Post #631 – Monday, October 29, 2012

The BigLaw Banker’s Bloomberg Interview

Having partnered with Dan DiPietro from CitiBank at a Webinar this past January (entitled The Future of Legal Services), I have great respect for his insight.  In a rather somber (and well worth watching) interview on Bloomberg TV last Friday, Dan describes the decline in confidence and overall uncertainty that he is seeing in the marketplace, how there are only pockets of demand for legal services and that he is expecting, at best, a flat growth year for 2012.

He reports on the excess capacity that he continues to perceive in the industry and how that has manifested itself in his observing some law firms making “really bad pricing decisions.”  Dan relates one example, of an AmLaw 50 firm, where they are pricing work at extremely discounted levels in order to get the matters.

Perhaps most importantly, Dan indicated that he is expecting to see some additional law firm failures.  The danger season for law firm failure is third quarter 2012 through first quarter 2013.  He notes factors to watch and stated that as a Banker he “looks hard” at departures of quality partners being a leading indicator of distress and also the productivity numbers (average hours of equity partners) to see if they are far below other firms or the current norm.

The law firm 'watch list' according to Citibank is "robust."  And in particular Dan has concern about the firms that have in recent years gone global.  He observes that the global firms are a 'watch list' item, especially with a number of newcomers to the arena and the higher costs, plus some question of how much capacity for service the global market really needs – “this space has gotten very crowded.”  He reports that the old logic of having a portfolio approach and being in multiple locations, believing that if things slow down in the US they will keep going elsewhere, is not working anymore.

Post #630 – Tuesday, October 23, 2012

Strategic Planning Research Study

This week a colleague pointed me to a new research study that you might want to take a look at.

The title of this study is "Strategic Planning In Law Firms” and it consists of responses from 79 of the AmLaw 200 firms to 31 different questions.  Now, I’m not sure how these questions were formulated, but only about 5 of the questions really deal with strategic planning: do you have a plan; who developed it, what resources were used; what growth options are being pursued; and how aggressively.  The remainder (26) of the questions deal primarily with five areas: various metrics, information sharing, staffing, client satisfaction, and managing profitability – all important issues; but all operational in nature (looking at the here and now) not necessarily looking at the future or at the strategic nature of how one’s firm and one’s profession may evolve over the next few years.  In other words, it would appear to me that neither LexisNexis, nor ALM Media really understand what strategic planning is about.

It is my strong belief that a true strategic plan (rather than one that is strategic in name only) should

• focus on the future (“what will our profession look like in 2016 and how do we get to the future first?”) not obsess about the present;

• exploit opportunities and build on strengths (“how do we further enhance the value we provide clients?”) not simply solve problems and correct weaknesses; and

• be concerned with the external environment (“how do we operate in an economic environment that may be very different in the coming years from the continual growth economy that we all grew up in?”); not circle the wagons and firing inward.

One of the findings that jumps out of this report: “When pressed, many of our follow-up interviews revealed that implementation is not as rigorous as it could be.”

Big surprise?  This is an affliction that I’ve seen many managing partners suffer from, something I’ve come to call seeing SPOTS – Strategic Plan On The Shelf.  One of the central reasons that this happens (certainly not the only reason) is because the ‘strategic planning group’ does not then become the ‘strategic implementation group’ once the plan is finalized.  Many firms behave as if the intelligence required to draft the strategy should not be sullied by actually having to roll-up-their-sleeves and now execute their strategy.  Thus the strategic plan is delegated to someone else; anyone else – the busy managing partner and/or COO, the marketing department, some newly formed committee, the practice group leaders and so forth.

One of the other reasons this happens is because partners have not really been actively involved in the creation of the strategy such that they can see a glimmer of their own fingerprint somewhere on the final plan.  And we all know (don’t we?) that no partner buys in to, gets enthusiastic about or willingly supports any plan, direction or change that they have not had some small part in formulating.  I’ve actually witnessed executive committees go off for a weekend to develop the firm’s strategic plan and then spend the better part of the coming year trying to sell it to their partners.

One section of this report deals with ‘Client Relations” and in the survey they asked law firms: “Which aspects of your firm’s relationship with clients would you most like to change in 2012?”  They then proceed to report that just over half (56%) of respondents reported they have a plan to track client loyalty and satisfaction.  This may all be very interesting information . . . but what does it have to do with strategic planning?

Strategic planning is NOT about determining your client’s satisfaction (looking backwards); it’s about discovering what your client’s unmet needs are and what is frustrating the hell out of them in achieving their business objectives.  It’s not about you.  It is about how much you know about them, and what their future expectations and aspirations are.  Have they used AFA’s, are they inclined to offshore any work, what do they think of certain technology applications, and so forth?

I could go on at some length, but in the final analysis, consider: Does your latest strategic plan show you doing anything different from the three or four significant competitors in your marketplace; provide for specific ways to improve your firm’s profitability (not just PEP); and cause other competitive firms to see you as a leader in some particular market niches?

Post #629 – Monday, October 8, 2012

Some Surprising Findings About RFP Responses

Between July 23 and August 3, LexisNexis conducted an extensive survey measuring the level of RFP activity underway within law firms.  After all, many corporate legal departments have embraced the use of RFPs and other competitive bidding mechanisms to identify, vet and engage outside counsel. 

One of the more revealing finding of this survey was that 146 (41%) of 359 survey participants simply did NOT know the level of RFP activity underway at their firms – how many RFPs, pitches or proposals their firm responds to on a monthly basis.  Given today’s economic climate, you would expect that RFP-type activities would be more top-of-mind for every law firm – and especially for firms of over 500 attorneys in size!

0 – 50 Attorneys:  9% of Respondents / 11% Didn’t Know RFP Activity

51 – 100 Attorneys:  24% of Respondents / 21% Didn’t Know RFP Activity

101 – 300 Attorneys:  42% of Respondents / 30% Didn’t Know RFP Activity

301 – 500 Attorneys:  9% of Respondents / 14% Didn’t Know RFP Activity

Over 500 Attorneys:  16% of Respondents / 24% Didn’t Know RFP Activity

Overall, firms are responding to an average of 5 to 16 proposals each month with larger firms engaged in a higher volume of RFP activities than their counterparts in smaller firms.  Meanwhile, responding to RFPs, pitches and proposals puts a strain on practice resources.

Number of Proposals By Firm Size and Average Hours Per Proposal

101 – 300 Attorneys:   96 Proposals / 22.39 Hours Per Proposal

301 – 500 Attorneys: 132 Proposals / 24.61 Hours Per Proposal

Over 500 Attorneys:  192 Proposals / 25.00 Hours Per Proposal

It’s interesting to note that, on average, larger firms tend to devote more time to each proposal activity than smaller firms. There don’t appear to be any efficiencies or economies of scale for handling proposal work attributable to larger firms.

Other survey highlights included:

• For all the time and effort devoted to RFPs, pitches and proposals, only 58% of respondents verified they bother to track wins and losses. 25% placed themselves in the “don’t know” or “maybe” category; and 17% were willing to admit they do NOT track.

• 42% saw an increase in RFP activity at their firms over the past 12 months; and an identical 42% believe the volume of RFP activity has stayed the same.

Post # 628 – Monday, October 8, 2012

Advice On Incentives And Cooperation

A great little tid-bit on Bob Sutton’s (Work Matters) blog is well worth thinking seriously about.  According to Bob:

I heard something last week at the dinner in Menlo Park that especially caught my ear -- from none other than Brandi Chastain, the Olympic Women's Soccer gold medal winner and world champion, who still plays soccer seriously and now often works as a sports broadcaster for ABC and ESPN.  The award winners at Menlo Park were each asked to describe the best advice they ever received.  Brandi began by talking about her grandfather and how crucial he was to her development as a soccer player and a person.  Brandi said that he had a little reward system where she was paid $1.00 for scoring a goal but $1.50 for an assist -- because, as she put it, "it is better to give than receive."

I love that on so many levels.  I helped coach girls soccer teams for some years, and getting the star players to pass was often tough.  And moving into the world of organizations, as Jeff Pfeffer and I have been arguing for years, too many organizations create dysfunctional internal competition by saying they want cooperation but behaving in ways that promote selfish behavior.  Chastain's grandfather applied a simple principle that can be used in even the most sophisticated reward systems -- one that I have seen used to good effect in places ranging from General Electric, to IDEO, to McKinsey. 

Post #627 – Monday, October 8, 2012

The Sad Truth About Housing

Last week an interesting little news piece caught my attention.  Federal Reserve Board governor Elizabeth Duke is reported to have said that the U.S. has an “extraordinary” level of abandoned properties that will inflect heavy costs on the wider community and government aid may be needed.

Now if you are like me, we’ve all been reading recently about how the housing industry has finally hit the bottom and how things are starting to rebound . . . and how this rebound and raising real estate prices are indicative of an improving economy (have another look at my Post #618 - Hope For The Best, Prepare For The Worst).  So, what’s this all about and what does an “extraordinary” level of abandoned properties mean?

Well, digging deeper, Ms. Duke informs us that vacant homes for sale have fallen.  (At first blush one would conclude that that sounds like good news.)  They have fallen from a 2 million peak in 2010 to 1.6 million in the second quarter of 2012.  But, Ms Duke also points out, “there are still 2½ times as many vacant homes available in the US, just not for sale.”

Now that concluded this little news report from Reuters, but let’s do some math to determine what this all means to our economy going forward.

Let’s imagine a best-case scenario in that when Ms. Duke referred to 2010, we will assume she was referring to the end of 2010, (18 months ago) and not the beginning of 2010 (30 months ago).  If, as she reports, they were able to dispose of 400,000 vacant homes for sale over the course of 18 months, that would amount to roughly, 23,000 homes per month.  We now have 1.6 million plus 4 million (2½ times) or 5.6 million total vacant properties remaining to dispose of.  If we were to maintain disposing of 23,000 per month (highly doubtful, but this is a best case scenario after all) we could rid ourselves of this inventory in . . . (wait for it) . . . about 243 months, OR in 20 years, OR by July 2032.

And, by the way, this does not take into account those properties still occupied (not abandoned) and in foreclosure proceedings, or those properties that continue to remain financially underwater.

Post #626 – Thursday, October 4, 2012

Looking At It From The Client’s Perspective

In discussions this past week with the members of a newly formed practice group, we were exploring the various ways in which to effectively market their offerings.  From those discussions we concluded that there are at least five ways in which you can start to identify your clients’ unmet needs and create opportunities for your firm:

1. Frustrations

What makes your clients most frustrated when they are trying to use you or some competitive firm’s legal services?

2. Compromises

What compromises do clients have to make in order to get the results that they are after, and how could you innovatively address those compromises?

3. If Only

What would absolutely transform your clients’ experience, if only you had the means to make it happen?

4. Haves and Have-Nots

What can Fortune 50 clients afford to do, that those of your clients on tighter budgets can not afford?  How could you help these clients turn a dream into reality? 

5. Technology and Convergence

What changes in technology are emerging, and how could you link them with your services to create entirely new client solutions?

Post #625 - Tuesday, September 25, 2012

The Firm Leader – COO Team

Following on my last Webinar in July covering the subject of how to go about ‘Selecting Your New Firm Leader,’ I’m delighted to be following on that theme with a new event, scheduled for November 13 to discuss the sensitive balancing act that every firm leader faces in sharing management responsibility with their COO/Executive Director.

This web-based discussion draws on in-depth research exploring approaches and behaviors that build and maintain highly effective teams - including real life, concrete examples, tips and tools for bringing the key ingredients to life in your firm - including analysis of what this research reveals as being the critical missing elements in cases where the relationship is "something less than extraordinary."

This webinar will cover:

• The importance of the Firm Leader and COO developing a shared understanding of where each other's job begins and ends - and what they each need to do in order to back each other up.

• The 14 distinctive characteristics of highly effective Firm Leader - COO teams grouped into three areas: communication, common approaches and shared relationship

• Establishing effective working protocols and coordinating approaches so you aren't stepping on each other's toes; and

• How to manage your respective egos - from taking your bows together even though you may feel that you did the lion's share of the work

Joining me for the Webinar will be John Michalik, former Executive Director at the Association of Legal Administrators and author of The Extraordinary Managing Partner: Reaching the Pinnacle of Law Firm Management.

Further information is available from Ark Conferences 

Post #624 – Wednesday, September 19, 2012

Be A Meaning Maker

It is popular folklore these days to insist that our firm leaders be some kind of visionary, or strategic thinker.  Maybe we would do better by simply asking them to be meaning-makers!

What is a meaning-maker?  

Those are firm leaders who . . .

• continually talk about the importance of each professional.  They find ways to honor the unique strengths of each individual while coaching that professional and helping them find opportunities to become even more successful.

• continually talk about the future of the firm in ways that makes others not want to be left behind.  They use words that re-define the future as one of exciting possibilities and beckoning challenges.

• continually talk about the contributions that the firm makes to its communities, to pro bono endeavors, to the economy, and how it enhances the lives of clients, partners, staff and their families. 

These are the firm leaders who talk about the firm's work as a "calling," a calling worthy of its members' very best efforts and talents. 

Post #623 – Wednesday, September 19, 2012

Student Loans – Another Bubble Ready To Pop!

Get Ready.  The fallout from the student loan crisis will hit in mid-2013, four years after the volume of government-funded student loans surged.  Like the infamous option ARMs (adjustable-rate mortgages) during the housing bubble, these loans have precisely timed fuses: Four years after the loans are made, borrowers must start making payments.

So, imagine it is May 2013 on an ivy-draped college campus.  Your child just graduated with a degree in English.  In 2009, your child borrowed $50,000 from the US Department of Education’s Direct Loan Program.  Job searches for teaching and journalism positions have been fruitless.  Within a matter of weeks, your child must start making loan payments on a waiter’s wages and tips. 

Signing up for a huge student loan was a mistake.  Everyone had assumed a certain type of job market would exist four years into the future.  The lender — the US government — has long subsidized unsustainable activity.  According to Labor Department statistics, 1.9 million Americans between the ages of 20 and 24 not in school are officially unemployed.  The size of this age group working part time is the biggest since 1985.

Unless recent college grads hold degrees in high-demand fields like computer science, engineering or geology, they aren’t finding jobs; they aren’t buying new cars; they aren’t starting families; and they aren’t buying houses, absorbing the excess supply in a sluggish housing market.

The US Department of Education has become the Countrywide of student lending.  After a lending binge started in 2009, it now holds a massive $452 billion portfolio of student loan receivables, according to Federal Reserve data.  This so-called “asset” will become a liability by next year.  A huge percentage of these loans will go bad or have to be restructured.  When that happens, Congress will have to appropriate money to make up for the loan-payment shortfall.  What was quietly off budget will soon make a big splash on the federal budget.  You may expect defaults on government student loans to reach tens of billions of dollars per year starting in late 2013.

Like Countrywide, the government is not honestly accounting for its portfolio risks.  This $452 billion portfolio doesn’t even include a few hundred billion more in guaranteed student loans.  The exploding deficit will force the Federal Reserve to not only keep rates at zero for the rest of the decade, but also to print trillions more dollars in order to buy the Treasury bonds floated to fund these deficits.

Post #622 – Wednesday, September 19, 2012

The CEO of Tomorrow

What will CEOs be like 20 years from now?  CEO.com went ahead and asked them. After surveying more than 2400 students aspiring to the C-suite, they discovered what they thought about education, entrepreneurship, management style, and social media, as well as what their top priorities really were.  Here are a few highlights:

• According to the students surveyed, the most important characteristic for CEOs to have is:

40%     Passion

29%     Experience in Leadership

14%     People skills

  8%     Experience in the industry

  6%     Intelligence

  3%     Education

Yes, these results are correct. Education and intelligence scored dead last and that high score for passion is almost reminiscent of the thinking that drove the dot com bust.  But then I could just be reflecting the sentiments of my age.   So, let’s try another . . .

• When asked to choose what their primary concerns would be over the next decade, the CEOs of tomorrow revealed the following as their top priorities:

54%     Globalization

53%     IT Security

48%     Corporate Social Responsibility

47%     Mobile Technology

44%     Social Media

38%     Talent Retention

37%     Increasing Costs and Taxation

35%     Data Storage

18%     The Cloud

I don’t know about you, but the foresight displayed in this list might have been slightly inspiring had it been compiled in 1999, but looking into the future . . .  

We’re in for an interesting generational shift in the thinking of our organizational leadership.  Again, just my opinion.