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Post #520 – Sunday, January 30, 2011
Positive Deviance
 As we discussed in New York at our Change Forum this past week, when firms are faced with a seemingly insoluble problem they may try to bring in experts and explore best practice. But a solution may exist among individuals within your offices who have been experimenting with various approaches and may already have the answer. The trick is to find them and embrace the innovative concept of "positive deviance."
The principle of positive deviance is to focus on the successful exceptions – those attorneys who may have already been experimenting with new ways to offer clients value or to embrace alternative fee arrangements, or some novel challenge that is currently baffling the majority. The premise is that at least one person in your firm, working with the same resources as every other partner, may have already found all or part of the solution to the problem that confounds others.
The attached article is from the book The Power of Positive Deviance: How Unlikely Innovators Solve the World’s Toughest Problems authored by Richard Pascale, Jerry Sternin and Monique Sternin. This excerpt was published in Strategy Magazine and I am grateful to my friends at the Strategic Planning Society to be able to share this article with you.
Post #519 - Monday, January 17, 2011
An Example of Enlightened Firm Management?
A little noticed announcement today from UK powerhouse Freshfields . . .
Now, for anyone who doesn’t know, Freshfields Bruckhaus Deringer LLP (informally Freshfields) is a global law firm headquartered in London and a member of the 'Magic Circle' of leading UK law firms. It is the second-largest law firm in the world measured by revenues with 27 offices in 16 countries across Asia, Europe, the Middle East and North America.
According to the announcement, the senior management team at Freshfields has emphasized its commitment to client work by pledging that all partners in management positions will spend a significant proportion of their time on fee-earning. This commitment follows the replacement of joint senior partners Konstantin Mettenheimer and Guy Morton with a three-man team featuring managing partner Ted Burke.
 My thoughts:
I guess with 2009/10 total
revenues of £1.14 billion and profits per equity partner of £1.4
million Burke figures that they can now just operate on auto-pilot.
Imagine this scenario . . . think about a publicly traded company, a company that you have personally invested in and a company wherein you own a fair amount of shares in your personal investment portfolio. Now, imagine that this same public company has just issued a press release stating that they are going to redirect the time and attention of their senior management into spending more time on the production line.
Now, is that a buy sign for you ("let me immediately get out there and buy more shares) or a SELL sign?
Post #518 – Thursday, January 13, 2011
When Authority Perverts Leadership
Having read my Post #509 on When Leaders Stumble, one reader directed my attention to some interesting psychological research . . .
Apparently, a few years back, a psychologist at Berkeley was interviewing new students on campus. He presented the students with pizza and a survey, asking them to provide their first impressions of every other student in the dormitory. This psychologist then returned at the end of the school year to survey the same students once again. According to the results, the students at the top of the social hierarchy were the most powerful and respected, were also the most considerate and outgoing; and scored the highest on measures of agreeableness and extroversion. In other words, the survey’s conclusion was that nice guys finished first. These results are not unique. Other similar research in the military, within corporations and politics clearly indicates that people give authority to those that they genuinely like.
Now for the bad news. When some of those nice people finally get into power positions, they begin acting inappropriately and become totally impulsive. In other words, while a little compassion might help us climb into positions of responsibility, once we get to the top, we end up morphing into a different kind of individual. According to numerous psychological studies, one of the fundamental difficulties with authority, or position, is that it makes us less sympathetic to the concerns and emotions of others.
 One might remember Goldman Sachs CEO Lloyd Blankfein waving away public outrage in 2009 by saying that he was “doing God’s work.” There was also the insistence by several top bankers after the immediate threat of the financial crisis, that their banks could have easily survived without government funding, but that they were strong-armed by the Treasury Secretary to accept the funding. It is telling that Blankfein is the son of a Brooklyn postal worker. A working-class boy who made good. And while we might imagine that such a background would make him especially sympathetic to those who are struggling – sadly, the opposite is often true. For these elite leaders, some twisted sense of meritocratic achievement can inspire high self-regard and indifference to those around them.
There is no easy cure to prevent the atrophy of good leadership. Some would propose term limits; while others suggest that the best treatment may well be transparency and that the worst abuses of position can be prevented when people know they are being watched closely. Still others suggest that even top leaders require regular performance appraisals.
What do you think?
Brian Burke (Chair Emeritus at Baker & Daniels), Harry Trueheart (Chariman of Nixon Peabody) and I will be discussing this and other issues at our special unique master class for new managinging partners (First 100 Days) in New York (American Management Conference Center) on January 26.
Post #517 – Monday, January 3, 2011
The Illusion of Tracking Time
 While the debate over the billable hour may have subsided, the debate over the necessity of tracking time seems to rage on.
I had an interesting back-and-forth over the holidays with Ron Baker. For anyone who doesn’t know who Ron is, I am pleased to commend his expertise as he is the original trailblazer on a passionate mission to rid the professional world of the billable hour.
Our discourse revolved around an article entitled The Seven Myths of Alternative Fee Arrangements and one particular recommendation that spoke to the need to track billable time and also stated that: “in order to evaluate the effectiveness of the AFA, corporate law departments should carefully monitor how much time and resources their outside law firms are devoting to a case.”
Meanwhile, from Lee Rosen of the Rosen Law Firm in yet a separate article, comes the rationale for why you should track your time while handling fixed-fee matters:
• keeping time helps you figure out what you should be charging if you’re using an alternative billing approach, and it better prepares you for providing clients with estimates;
• the more you understand the time required to achieve particular results, the more efficient you become; and
• tracking your time minute by minute will answer your questions about what happened to your day.
I firmly believe that if you are really employing an alternative fee arrangement, like a fixed fee, you’ve already determined, from having executed many of the same deals, a darn good idea of how much time it is going to take to complete the matter. Why would you then require intelligent professionals to waste time complying with some bureaucratic requirement to track their time?
Ron’s evidence supports my belief: There are over 1,000 firms that we know of—and I’m sure there are many more—that don’t track time. These firms exist in all professional sectors—advertising, consulting, CPA, IT, and law firms. They exist all over the world. Some are among the most profitable firms in their sectors. Yet, none of the people advocating timesheets seem to show any intellectual curiosity about how these firms manage without them. What have they replaced them with? Why haven't they gone back to using them if they're so critical? Why the dogmatic insistence on maintaining timesheets without any acknowledgment of firms that operate successfully without them?
Why, indeed!
Why insist on linking timesheets and cost accounting when time recording is not the only way to perform cost accounting? (It’s important to remember that a “billable rate” is not cost accounting, since it includes a profit margin. To be true cost accounting, you must remove the built-in profit from the hourly rate).
Why don’t they recognize that project management is based upon looking into the future, not backwards with lagging indicators?
Why continue to expound an “efficiency” argument, when what matters in firms is effectiveness? And why continue to believe that timesheets even measure efficiency? This is the illusion of control.
AND, then of course there are the legal consultants that, in various articles on this same subject, offer their advise:
Delay the timesheet-burning ceremony for a few years. Determine fixed fees objectively, compare the result with the value of recorded time and build corporate knowledge and estimating skill.
Ron continues, when I see a consultant write on the necessity of timesheets, I want to ask them: Do you know the difference between a Key Performance Indicator and a Key Predictive Indicator? Do you understand the difference between a leading and lagging indicator? The difference between efficiency and effectiveness? I have seen very few of the consultants even refer to knowledge workers, or how they are different than manual laborers, which is who timesheets were developed for.
I’m personally fascinated with this subject. What is your view? What do you think is going on here?
By the way, Ron’s new book (released just last week) ‘Implementing Value Pricing’ has case studies from many firms that operate without measuring time.
Post #516 – January 1, 2011
Enjoy Life NOW – It Has An Expiration Date
 I received this intriguing little story by e-mail this morning from my friend Ed Reeser, a former AmLaw managing partner. It really causes one to pause and think about what one might be missing as we rush around being preoccupied with the busyness of business. Anyway, I thought I might share the story if you haven’t already heard about it, as I think it is perfect for a New Year's Day:
In Washington DC , at a Metro Station, on a cold January morning in 2007, this man with a violin played six Bach pieces for about 45 minutes. During that time, approximately 2,000 people went through the station, most of them on their way to work. After about 3 minutes, a middle-aged man noticed that there was a musician playing. He slowed his pace and stopped for a few seconds, and then he hurried on to meet his schedule.
About 4 minutes later: The violinist received his first dollar. A woman threw money in the hat and, without stopping, continued to walk.
At 6 minutes: A young man leaned against the wall to listen to him, then looked at his watch and started to walk again.
At 10 minutes: A 3-year old boy stopped, but his mother tugged him along hurriedly. The kid stopped to look at the violinist again, but the mother pushed hard and the child continued to walk, turning his head the whole time. This action was repeated by several other children, but every parent - without exception - forced their children to move on quickly.
At 45 minutes: The musician played continuously. Only 6 people stopped and listened for a short while. About 20 gave money but continued to walk at their normal pace. The man collected a total of $32.17
After 1 hour: He finished playing and silence took over. No one noticed and no one applauded. There was no recognition at all.
No one knew this, but the violinist was Joshua Bell, one of the greatest musicians in the world. He played one of the most intricate pieces ever written, with a violin worth $3.5 million dollars (a handcrafted 1713 Stradivarius). Two days before, Joshua Bell sold-out a theater in Boston where the seats averaged $100 each to sit and listen to him play the same music.
 This is a true story. Joshua Bell, playing incognito in the D.C. Metro Station, was organized by the Washington Post as part of a social experiment about perception, taste and people's priorities.
This experiment raised several questions:
• In a common-place environment, at an inappropriate hour, do we perceive beauty?
• If so, do we stop to appreciate it?
• Do we recognize talent in an unexpected context?
One possible conclusion reached from this experiment could be this: If we do not have a moment to stop and listen to one of the best musicians in the world, playing some of the finest music ever written, with one of the most beautiful instruments ever made . . . How many other things are we missing as we rush through life?
Post #515 – Friday, December 31, 2010
Reflecting On The Year Ahead
 Looking back over the past year and the leadership legacy you have been creating . . .
• What do you need to let go of or complete before the year is over?
• What type of personal example did you set for others during this past year?
• Did you handle those sensitive and difficult situations in ways you would want your team/firm members to remember?
 • As you look at your personal day-timer over the past twelve months – how did you spend your time and what message do you think you sent your people about what it is that you really value?
• What specific initiative did you successfully put in place during this past year, that helped your team/firm pursue excellence?
• As you reflect upon those of your competitors that did well in 2010, how might you incorporate some of the things they accomplished into your team/firm?
• Looking to 2011, is the climate you are creating within your team/firm conducive to innovation or is the prevailing attitude one of caution?
• What specific goal will you set for yourself over the coming year, and how will that goal stretch your thinking and your actions going forward?
Post # 514 – Tuesday, December 21, 2010
A Year In Review
 I’m often asked about my consulting practice, what kinds of assignments I get called in on, for what sized firms; what I’m currently researching and writing about, and just generally how I spend my professional time. I looked back over my various activities during this past year. With some of these items (like clients served) activity is not a sufficient measure; results and the client’s satisfaction are really what counts (and to that end, you can find numerous client testimonials and commentary throughout this web site). But for purposes of looking at where one’s time is invested, here is what my 2010 looked like:
• Client Firms Served:
GEOGRAPHIC LOCATIONS
73% U.S. Based
9% Canadian
18% International
NATURE OF ASSIGNMENTS
55% developing comprehensive strategic plan
36% management and leadership issues
9% client relations and marketing projects
FIRM SIZE RANGE
27% firms of over 500 attorneys
18% firms of 300 to 500 attorneys
55% firms of 100 to 300 attorneys
• Initiated 2 Published Research Projects covering:
- Managing Partner’s Issues
- Bring About Change: What works and what doesn’t
• Participated in 5 Speaking Engagements:
Conference Chair & Presenter: Change Leadership (March)
Presenter - Alternative Fee Arrangements Seminar (March)
Facilitator: Practice Leaders Masterclass – ARK Group (August & December)
Panel Participant: American University College of Law Conference (October)
• Authored or Contributed to 25 Articles in Publications including:
American Lawyer Magazine
Managing Partner Forum e-Newsletter
Of Counsel – Legal Practice and Management Report
Australasian Law Practice Journal
ABA Journal – Law News Now
CBA PracticeLink – Law Firm Leaders Edition
SLAW – Cooperative Legal Weblawg
VSAE Association Press - Society of Association Executives
PSF Journal
• Acknowledged as a Contributing Source to 3 New Books:
- Legal Department Benchmarking Report 2010
- Strategy Development For Practice Group Leaders -- ARK, to be published January 2011
- the second in 2011 is not yet titled and will deal with the issues facing managing partners
• Honors
- My Leadership Rants blog was identified as one of the top twenty practice management resources and also recognized by Accounting Web.
- Finally, I have MBA students from Harvard interviewing me in the process of researching and writing a Case Study on my exploits - from starting Edge to my latest adventures.
 In spite of the challenges we face in the world, I am extremely thankful for the privilege of doing what I do. I might call this brief snapshot my personal Annual Report.
To everyone: I wanted to say thanks to you for being able to serve and spend time with you in the past. Thanks for your confidence and commitment.
To my valued clients: I look forward to serving you again in the future.
To my colleagues and friends: thanks for being a gift in my life.
I wish you and your family the very best for 2011.
Post # 513 – Tuesday, December 21, 2010
Seeing Possibilities Where They Didn’t Yet Exist
 Given that it is the end of another decade, I was struck by a story that you may have heard before, but was news to me:
Apparently, some ten years ago Ralph Palumbo and Otto Klein, two partners in Heller Ehrman’s Seattle office, presented to their firm’s chairman a 20-page document. Though its official title was “Creating the Law Firm of the Future,” it came to be known as “The Manifesto.” And it was nothing short of revolutionary. The Manifesto had clear intentions. “Our task was ambitious,” Palumbo and Klein wrote: "To make the practice of law more fun, more productive and more profitable."
Its prescriptions included eliminating the hourly rate system, providing a service guarantee, allowing customers to define success, radically reducing overhead by vacating high-rise office space and moving to a renovated warehouse, abolishing the title of “associate” to make every attorney an equity partner, and instilling an unrelenting obsession for customer service. Perhaps the most unsettling proposal to traditional law firm owners was to include a blank line at the bottom of every invoice where clients could add or subtract from the total fee based on their perceived value of the service.
In short, Palumbo and Klein looked at law firm management as it had been practiced for decades and saw an opportunity for something different: They reframed a firm’s success as defined by clients instead of by attorneys. They appreciated each lawyer’s expertise and contribution to the firm instead of focusing on the partners at the top of the hierarchy. They embraced warehouse space as viable real estate instead of dismissing it because it wasn’t at the top of a building. They envisioned new practices in billing, customer service and organizational relations that could build satisfaction and value for customers, lawyers and the company.
Robert Rosenfeld, chairman of Heller Ehrman, didn’t fire Palumbo and Klein for their insurgent and entrepreneurial thesis. Instead, he invited them to present it to the firm’s partners for consideration. When it became clear that the other partners weren’t quite ready for a revolution, Palumbo and Klein started their own firm, Summit Law Group, using the Manifesto as its foundation. Today, Summit Law Group employs 24 attorneys (all equity partners) and touts an A-list of clients whom they serve in its class-C office space.
According to one Summit Law Group member, “We determined that our physical plant—office layout, location, and design—would be critical to enabling us to implement our theories. So we found office space outside of the downtown district, designed the interior so that all offices are sized and configured similarly regardless of seniority or status, and oriented workspaces to maximize the benefits of technology. This lowered our overhead so that we could lower our rates."
"We also promoted a sense of mutual respect and value for all employees so that we could promote teamwork; and we subordinated superficial trappings of traditional law firms in favor of technology to maximize efficiencies. By envisioning and creating equitable work spaces, eliminating hierarchical distinctions between partners and associates, and inviting all the firm’s attorneys to become owners of the business and help make decisions, the firm cultivated an entrepreneurial culture and gave all employees a stake in its success."
Here’s to 2011 . . . the start of a new decade that will require of the most successful firms that they focus intently on value, transparency and innovation. And here is to the prospect of more lawyers creatively exploring opportunities to examine alternative points of view, question conventional perspectives and brainstorm new possibilities!!!
Post #512 – Friday, December 10, 2010
Does Your Firm Have a New Leader About to Take Office?
 Does your firm have a new leader about to take office? How is that individual going to prepare themselves for the (often, unexpected) challenges that lay ahead?
From my work, I can confirm that most every new firm leader transitions through four very predictable phases early in their tenure . . .
- from ‘Anticipation’ (the peak of inflated expectations)
“I guess my partners really do think that I can lead this firm to greater heights”,
- to ‘Adjustment’ (the trough of disillusionment),
“What the hell did I get myself into?”
- to ‘Acclimation’ (the slope of enlightenment),
“Given what I’m dealing with, how do I make this work?"
- to finally, the phase of ‘Acceleration’ (the plateau of productivity)
“I think I’m starting to get the hang of this!”
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. My research clearly shows that without guidance, by the 10-month mark, over 40% of new firm leaders are finding the job extremely difficult and not what they expected. One needs only look to Jeffrey Kindler, the General Counsel who became CEO at Pfizer who announced his unexpected resignation last Sunday and is the rare CEO to publicly acknowledge that the job just “wore him out!”
The role of being a law firm leader today is more stressful than ever, thanks to a greater emphasis on economic stagnation, globalization, commoditization, and competition. Unfortunately, new leaders aren’t exactly receiving much by way of prescriptive guidance, with only 14% reporting in my survey of 92 law firms (November 2010) that they were given any coaching by their predecessor – or others in the firm.
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. That's why the 100-day transition period is so important.
Now there is a special program available for new law firm leaders. The Fourth Annual session entitled: First 100 Days: Master Class For The New Managing Partner is scheduled for Wednesday, January 26 at the American Management Center in New York. Earlier sessions have been attended by new managing partners at: Cozen O’Connor, Davis Wright Tremaine, Drinker Biddle, McCarter & English, Irell & Manella, McDermott Will & Emery, Holland & Knight, Vorys Sater and over 40 other firms from four different countries.
According to the (unsolicited) comments of one firm leader, a full year after attending our first session: “Your program really did help me to prioritize my goals and objectives for the first 100 days. As I look back, I really didn’t know what I didn’t know leading up to taking on this new responsibility as the Managing Partner. The guidance and suggestions I took away from the seminar (and reading materials) were extremely helpful. I had a much better understanding of what to expect. I really do appreciate all of your help.”
For more information, please give me a call: 780.428.1052
Post #511 – Tuesday, December 7, 2010
Looking To The Economy in 2011
My earlier posts noted what future law firm leaders need (#506) and what a future law firm might look like (#507) so perhaps it’s time to touch on what the future economy may bring. What a couple of weeks it has been for the economy. A bold plan to slash the U.S. budget deficit failed to win the support needed to trigger legislative action in Congress. The government confirmed that the unemployment rate jumped to 9.8% (at least). And if that wasn’t enough, the government has now extended unemployment benefits and expiring tax cuts that will add to the current deficit - about another 700 to 800 billion dollars!
 And what a deficit it is becoming. A trillion dollars here, a trillion there.
When a company experiences what accountants call 'a material adverse impact' on its expected future earnings, and those changes affect an item that is already on the balance sheet, the company is required to report the negative impact - 'to take the charge against earnings' - as soon as it know that the change is reasonably likely to occur (at least that is how it was when I sat on the board of a public company). These days, governments seem to believe that Generally Accepted Accounting Principles are some sort of conspiracy. For example, the current debt numbers start to get really hairy if you add in liabilities under Social Security and Medicare and there is no national nest egg to fund those entitlements. Then you can add in another $1 trillion for the retirees' health care and other benefits at the state level, another $1 trillion (or more) in liabilities related to guarantees of the Fannie Mae and Freddie Mac bailouts . . . and pretty soon were talking about some serious money that is owed!
Boston University economist Lawrence Kotlikoff told us all a couple of month back (in a widely quoted article in Finance and Development, a journal of the International Monetary Fund) that the US government debt was NOT $13.5 trillion as most global investors and taxpayers think, but really more like $200 trillion. BUT, is anybody listening?
In my article (Managing Through A Prolonged Downturn) from August 2008, I forecasted that "for the next five years, every time you think it's safe to get up and dust yourself off from this downturn, every time you feel like you've endured the worst of it, another piece of news is going to come along to freshly bludgeon you. This time the economic slowdown is going to be a lot different and, in many ways, a hell of a lot tougher." Meanwhile, I received an e-mail from my favorite economist colleague warning that: "Next year is going to be worse than 2008 – a lot worse. Here's why:
1. The euro is going to fail. Ireland, Spain, and Italy's sovereign debt cannot be financed. Shares of even the biggest and strongest of Europe's banks (Deutsche Bank) have begun to "roll-over."
2. More QE in Europe and America will make it much more difficult for businesses to invest across borders. That will result in massive trade problems and could easily cause a global famine. Most people don't realize how dependent the world has become on free trade for basics, like food. Agricultural prices have increased dramatically since July when QE II began. Vastly higher agricultural prices are not bullish for financial markets or world order.
3. Housing in the US is going to collapse, again. The various games that have been played to prop up the housing market in the US have failed. Tax credits, etc. haven't worked . . . and they never had a chance. According to contacts in this industry things are completely bleak. With foreclosed properties making up 25%-50% of the inventories, housing prices will continue to fall 10%-15% a year - or more. There will be no new net demand for homes for a long time. Several major homebuilders will go bankrupt, including the largest, Pulte.
4. Lots of major US corporations - see GE - have unsustainable debt loads. These companies will end up bankrupt and will fire at least 50% of their employees over the next three years.
5. Probably half of the states and municipalities in the US are being run in a way that's completely unsustainable. Beyond the official federal debt, there is another $2.5 trillion or so in state and local debt, according to Federal Reserve figures. One of the biggest areas of liability is the pension payments owed to government workers. The states have been running a mad-scientist experiment in their pension funds, making huge promises but skipping the part where they sock away the money to pay for them. As budget cuts are made it will have a big impact on the economy. Take a look at what happened to Cisco this last quarter, all because of cutbacks at the local government level.
The problems of 2008 haven't gone away. We've just borrowed a lot more money to make people think everything would be okay. As the veneer wears off, this time it will be worse, because there's zero trust and confidence left in the government or the bankers.
I don't mean to sound pessimistic, and this is not to generate fear. We need not be afraid, but rather those who are prepared will thrive, and be well-positioned for the opportunities that await. Conversely, those who cling to the old system, hoping for a return to the carefree days of the past, will have their lives turned upside down, yet again. In 2011 you need to make sure that every area of your firm is being run in a very prudent way.
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