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Post #689 – Sunday, December 1, 2013
Join Our Compensation Think-Tank
On January 30th, I
will be joining old friends Mike Roster, co-chair of the ACC Value Challenge;
Professor Bill Henderson from Indiana University; Don Lents the Chairman of
Bryan Cave; writing collaborator Ed Reeser and numerous others in a
“Compensation Think-tank” – a forum for discussion and debate concerning ways
to adapt to the emerging procurement environment and design reward systems that
will attract and retain key lawyers while also incentivizing them to do more
with less and in ways that will accrue to the benefit of the larger
Does the average rank and file partner
understand that the years of ever-escalating compensation have come to an
end? How can firm management address the
pressure to deliver on unrealistic expectations? Of course many see the problem differently -
or don't see the problem at all. No
compensation system is perfect. But any
sound compensation system will remove impediments to good management and be
flexible enough to address the current and future strategic needs of the
How do we make sure that the culture of the
firm, perhaps the single most important component of a thriving organization,
is not only tolerant of change, but in fact complements and is reinforced by
For more information on attending a think-tank focused on aligning
compensation systems with current and future business realities and
the goals and objectives of your firm - go here Compensation [re]Design For Law Firms
Post #688 – Sunday, December
Watch Your Use of Jargon
corporate speak may make meetings seem amusing it can seriously undermine
effective communications. Reading an
excerpt from Flat Army: Creating a Connected and Engaged Organization by
Dan Pontefract over the weekend reminded me of how using jargon undermines a
person’s ability to lead.
out clichés and over-worn vernacular may give you the feeling as though you’re
effectively leading, but in reality it brands leaders as shallow and lacking
true leadership depth,” Mr. Pontefract said.
way of a few examples:
Certain terminology can spur unintended reactions. Continually harping about "getting your hours up" can send a message and drive behavior that you didn't mean to emphasize.
And, consider the numerous acronyms that some lawyers throw around. Those same
acronyms can undermine your communications effectiveness, especially when using
terms that your clients aren’t familiar with.
Meanwhile, from Glain Roberts-McCabe, founder and president of the Executive
Roundtable, the issue is less about jargon and more about juvenile word
choices, such as “my bad.” “Saying
‘oops, my bad’ when you’re in a leadership role makes you sound like an
adolescent and, depending on the severity of the situation, can make you look
like you’re blowing it off with a shrug.
Cutesy phrases don’t make you sound strategic.
Post #687 – Monday, November
Leadership Succession Done
In early 2007 I initiated a
survey and asked
firm leaders to reflect upon the various Managing Partners that they had met, observed and / or read about, from across the country,
and report back their answer to this question: “Aside from your own law firm,
please tell me the name of that law firm Managing Partner / Chair / CEO you most admire for their management
/ leadership competence?”
Far and away the most
admired law firm leader was Robert M. Dell, Chair and Managing Partner at
Latham & Watkins. The announcement
this past week that Bob would be retiring after 20 years as Latham’s firm
leader reflects a loss that will not be easy to fill. That said, the steps the firm is taking should
serve as a role model for any firm that takes management and leadership
Let’s take a look at just a
few of the steps that Latham’s is doing right:
• Dell gave the firm over 13
months advanced notice that he would be stepping down
• To oversee the
identification and election process, Latham has appointed a succession
committee that consists of a diverse group of partners from a variety of the
firm's offices and practice groups.
• Once the new managing
partner is elected, Dell will work with the individual for about 6 months to
help ensure a smooth transition.
• Following this
transition period Dell plans to leave the firm in order to “get out of the way" of
whoever succeeds him. "When a new
person is coming in, following a person who has been doing it for two decades,
I think that new person deserves a lot of space," he says. "So, my
view is it's best for me to retire and to let that person create his own
successes, or her own."
Now contrast this example
with the one reported at Reed Smith. On
October 5th, the firm announced that their Global Managing Partner of 13 years,
Gregory Jordan was leaving (immediately) to become executive VP and GC at PNC
Financial Services. As a replacement, Sandy
Thomas, the firm’s Litigation Department Chair, was anointed (with no
opportunity to deal with his personal practice or be properly oriented into a
job of this magnitude) to take over. According
to the media spin . . . Besides being an "exciting opportunity" for him to join
PNC's leadership team, Mr. Jordan said the time was right to hand over the top
job at the law firm to Mr. Thomas. Asked
how he feels transitioning from his role at the top of Reed Smith to be part of
a team of executives at PNC, Jordan said, "I feel great about
Now think about you
personal investment portfolio. Imagine
the corporation in which you hold the largest number of shares suddenly
announcing that their CEO was fleeing the post.
As an owner, stakeholder and investor - Would that he a “buy” signal for
you or a “sell” signal?
Post #686 – Tuesday,
November 12, 2013
Continuing Anemic Growth
The following is excerpted
from today’s Wells Fargo report (as contained in the AmLaw Daily and written by
Sara Randazzo) together with the commentary from a former AmLaw 100 managing
partner who is interpreting “the story behind this story.”
bank's report—based on a survey of 125 law firms, including 60 in The Am Law
100 and 45 in The Am Law Second Hundred—found gross revenue up 2.5 percent on
average for the first nine months of the year compared to the same period in
2012. At the same time, demand, measured by hours billed, was down 0.75
percent, the report found. The nation's top firms, which Wells Fargo defines as
those with profits per partner of at least $2 million, saw their gross revenue
increase 5 percent on average during the year's first nine months, group senior
director of banking Jeff Grossman says. Among all Am Law 100 firms surveyed,
the average increase was a more modest 2.7 percent. The Second Hundred firms
polled, meanwhile, eked out a 1 percent average uptick in gross revenue.
(That is a very elite
group of law firms. Removing their performance influence on the average
AmLaw 100 firm performance, it means that there will be many firms headed to a
year where revenue performance is down from 2012)
results, Grossman noted, cut against a recent buzzed-about study from
LexisNexis that showed work moving from the largest firms to those clients
consider "big enough." As The Am Law Daily previously reported, that study found
the nation's largest law firms—those with at least 750 attorneys—had seen their
share of outside counsel spending slip in the three-year period that ended June
30, 2013, with firms within the 201-500-lawyer range appearing to pick up much
of that work.
(Don't confuse these firms
with the elite...the largest firms by headcount tended to be among the lower
per partner income platforms in the AmLaw 100, and they did not have a large
plate of high value work).
the demand side, the difference from top to bottom varied slightly, with demand
down half a percent on average among Am Law 100 firms and 1 percent among the
(We should not lose sight
of the survivor bias to reporting in 2013 either. Remember that the Dewey
firm collapsed and at least $700 million of revenue relocated to other firms,
most of them in the AmLaw 100. That was not 'growth' for those firms that
took on the refugees with business to buy their new partnership positions.)
survey suggests that partners, both equity and non-equity, are struggling to
find a satisfactory amount of work. Hours
per lawyer were down 1.1 percent across the board through September, to 1,615
on average. That figure average dropped
into the mid-1,500 range for equity partners and to the high-1,400 to low-1,500
range for income partners.
(The issue here is partly
a demand challenge, but also a compensation adjustment task. Income
partners are very easy to price at a profit...a significant profit. Just
because their hours are in this range does not mean that the firm is not making
a robust profit from them. Likewise, the exploding spread in equity
partner compensation ranges reflects a compression on lower and middle tier equity
partners and a redirection of distributable income to senior levels. They
are converted for the most part to not being true 'partners'. The
compensation adjustment has been made in most firms. It isn't the
management problem that these bankers are saying it is. Most are being
less than they contribute already.)
under-productivity is largely centered in the partner level of all the law
firms," says Grossman, who notes that associates are logging many more
hours than partners.
(Yes, but they are not
being billed, or there are significant discounts when they are billed.
The realization rate on associate hours remains typically poor.)
continues to be one of the biggest challenges law firms are facing. ... Not
enough partners are being asked to leave."
(It isn't that easy.
Dump a partner with a modest book of $1.5 million....and it probably reduces
the distributable income for the firm.)
Grossman says, average hours would be in the 1,800-range based on historic
norms. Meanwhile, the survey shows,
firms have managed to somewhat offset the decline in demand by raising billing
rates yet again. Blended rates are up 4.1 percent, according to Wells, with
effective rates (those actually being paid by clients) up 3.6 percent.
(Part of the demand
problem is that clients stop complaining about rates, and move the work.
If rates are up net 3.6%...but demand is dropping, one is on very perilous
ground. To the extent that associate headcounts are reduced from
lower numbers hired and more attrition, relative to higher rate income and
equity partners, there will be an average rate increase from that dynamic
concern for firms, in Grossman's view, is that expenses and revenue are rising
at the same 2.5 percent rate.
(An expense growth rate of
only 2.5% is unexpectedly low)
he says, is in part a result of slight increases in head count—though not on
the legal secretary front, which continues
to see its share of layoffs. A minority of firms also told Wells
they expect to reduce head count in the future, with 15 percent saying they
expect to cut partners and just under 10 percent saying they plan to thin their
(The cutting of staff at
the levels being reported is a last resort and bespeaks a much lower
utilization. Normally a firm will stop hiring, and normal attrition from
retirements, moves away, and performance review cuts is satisfactory or close
to it. When partner groups leave, if they don't take their support
secretaries, they are now cut rather than redeployed. When partner groups
come, the number of support secretaries taken is severely restricted.
When all that together is still not enough, and group layoffs are
required....there is a lot less work, and that suggests there will be a round
of attorney cuts to follow.)
Wells survey also polled firms on how much debt they are carrying, and found a
6.5 percent drop in line of credit usage. Rather than turning to banks, it
appears, firms are keeping their coffers stocked by tapping
(This was predicted to be
the trend in 2013, pushing full recourse debt on capital borrowings at the
partner level, in exchange for cutting working lines at the firm level.)
survey found average capital levels among the firms surveyed up 4.5 percent, to
an average of $285,000 per equity partner (and $335,000 per equity partner in
The Am Law 100).
(Basically, firms on
average just tapped the partners for an extra $15k-20k. Expect it to keep
There is nothing in this
initial report on the WF perspective that is a surprise, or out of trajectory
with how the year has gone to date. Clearly, things picked up a bit for
some firms in the third quarter, and that is good news. But the big
question is . . . with so little positive change, what are firms going to do now to
readjust to the prospect of what the banks have been saying now for three
years . . . the good old days are not coming back, what are you going to do to
develop a sustainable profit generating enterprise that partners are happy to
be a part of? It isn't a trick question, and it is not an easy one to
Post #685 – Sunday,
November 3, 2013
Law Firm Strategies For The 21st Century
I am delighted to have been asked and contributed to a new
book, due to be released later this month, exploring the complexities of law firm strategy. Published in
association with the Law Firm Management Committee of the International Bar
Association (IBA), this practical title is the first in a Globe Law and Business series on the business of law dedicated to exploring strategic development in
Law firm partners have long resisted the
notion that they need a strategy. However,
markets change and the landscape has become increasingly competitive. Law firms that want to remain competitive need
to think about and engage in strategy development; those firms which have done
so are now undeniably in a better position than those which have not.
This book is organized around the market
and the resource side of law firm management, and offers new ways to think about
strategy and how to discuss it in the context of a partnership. Whether you are a managing partner of a
small, large or international law firm, this book offers points of views which
have never before been aggregated in a single volume. This volume addresses, in a most practical
manner, those questions that are of relevance to today’s law firm management
To download and read a sample chapter, have a look - here.
Post #684 – Thursday, October 24, 2013
Attributes That Distinguish CEOs From Other Leaders
For those who occupy elected law firm boards or executive
committees who need to effectively identify and prepare firm leadership
successors – knowing which skills and abilities matter most is essential. In my latest research, conducted at the
beginning of 2013, (“Inside The Corridors of Firm Leadership”) leaders from
over 100 law firms (all in excess of 100 lawyers in size) confidentially
reported to me that when it came to leadership succession, they really had no
particular process or desired attributes in mind for their next firm leader.
Russell Reynolds Associates (leading firm noted for helping boards make better
CEO succession decisions from 31 offices world-wide) released results from in-depth
analysis they conducted of their database of 4000 executive assessments,
specifically including 130 CEOs. They
examined test scores measuring a number of leadership competencies including
relationship skills, communications skills and decision-making approaches to
determine what CEOs have that other leaders don’t.
findings: Of the 60 common attributes used to assess leaders, CEOs differ from
others in nine (9) of them. In fact,
CEOs differ the most from other leaders in terms of their:
willingness to take calculated risks
bias toward action
ability to efficiently ‘read’ people
The total of these 9 key attributes fall into three categories:
1. Forward thinking (a category of one attribute) is simply the ability to plan for the
future while focusing on the present.
2. Intrepid is the ability to perform effectively in complex and difficult
environments – and includes such attributes as “Calculated risk taking” (being
comfortable with taking calculated but not careless risks); “Biased toward
thoughtful action” (focus on execution but not too impulsively); “Optimistic”
(actively pursuing new opportunities); and “Constructively tough minded”
(thick-skinned and perservering but not insensitive).
3. Team building is the ability to achieve success through others – and includes
being an “Effective reader of people” (understanding different perspectives but
not overanalyzing); “Measured emotion” (one who displays intensity but
maintains control); “Pragmatically inclusive” (involving others in decisions
but also is an independent decision maker); and “Willingness to trust”
(comfortable with a variety of people but not too trusting).
Analysis of the nine attributes reveals a number of interesting
CEO profile paradoxes, according to Russell Reynolds. CEOs are strategic yet tactical, tough yet
emotionally sensitive; decisive yet inclusive.
Much of this parallels research and a subsequent article that I authored
some years ago identifying five different leadership tensions (“The Tensions of Leadership") that all new firm leaders face.
This Russell Reynolds research strongly recommends
that boards incorporate these attributes into their success profile and assess future
leadership candidates across the nine important attributes.
Post #683 – Tuesday,
October 22, 2013
Technique For Making Meetings More Effective
Here is one technique I
encountered to help you make your meetings more effective. It involved creating shared visuals. The practice group had anointed one
individual to flip open their laptop and take notes . . . that then
appeared for all to see on a projected screen. Taking and projecting notes serves a couple of
First, it refocuses everyone
on what they can see before them - which could be a list of questions or
brainstormed ideas; a list of options to be considered and decisions to be
made; or whatever happens to be the key issue on your meeting agenda.
Second, you can use the documentation to drive
problem solving. Framing the discussion
with a simple outline, such as “Problem, Objectives, Facts, Questions, Action
Items, Next Steps,” can help move your group from issue to action steps.
Conclude your meeting by identifying specific
members, the particular project that they have each agreed to work on and
expected deliverables for the next meeting, to the document. Now, given your efforts, your group has a working
document that serves as your agenda for the next group meeting.
Post #682 - Saturday, October 12, 2013
Is Law Firm Pedigree A Thing Of The Past?
Here is an interesting HBR blog post written by Dina Wang
and Firoz Dattu
Have you ever heard the saying: “You never get fired for
buying IBM”? Every industry loves to
co-opt it; for example, in consulting, you’ll hear: “You never get fired for
hiring McKinsey.” In law, it’s often:
“You never get fired for hiring Cravath”.
But one general counsel we spoke with put a twist on the old saying, in
a way that reflects the turmoil and change that the legal industry is
undergoing. Here’s what he said: “I
would absolutely fire anyone on my team who hired Cravath.” While tongue in cheek, and surely subject to
exceptions, it reflects the reality that there is a growing body of legal work
that simply won’t be sent to the most pedigreed law firms, most typically
because GCsl are laser focused on value, namely quality and efficiency.
A recent survey of General Counsel at 88 major companies
conducted by AdvanceLaw (an organization founded by Firoz) - The results
suggest that GCs are increasingly willing to move high-stakes work away from
the most pedigreed law firms (think the Cravaths and Skaddens of the world)… if
the value equation is right. (Firms surveyed included companies like Lenovo,
Vanguard, Shell, Google, NIKE, Walgreens, Dell, eBay, RBC, Panasonic, Nestle,
Progressive, Starwood, Intel, and Deutsche Bank.) The results of the two
questions the survey asked are below.
That 74% of GCs preferred the less pedigreed firm under the
circumstances described in question 1 reaffirms that clients are becoming more
and more comfortable with using a wider range of firms. Moreover, in the U.S., the current cost
premium for an AmLaw 20 firm relative to, say, an AmLaw 150 or 200 firm is
typically far more than 30%. Factoring
in lower hourly rates as well as the greater efficiency most clients say the
other firms deliver, we are likely talking about an overall cost premium in the
What can also seem non-intuitive is that only 11% of GCs
surveyed felt that pedigreed firms, despite the price premium, actually were
more responsive (a key element of client service). However, this actually mirrors Firoz’s
experience at AdvanceLaw, where firms of varying sizes and pedigree are
successfully unseating AmLaw 20 and Magic Circle incumbents on high stakes work
(e.g., a recent M&A deal valued at $500 million; national trial counsel for
a significant multi-state class action).
These firms have been receiving impressive evaluations from GCs and
in-house counsel on responsiveness, expertise, quality and efficiency. One reason for this is that top talent is
increasingly dispersed, not residing solely at the most pedigreed of firms.
This AdvanceLaw survey suggests that clients are serious
about moving high-stakes work away from the most pedigreed (and expensive) law
firms. So, are white shoe firms feeling
the impact of this mindset change? When
we examined revenue per lawyer (a proxy for a law firm’s ability to command a
price premium) across a sample of firms, we found that growth was highest among
non-pedigreed firms. Our sample of 15
especially highly reputed firms (including the likes of Cravath, Skadden, and
Sullivan) experienced an average increase of only 2.9% in revenue per lawyer
over the 5-year period from 2007-12. In
comparison, a sample of 15 smaller, comparatively less known firms posted
average growth in revenue per lawyer of 12.7% in the same period.
Surprisingly, many (though not all) pedigreed firms are
choosing to not yet compete on value, arguing that this would diminish their
future ability to compete for the shrinking pool of high-stakes / high-margin
work. However, as the survey and
financial analysis reveal, this ends up opening the door for other law firms
(as well as non-traditional providers) to slip in and chip away at what we all
once assumed were unassailable relationships between the most pedigreed law
firms and their clients.
Make no mistake: the competition for market share in the
legal space is tough and getting tougher.
What do you think?
Post #681 – Saturday,
September 21, 2013
Fall 2013 Issue of
International Review Is Now Available
my newest issue of International Review – an issue that I hope
contains a balanced blend of thoughtful insight and practical contributions on
law firm strategy and leadership.
I believe that my colleague Ed Reeser
and I were amongst the very first to start cautioning firms about the overuse
of lateral hiring, efficiency - at producing commodity work, and excessive
compensation spreads. These articles have been intended to warn good
firms among the AmLaw 100, 200 and below of the dangers that may lie ahead if
they pursue some of these same strategies and we are gratified by the
supportive responses we’ve received from many firm leaders. In this issue we continue on that same theme
with two articles, Efficiency Is Not The Competitive Advantage and Are You Developing A Star Culture? Our piece on Star Cultures received a lot of
attention throughout July and August in Texas Lawyer, the ABA, The Legal
Intelligencer, Law Technology News, and American Lawyer – where it ranked among
the top five “most viewed stories” on multiple web sites.
our First 100 Days program (see: first100daysmasterclass.com) we introduce new firm
leaders to the same personality assessment taken by Fortune 500 CEOs and
designed to identify their 'Dark Side' - a personalized assessment of those
strengths you possess that, when under extreme pressure or stress, can turn
into vulnerabilities. I am delighted to include an article, Exploring The Dark Side: When Firm Leaders
Overuse Their Strenghts that emanates from research conducted over the past
Finally, Competitive Plagiarism warns us of what
can happen if we consciously or inadvertently replicate the strategies that
others may be pursuing; The Hurdles To
Initiating Change offers a view on what might be holding back some firms
from being more innovative; and Conducting
Client Interviews draws upon the wisdom of some insightful clients as to
their expectations when law firms come looking for feedback.
As always, I sincerely hope
that you find some practical ideas, tips and techniques here that you can put
to use immediately. Please send me your observations,
critiques, comments and suggestions with respect to any of these articles.
Click on the Cover to download your e-magazine copy.
Post #680 – Thursday,
September 5, 2013
Your 4 Leadership
One particular firm
leader I know makes it a regular habit to ask his fellow partners for feebdack
on how he is leading. He tells me that
it only involves his asking four questions:
1. What do you need more of from me?
2. What do you need less of from me?
3. What is it that I’m doing that you
would like me to stop doing . . . completely?
4. And what is it that I’m not doing at all, that you would like me to start doing?
It’s really that
simple! How sad it is that more leaders
don’t engage in this kind of feedback process.
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