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Rant #652 – Friday, March 1, 2013
I’m pleased to be participating, for the second year, as a
Law Firm Leadership Mentor and one of only nine individuals in North America,
for the Mentoring Programme established by the International Bar Association.
The aim of the Mentoring Programme is to
provide law firm management advice and guidance to lawyers who do not have easy
access to management consultancy services. The first version of this Programme
was launched by the Law Firm Management Committee in 2009 as a pilot programme
available to IBA members.
For more information: http://www.ibanet.org
Rant #651 – Friday, March 1, 2013
The Demise of The Small Banking Industry
I had heard about this trend taking shape from lawyers
serving the industry for some time now, but after reading a report this week I
see that things do not bode well for the small banking industry as they bear
the brunt of the regulatory costs following the crisis of 2008.
According to a statement made by James Meagle, a 40-year
veteran and departing CEO of Third Street Bancshares he “didn’t have the patience anymore” for the tremendous changes in
regulatory costs and compliance issues.
Meagle said his bank will have to spend about $100,000 to meet new
demands from regulators. For a small
bank with only one branch, $100K is a lot and probably a big chunk of the money
it makes in a year. Third Street is
privately held, so we can’t know for sure.
ludicrous,” is how Meagle described the regulators’ level of scrutiny. “I don’t know how we’re going to be able to
make it. We can [survive], but we’re
just spending so much time and energy complying with these new
regulations. We’ve been able to hold our
earnings up and we’re still well capitalized, but what I see coming in the
future is not pretty. We really do not
want to sell, but we may have no other options.”
It’s a common
story in the banking sector. What is
this bank to do? The small banks will
have to sell out to larger banks, which can spread out those costs over a
larger asset base. Here is how the Banking
industry is currently configured:
• 80% of the
industry assets ($10 Billion+) are held in 106 Banks/ Thrifts;
• 10% of the
industry assets ($1 – 10 Billion) are held in 561 Banks/Thrifts; and
• 10% of the
industry assets (under $1 Billion) are held in 6769 Banks/ Thrifts.
increasingly becoming evident is that thousands of the banks at the bottom of
this industry pyramid are toast! In
fact, regulatory costs, as well as the banks’ net profit margins (from low
interest rates) put pressure on the next block up to consolidate. The industry consolidation underway will mean
the death of the small community bank. The
consequence of all those new rules and regulations is that the US banking
system will become even more top-heavy. Banks
will get even bigger. Banking assets
will concentrate in fewer hands and the economy will become even more
vulnerable to the “too big to fail” threat.
Post #650 – Tuesday,
February 26, 2013
The State of Alternative Fee Arrangements
I received an e-mail
from my friend Jeff Carr (Senior VP and General Counsel for FMC Technologies
Inc.) this morning sharing some views on the new Fulbright & Jaworski
Annual Litigation Trends Report which was just released. Well articulated by Jeff:
The “highlight” by F&J (pages 20 – 22) is that
companies reporting use of AFA’s is down from 62% to 52% -- particularly among
larger companies. 49% of the companies
don’t use AFA’s at all.• Of those using AFA’s, the majority of mid size and larger companies report use in less than 20% of their matters. In smaller companies, the use of AFA’s in more than 50% of the matters has declined from 36% in 2011 to 13% this year.• Fixed fees are thought to be the most effective in the US (82%) -- although “popular” is probably a better adjective• Performance/Rewards Based are second most effective in the US (80%)• Conditional (aka contingent) fees are considered 100% effective in the UK• Perhaps the most telling is 76% report satisfaction with “quality” of work done under AFAA reporter from Law 360 contacted me yesterday. His tack was essentially “wow use of AFA’s is down – looks like the tide is turning back.” I told him some of this may be definitional, some may be sample related. The report is based on responses from 393 in-house counsel from the US and UK – 82% of which are GC’s, and mid to large companies (49% over $1B in revenue). Some may be focused on litigation only – the AFA questions are vague in this regard. To me at least this demonstrates the following:• AFA’s are effective• AFA’s are in use in a broad range on industries and for broad range of matters• We’ve finally succeeded in banning discounted fees from what’s called an AFA (however blended rates are still included in the definition)• GC’s remain resistant – but while almost half don’t use AFA’s at all, it’s very difficult to find a GC willing to stand up and say why (at least in a public forum)• So, Massive Passive Resistance (or “MPR”) reigns supreme• Unless and until GC’s make use of AFA’s a priority for their teams, MPR will continue• Since firms organized under traditional models benefit substantially from the status quo, they by and large will not be advocates for change• Since law schools generally see either the larger firms of the hallowed halls of academia as their “customer”, they are unlikely to drive for change
The fundamental questions remains: What’s in the
way? What’s holding us back? The answer
– GC passive resistance coupled with politically correct focus on value and
quality. Our profession’s general aversion to risk, focus on precedents
as opposed to innovation, and self-indulgently skewed view of what really
distinguishes legal work from other work conspires to support the status quo.
Besides, it’s a potentially career limiting move for an AGC or DGC – let
alone a staff in-house counsel – to move to AFA’s unless they have air cover
from the GC.
The antidote – CEO and CFO have to break that
resistance by making it important to their GC – yet the issue isn’t
really on their table of strategically important items.
As in-house counsel, while we are part of the
profession, in reality we are its truest customer. Therefore, we have an
inherent interest in preservation as opposed to protection of the profession –
as such, we must be the agents for change. Only we can drive the
profession where it must go to avoid increasing irrelevance.
Post # 649 – Tuesday,
February 12, 2013
New Report from Managing Partner Magazine
I’m delighted to have contributed a chapter to a new
report entitled: Practice Group
Leadership for Lawyers.
In an environment where
innovation, value-added services, and AFAs are now the ‘new normal’, the
effective management of practice groups is fundamental to a law firm’s
Group Leaders are ultimately responsible for the growth and profitability of
their practice area – but they are often weighed down with administrative
tasks, and pressured to deliver as many billable hours as possible. Even worse, PGLs are often not given the
management training they need to deliver the goals and expectations put upon
them by senior management.
This new publication also includes other contributions from: Paul Lippe,
CEO, Legal OnRamp; Perry A. Napolitano, Chair Financial Industry group, Reed
Smith; Tea Hoffmann, Chief Strategy Officer, Parker
Poe Adams & Bernstein; Eric Seeger, COO, Barley Snyder and many others.
Practice Group Leadership for Lawyers covers topics
including:- Facilitating effective practice group meetings- The evolution of effective practice group leadership- Leadership development and recognizing future leaders- Leading large international teams- Addressing practice group under-performance- Managing practice group staffing/recruiting- Leadership Accountable- Professional development and mentoring- Collaboration between business development teams and practice groups- Mentoring and people management- Management activities versus billable hour work
For more information: Executive Summary and Contents
Post #648 – Tuesday,
February 12, 2013
World’s Fastest-Growing Economies in 2013
Forget the BRICs. If it’s emerging markets with explosive
potential you’re looking for, here are some serious considerations:
Mongolia - You have a tiny economy of just under 3 million
people. And they are sitting on enormous reserves of natural resources. The top
10 deposits alone are worth an estimated $3 trillion. It’s a decade-long story. A good analogy is Kazakhstan, which is culturally similar — an old
Soviet-style economy that opened up and created an enormous boom, thanks to
resources. The stock exchange went up 2,400% in six years from 2002; apartment
prices rose 800%-plus and land prices in Almaty rose 8,000%.”
Myanmar (or if you prefer, Burma) - Another great story. Fifty years of isolation and
dictatorial rule and it is finally starting to thaw. There is no reason why
Myanmar can’t approach the development of its neighbors such as Thailand, given
time, investment and a commitment to freer markets. Expect it to be one of
the fastest-growing economies in Asia.
United Arab Emirates - The economy went through a giant bust, but its place
as the money center for the Middle East is secure, thanks to low taxes, privacy
protection and location. It has the region’s biggest marine port and airport
and is home to the highest number of foreign businesses. Best of all, the market is cheap after an
epic bubble, but the underlying economy is still growing rapidly.”
Post #647 – Tuesday, February 12, 2013
Among LinkedIn’s Top 5%
Today I received this nice note: "Congratulations. You have one of the top 5% most viewed
LinkedIn profiles for 2012. LinkedIn now
has 200 million members. Thanks for
playing a unique part in our community."
Very nice! Thanks.
Post #646 – Monday, February 4, 2013
an intense session this past week with a group of eager practice group leaders in
San Francisco, here are some guidelines to reflect upon that emanated from our
various workshop discussions:
• Create goals
that are both realistic and unrealistic; commit your goals to writing and
ensure that they are measurable, and then celebrate the achievement of each goal.
• Be genuinely
interested in the needs of others and be interested in the growth of others
even more so than the others are at times.
• Know that all
endeavors will not be easy and will not happen the way you would have planned
or wished. Inspire persistence even after the first, second, and third
rejection of an attempt.
• Infuse a need
to grow by teaching, rather than giving the answers.
• Maintain an
awareness of just how much your body communicates and remember that your body
continues talking long after your lips stop moving.
• Fuss over
others’ events, achievements, families, and friends.
• Avoid assuming
that your communication or personality style is the one everyone else has and
learn to modify your communication style to the style of others. Adhere to the
principle that “communication is not what was said, but what is received.”
• Give yourself
permission to leave things undone and let go of needing to be perfect, and of
needing everyone else to be perfect.
• Become clear
and comfortable with the fact that leadership does not mean “being the most
popular one on the playground.”
• Believe that
people do what they get paid attention for, and be spontaneous, as well as
scheduled in your recognition efforts; but avoid giving a public person,
private recognition as they will see little or no value in it.
• Remember that
money does not motivate for the long term and becomes expected.
• Address only
areas of behavior and performance when being critical; and avoid engaging
emotions until all angles have been examined. Maintain clarity on the fact that
attitudes are not taught or changed without the owner’s consent.
traits as part of who you are, not what your particular title is!
Post #645– Wednesday, January 23, 2013
Join Me at The Practice Group Leaders Workshop
Join me in San
Francisco next week, on January 30,
for an intensive one-day workshop. There
are only a few days left to register and only a few seats remaining.
are the leader of a practice group or industry team, whether this is your first
experience in leading a group or the custodian of an especially
challenging group of mavericks, you are among the most essential players in
achieving your firm’s long-term profitability and success . . . But this job is not an easy one!
It is your challenge to:
• Create a
strong cohesive group out of a collection of bright, intelligent, autonomous
how, as a practice leader, you add value and what specifically is it, that you
can do, that is likely to affect the success of the group you lead
impact and enhance client satisfaction – turning client needs into growth
• Find a way
to develop a strategic direction in an intensively competitive marketplace and
have your colleagues actually want to work together
effective meetings that result in some action plans being formulated and your
colleagues taking responsibility for actually doing something
Click here for the complete agenda and to register. I
received these sample comments from a couple of practice group leaders that attended my last workshop session in Chicago:
“I enjoyed the
practical tips. Patrick really understands law firm cultures and was responsive
to specific questions and situations.” Kerrin Slatery –
McDERMOTT WILL & EMERY
extraordinarily helpful. Much more helpful than a similar event I went to
at the Harvard Business School. It has given me some terrific insights
that I intend to implement immediately.” Scott Turner –
Post #644 – Thursday,
January 10, 2013
More On Malignant Leaders
My January article in
American Lawyer Magazine, entitled Malignant
Leadership, stimulated a good number of emails from readers wanting to pose
questions and explore this subject in more depth – which makes one wonder
whether they are observing certain behaviors within their own firms that they
find troubling. In any event, here are
some of the questions, followed by my response.
To read the complete post - click here
Friday, January 11 - This was sent by a Partner (from an AmLaw 50 firm) who would prefer to remain anonymous:
Mr. McKenna’s article is excellent. However, the article
appears to be premised upon at least two “aspirational” assumptions: (a) the
managing partner and his/her governing board are open to such procedures; and,
(b) the partners at large have the courage not only to advocate for those
procedures, but to insist that they be followed.
Unfortunately, my own experience, as well as that of many
others I know in large law firms, suggests that rarely do either of these
assumptions prove to be true. More
often, it is the large rain-makers, rather than those most qualified (and most
likely to be receptive to instituting such procedures), who are placed in
positions of firm leadership. Those
individuals then typically seek to consolidate their power by surrounding
themselves with like-minded persons (i.e., individuals who are willing to place
their own interests above those of their partners and the firm as a whole),
and/or persons they can control. Partnership
agreements may be modified to accomplish this, or such agreements may be
ignored altogether. More importantly,
those who could do something about the situation – the partners themselves –
sit idly by out of fear for their own positions, having watched those brave
enough to take a stand being sliced to bits and then unceremoniously hurled out
the saloon’s plate glass window onto the dirt street. Indeed, the partners (myself included
at my former firm) who sit by and do nothing are probably the most to
blame for this situation – they get what they deserve (or some other applicable
However, there’s plenty of blame to go around. Indeed, the bankruptcy courts and those
charged with the responsibility of cleaning up the messes left after these
malignant leaders drive their firms into the ground, fall just slightly below
the rank and file partnership in terms of blame (in my opinion). Until the bankruptcy courts and the persons
charged with administering the bankruptcy process are willing to actually hold
these malignant leaders accountable for their acts – in ways that leave no
doubt that the legal profession and society will no longer tolerate such
conduct – rather than do that which is expedient, there is absolutely no
incentive for the malignant leaders to do otherwise. It is ironic that if creditors in these law
firm failures could see beyond the end of their respective noses (i.e., the
long-term), they would realize that their future interests would be better
served by taking a stand to deter this conduct now, thereby reducing the risk
that they and others will find themselves in this situation again (and again,
and again). It seems to me that
financial institutions who regularly loan money to law firms and individual
partners would be particularly incentivized to do this. Silly me.
Please excuse my broken record regarding this issue of
holding malignant leaders accountable in bankruptcy proceedings; however, as I
believe this point is key. In fact, it
is one of the few areas where behavioral change can actually be effected (as
opposed to waiting for the rank and file partners to stand up and say, “I’m mad
as hell and I’m not going to take it anymore”) in the relatively near term.?
The unchecked malignant partner problem would seem to fall
squarely within first part of Lord Acton’s oft quote adage, “Power tends to
corrupt, and absolute power corrupts absolutely.” I’m less sure of the applicability of the
second half of the adage – i.e., “Great men are almost always bad men.” That is to say, I find it difficult to
characterize most of these malignant leaders, both those whose firms have failed
and others still in power, as “great men.” “Bad men,” yes; “great men”, no. Thanks for letting me vent.
Post #643 – Wednesday,
January 2, 2013
latest article appears today in the January issue of American Lawyer magazine.
wasn’t until a pair of more recent failures, of Howrey and Dewey & LeBoeuf,
that we’ve seen the industry begin to hold a firm’s own leadership accountable
for its failure.
often, boards and/or executive committees facilitate firm failures by denying,
overlooking, or “working around” crucial issues. In other words, firms fail when good people
do nothing! There is an absence of
checks and balances. Power is
centralized, and those responsible for monitoring have either been silenced or
choose to be mute. So when the board is
benign . . . the leadership can become malignant.
can take some time to realize that a firm leader is on a path to disaster. This is particularly the case when the leader
has had a stellar career. Fortunately,
there are firm-governance steps that can be taken to curb a malignant
leader. While this list is not
exhaustive, it does present plenty of options for consideration.
To read the complete
article – click here.
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