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Post #389 - Tuesday, May 26, 2009
Industry Insiders React To Changes in The Legal Profession
There was an interesting roundtable discussion / article today in the Philadelphia Business Journal written by Jeff Blumenthal and entitled The Future of Law Firms. Here are a couple of excerpts that caught my attention:
Q: Is the large law firm model sustainable, or are we witnessing a shift in how the industry is structured?
Abe Reich, Fox Rothschild: You’re looking at a transformation of the legal profession. Just as Wall Street is saying it no longer will have the kind of profits it had and you can’t take bonuses in certain environments, I think the legal profession is going through the same correction. We’re re-examining the way we do business. It can’t all be about profits per partner and revenue per lawyer.
Q: What can we learn from the demise of Wolf Block?
Carl Singley, Temple University / Wolf Block: There were structural problems in terms of the absence of diversification in the client base. I remember over the last year literally reading the financial papers to see what was happening to our clients. If 25 percent of your billables are coming from a specific industry that is tanking, I don’t know how you bounce back from that. Now the structural problem, I think once you see you’re at risk because of that, comes in deciding what you do to right the ship. It would seem to me that you have to think about realigning practice groups. Having fewer real estate lawyers might have been the way to go, but a lot of these lawyers are partners who have an interest in not being reduced in force. It creates an almost untenable position for the folks in leadership.
Q: Looking ahead, what changes do you predict for the profession?
Andrea E. Utecht, FMC Corp.: For me the biggest challenge in getting legal services is that more than half of our business — and this is growing even more — is outside of the United States. So how to use my U.S. firms to help me get international legal services is becoming an increasing problem for me. I think that U.S. firms need to start to think about how they can help me address that problem.
Jerome Shestack, Schnader Harrison: The major clients for many law firms are governments. And they insist on lower [hourly] fees, like a limit of maybe $220 for a partner. So they hadn’t been regarded as quite the valued client as the client who pays the prevailing rate. That attitude is changing.
Another aspect I think may change is marketing. Twenty-five years ago there was no marketing association. No law firms that I knew had a marketing director. Now law firms have maybe 10 or 15 other people in marketing, and I don’t think they do very much on the whole. I think most of it’s a waste of time, and I think there will be a new appreciation of marketing as not particularly valuable.
Post #388 - Thursday, May 21, 2009
Listening To Economic Happy Talk
Here’s an interesting statistic I just came across - as a guiding rule, every individual laid off from their job results in 180 square feet of vacant commercial space. So if we’re currently seeing layoffs in the range of 600,000 a month . . . well, you can do the math.
Celebrated analyst Meredith Whitney stated this week that commercial real estate would be the next big black hole for the U.S. banks (something I predicted in my paper of last September: Managing Through A Prolonged Downturn). And it's easy to see why. The economy has forced many businesses to downsize and others like Linens N Things and Circuit City to go out of business. That's left behind empty storefronts, office buildings and warehouse space. There's a lot of vacant space coming on line with vacancy rates rising and rents expected to fall. (It is reported that Clifford Chance is trying to sublet 100,000 square feet at its Upper Bank Street offices).
Even as banks grapple with residential foreclosures, many lenders now have to worry about a rising tide of potential losses from commercial real estate loans. Delinquency rates and defaults on office and retail buildings and hotels have more than doubled in just six months. For apartments and industrial buildings, the rates have increased more than 80 percent, according to Reis Inc. Regional and local lenders hold a big chunk of the nation's $3.5 trillion commercial property loans on their books and remain vulnerable. It could be a mistake to underestimate the damage this could inflict on already battered bank finances.
To make matters worse for commercial property holders and bank lenders, there is an accelerating trend toward "virtual work": the changing nature of how work is performed - and in particular, the increased global demand and feasibility for home-based freelancers or other "virtual" workers, that is being solidified by a combination of faster and cheaper communications and the economic pressures of the current recession. These factors are forcing companies to find cheaper ways of getting work done than having on-premise workers in the classic industrial age model at a faster rate than ever before. Overall, this is a socio-techno-economic trend that will be hard to reverse, and increasing numbers of new and existing tech companies, service providers, and others are beginning to exploit it to their and to their clients' advantage.
Meanwhile, David Walker, writes in the Financial Times that the US is headed for bankruptcy just like General Motors. It owes $11 trillion officially, with another $45 trillion in "off balance sheet" obligations. And, this year it will lose another $1.8 trillion. That's according to the Obama administration's official count. My own guesstimate is that the loss will come to $2 trillion or more (and that trillion dollar losses will continue for years into the future). By official estimates, the US government is spending $2 for every dollar it brings in. Hey, even GM doesn't operate that recklessly.
AND despite all the happy talk about the 'tentative signs' that the recession is easing - the fine details of the Federal Reserve’s (Federal Open Market Committee) minutes released yesterday paint a clear picture . . .
In spite of renewed economic optimism over the last 5 months, the FOMC now forecasts:
Unemployment: Forecast made in January 2009: 8.5 to 8.8%
CURRENT FORECAST: 9.2 to 9.6%
GDP: Forecast made in January 2009: -1.3 to - 0.5%
CURRENT FORECAST: -2.0 TO –2.3 %
Unfortunately, the worst is yet to come and we would all be wise to make our personal and strategic plans accordingly.
Post #387 - Friday, May 8, 2009
In The Footsteps Of A Successful Predecessor
Last March, 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 different queries that The LAB members have now responded to:
I was elected as the new managing partner of our 80-lawyer, one office firm effective at the beginning of April. My predecessor had been the firm's leader for some 15 years. I was naturally thrilled with the confidence my partners seemed to have in me. I've become dismayed to now discover that many of those same partners continually tell me about how great my predecessor was. At first, I brushed it aside as just me felling a bit insecure. But it has now been a month and I'm starting to wonder what I should be doing to counter having such a tough act to follow. I would be most grateful to hear your group's suggestions and ideas.
Read the entire question and response: In The Footsteps Of A Successful Predecessor
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); John R. Sapp (Michael Best & Friedrich LLP); Keith B. Simmons (Bass Berry & Sims PLC); William J. Strickland (McGuire Woods LLP); and Harry P. Trueheart, III (Nixon Peabody LLP).
Post #396 - Friday, May 8, 2009
I Bet You Didn’t Know . . .
• In the 1400’s a law was set forth in England that a man was allowed to beat his wife with a stick no thicker than his thumb. Hence we have ‘the rule of thumb’.
• The average number of people airborne over the U.S. in any given hour: 61,000.
• Coca Cola was originally green.
• The first couple to be shown in bed together on prime time TV was Fred and Wilma Flintstone.
• Many years ago in Scotland, a new game was invented. It was ruled ‘Gentlemen Only . . . Ladies Forbidden’ – and thus, the word GOLF entered into the English language.
• If a statue in the park of a person on a horse has both front legs in the air, the person died in battle. If the horse has one front leg in the air, the person died because of wounds received in battle. If the horse has all four legs on the ground, the person died of natural causes.
Kudos to Watts Wacker, noted futurist and best-selling author, for sharing these tidbits of trivia with me in his e-mail today.
Post #395 – Friday, May 1, 2009
Support Function Management Within Firms
Given that law firms have invested heavily in building strong management teams to complement attorney leadership, readers may be interested in the results of a new proprietary study on management within law firms. The product of a survey of firm leaders of The Global 100, conducted between December 2008 and January 2009, on their views with respect to the key (non-lawyer) management functions within their firms, here are a couple of the more interesting findings:
• Respondents were asked to rank the various support functions in their firms in order of importance. On a worldwide basis the largest law firms rated these functions as most important:
#2 Human Resources
#3 Information Technology
#4 Business Development
I remember an old research study from my University days that showed that when times were good in any industry, marketing was viewed as one of the more important functions while when times were bad, finance rose to the top – and perhaps this is what is taking place today. What I did find rather shocking was that Knowledge Management was deemed the least important of the support functions.
• The vast majority (90%) of U.S. firms hold to the conviction that lawyers, not administrators, lead the direction of the firm. However, a slightly different model may be evolving in the European and Australian based firms (with the later being home to the first publicly-traded law firm) where one-third (33%) of the participating managing partners agreed that support functions are now leading the direction of their firms.
• Fifty-eight percent (58%) of the respondents report major difficulties in finding talented professionals to fill support function leadership positions. And, once an administrative executive is hired, fitting into the firm’s unique culture, being perceived as a trusted advisor and managing relationships with the partners are just a few of the primary challenges awaiting them.
• One finding that the ALA should pay attention to – while the overwhelming majority of firm leaders (84%) say they are generally satisfied with the caliber of their management talent, only 11% indicated that they are ‘very satisfied’ suggesting there remains room for overall performance improvement. One could interpret this low measurement as an indication of a disconnect between some administration professionals and the expectations of the partners. Law firm leaders concur that measuring ROI and the value added by support functions remains a priority.
Post #394 – Friday, May 1, 2009
Spring Issue Available
I received this kind note early this week: I belong to a Chicago group of managing partners of law firms and at our last meeting one of the members quoted your Spring 2009 magazine and suggested it was very informative. Our firm has 60 lawyers in one office. I would like to know if I can subscribe and or receive your magazine publication. One other member stated it was by invitation. Please advise.
Edwin I. Josephson – Chuhak & Tecson
My Response: Thank you for your kind note. I'm pleased to hear that people are finding the publication useful. Ed, I’m happy to add your name to our mailing lists for future issues. Have a great week.
If for some reason, you haven’t received your Spring International Review magazine, please shoot me a note and I will be pleased to get a copy sent off to you.
Post #393 – Tuesday, April 28, 2009
Why Is The First 100 Days Important?
It would appear that this week the news media is obsessively focused on Obama's 100-Day report card. A hundred days is a nice round number, but why do we critically judge presidents (and firm leaders) on what they're able to accomplish in just their first 100 days? The short answer? Blame FDR.
Franklin Roosevelt came into office amidst a massive financial crisis. Unemployment was high. Banks weren't loaning money. America had a confidence problem. (Sound a little familiar, doesn't it?) The new president went right to work. In just over 100 days, a first version of the New Deal was launched and Congress passed 15 major bills. As The L.A. Times reported: The initial storm set a tone for the rest of Roosevelt's first term: constant action, bold experimentation, unprecedented expansion of the authority of the federal government. Since then, journalists and political analysts have embraced the 100-day report card for new presidents.
Pretty tough yardstick to be measured against. And Barack Obama knows it. He even told "60 Minutes" that he had been brushing up on Roosevelt's initial days.
Mike Watkins, who wrote The First 90 Days, claims that the first 100 days actually tell us a lot about what's to come. He explains, An illustration may help to confirm the importance for leaders of doing well during transitions into their new roles. While visiting at IMD (a leading business school located in Lausanne Switzerland) I surveyed senior human resources executives about the many executive transitions they had observed. Fully 87% of the 143 survey respondents either agreed or strongly agreed with the statement, 'Transitions into significant new roles are the most challenging times in the professional lives of managers.' More than 70% agreed or strongly agreed that success or failure during the transition period is a strong predictor of overall success or failure in the job.
From my own work, with the First 100 Days Master Classes that I conduct bi-annually, I can confirm that new firm leaders transition through four very observable phases early in their tenure – from ‘Anticipation’ (the peak of inflated expectations), to ‘Adjustment’ (the trough of disillusionment), to ‘Acclimation’ (the slope of enlightenment), and to finally the phase of ‘Acceleration’ (the plateau of productivity). What is important for the newbie is to recognize each of these predictable stages, the traps inherent at that point in the transition process and what he or she must do to transcend those pitfalls.
And this is a key point: transitions are times when momentum builds or it doesn't, when opinion about the new leader begins to crystallize. It's a time when feedback loops - virtuous cycles or vicious ones - get established. Any observable misstep can feed a downward spiral that then can be hard to halt It is far better for a new leader to secure an early win that builds personal credibility, rather than dig themselves into holes and have to scramble back out. And that's why the 100 day transition period is so important.
Post #392 – Friday, April 24, 2009
How To Identify High Potential Leaders
In the context of some strategy work I’m doing for one of the AmLaw 200 firms, I’ve found myself thinking about a couple of related question that I’m often asked by managing partners: How do you go about identifying those attorneys who could be good practice group leaders? I suspect that we’re like most firms in that we don’t have a great deal of attorneys to choose from to be practice leaders. Then the follow-up question becomes: Is it better to have the group select the leader or should I, as managing partner, make the appointment?
There is no right answer on whether the managing partner should make the selection or not. In some cases it is a matter of what fits with your firm’s particular culture. What is most important is that the potential leader understands what the job of being a practice group leader is all about and a job description exists (see my Post #388 – What Does A Practice Group Leader Actually Do?); that the chosen candidate really wants to take on the responsibility and knows precisely what amount of non-billable time is expected of them in managing the group (and is not being arm twisted); and that the chosen leader is prepared to accept some guidance and training on how to successfully execute their leadership role.
In my discussions with other managing partners I continually hear that what firms believe they need today is practice leaders capable of:
- being adept at exercising exceptional interpersonal skills, as opposed to simply having substantive legal competence;
- thinking like their clients and anticipating how to react to client’s continual demands for quality, value and cost-effective service delivery;
- connecting with different kinds of professional colleagues, of different ages, different values and different cultural backgrounds;
- working and managing groups in a boundary-less, virtual manner as more and more members of practice teams are geographically separated from one another; and
- fostering growth while dealing with uncertainty in adapting to today’s economic constraints.
This quest for finding the right kind of practice leader is something just about every firm is struggling with. I therefore, continue to be surprised that we, in the profession, do not subscribe to the rigors of assessing our leadership talent as do so many other professions and industries. And there are some great resources available to help. For example, I have discovered that when you select your next practice group leader, it could be enormously beneficial to know how the attorneys you are considering compare, with respect to these 10 critical competencies:
BUSINESS DOMAIN (competencies related to the processing of information to address business challenges)
• Strategic Reasoning – Combines the ideas of self and others to envision the possibilities
and chart a course for the group to an improved future-state.
• Tactical Problem Solving - Synthesizes available data and facts into plausible courses of
action that will result in the resolution of identified problems.
• Operational Excellence - Manages business priorities and resources to ensure the efficient,
timely, and cost effective achievement of results for the practice group.
LEADERSHIP DOMAIN (competencies related to the challenges of leading self and others)
• Results Orientation - Establishes high performance standards for self and others and
assumes personal ownership and accountability for achieving results.
• Talent Development - Pursues a personal course of development related to business
acumen and uses that knowledge to recruit, coach, and develop the performance of peers.
INTERPERSONAL DOMAIN (competencies related to building and maintaining relationships)
• Respect for People - Builds trust-based relationships with peers by treating them
with dignity, respect, and fairness, while valuing their diversity in background and views.
• Collaboration - Develops positive working relationships that emphasizes the practice group’s accomplishment in conjunction with individual contributions.
INTRAPERSONAL DOMAIN (competencies related to the way one approaches challenges in the office)
• Strategic Self-Awareness - Recognizes own strengths and weaknesses and uses that information to guide personal growth and development.
• Tenacity - Pursues the resolution of business development challenges with urgency and determination to achieve positive outcomes.
• Judgment - Initiates action only after evaluating the consequences of the action and determining that the benefits are likely to outweigh the costs.
How can you increase your confidence that you are selecting practice group leaders with the potential to be great?
Based on research from a global sample of more than a thousand executive MBA program graduates, there is now a sophisticated assessment tool called the High Potential Candidate Report that allows you to identify top candidates in relation to the specific competencies I’ve outlined above. Requiring less than an hour for completion, the High Potential Report provides you with a snap-shot for enhancing your leadership candidate selection. Your candidate registers online, completes the assessments, and the detailed report is emailed to your firm within a day of completion. (To learn more about this High Potential Report contact me.)
Winning firms find a way to manage through these turbulent economic times and take advantage of the opportunities presented. And in order to take advantage of those opportunities you need to have the best attorney leading your various practice teams.
Post #391 - Tuesday, April 21, 2009
Is Innovation In BigLaw An Oxymoron?
A few weeks back, I posed this question to the over 500 members of LinkedIn’s Legal Innovation Group (a group specifically constituted of those people in the profession interested in innovation): “Is there a law firm anywhere, with a culture that consistently encourages innovation? In other industries, organizations that encourage and appreciate innovation are often known to reinforce those core values by undertaking activities such as: providing internal training to assist people to tap into their natural creativity, facilitating innovation meetings, sponsoring internal innovation award initiatives, and providing some means to finance and enable small-risk experimentation. Is anyone aware of any law firm anywhere, doing something of this nature?”
As I fully expected, thus far there has not been one single response. It is sadly reminiscent of an article that appeared a few years ago wherein forty-five Chief Legal Officers, meeting in Europe, were asked: “What is the single most innovative practice proposed or used by your outside counsel in the last 12 months?” The unanimous answer . . . Nothing?
What this all makes painfully clear is that:
1. Innovation is a trip to a vague and uncertain future.
Successful innovation requires getting comfortable with the discomfort of not knowing precisely where the heck you’re going. Some of us might enjoy the adventure of getting into our cars and taking a Sunday afternoon drive with no specific destination in mind. For others, the possibility of getting lost is a scary proposition. If there isn’t a documented road-map – in legal terms: Who else has done this before? – available, too many firms are not prepared to venture into anything that smacks of ‘the unknown.’
2. How you view your competitive position affects your ability to innovate.
Today’s vibrant BigLaw firm is probably well aware that it should embrace innovation to sustain its leadership. But, in its heart, it needs any accepted innovation to be clean, non-disruptive and most of all, painless. Unfortunately, real innovation is rarely mistake free. It can be painful, discouraging, expensive, time-consuming, and worst of all, the outcome is always uncertain. All of these are characteristics that most in BigLaw don’t support. Anything that is perceived to be innovative is usually just a trivial incremental step towards differentiation. Thus the firms that most desperately need to be innovative are often the least likely to achieve it.
3. Finally, following the market, rather than leading it, is the major innovation roadblock.
The real challenge in innovation is in identifying how to lead clients not follow them. If your innovation efforts are grounded solely in your understanding of where your clients are today, you will not likely succeed. By the time you get your innovation launched, the marketplace will have already progressed well beyond where it is currently. By way of example, when Allen & Overy (UK) launched the first of its online, subscription-based legal services, there was no client survey informing the firm that this was what clients wanted or would be willing to pay to subscribe to. Similarly, when Eversheds initiated its massive internal program to teach its lawyers project management skills, it was not based on any client satisfaction survey results asking for better project management. These were firms following the Gretzky Paradigm. (Legend has it that when hockey superstar Wayne Gretzky was asked to disclose the secret to his phenomenal success, he responded, “I don’t skate to where the puck is. I skate to where the puck is going to be.”)
There is no doubt that every law firm, even the most tradition bound of BigLaw, have individuals who look at situations in a new way and say, “Hey, there’s a way we could do this faster, easier, cheaper and better.” What happens next with that blossoming idea determines whether your firm is truly capable of innovation.
Post #390 – Monday, April 20, 2009
I am honored to have been asked and have now contributed a chapter to a new book scheduled for release on May 15th.
Entitled Foundational Success: Building Blocks for Personal and Professional Success, I am joining Seth Godin, Jim Cathcart, Shelle Rose Charvet, Nido Qubein and twenty-five other prominent contributors in authoring a text designed to raise funds for a charitable foundation dedicated to providing the financing for student scholarships and encouraging more children to choose a post-secondary education.
You can obtain more information on the book and the impressive list of guest authors at: www.foundationalsuccess.com
where you can also pre-order your copy now.
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