communicate, participate, cooperate and support each other.
• Uniting A Divided Firm - by Managing Partner LAB
How do you overcome a strong sense of "us and them" amongst your firm’s various offices?
• Law Firm Leadership Reflections: Practical Advice For Those Who Manage - by Patrick J. McKenna
Excerpted from my blog, here are a selection of short snippets for reflecting on everything from what is on the minds of senior general counsel to what experiences best develop new leaders.
• The Leader's Role in Integrating Laterals - by Managing Partner LAB
As a new leader, what specific actions would you recommend i take responsibility for, in helping orientate and integrate new lawyers?
I am pleased to have been putting out this magazine for some years now. It essentially started when I first began mailing copies of periodic articles I had authored to select managing partners back in the Fall of 1998. Today, I am (to the best of my knowledge) the only law firm consultant to publish his own magazine for firm leaders.
If for some reason, you haven’t received your Fall International Review magazine, either click on the cover above to download a PDF copy or kindly shoot me a note and I will be pleased to get a hard copy sent off in the mail to you.
Post #494 – Friday, October 1, 2010
The Top Global Elite
Which law firms are winning the battle for mind and global market share in 2010?
My friend, Juliana Garcia, New York-based Director of Strategy at international research firm Acritas, unveiled their first-ever sharplegal Global Elite Brand Index – a ranking of the top global brands of the legal industry, as recognized by General Counsel from the world's top companies.
According to Juliana, these are the top corporate brands major companies turn to for legal advice on high-stakes, high-value, cross-border matters:
Acritas published these rankings based on a global survey of 1,000 executives about law firms they employ most often for cross-border litigation and deals. This index is determined through the answers to four open-ended questions regarding:
- Top of mind awareness
- Most considered for multi-jurisdictional deals
- Most considered for multi-jurisdictional litigation
According to Acritas research, the "Top 15 Global law firm brands achieve 50% higher revenue growth since 2007 than their global 100 peers" and the "Top 6 Global law firm brands achieve almost double the revenue growth since 2007 of their global 100 peers"
Post #493 - Thursday, September 23, 2010
Advice For Those In Support Positions
I happened to have had lunch with a new marketing professional recently. I spent some time briefing her on the strategic project that I was doing with her firm. During our discussions she asked if I might have any advice for her, given that I’ve spent three decades working with law firms and this was her first foray into professional services.
Now, I’ve heard from a number of business development professionals about how they spend far too much of their time having to justify their existence at their firm; how no one knows or appreciates the contribution that they are making, how their reporting structure has become overly bureaucratic, how they are continually having to defend their budgets, and so forth. Some long-term folks are even questioning whether this is still the right career choice for them, feeling that they suffer from the “what-have-you-done-for-me-lately” syndrome far more than any of their other department head counterparts.
I told this particular business development professional that there are a couple of specific actions she might want to think about taking in her new position . . .
One, if you think about law firms, irrespective of size, you can place all the partners across a bell curve. 10% originate the work, 80% do the work, and with the remaining 10% you feed the work through the top of the door, pull it out the bottom, but never expose them to clients. My advice is that you make it a regular habit to visit, one-on-one with all of the equity partners twice a year, and ask of each, what activities they think you should engage in to both support their efforts and to add value. In visiting with these partners, recognize that the top 10% represent the power in the firm and you must ensure that you get them in your camp and understand their views and needs. The middle 80% probably won’t give you any answers of much substance, but just asking the question will ingratiate you to them. And the bottom 10% if you are not careful will find never-ending ways to suck the life-blood out of you (“energy vampires”) by consuming your time in meaningless adventures. Any real time invested in them is to be avoided at all costs.
Two, in most professional service firms, money is the currency of respect. Why not consider adopting a reasonable charge-out rate for the services you provide. Institute a “mock” charge-back system, placing a dollar value on the marketing department’s services and issuing an account at the end of each month for the value of the services provided to different practice groups and the firm in general. Do it as if you were an outside marketing consultancy providing these same services. This initiative could well progress into your group developing it’s own engagement process, seeking interesting problems to solve and making “pitches’ to your internal clients.
Three, that said, the bottom line is that you do need to recognize that you are a support center and not necessarily a revenue center. And as a support you must always be sensitive to justifying you and your department’s existence as power partners may very well ask what it is that you are accomplishing. My advice is, at the very least, to begin preparing a written, one-page, Friday afternoon wrap-up, in bullet point form, of your core activities and accomplishments for that week and e-mail it to the managing partner and whomever else you think important enough to receive your report. Keep your Friday briefings in a binder and prepare a monthly summation. Keep those monthly reports together and prepare a quarterly synopsis. Keep your quarterly highlights so that you can produce an Annual Report. Never let any partner ask what it is that you are doing or contributing without having others informed enough to quickly provide ample written evidence.
The above represents my latest column for Slaw. Slaw identifies itself as “a cooperative weblog on all things legal.” Slaw has been publishing for five years and gets 30,000 unique visitors and about 100,000 visits every month. For the past two consecutive years it has been the winner of three different awards as the best legal blog. I’m honored to have been asked to become a regular columnist and invite you to comment on my latest meandering.
Post #492 – Tuesday, September 14, 2010
Handling Partners With Strong Views
Two years ago, together with Baker & Daniels Chair Emeritus Brian K. Burke, I co-founded what is now known as The LAB (the Managing Partner Leadership Advisory Board) – a forum designed to provide recently appointed managing partners with a source for obtaining pragmatic advice on their leadership questions and critical burning issues. The formation of this group was the result of suggestions made during our bi-annual First 100 Days master class for new managing partners and has proven to be a valuable resource for new leaders.
Here is the latest question in a series of some twenty different queries that The LAB members have now responded to:
Since recently becoming our firm’s managing director, I’ve been engaging a number of my colleagues in discussions on how we should be concerned with delivering more value to our clients. I think this is an important issue for us going forward and find that most of my partners are on-board conceptually and willing to explore the issue. However, there are a few who are have responded uncompromisingly, with rather curt, dismissive statements whenever the topic comes up. Any tips for me on how you might handle the partner who holds strong beliefs on high-stake topics and demonstrates little willingness to either listen or consider alternative views?
Read: Handling Partners With Strong Views
The LAB responses derive from its members' many years' experience as law firm leaders. Along with Brian and I, the LAB is comprised of the following distinguished current and former law firm leaders: Angelo Arcadipane (Dickstein Shapiro LLP); John Bouma (Snell & Wilmer LLP); Ben F. Johnson, III (Alston & Bird LLP); Keith B. Simmons (Bass Berry & Sims PLC); William J. Strickland (McGuire Woods LLP); Harry P. Trueheart, III (Nixon Peabody LLP); R. Thomas Stanton (Squire Sanders); and Robert M. Granatstein (Blake Cassels and Graydon).
Post #491 – Thursday, September 9, 2010
Little Demand in Australia
My post of last Wednesday (#490) claiming that the demand side of the market was not demanding generated a number of responses on Legal OnRamp from both lawyers and general counsel, all of which concurred with my central message that change was slow in coming from the client side. Well, now here's some further confirming research from the other side of the globe . . .
In a comprehensive study by the Corporate Lawyers Association of New Zealand (CLANZ) and the Australian Lawyers Association (ACLA), the ACLA/CLANZ Legal Department Benchmarking Report 2010 delivers the results of the most extensive study of its kind ever conducted. My good friend and former CLANZ president Ron Pol, and his professional services company Team Factors conducted the research with some of the largest corporate and government users of legal services in Australia and New Zealand, with an average legal spend of $5.5 million in New Zealand and $13.5 million in Australia.
Here are but a few of Ron’s findings:
Selecting good outside lawyers was not regarded as a pressing issue facing any legal department, but the need to reduce outside legal costs featured consistently as a top priority.
The actual extent of alternative fee arrangements is less than some reports suggest. Notwithstanding continued antipathy towards hourly billing and reports of a surge in alternative fee arrangements, the report confirmed hourly billing's continued dominance. On average, standard and discounted hourly rates still represent 85% of fee arrangements by value, in both New Zealand and Australia. Across the board, fixed fee arrangements represent around 13% of the balance. This means that, overall, the impact of most of the alternatives beyond fixed fees seems virtually negligible.
“It’s hardly surprising that costs are amongst clients’ top concerns”, says Ron, “but it’s not just the size of legal fees; the way that lawyers communicate costs – and the timely reporting of unexpected overruns – seems to be a big part of the issue.”
The general counsel of some of Australasia’s biggest organizations, with some of the largest teams of in-house lawyers and most sophisticated legal procurement systems, reported that when they asked law firms for fee estimates, the final cost was consistently on or below budget just 4% of the time.
Meanwhile Ron’s findings contain some unwelcome news for law firms. None of the respondents expect to significantly increase their use of big firms and as many as 30% expect to reduce their use of national full service firms over the next two years.
Post #490 – Wednesday, September 1, 2010
The Demand Side of The Market is Not Demanding
We keep reading editorials about how the “clients are driving change” and one in today’s Financial Post about how the “clock is ticking on hourly billing.” Then from certain consultants come dire warnings about the potential obsolescence of law firms whose leaders are too clueless to see and react to the changes in the market (See my Post #489). On September 14, New York will host a one-day event entitled: The Client’s Revolution. What you should be demanding from your legal advisors in the 21st Century.
Client revolution indeed! Amongst all of this one sees a lot of smoke, but . . . where’s the fire?
Regular readers of my blog may remember my rant (#396) back on June 30 of last year, entitled: CLO’s Are Not Serious About Change. In that post I reported on an interesting experience working on behalf of an AmLaw listed, “Go-To” regional firm of over 500 attorneys. I spent two weeks initiating contact with the General Counsel of over thirty-five Fortune 500 Companies to explore their interest in investing one-hour to meet. The invitation was to discuss how this particular law firm could provide exceptional client service and deliver a potential savings of between 25 to 40 percent, or more. And that proposed savings was accompanied by specific details of guaranteed responsiveness, assured predictability, enhanced added-value, and references from some top New York based Fortune 50 existing clients. To my absolute chagrin, I confessed in my post that I completely struck out! No bunts, no hits, not even a sniff of interest. I subsequently heard back from a couple of GC’s via Legal OnRamp that . . . “unfortunately, change comes slowly.”
Well, fast forward a year and here’s an editorial from Alex Novarese at Legal Week, wherein Alex postulates that maybe someone called for a revolution but nobody came.
The harder I look at the profession the more convinced I become that clients - the demand side of the equation - are not only generally failing to enforce change, they are, if anything, more conservative than the law firms, which is saying something. What evidence is there that all but a few brave pioneers have even tried to make good on that vision? A financial crisis and a deep recession has hit Western economies and little has changed beyond a modest uptick in alternative billing. The internet? Disruptive technologies? Such trends have unquestionably forced more transparency onto the legal profession and in theory should give clients scope to take control of buying legal services. But, as yet, there has been little to back up the hype in terms of shaking up the industry or empowering clients.
Alex continues . . . outsourcing, offshoring and attempts to unbundle legal service provision - experiments in these areas are being pushed more by managing partners than pulled by clients. It was the same in earlier years when law firms went international, which was as much a strategic bet taken by the profession as a response to client demand.
As an explanation for this lack of urgency, one commentator suggested: Unlike the management in law firms, GCs don't change every few years - they stay in leadership posts and maintain old practices. Change will take time, but perhaps it will require a generational change inside the in-house world to really make a difference.
Perhaps the real mystery is why clients are quite so ready to tolerate the status quo. Why do some GCs make a show of complaining about the cost of legal services when they do almost nothing to materially change things?
As yet another commentator opined: Perhaps, moaning about fees gives a sense they are responding to the predicament they are in, effectively signing blank checks for legal services on behalf of their company. But, the alternative - to do something about it, is not a strong enough driver for many GCs. One has to ask, what is the benefit to the GC in annoying law firms by driving down prices, demanding fixed fees, or insisting on other non-traditional methods? For many there is none. No one in the company is second-guessing the GC’s decisions, they can maintain the status quo unchallenged. The law firms they work with are doing all they can to assure the GC that the legal spend is justified. The GCs themselves are busy, have a team to worry about, and ultimately they are spending other people's (shareholder’s) money, not their own. For most GCs their salary is not directly linked to how efficient or inefficient their legal spending is. Perhaps if that changed then behavior would change too. But that means getting C-level people into the discussion and most have other things to worry about.
In summary, there is little incentive to change business practices unless it benefits you. For many GCs the positive / negative impacts are still too slight. They are in an accountability blind-spot and few have someone going over their spending decisions with a critical eye. Most CEOs worry about their company winning the litigation, not whether the legal spend has risen by another “x” percent this year. It all makes one wonder: 'Who will put pressure on the GC to change?'
I remember an engagement that I was involved with in the early 90’s with McKinsey & Company. It involved helping “re-engineer” the legal department of a Canadian-based, international conglomerate to determine which law firm or combination of firms offered the best value proposition. Their strategic decision was whether to continue with the internal legal department as is, or whether they should shut down their internal legal capability and outsourcing all of the work. Only after the decision was made and the outside law firms were chosen did it occur to me that a couple of the choices of firms made, were not based on value at all, but were safety chutes for certain senior lawyers who would be remaining as employees within the legal department, should they ever decide or be forced to go back into private practice.
In the end things will change. Corporate behavior will slowly evolve; more CEOs and shareholders will take notice of legal spend as it grows and grows; GCs will adopt new practices simply because they don't want to stand out as someone who is not following what has become 'best’ practice. Things will change, but on the client side, it may yet be a long, protracted process.
Post #489 – Saturday, August 28, 2010
Can We Please Stop Crying Wolf?
In preparation for my chairing and presenting to last week’s forum on ‘Overcoming Lawyers’ Resistance to Change’ I surveyed the dozens of participants and a good number of other managing partners. One of the common themes emerging from the feedback I received was numerous firm leaders who reported that much of the published hyperbole about some client revolution or how lawyers are genetically resistant to change is not at all helpful to their own internal efforts to mobilize partners.
These firm leaders cited examples of how certain consultants and commentators seem to relish playing on this theme by uttering dire warnings about the potential obsolescence of law firms with leaders too clueless to see and react to changes in the market.
It’s going to take a long time, and many lawyers won’t grasp the reality of the new environment until it’s too late.
The sooner we abandon the past, the better our chances of responding in time to survive in some recognizable and profitable form.
I think many underestimate the magnitude of the change that is looming, or the level of effort that will be required of firms to adapt … or die.
These solemn-faced experts, media rabble-rousers and all-knowing prophets compete in articles, speeches and blogs to get their warnings into our easily distracted heads. It is as if they believe that if they don't make their message apocalyptic, those they're trying to alert aren't going to pay attention.
Call it confidence or complacency or the calm before the storm, but our collective panic response seems to have been switched off. Fortunately (or to our inevitable detriment), many of us have lived through the treat of atomic annihilation, the predicted over-population bomb, the global shortage of oil and even Y2K only to see nothing of the envisaged calamities. Scary phrases such as economic meltdown, global pandemic and environmental catastrophe seem to describe our daily status quo. The human brain can function on high alert for only so long before it shifts to either rational decision-making or apathetic detachment. We require an accelerated arc in our disasters, a quick collapse and rapid recovery that suits our short attention spans.
Crying wolf, as even small children know from their scary bedtime stories, doesn't work well in the long run. So please, perhaps it is time that we all give it a rest.
Post #488 – Saturday, August 28, 2010
Thank You For Your Feedback
Last week witnessed me spending a number of days at The University of Chicago’s Business School speaking to different groups of lawyers about critical leadership issues from the adaptive aspects of change, to how to transform your firm and even how to manage a group of professionals. When the dust finally cleared and the results were tabulated, I was both honored and humbled by the various critiques and feedback that participants kindly provided:
Patrick presented a good reminder of approach to managing change, specifically for law firms. Good tools to assist in development of change strategy. Appreciated time to reflect and think about change initiatives that I am involved with.
I've picked up some very practical types on how to introduce and lead change in a law firm. Thank you.
Good approach in advising on best ways to effectuate changes without telling us what changes we need to implement.
Very helpful explanations regarding: how attorneys tend to (and are trained to) approach potential change and the approach that actually is most effective.
Patrick’s presentation was . . . Worth the trip!
Very relevant for us at this time.
Great program! 10 pages of notes!
Thought provoking. A lot of good ideas.
Patrick's ability to start with an open-ended roundtable and end up, by the end of the day, covering all the listed topics in the syllabus, is impressive. This achievement is the result of mastery of the complex issues and his personal experience.
Excellent content. Very though provoking. Confirmed a number of good things that we are doing, but also raised additional things that we need to do / could be doing to ensure further success of the firm.
A lot to take in in one day but an excellent program that is implementable.
Very good presentation and knowledgeable.
Excellent program. Patrick knows professionals, how they interact and what motivates them.
I thought Patrick was fantastic. I learned a lot and look forward to putting all the knowledge learned into action
Thank you all for making the preparation for these events worthwhile.
Post #487 – Friday, August 27, 2010
Dealing With Malicious People
Last week I conducted my bi-annual one-day masterclass for practice group leaders at the University of Chicago. One of the participants asked a provocative question . . . how do you deal with that extremely talented, but narcissistic professional that occasionally can be just outright malicious towards you?
My response went something like this . . .
We all encounter personal and professional rip tides. It may be the fates, bad luck, others' doing, or an accidental confluence of unfortunate events that we inadvertently create or exacerbate. Someone who is insensitive, rude or verbally hostile is often trying to assuage their own demons by striking out at others. Understand this is the other person's problem and not yours. If they had honorable intentions, they would attempt to communicate, negotiate or work with you, not try to undermine you.
Use perspective. It's not even a major event in your life. Keep above the fray. Though it may seem satisfying to strike back, that is usually what this other person desires – to see that they've impacted you. You may need to move away, to turn the page, to start something else. No one is a lesser person for avoiding unnecessary unpleasantness in life. It is not a commentary on your courage, intelligence, or confidence to simply walk away from continuing disaster. Remember they only end up punching at shadows when there is no opponent.
Take a deep breath. Wait a day. If some response is merited, take some time to ensure that it's measured, proportional and not emotionally overwrought.
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