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Post #601 – Monday, March 19, 2012
What Makes Overcoming Lawyers’ Resistance To Change So Difficult?
 If you believe that your firm, practice group, or department must change or evolve in order to succeed, what can you do to effectively promote the required changes? Of course, it is human nature to resist most change — and some lawyers seem especially skilled at this resistance.
In a recent survey I posed two questions and received responses from the management of 64 law firms. The first question I posed was: “Think back to some important initiative that didn’t quite turn out to be the roaring success that firm leadership had hoped . . . What were the primary obstacles your firm faced as it tried to implement the new strategic initiative?”
I posed 17 different choices and the most popular (94% resoponses coming back from these 64 law firms) was: “They involved changes that some lawyers weren’t motivated to make (for example: required a generous amount of non-billable time, or they took lawyers out of their comfort zone, or they threatened to change the status quo of some lawyers in the firm.)”
The second question that I posed was deliberately intended to build on the first - “In thinking back to that important initiative that didn’t quite turn out to be the roaring success that firm leadership had hoped . . . What specific actions did your firm take to try to further this strategic initiative?”
For this second question I offered 16 different possible choices, with, of course, an option to choose “other” in the event that none of these choices hit the mark. With this question, an overwhelming 76% choose: “Most of what had been done boiled down to multiple emails, memos, presentations and talking points about the need for change.”
The top mistake made in leading change is clear - Believing that information leads to action! We humans are not quite so rational.
Join me on April 26th in New York where I will be chairing the Fourth Annual Overcoming Lawyers’ Resistance To Change Conference and explore all of the various mistakes that are made in trying to bring about change in your law firm and how to do it effectively.
Post #600 – Monday, March 12, 2012
A Third (Or More) of Lateral Hires Fail
 Further to my Post #596: “Are Some Firms Creating A Lateral Bubble?” there was a study released in the UK that I just came across – showing that a third of partners hired into London law firms were failing before five years and “that lateral partner hiring is a devilish business that goes wrong a lot of the time.”
The research encompasses 2,295 hires into UK, US, and merged US-UK firms in London from 2005 to 2011. Of those hires, 714 (or 31%) have already left the firms they were hired into. That attrition rate only represents the out-and-out failures; behind the figures lurk a raft of other hires that have failed to meet expectations but that have not performed poorly enough to warrant the chop.
And that 31 per cent is just an average figure taken from hires across the six-year period. When they looked at individual years to determine how long partners were lasting, the picture is worse. Among partners hired in 2007, more than 50 per cent have already left. Things are a shade better for 2006 partners – 46 per cent have already gone – and a little worse for those hired in 2005, with an attrition rate of 51 per cent. The only sliver of comfort is that partners who last beyond five years seem to stick around.
The most surprising finding of this research relates to team hires. The hiring of multi-partner teams has become many firms’ stated preference with regard to lateral partner hiring. The logic is that a team is more likely to transition clients successfully, is less reliant on a single individual and will be a more solid hire for the firm. However, the study shows that team hires are no more likely to succeed, statistically speaking, than individual hires.
I reccomend a visit to my friend Mark Brandon's web site at Motive Legal and a PDF entitled ‘Lateral Partner Moves in London – Annual Survey 2012' - available here.
Post #599 - Thursday, March 8, 2012
What Is The Future of The Traditional Partnership Model?
 A provocative article in Legal Week [UK] proposes that: “the idea of a traditional partnership works for smaller firms but with the growth of large firms it is unrealistic to think that a traditional partnership model would be an efficient business model. For such firms to be able to succeed commercially it seems only logical that they should move to a more corporate-oriented model.”
These comments come on the back of a new survey that evidenced 72% of respondents believing law firms are failing both to identify and to deal with underperforming partners. The survey also revealed 25% describing performance management at law firms as ‘poor’. These findings come after numerous firms have moved to restructure their partnerships, undergoing initiatives to require partner departures and deequitizations.
According to one leader interviewed: “It is understandable that partner contributions are being looked at more closely in the current environment, but for firms wishing to retain the ethos and collegiality of a partnership it is important that there is a textured evaluation, where contribution is not judged solely on a limited range of metrics over a short period.”
Given the extent of partner cuts at major firms in recent years, nearly one fifth of partners (17%) reported a very real fear of being personally affected by a restructuring, whether that means being asked to leave or take a demotion. A further 52% admitted to sometimes feeling concerned, with only 31% unconcerned.
One commentator suggested: “There is a lot of short-termism involved in managing a partnership, which is why a lot of law firm leaders have difficulties dealing with underperformance. Law firms would rather let underperformers go instead of investing in training or even redeploying people to other areas of the firm.”
Despite the level of support for partner cuts, 81% conceded that such proactive management undermines the concept of partnership to some degree, with 19% arguing it does not undermine the idea at all . . . as partners know what is expected of them.
What do you think? What does all of this suggest for the future of the traditional partnership?
Post #598 – Thursday, March 1, 2012
Silent Symbols of Leadership
Here are some of the best ways to lead without having to speak (or write) a single word:
 An Open Door – Much has been said about the merits of having “an open-door policy“, but it’s one thing to give it lip service and another thing for you to actually keep your door open.
Smile – You know the saying “a picture says a thousand words“? If you are trying to project positivity, humility, graciousness, optimism, openness, and a general good nature, smiling whenever possible is a great place to start.
A genuine smile not only stimulates your own sense of well-being, it also tells those around you that you are approachable, cooperative, and trustworthy. When you smile at someone, they almost always smile in return. And, because facial expressions trigger corresponding feelings, the smile you get back actually changes that person’s emotional state in a positive way.
Eye Contact - Nothing says “I’m paying attention to YOU” better than actually looking your colleague in the eye. If you look at the floor, the wall, or worse yet, at your computer or Blackberry, you are sending a clear message of disinterest . . . even if it is totally unintentional.
If you want a colleague to feel comfortable communicating with you, don’t multi-task. Focus on those who are speaking by turning your head and torso to face them directly and by making eye contact. Leaning forward, nodding and tilting your head are other nonverbal way to show you’re engaged and paying attention. It’s important to make sure they know you are listening.
Posture – Body language can speak volumes. If you exhibit a posture of slumped shoulders and a rounded back, you will never be good at projecting authority and control (hint: practice this in front of a mirror and you will see what I mean)
Research at Harvard and Columbia Business Schools shows that simply holding your body in expansive, “high-power” poses (leaning back with hands behind the head and feet up on a desk, or standing with legs and arms stretched wide open) for as little as two minutes stimulates higher levels of the hormone linked to power and dominance — and lower levels of cortisol, a stress hormone. Try this when you’re feeling tentative but want to appear confident. The study also found that people are more often influenced by how they feel about you than by what you’re saying.
Handshakes and Back Pats – These “old style” gestures, when done with proper consideration of the particular sensitivities of the person involved, can make a real difference. For example. I will always remember the leader that would enter a room for a team meeting and shake every hand in the room before he started and would project his sincere encouragement or praise with a hand on my shoulder.
Touch is the most primitive and powerful nonverbal cue. Touching someone on the arm, hand, or shoulder for as little as 1/40 of a second creates a human bond. In your office, physical touch and warmth are established through the handshaking tradition and this tactile contact makes a lasting and positive impression.
Uncross Your Arms and Legs – Body language researchers Allan and Barbara Pease, report a fascinating finding from one of their studies: When a group of volunteers attended a lecture and sat with unfolded arms and legs, they remembered 38 percent more than a group that attended the same lecture and sat with folded arms and legs. To improve your retention, uncross your arms and legs. And if you see your colleagues exhibiting defensive body language, change tactics, take a break, get them to move — and don’t try to persuade them until their bodies open up.
Arrive On Time – Consistent punctuality sends a strong symbolic message to the rest of the team – it is a critical part of “leading by example“, especially when it comes to keeping all the trains running on time and meeting deadlines.
Be a Wanderer – Doing things like walking the halls, getting your own coffee, stopping by a partner’s office to see how they are doing, or sitting in on a practice group meeting you were not required to attend, are all ways to simply be “accessable.“ Your colleagues will notice you made the effort.
Be conscious of these things as you lead, and watch how your colleagues respond.
Thanks to Terry St. Marie (co-founder of SOBCon) and executive coach Carol Kinsey Gorman for their insight on this matter.
Post #597 – Thursday, March 1, 2012
Manufacturing Is Coming Back
 I received an e-mail yesterday from Chris, my economist buddy giving me some news that may be of interest to a number of law firms, “I like this story because it will surprise a lot of people and, hence, has some value as a contrarian observation. Something surprising is stirring in the economy. US manufacturing is staging a comeback!”
Caterpillar, the world’s largest maker of earth-moving equipment, gave us some tangible confirmation. Cat expects US construction spending will increase in 2012 for the first time since 2004. And Eaton, another large industrial, followed that by saying it expects its markets to grow faster in the US in 2012 than anywhere else.
There are other clues. A new report by Cushman & Wakefield, a commercial real estate services firm, points out that new leases for industrial property “returned to levels not seen since prior to the 2008-09 recession.” Tenants signed new leases for 306 million square feet, up 14% from a year ago and the most space signed since 2007. What drives leases for industrial space? Manufacturing is the main driver within the industrial landscape. Busy factories mean more rail and truck flow. It means fuller warehouses. It means looking for more space.
But isn’t China eating our lunch?
A recent paper, called “Workforce Rising: Why US Manufacturing Is Poised for a Comeback” by Reynders, McVeigh Capital Management points to a few reasons for the sudden revival. The report shows that the wage gap is shrinking. It isn’t that much cheaper to move to China anymore. As wages have gone gonzo in China, its wage edge melts away. US manufacturing wages were 22 times that of China’s in 2005. Today, that wage gap is under 10 times and likely will be under five by 2015.
Transportation costs figure into this too and cut further into China’s advantage. As the price of oil has stayed north of $100 a barrel, the cost to ship anything is high.
So those are two reasons for the manufacturing revival in the US. Even the automakers are coming back. GM will invest $2.5 billion in US factories. Until recently, that money was going to Mexico. Ford signed a new contract that calls for $16 billion in US investments and 12,000 new jobs by 2015. The foreign automakers are coming too. Mercedes plans to spend $2.4 billion by 2014 to expand an Alabama plant that will add 1,400 jobs.
Many people will miss this trend simply because the idea is so counter to what they think they know.
Post #596 - Thursday, February 16, 2012
Are Some Firms Creating A Lateral Bubble?
 I believe that irrespective of what most firms’ formal strategic plan might state, attracting laterals is priority number one, two or three. This need to attract and retain the best rainmakers in a volatile market may be creating some unintended consequences. Steven J. Harper, an adjunct professor at Northwestern University posed this question in his notable blog (thebellyofthebeast) yesterday: What if the lateral hiring frenzy is creating a bubble?
Consider:
• The impetus that gets the laterals hired then creates relentless internal pressure to satisfy dollar-based metrics. According to a former pay consultant for large firms: “A majority of big law firms have begun reducing the compensation level of 10% to 30% of their partners each year, partly to free up more money to award top producers.”
• According to a Hildebrandt consultant (interviewed back in October 2010): “We are already seeing a growing spread in high-to-low partner compensation. Before the recession, the average spread in high-to-low was typically five to one in many firms. Very often today we're seeing that spread at 10-to-1, even 12-to-1. (And today, I’m aware of firms where the spread exceeds 20-to-1)
• Meanwhile, self-interested partners, seeking to maximize their lateral options, work very hard to build client silos, rather than institutional bridges to fellow partners and the next generation.
This may the most difficult issue the profession faces over the next few years as market growth and demand for legal services flat-lines. That said, do you see this behavior driving increased tension between partners, adversely effecting morale, teamwork and collaboration, and ultimately contributing to institutional instability? And if so, what’s the alternative?
Post #595 – Wednesday, February 15, 2012
Deciphering The HBR / CitiBank Report
 I had the opportunity today, to confer with my good friend and one of the most brilliant minds I know on deciphering financial statistics (see my Posts #540 AmLaw Profit Reports and #530 on Howrey) and we were exploring the inner workings of today’s HBR/Citi Private Bank report. What is painfully obvious and doesn’t need deciphering is the report headline that legal market growth will likely lag again in 2012.
What may be worth thinking about is this initial statement: “The minimal uptick echoes last year's numbers, when the client advisory also reported an increase in demand of just 1 percent between 2009 and 2010. Though the market for legal services has yet to enjoy a significant increase in demand for two years running, the bright side is that 2010 marked the first uptick since 2008, when demand rose by nearly four percent, as we noted last year.”
As my colleague interprets this: What this means is that the only year in the great recession in which demand for legal services declined was 2009, and that was by four percent. The next two years were positive demand growth of 1 percent. Notwithstanding the demand growth as reported in 2010 and 2011, which at first blush would suggest to a reader that such is a "good thing", the carnage to people who work in the industry continued past 2009. Most certainly those of us paying attention to the years of 2010 and 2011 don't recall those as great, or even "good" years. The progression of the response by law firms to the real driver of action, which is profit compression, is well documented in waves, having rolled through at least the following:
- expense cuts at every operations level possible, including deferrals of expenses that must ultimately be recognized (and soon);
- terminations of staff and associates;
- in some firms (not all) creativity in modified cash basis accounting that overstates current income by accelerating its recognition at the burden of future years;
- de-equitizations and force outs from the equity partner ranks;
- changes in policies dealing with return of capital to retired / withdrawn partners to delay timing and preserve cash;
- increased capital infusion from existing partners, including some interesting "buy your job" capital contributions from "non equity" classes;
- holdbacks on portions of distributions and bonuses which become forfeit if the attorney departs before certain dates deferred into the new year; and
- delays in funding pension plan contributions later into the subsequent year . . .the techniques list is very long.
But the biggie is - the as yet to be widely recognized but very telling spread increase in the compensation ranges within the equity partner ranks, preserving or enhancing the compensation packages for a typically small band of equity partners at the expense / subsidy of a greater number of the remainder of the equity partners. This creates the interesting conundrum of firms reporting PPP "increases," while numbers of equity partners see their net income decline notwithstanding "growth" in PPP. This is all happening, and there is no indication that it is slowing.
What we must all recognize is that none of these steps, once taken, are repeatable in future periods. They are a cascade of steps that often are one-time actions, steps that cause acute financial pain when reversed, and numbers of them are not sustainable over time - certain deferred expenses being only one of them.
So, if the pressure of profit compression continues to be felt so acutely, notwithstanding "the bright side" of demand growth of one percent per year, and the reasonable prospect for the future is continued anemic demand growth, what does that really mean?
Obviously the "tipping point" for the business model to survive, let alone succeed, requires a demand growth of greater than one percent. If expense growth for the model is at least 3.5% this year, and with deferred expenses and the coming home to roost of the accounting ploys with amortizations on past period expenses that were capitalized likely to add at least one and perhaps two percentage points to that, how does the entity that employs that business model continue to deliver a profit pool that does not shrink?
It cannot. There is no escaping reality. Playing games with PPP by changing the number of partners downward to share in the shrinking pool of enterprise profit (whether from one firm or a combination through merger) is not a management of operations, it is a directive with significant organizational consequences both culturally and structurally. Playing games with PPP by changing the compensation allocations within the equity partner ranks to increase the spread (say over a short term of years from 6 to 1 from highest to lowest paid, to 12 or 15 to 1), something that most partners probably did not vote for or approve, or in some cases remain unaware of within their own firms, is another directive.
But then one of the questions we should ask is: where is this all going to take us and to what outcome?
Post #594 – Wednesday, February 15, 2012
Three Industries Coming Under Seige
 As more firms focus on developing successful industry groups – and it is an effective way to differentiate your offering, one needs to be ever vigilant to changes on the horizon. Thomas Frey is Executive Director and Senior Futurist at the DaVinci Institute and author of the 2011 book, Communicating With The Future. Earlier this month he spoke at a Conference where he identified three particular industries that he predicted would experience a significant shake-up within the coming decade:
1.) Power Industry
Until now, the utility companies existed as a safe career path where little more than storm-related outages and an occasional rate increase would cause industry officials to raise their eyebrows. Yet the public has become increasingly vocal about their concerns over long-term health and environmental issues relating to the current structure and disseminating methods of the power industry, causing a number of ingenious minds to look for a better way of doing things. Recently I was introduced to two solutions that seem predestined to start the proverbial row of dominoes to start falling. There are likely many more waiting in the wings, but these two capitalize on existing variances found in nature and are unusually elegant in the way they solve the problem of generating clean power at a low cost. Both companies have asked me to keep quiet about their technology until they are a bit farther along, but I will at least explain the overarching ramifications.
I should emphasize that both technologies are intended to work inside the current utility company structure, so the changes will happen within the industry itself. To begin with, these technologies will shift utilities around the world from national grids to micro grids that can be scaled from a single home to entire cities. The dirty power era will finally be over and the power lines that dangle menacingly over our neighborhoods, will begin to come down. All of them. While the industry will go through a long-term shrinking trend, the immediate shift will cause many new jobs to be created.
Jobs Going Away
- Power generation plants will begin to close down.
- Coal plants will begin to close down.
- Even wind farms, natural gas, and bio-fuel generators will begin to close down.
2.) Education
The OpenCourseware Movement took hold in 2001 when MIT started recording all their courses and making them available for free online. They currently have over 2080 courses available that have been downloaded 131 million times. In 2004 the Khan Academy was started with a clear and concise way of teaching science and math. Today they offer over 2,400 courses that have been downloaded 116 million times. Now, the 800-pound gorilla in the OpenCourseware space is Apple’s iTunes U. This platform offers over 500,000 courses from 1,000 universities that have been downloaded over 700 million times. Recently they also started moving into the K-12 space. All of these courses are free for anyone to take. So how do colleges, that charge steep tuitions, compete with “free”? As the OpenCourseware Movement has shown us, courses are becoming a commodity. Teachers only need to teach once, record it, and then move on to another topic or something else. In the middle of all this we are transitioning from a teaching model to a learning model. Why do we need to wait for a teacher to take the stage in the front of the room when we can learn whatever is of interest to us at any moment? Teaching requires experts. Learning only requires coaches. With all of the assets in place, we are moving quickly into the new frontier of a teacherless education system.
Jobs Going Away
- Teachers trainers and professors
3.) Automobile Transportation
Over the next 10 years we will see the first wave of autonomous vehicles hit the roads, with some of the first inroads made by vehicles that deliver packages, groceries, and fast-mail envelopes. The first wave of driverless vehicles will be luxury vehicles that allow you to kick back, listen to music, have a cup of coffee, stop wherever you need to along the way, stay productive in transit with connections to the Internet, make phone calls, and even watch a movie or two, for substantially less than the cost of today’s limos. Driverless technology will initially require a driver, but it will quickly creep into everyday use much as airbags did. First as an expensive option for luxury cars, but eventually it will become a safety feature stipulated by the government. The greatest benefits of this kind of automation won’t be realized until the driver’s hands are off the wheel. With over 2 million people involved in car accidents every year in the U.S., it won’t take long for legislators to be convinced that driverless cars are a substantially safer and more effective option. The privilege of driving is about to be redefined.
Jobs Going Away
- Taxi and limo drivers, bus drivers, truck drivers, gone.
- Fewer doctors and nurses will be needed to treat injuries.
- Fewer driving-related-injury legal claims
Post #593 – Friday, February 10, 2012
The Myth of The Visionary Managing Partner
The Strategic Planning Society recently posted on their Linkedin site the seemingly straight-forward question: “What is a good definition for vision?”
 Now please keep in mind that this question is being posed within the fraternity of those who have fostered and perpetrated the belief that every organization should have a vision and that the organization’s leader should be a “visionary” - the originator of such a vision. A flurry of responses came from a community who hold titles like Strategic Planning Manager, Senior Resource Planning Manager, Head of Planning and Control, Senior Manager Strategy Solutions, Strategy Execution Advisor, Managing Partner, CEO, CMO, University Professor and so forth and included:
- The position or status a company aspires to achieve within a reasonable time frame.
- The vision is a concise measurable statement that defines the mid to long-term (three to ten years) goals of an organization. The vision should be external and market oriented and should express how the organization wants to be perceived by the world.
- Vision - a smart ability to look behind horizon
- The ability to stay in a balloon above your business, to see beyond the operational issues
- "Vision" refers to an imagined state of affairs. All else is elaboration.
- Vision consists of thinking ahead and ensuring that colleagues address the right issues.
- Picture-painting by the Leader: We're going [over there]. We need to be there [by this time during a reporting-period].
These responses are coming from very smart, accomplished professionals. This question generated in excess of 65 postings over a one-month period without any real consensus amongst the 6800 members of The Strategic Planning Society of what a vision really is!
To read the complete article - download the PDF.
The above represents my latest column for Slaw.ca 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 # 592 – Wednesday, February 8, 2012
Some Curious New Leadership Announcements
 It is proving to be an interesting week for new CEO appointments . . .
First there was the news from the ABA Journal:
“A CPA, Not an Attorney, Is Named New CEO at Pepper Hamilton”
A Harvard Business School graduate (Scott Green) who is a certified public accountant rather than a lawyer will be the new CEO of Pepper Hamilton. The Philadelphia-based law firm proclaiming themselves “one of the few law firms nationwide to appoint a non-lawyer CEO.”
Then there came this announcement from Ernst & Young:
“Sign of the Times? Next Global CEO of Ernest & Young is not an Accountant. He’s a Lawyer.”
Mark Weinberger, 50, will take over as global chairman and chief executive when Jim Turley retires in June 2013. A native of Scranton, Pa., Weinberger studied economics, law and finance and was co-founder of Washington Counsel, a D.C.-based law and legislative advisory firm.
Does anyone know what’s going on here?
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