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Post #361 – Tuesday, December 9, 2008
Living In The Age Of Entitlement
It’s interesting to note how the bailout of the automakers is indicative of a much larger and pervasive phenomenon.
For decades the Big Three North American automakers have been driven to the cleaners by their Japanese competitors. They ignored changing consumer habits and preferences despite a plethora of data confirming a need for new directions. They paid workers 50% more than the competition and gave their CEOs obscene bonuses as sales dwindled. In response, taxpayers will chip in billions of dollars so they can continue to perform miserably and high school graduates can pull down a hundred grand annually on the assembly line. This apparently, is how things now work in the real world.
Where do these people all get off thinking that they are entitled to some kind of bailout for their years of mismanagement?
 Perhaps this phenomenon of entitlement should be considered a cultural inevitability. After all, the halls of academia have always been a microcosm of the larger society, and what is also happening in the classrooms may not be so distinct from what's going on in the real world. As one professor reports, “Not unlike my colleagues, every semester I receive requests and demands to increase grades and give credit where none is due. I've had students insist that their stress-filled lives and exacting parents must be taken into account when calculating their letter grade. I've received angry e-mails that an assigned grade is ‘unacceptable,’ accompanied by demands that I ‘do something about it at once.’ I have a student who has been AWOL since the start of this semester and approached me three-quarters through the term with the vague explanation that she was going through a difficult time. Her solution was for me to revise the course format so she could get full credit for playing "catch-up" during the last few weeks.
Meanwhile, Ellen Greenberger, a psychology professor in California, reports that students are coming to class with an unattractive sense of entitlement. Her study, which surveyed two groups of approximately 400 undergraduates is published in the Journal of Youth and Adolescence. According to Ms. Greenberger's research, more than one-third of university students believe they deserve at least a grade of B . . . just for attending class!
There's more. Two-thirds of Ms. Greenberger's respondents believed if they explain to a professor they are trying hard, the professor should give "some consideration with respect to my course grade." A quarter of students think if they send an e-mail to their professor they are owed a response the same day.
And there’s even more. Ms. Greenberger's study reveals that students who are academically entitled are more likely to engage in academic cheating, exploit others, shirk hard work and display "narcissistic orientation." She found virtually no connection between self-entitled attitudes and grades, meaning it's not just weak students trying to wheedle better marks out of their profs, and those who do so aren't reaping the benefits on their transcripts. Ms. Greenberg was surprised that parenting appears to have little influence in shaping self-entitled students.
None of this should be shocking or even mildly surprising. These students are hardly any different than the financial institutions, automobile companies (and those yet to come) who are now pleading with the government to solve problems of their own making.
It is a bit like some law firms who think that they should be able to raise their billable rates simply for existing; for responding to the client’s request for service. Increasing legal fees, like the ability to make cars or run a successful financial institution, have become an entitlement.
Post #360 – Wednesday, November 26, 2008
Thoughts For Thanksgiving
The following is an internal e-mail from the Chairman of an AmLaw 100 firm:
 During my adult life, I do not believe there has been anything close to the economic uncertainty now facing our nation’s citizens. If there was ever a time to have concerns or challenges, this must be at or near the top.
So lets not avoid it; lets confront it. In the next day or so, I want you to take a piece of paper and on the left side list all of the concerns, challenges and problems that confront you and your family. Once you have done that, I want you to pause before you think about the blessings of your life. Think first about all of the images of people across the world without food, shelter, drinkable water and basic utilities. Think about all of the folks living in the grip of rampant disease, civil war, despotic dictators, unbearable climate and the absence of basic freedoms. Closer to home, think about the people that are unemployed, homeless, afraid to leave their house due to crime, lonely, seriously ill, or just generally without hope. Think about the hardships and sacrifices of our forefathers who experienced every adversity, but stopped to celebrate their new adventure and give thanks. After you have paused to reflect on the adversity facing so many, I want you to reflect on your blessings and the blessings of being an American. Give some real thought to the blessings of your life, your family, your friends, your colleagues and your community. Reflect on the beauty around you. Give some thought to the freedoms and privileges which are available to us due to the many sacrifices of those before us – freedom of speech and religion, privacy, the rule of law, national security and the freedom to dream and to realize our dreams.
After you have smelled the coffee a bit, write those blessings down on the right side of the page. For most of us, but certainly not all, our blessings will overwhelm our challenges and the right side will far outweigh the left side.
Hopefully that perspective will help you balance your attitudes, give you a grateful heart, prepare you for the holiday and help you channel your energies into helping those around you that truly need it – those whose left side list of challenges really outweigh their right side list of blessings.
It is always more blessed to give than to receive. Have a wonderful Thanksgiving holiday. Thanks to each of you for all you do to serve our clients and to serve each other so well.
Ben Adams is the Chairman and Chief Executive Officer of Baker Donelson in Memphis. The firm has offices throughout six States as well as in Beijing, and a firm I’ve long admired for it’s strong cohesive culture. I was moved by Ben’s communiqué such that I wanted to share it with you. I believe this is an excellent example of the kind of message that leaders of firms need to be sharing with their people at this time and one worthy of emulating. You should know that this communication is but one of the notes available on Ben’s personal blog, which is accessible only by the lawyers and staff within the firm . . . pity!
Post #359 – Tuesday, November 25, 2008
What Should You Do Now?
The November 2008 issue of Law Practice Today, a monthly e-zine published by the ABA Law Practice Management Section has been posted and is well worth reading. The feature story focuses on practicing law in difficult economic times: What Should You Do Now? A Roundtable Discussion on Law Practice in a Time of Great Economic Turmoil.
 Here's a summary of the piece:
The economic turmoil rumbling through the land has lawyers facing layoffs, uncertainty and flat-out fear. In this roundtable discussion, our panel of law practice management experts share their expertise, wisdom and practical tips about what you need to do right now.
Participants included Tom Collins, Jordan Furlong, Patrick Lamb, Bruce MacEwen, Patrick McKenna, Edward Poll, Allison Shields and Merrilyn Tarlton.
There are six parts to the conversation:
1. The Nature of the Crisis – Uncharted Territory.
2. Tell-tale Signs – When Do You Need to Act?
3. Taking a Prudent Approach – Setting the Right Priorities.
4. What Steps Do Make Sense? Some Practical Advice.
5. Predicting the Future.
6. Best Practical Tips.
According to roundtable host, moderator and article author Dennis Kennedy, “I'm proud of this article and highly encourage you to go over to the article and read it from beginning to end. Even better, work your way through the same questions I asked the experts and come up with your own answers to both those questions and the fantastic list of hard questions that Patrick McKenna provides as part of the article.”
Post #358 - Tuesday, November 25, 2008
Deflation Now . . . HyperInflation Coming
According to Bloomberg: The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges amount to half the value of everything produced in the nation last year. As the enormity of the economic bailout continues, one wonders where all of the money is going to come from. Fortunately for me, I have an economist friend who understands this far better than I do and was able to shed a bit of light on the situation for me . . .
From the day of its inception in 1913, the Federal Reserve Board’s assets – the foundation capital of the U.S. banking system – grew, reaching $1 trillion on the 24th of September, 2008. Then, something extraordinary happened. Something breathtaking – and incredibly reckless. In the next six weeks, the Fed added another trillion. The head of the Dallas Branch of the Fed said that he expects to add another trillion before the end of this year. And how else can you keep bailing out banks like the one yesterday.
How does the Fed get these “assets?
Simple. It buys them. And where does it get the money to buy them? Simple again: it creates it. It makes it up. It conjures it out of nothing. So, if it was that easy, how come the Fed didn’t do it before? The answer to that is simple: because when the Fed inflates the money supply it risks inflating consumer prices. People don’t like that. They like it when asset prices go up. But not when gasoline and milk increase in price.
But is no one worried about consumer prices?
In fact, the Fed is worried about deflation . . . about falling prices. Bernanke knows what happens when consumer prices begin to fall. Consumers stop spending – knowing that they will be able to get a better deal in the future. That further depresses the economy. So the Fed has begun a huge program of monetary inflation, intended to offset Mr. Market’s price-cutting.
And now the BIG question: Isn’t there any chance that the Fed will overdo it?
Duhhhh! Remember what happened in the slump of the early 2000s? Alan Greenspan panicked . . . cut rates to 1% and left them there for more than a year. He gave the market the wrong medicine at the wrong time and then delivered such an overdose it set off the biggest bubble in history. Now, it’s a different kind of slump . . . a credit slump. And once again, the Fed is on the scene, like a quack doctor at the side of a heart-attack victim. This time, it's giving stronger medicine . . . not just a 1% lending rate, but actual monetary inflation. Trillions of dollars worth of it. And here, we affirm our unshakeable faith in the people who lead us. They are trying to cause inflation. Eventually, they will get the hang of it. They may shoot for 2% per year; but they are sure to overshoot. The money printers always do.
This continues to just get more and more interesting.
Post #357 - Wednesday, November 19, 2008
Just A Few Seats Remain
My next master class (‘Hit The Ground Running’) for NEW practice group leaders is scheduled to be held on Tuesday, December 2nd at the University of Chicago. Thus far we have registrants from firms such as Husch Blackwell Sanders, Morgan Lewis, Quarles & Brady, Winston & Strawn and Womble Carlyle among others.
 Once again, John Wm Butler, Jr. will be co-presenting with me. Jack is partner and global leader of the corporate restructuring practice at Skadden, Arps, Slate, Meagher & Flom LLP. His group serves corporations and their principal creditors and investors by providing value-added legal solutions in troubled company M&A, financing and restructuring situations. He was the recipient of the first-ever Chairman’s Award from the Turnaround Management Association in 2001 for his contributions to and standing in the corporate renewal industry; and has been listed in all editions of the K&A Restructuring Register, the peer group listing of the top restructuring attorneys and financial advisors in the United States.
As I’m told that there are only a couple of seats remaining, if you are interested in attending, call Peter Franken at The Ark Group (773) 281-4275.
Post #356 – Saturday, November 15, 2008
Standardized Legal Services and Help For Laid-Off Associates
 In his excellent Welcome To The Future article series, Legal OnRamp’s Paul Lippe this week published an interview with UK-based Richard Susskind, an old friend of mine and regarded (certainly in the UK) as the world's pre-eminent legal futurist. Richard’s new book, The End of Lawyers? (which I've just received my copy of) is expected to be available from Amazon in early December. (You can read Paul’s interview on The Am Law Daily site)
To one of Paul’s questions Richard responded, “The book points to a future in which conventional legal advisers will be much less prominent in society than today and, in some walks of life, will indeed have no visibility at all. This, I believe, is where we will be taken by two forces: by a market pull towards commoditization and by pervasive development and uptake of information technology.”
This comment stimulated a couple of intriguing on-line responses of which I couldn’t resist the urge to weigh in . . .
There are two types of products or services, standardized and customized. The latter can never be commoditized and is sold based on expertise. While there may be a few areas where the law has a degree of standardization, the vast majority is customized. Litigation, M&A, international contractual arrangements, fraud investigations, intellectual property, employment law, etc all require specialization and will will continue to be dominated by the highest and best experts one can afford. Until legislators begin to make the law simpler, which is not their job, lawyers and other experts will continue to make significant sums of money. This is basic marketing strategy 101.
Comment By Ned Lips (consultant with VHY Tax and Business Consultants) - November 10, 2008 at 11:44 AM
"The vast majority is customized." Ned, if only that were so!
Michael H. Trotter is his excellent commentary, entitled "Legal Services Have Transformed into Legal Commodities" summarizes all of the various factors that transform the legal services demand curve through four stages (as I see it) from customization to specialization to standardization and finally to commoditization. Trotter's final observation: "If you were to ask partners in most firms today what percentage of their work was commodity products, I suspect that most would say 10 percent to 25 percent. In reality I think the percentage of commodity services for most Am Law 200 firms would be much higher." Now with all due respect to Trotter, I believe he is right in his conclusion, but misdirected in his question. No one wants to admit that their work is not highly specialized and customized. I therefore believe the correct question (which my colleague David Maister and I have been asking partners at significant firms for some years) is: "tell me please, what percentage of your work could you delegate to a junior, given that that junior was properly trained to do the work with quality?" The answers we get are usually upward of 70 percent. The implications are staggering. But don't believe me, try it for yourself.
That said, we should not lose the essence of what my good friend Richard Suskind is saying in Paul's interview - the party is now over, change is coming, and clients increasingly will require more work at lower fees. Richard's observation that "US firms are some way behind the most technologically thrusting of the UK firms" should not be overlooked. By way of an example, apparently conducting due diligence on potential counterparties in over-the-counter derivatives to provide legal certainty in any given jurisdiction can cost anywhere between $10 to $50,000 in local counsel fees plus internal management costs. Allen & Overy has developed a way of cutting its clients’ due diligence costs by way of an online subscription service. For a fixed annual fee of $3 – 4,000 per jurisdiction, you can access a database of legal memoranda to complete the task without hiring outside law firms.
Online subscription services typically require a significant initial investment in non-billable time to establish and then take about three years to break-even. Those on-line services that were launched by many UK law firms five or more years ago are proving to be extremely profitable today. Meanwhile, too many US firms are obsessively intent on short-term billable hour requirements to consider making longer-term investments of this nature.
But I expect that severe cost pressures from a client base besieged by economic adversity could change some of that traditional short-term thinking.
Comment By Patrick J. McKenna - November 10, 2008 at 3:45 PM
Patrick McKenna is absolutely right. If the "vast majority" of legal work was customized, the Indian legal outsourcing industry would not be thriving to the extent it is now. Most transactions start with standardized documentation that is modified to fit the particular circumstances. And more and more of this is now firm-specific capital rather than the knowledge of the lawyer. 21st century practice is going to look very different from that of the 20th century.
Comment By John Flood (Visiting Professor at the Institute for the Transformation of the State at Bremen University in Germany) - November 10, 2008 at 4:45 PM
 AND WHILE I’M ON THE SUBJECT – Kudos to Paul Lippe. I’ve learned this week that while primarily a resource for inhouse counsel, Legal OnRamp is inviting associates who are being laid off in the larger firms to request an invitation to join. Apparently they are putting together a career center with a variety of resources, including job listings and various networking and skills development activities. Just indicate which firm you are being laid off from when you request an invitation at www.legalonramp.com
Post #355 – Monday, November 11, 2008
Demand For Legal Services
 There has been some discussion of late (see Post #347 and the latest question posed to our Managing Partner’s Leadership Advisory Board) as to whether there is a trend towards a reduction in the demand for legal services. While such a suggestion would be considered to be heresy within professional corridors, there is nevertheless some rather disconcerting trends that you should be aware of . . .
While corporate spending on law firms is reported to be decreasing
According to the latest ACC / Serengeti survey of 337 law departments, spending on outside counsel fell 9.1 percent and dropped to its lowest level in eight years. While legal costs incurred by US companies continues to increase, that spending has gone to in-house lawyers rather then to retaining outside counsel.
A new Financial Accounting Standard 141 (R) covering business combinations is about to take effect
As part of n evolving shift to international accounting standards, the Financial Accounting Standards Board last year voted to change the U.S. rules for accounting for M&A. The new requirements, often called the “acquisition method” by the accounting crowd and viewed by some as less beneficial to companies than the current “purchase-accounting method,” will take effect for acquisitions that close on or after Dec. 15, according to financial accounting standard 141R, which replaces FAS 141.
Under this new accounting rule acquisition or deal costs are to be expensed in the year the deal is incurred, rather than how they had been traditionally handled, as a capitalized item that could be amortized over numerous years (or even deferred as “goodwill”). The implications of this rule change are profound. M&A transaction costs will be tossed out of purchase price. The new rule does not allow, for example, fees charged by investment banks, attorneys, and valuation specialists to be lumped into the price of an acquisition, as is currently allowed. Corporations who were far less sensitive to their outside law firms simply wrapping their fees into the total cost of the final deal will likely now be highly sensitive to what their deal costs are, since these costs will have a very direct and immediate affect on profitability.
Which may mean less deals actually going through.
This new accounting method requires companies to recognize all of the acquired company's assets and liabilities at fair value on the day the acquisition closes. This holds true even if a company acquires just a controlling interest in the business.
At the end of October, Key Bank claimed to have shied away from making an acquisition because of the effect of fair-value accounting (FAS 157) in conjunction with another accounting rule (FAS 141R), on mergers and acquisitions. Chuck Maimbourg, senior vice president at Key explained, “Our biggest challenge has been at the intersection of 141R and 157.” In accordance with FAS 141R, Key Bank would have had to value the portfolio of loans of the bank it was hoping to acquire at fair value on the day of the acquisition. But that would have required taking into account market prices, which he said reflected “huge markdowns.” That meant the deal would have negatively impacted Key’s balance sheet and forced it to increase its regulatory capital once the acquisition was complete.
Post #354 – Wednesday, November 5, 2008
Effective Management Strategies For Practice Group Leaders
Managing Partner Magazine has announced the publication of a new comprehensive guide and reference tool for practice leaders to develop the necessary skills and leadership techniques.
 According to the announcement: Managing Partner Magazine's new independent report Effective Management Strategies for Practice Group Leaders is specifically focused on the development and implementation of effective practice group management strategies. It has been written for those involved in any capacity with the contribution to, or management of practice groups and client teams and offers readers the information and support they need to ensure that they are an integral part of their firm’s long-term success
Effective Management Strategies for Practice Group Leaders covers topics including:
- The changing role of today’s Practice Group Leader
- Assessing team abilities, so that everyone is playing to their strengths
- Motivating, driving and gaining commitment within your group
- Common communication mistakes and how to avoid them
- The pitfalls and benefits of having co-chair or co-head positions
- Striking a balance between client work and group management
- The challenges of managing geographically diverse practice groups
- Demonstrating the value a strong group can add to the organization
- Effective business development, marketing, and cross selling to differentiate your practice group
- Financial management and the effects of the current economic climate on practice groups
- How diversity can be increased at the practice group level and in turn increase business
- Meeting and exceeding the expectations of managing partners
- Determining and nurturing the skills you need to be a successful practice group leader
- Talent management: recruitment and retention
- Capitalizing on the practice support functions in your firm
This brand new report includes expert contributions, insight and case studies from those who have achieved high levels of success and recognition in these areas including Morrison & Foerster LLP, Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, Fenwick & West LLP, Nixon Peabody LLP, Patrick McKenna (yours truly) and many more . . .
This is my second contribution to Ark Publishing and Managing Partner Magazine (see: Passing The Baton: The Last 100 Days) and the third book published this year within which I have had the pleasure of contributing a chapter.
This new report will be available at the start of December; however you can preorder your copy before November 25th and save $200. Place your order quoting code #DS-PGL1 and contact Michelle Elam at (309) 681-0960
Post #353 - Saturday, November 1, 2008
Admirably Prudent Management Action
One firm that I’ve long admired for their sensible management is Eversheds. A report from the firm claims that partners at Eversheds (one of the U.K.'s largest law firms with about 2000 lawyers), plan to pass on taking a draw from their profits over the next two quarters - a move seen to be a shrewd response to the economic downturn.
"This is about keeping working capital in the business and we envisage not paying two quarterly drawings," claimed an Eversheds spokesperson.
While law firms operate different remuneration plans, partners generally get a basic payment every month with additional profit checks quarterly or annually, Eversheds, which has about 40 offices worldwide, said the move should improve billings and handling of work in progress.
 Managing Partners would be well advised to build up a reserve of cash so if the market gets worse they have a bundle of cash to sustain their operations. This is fast becoming a time when ‘cash is king’ so it becomes critical that you manage your cash position:
• Watch your accounts receivable daily. Beware of any clients who display a pattern of slow payment and call or visit them immediately. Review both your largest clients and your riskiest clients to determine the potential impact of economic adversity on their ability to meet their obligations to you.
• Make sure your overall cash position and anticipated cash needs are in line with your firm’s short-term goals and risk tolerance. Do you have sufficient cash reserves for the next 60 days to 90 days?
• Check with your bankers on the status of your credit availability. Are you in compliance with their terms? Will your bank renew their commitments at similar amounts, rates and terms?
Post #352 – Monday, October 27, 2008
A McKinsey-Inspired Strategy
According to the most recent issue of Lawyer News Daily, White & Case is set to overhaul its management team as part of a worldwide strategic review following recommendations from management consultants McKinsey & Company.
The report informs us that the firm is in the process of selecting heads for newly established regional divisions and practice groups. The aim is to promote greater global unity within practice areas rather than seeing offices operate as independent fiefdoms. The new management will operate as a matrix with, for example, three regional chiefs in Europe (Central and Eastern Europe, Germany and Western Europe) working in tandem with global practice area bosses. “The firm wants to become more profitable and driving growth on a practice group basis rather than by office may well help it to do that,” said a source.
NEWS FLASH for firm chairman Hugh Verrier: You could have saved yourself some serious professional fees by simply reading and acting upon the advice provided by David Maister and I in an article we co-authored in 2006, entitled: Addressing Structural Complexities.
And, I thought it really rather quaint that McKinsey also recommended scaling back the partnership in unprofitable practices, “but it is understood that the firm does not currently have the stomach for such radical change.”
Cartoon courtesy of Jim Barker.net
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