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Post # 737 – Thursday, June
New Book Offers Practical, Insightful Advice on
I am indebted to Steve
Taylor for his gracious review of my latest work. Here is an excerpt:
J. McKenna’s latest book, The Changing of the Guard: Selecting Your Next Firm
Leader, may be the most comprehensive text on law firm succession ever
written, covering every priority from choosing a nominating committee to
defining leadership criteria.
worth highlighting some points that McKenna makes in his thorough and
informative guidebook—and that’s really what it is: a succession bible. He really covers all the bases, from
selecting a nominating committee with the right composition and setting
selection criteria for the next leader, to developing and implementing a
transition and integration plan to usher out the former chair or managing
partner gracefully and usher in the new one.
And, he offers guidance on all of the many steps in between.
biggest value of The Changing of the Guard is the way it helps show how
best to pass the leadership baton. To use another metaphor, it serves as a beacon
to navigating through the rocky waters of succession planning.
from Critique written by: Stephen T. Taylor, Senior Editor
Counsel, The Legal Practice and Management Report - Vol.34
• No. 6 • June 2015
Post #736 – Monday, June 1, 2015
Leaders Find It Hard To Say I’m Sorry?
Even the smartest leaders often find it hard to swallow
their pride and say the simple words, “I was wrong” when they have made a
mistake. Yet executives who cannot openly assume responsibility for
flawed decisions can never correct these mistakes or successfully change
direction, wrote Harvard Professor Rosabeth
Moss Kanter. And the implications of poor judgment get worse the
longer denial continues, she warned.
The simple sentence "I was wrong" is the hardest
for leaders to utter and the most necessary for them to learn. If a
leader cannot admit being wrong in a timely fashion, he or she can never
correct mistakes, change direction, and restore success. The consequences
get worse the longer denial prevails.
The arrogance of success is well-known. Powerful
people start to believe that they are above the rules, that what applies to
ordinary people does not apply to them. That's how officials get into
trouble in the first place, using their power to suppress criticism. They
never have to say "I was wrong," because everyone conspires to hide
mistakes. The best leaders manage the risk that they could be wrong by
surrounding themselves with people are smarter than they are, at least in some
things. They create conversations, weigh facts, listen to arguments, and
then make better-informed and less self-serving decisions.
Perhaps apology training will become a growth
business. Actually, I hope not. But I do hope that smart leaders
will be more alert to problems, and if mistakes are made, they can utter the
three magic words and take corrective action.
For more on this subject you might
find my co-authored article in the brand new June issue of American Lawyer Magazine of interest – Admitting You’re Wrong: Why you made that strategic mistake – and how to recover from it.
Post #735 – Friday, May 15,
Structure Your Practice Groups For Performance
had an interesting and lengthy telephone discussion the other day with some
folks from a 500-attorney firm spread over a dozen offices. They related
to me how they have now changed out all of their practice group leaders to newer
and younger candidates. And they were telling me about all of the
internal training that they have been conducting - from developing internal tutorials
(on staffing and financial reports) to bringing in some expert on cultural
competence (what ever that means?) to Professor Heidi Gardner to speak to them
on collaboration (see her latest article in the March HBR and my Blog Rant #733). They then reported that some of these
activities, unfortunately, seem to have generated less than glowing feedback.
I inquired as to why they thought that was the reaction, they reported that it would
seem that these new practice group leaders wanted some pragmatic guidance on
what the job of being a practice leader was really all about, some basic leadership
skills, some help in determining how to balance their producer/manager roles,
and some “substantive take-aways”
(rather than just theoretical lectures). Can you imagine?
course I asked some fundamental questions – questions like whether these new
practice leaders had been given written job descriptions and whether they had any
clarity around how much specific non-billable time they would be expected to
devote to their new leadership roles. And the resounding answer was . . .
much for the fresh start, or for their experiment in getting PGL 2.0 on track
within this particular firm.
the real tragedy? After the call, when I
happened to check my files I noticed that my notes indicated an almost
identical discussion, with a different cast of characters from this same firm,
in November 2003 as they attempted to get serious about “launching a more effective practice group structure.” Now that is sad.
For my part, I’m becoming
obsessive about trying to help firms get this right. So, if you are interested in learning more
about how to effectively address this issue in your firm, come and join me at
our Ark hosted Webinar on June 4 – Law Firm Practice Management 2.0: Identifying and Implementing the Structural Neccessities for Effective Practice Management.
Rant #734 – Monday, May 11,
Why Law Firms Need Non-Executive Directors
recently and certainly before the failure of Howrey and then Dewey &
LeBoeuf, the bankruptcy of a large law firm had been regarded as nearly
inconceivable. In examining what went
off track and in my article, Malignant Leadership, I reported that: too
often, boards and/or executive committees facilitate firm failures by denying,
overlooking, or ‘working around’ crucial issues.
that same piece I cited a number of governance steps that firms might consider.
One of the notable differences between
the top U.K. law firms and top U.S. firms is that almost one-in-four (24%) of
the U.K. firms now employ one or more Non-Executive Directors (NED) on their
boards. Even more interesting, in a
study released late last year, those law firms with at least one NED have seen
revenues grow by one-third more than those without. In yet another research study, this one commissioned by
BDO and published in April: Nearly one-third (33%) of the global firms had at
least one NED on their board.
firm NEDs have often been drawn from a pool of retired law firm leaders,
accountants and management consultants. None
of the U.S. firms surveyed had any independent advisers involved in their
firms’ governance. U.S. lawyers continue
to be skeptical about the value an outside expert might bring. Yet, the use of non-executive directors has
grown significantly. Lovells was known to have appointed the first
non-executive director back in the early 1990s and attested to the benefits of
taking such a move. In raising this
topic with Fred Lautz, Managing Partner at
480-lawyer Quarles & Brady, he offered this observation:
We have assembled a few partners who we call investment partners. They
are attorneys who were partners in the firm at one time, and then went on to
become business executives. After retiring or otherwise completing their
executive roles, some of them have been willing to commit some portion of their
time, under contract, to assist us in business development. We ask them to
leverage their significant business contacts and community and business
profiles to help position us to be in front of developing legal needs which fit
our strategic imperatives. I frequently confer with a number of these investment
partners on matters of firm business, service delivery, client relationships
and Firm growth. I find their experiences in the business side of things (and
in some cases as purchasers of outside legal services), coupled with their
knowledge not only of the business and operations of a professional partnership
generally, but of ours in particular, provide terrific perspective and insight
for me as I lead our Firm. So, while we have not formalized any advisory board
of outside business folks, I can certainly affirm the value of tapping into
people with this type of experience.
believe an NED can provide any law firm with a number of benefits, such as:
providing a dispassionate external view of the firm together with
business experience and new concepts;
making a contribution to the firm’s strategy and market performance;
acting as a vital sounding board and an outside voice to challenge
current thinking and practices;
strengthening the firm’s management and providing an objective view;
delivering a fresh perspective and opening up opportunities for how the
firm might access new revenue streams; and
objectively assessing the firm’s performance and making recommendations
areas that NEDs might be consulted on include governance, complex partnership
matters, areas of risk management, changing partner performance evaluation,
financing policies, along with many of the marketing and strategic challenges
that today’s firms are facing. The
‘right’ NED can also be engaged in the role of leadership coach, helping the
Managing Partner who may be an excellent attorney, but with limited leadership
and management experience.
is important that NED’s are focused on matters at the Executive Committee or
Board level and should not be involved in the day-to-day operations of the
firm. An outside NED should have a more
objective view of external factors affecting the business than the partners and
should not be afraid to comment and contribute accordingly in the longer-term
interests of the firm.
recognize that it is good practice for their clients to involve external
non-executive directors on their boards, yet law firms seldom adopt this
practice themselves. It is often claimed that only partners really understand
the business or enjoy the necessary respect, and that elected partners don’t
have the necessary oversight function. Yet
non-executive directors are perfectly capable, in the corporate world, of
commanding respect and of calling management to account on behalf of the
shareholders. They can also use their
outside experience to advise, and to challenge the sacred cows which tend to
develop in any inwardly-focused organization. Thus they can help the board to see things
from a different perspective, and to spot unforeseen risks and opportunities.
it is time for law firms to adopt a similar strategy to what most of our
corporate clients have been doing for decades. Indeed, many partners believe that their own
firms need to apply a few more of the proven rules of good governance that they
themselves recommend to their clients.
#733 - Saturday, May 2, 2015
interesting article on collaboration in professional service firms, written by
Professor Heidi Gardner, appeared in both the March 2015 issue of the Harvard
Business Review and also in American Lawyer magazine. My candid response to Professor Garner’s
article was published, in part, on page 19 in the May issue of HBR but
unfortunately, did not elicit any response from her. Here are the entire comments I shared with
Why It Pays To Collaborate With Your Colleagues (March 2015 Issue)
subject of collaboration within professional services firms is a critically
important topic and I believe worthy of a couple of supplementary points.
while the number of practice groups serving a client should definitely increase
a firm’s revenues as Gardner’s research suggests, simply adding more revenue
does not necessarily translate into increased profitability. And professional service firms have been
notorious for chasing revenues without really giving sufficient attention to
whether those revenues, practices or clients are profitable. And unfortunately today, there is also a
strong correlation between the number of practice groups that a client uses
translating into the increasing power of that client and even stronger demands
for fee discounts.
Gardner accurately observes that one of the things that gets in the way of
collaboration is compensation systems that favor individual contribution rather
than team work. What she does not
acknowledge is that the partner’s compensation spread in many large law firms
is now anywhere between 10 to 1 and 20 to 1. That means that if you hear about how some
major law firm is enjoying profits per partner averaging $1 million, you may
rest assured that half of those equity shareholders are taking home about
$500,000 or less, while some of their fellow partners are being paid $8 to10
million. Now in the typical professional
environment where any form of recognition, other than money, is hard to come by
(and so the common mindset becomes “pay me a dollar more than that turkey and
I’m a happy camper; a dollar less and I’m underappreciated”), I would welcome
hearing how you solve this collaboration hurdle.
suggestion that “leaders need to resist the temptation to bring in high
performing but selfish partners” is technically correct but not grounded in
firm behaviors. These professional service firms go out into the talent
marketplace looking for some professional who has a big book of business. And they tell that professional that if he or
she comes with their firm they will have a bigger platform to practice in,
significantly more opportunities, and they will do so much better . . . and of
course we will pay you commensurate with the number of clients and revenue that
you bring across to our firm. Then when you get over to our firm, we
immediately want you to share your book of business and your clients (all the
things that initially attracted attention and made you a valuable candidate)
with the rest of your new partners. Yeah,
other related factor that is not acknowledged is the difference between an
‘open’ (every partner knows what every other partner makes) compensation
systems and a ‘closed’ (only a handful know) compensation systems and how each
of those can either enhance or impede collaboration. For example, about 90 of the top 100 largest
accounting firms have transitioned over the past to a closed system while 90%
of the large law firms still favor the open system.
I had really expected Gardner to proffer some client-centric approach as one of
her prescriptions for enhancing collaboration. To be specific, many professional service
firms, and most every law firm, structure themselves based on the particular
disciplines they were trained in (Consulting – marketing; Accounting –
auditing; Law – litigation). So as Gardner correctly observes, when you
structure your firm in a vertical manner, it becomes rather challenging to have
professionals collaborate across independent silos. That said, every industry
study that we’ve seen over the past two decades clearly informs us that clients
choose their professional provider based on an entirely different criteria. The
number one selection criteria is based on “demonstrated understanding of my
industry.” Read that to mean that those
practice groups comprised of multi-disciplinary professionals, all serving a
common industry (BioTechnology Group) do not suffer the same collaboration
problems or the persistent pleadings from firm management to “please try to
cross-sell your fellow partner.” So one
example in the article is a firm that “creates a cross-selling SWAT team.” In my 32 years of consulting to large and
international professional service firms I’ve heard that attempted many times,
but have yet to see it work.
here is yet another wrinkle: A new study just released by
Stanford Graduate School of Business professor Jeffrey Pfeffer revealed that
although reciprocity (paying back a courtesy) is still an established norm in
private lives, its importance at work has significantly diminished. This lack of reciprocity is observed among colleagues. Reciprocity at work is a calculated and
benefit-seeking task. Thus colleagues
tend to pay back favors ONLY if they can benefit from that individual in the
you do a favor for me, as one human being to another, I feel a normative
obligation to repay the favor, even if you aren’t going to be very useful to me
in the future,” Pfeffer said, as reported by Insights by Stanford Business. “But we found almost the exact opposite in an
organizational context. There, it’s all
about calculations. If we don’t feel
repaying the favor will benefit us much in the future, we won’t do it.”
this mindset sadly reduces the possibilities of collaborate undertakings
between certain partners in any professional service firm.
Post #732 – Saturday, May 2,
Signs The U.S. Economy Has
I received this from an
economist friend that points to no less than ten intriguing signs that aren’t noticeable
if you read the mainstream media:
• We just
learned that U.S. GDP grew at an anemic 0.2 percent annual rate during the first
quarter of 2015
• If you
strip a very unusual inventory buildup out of the GDP number, U.S. GDP would
have actually fallen at a -2.5 percent annual rate during the first
trade deficit with the rest of the planet is absolutely killing our economic
growth. U.S. economic growth would have
been a total of 8 percent higher since the end of the last recession if we
actually had balanced trade with other nations.
to numbers that were just released by the Bureau of Labor Statistics, in one out of every five American families nobody
has a job. So how in the world can the “unemployment rate” be sitting at
“5.5%” when everyone is unemployed in 20% of all families in the United
• The rate of homeownership in the United States has just hit a brand new
25 year low. How can anyone claim that the middle class is
“healthy” when the percentage of Americans that own a home is the lowest that
it has been in more than two decades?
• In 2013, 31 percent of all Americans said that they did
not anticipate buying a home “for the foreseeable future”. Now, that
number has risen to 41 percent.
• The student loan bubble is clearly bursting. According
to Bloomberg, only 37 percent of all student loan
borrowers are actually up to date on their payments and reducing their balances
& Gamble has announced that it will be cutting up to 6,000 more jobs from their payroll;
while McDonald’s plans to permanently shut down 700 “poorly performing” restaurants over the
course of 2015. Why would they be doing this if the economy is “getting
• It is being projected that half of all fracking
companies in the United States will be either “dead or sold” by the end of 2015.
• Retail sales, wholesale sales, factory orders and credit
requests all have declined at a rate not seen since the last recession.
One might conclude that the past few years have been a period of
relative stability for the U.S. economy. A lot of people have been lulled
into a false sense of security during that time. These people have become
convinced that the problems have been fixed. But these signs would
suggest that they haven’t been fixed at all. In fact, these problems are
far worse than they were just prior to the last financial crisis.
Post #731 – April 9, 2015
The Spring 2015 Issue of International Review is Now
International Review is my 24-page glossy, printed
magazine distributed to over 1600 law firm chairs and managing partners
throughout North America.
What happens as a firm
leader when something goes sideways, espcially when it is the result of
something you did . . . or even did not do, that perhaps you should have. Recovering From A Leadership Misstep is another collaboration between me and my good friend
and colleague, Ed Reeser proposing some remedial courses of action for when the
worst that could happen, happens
The Leadership Succession Process, I
set out the three fundamentally different approaches to leadership succession,
together with their respective advantages and disadvantages. This article is an excerpt from the
Introduction to my newest work, The Changing of The Guard: Selecting Your
Next Firm Leader. You will find
more information on this NEW instructive guidebook on pages 12 and 13.
Innovation In Your Firm had it’s origins in a Webinar that I was privileged to participate
in with Andrew Smulian, Chairman at Akerman LLP; Ken Grady, CEO of SeyfarthLean;
and John Paris from Williams Mullen’s Innovation Committee - while Inquiring Leaders Want To Know offers
you ten questions to jump-start your strategic thinking. Hopefully both of these offer some pragmatic
advice to those interested in either subject.
Finally, When Job
Descriptions Don’t Do The Job is an article that I hope will provoke you
into taking action on job descriptions for your practice leaders.
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 complimentary PDF copy of the magazine.
Post #730 – March 25, 2015
My Newest Book Is Available For Pre-Order
firm eventually finds itself in need of a new leader. The executive committee or
board must seek to replace the current incumbent as that individual comes to
the end of their term of office, announces a return to their practice, or
perhaps is contemplating retirement. Every year we also see
firm leaders step down because of a loss of partner confidence, an unexpected
disability, a tempting career offer from a prestigious corporate client, or
even, on occasion, being laterally recruited by a competing firm. While each firm’s situation is unique, the
necessity for determining a succession process that will work is critical.
The Changing of the Guard: Selecting Your Next Firm Leader is a strategic guide to
effectively managing the leadership succession process. Supported by practical action points, real world
examples, and expert insights, this text is
broken down into 5 distinct parts:
Part One: Making ready
Choosing a nominating committee
Developing your timeline
Identifying the challenges your next leader will face
Part Two: Identifying criteria
Develop/refine the job description
Identify your selection criteria
Identifying specific performance requirements
Develop a formal written application form and process
Part Three: Calling for nominations
Invite your partners to nominate candidates
Host candidate town hall meet and greets
Invite confidential input
Design and structure a formal interview process for candidates
Analyzing a candidate’s strengths
Part Four: Making the decision
Reporting on results of interviews and confidential commentary
After selecting your new firm leader
Part Five: Managing the role of the outgoing leader
Creating a transition/integration plan
The Changing of the Guard also features a series of exclusive interviews
with law firm leaders on their succession planning experiences, these include:
• Stephen J. Immelt, chief executive officer at Hogan Lovells
• Vincent A. Cino, chairman at Jackson Lewis
• Carter G. Phillips, executive committee chair at Sidley Austin
• Timothy E. Powers, managing partner at Haynes and Boone
• Kim Koopersmith, chairman and managing partner at Akin Gump Strauss Hauer &
of your current approach to, or role in the succession planning process, The Changing of the Guard is
critical reading. The
Changing of the Guard: Selecting Your Next Firm Leader will
be available in mid-April. Pre-order your copy
before 5pm April 8th and save $100 making your copy $295 (normally $395)
How To Order: To pre-order your
copy at the discounted rate of $295 simply email Daniel Smallwood at Ark Publishing: firstname.lastname@example.org
quoting the ordering code DS-E1 (Orders must be received by 5pm April 8th)
Post #729 –
Wednesday, March 18, 2015
Hedge Funds Are Betting Big on Lawsuits
According to an article today on Bloomberg Business the lawsuit
finance market is continuing to grow in spite of the US Chamber of Commerce
warnings of wasteful litigation and corruption.
Hedge funds and others speculating on litigation are making more
and larger bets. Some corporate
lobbyists warn that the new financial engineering encourages wasteful courtroom
warfare, but investor demand for fat returns—and big law firms' appetite for
business—guarantee the spread of litigation finance.
the largest player in the litigation-finance business, reported that their revenue
rose 35 percent, to $82 million. Burford
has built a $500 million arsenal, and thus far made 32 investments that have
generated $209 million in gross recoveries. Burford mainly finances litigation
initiated by major corporations and handled by big corporate law firms. Among
the well-known law firms that have been involved in Burford-financed cases are
Simpson Thacher & Bartlett, King & Spalding, and Latham &
Watkins. Burford’s CEO is a former
Executive VP and GC of Time Warner.
Meanwhile, Australian-based Bentham IMF
reported funding 10 deals in 2014, including "contract disputes, a
patent-infringement trial, partnership disputes, and five law firm case
portfolios." Bentham says that for
the year it had gross returns of $31 million in the U.S.
The U.S. Chamber of Commerce’s Lisa Rickard (president of the
chamber's Institute for Legal Reform) condemns all of these developments,
alleging that they lead to "more lawsuits, more litigation uncertainty,
higher settlement payoffs to satisfy cash-hungry funders, and in some
instances, even corruption." Others
unabashedly advertise their commitment to financing suits by the "little
guys" against large corporate interests.
This looks to be an area that is going to continue to experience increasing
hedge fund investment attention.
Post #728 – Sunday, March 8, 2015
The Case For Psychometric
Testing of Leadership Candidates
I’ve been a touch absent from this blog over the past two
months as I’ve been scrambling, between client obligations, to complete the
manuscript for my newest book, tentatively titled: The Changing of The Guard: Selecting Your Next Firm Leader and
expected to be published sometime in April.
The chapters include specific guidance on everything from choosing a
Nominating Committee and identifying your selection criteria; to designing and
structuring a formal interview process and analyzing a candidate’s strengths. And I suspect that it will be this last item
analyzing strengths that will be the most controversial as I reserve no hesitancy
in strongly recommending the use of psychometric testing. Here’s a short excerpt from my manuscript:
So should your one consensus leadership candidate or all of
them undergo psychometric testing?
The vetting process in some firms has become more intense
and my investigations have determined that more firms are beginning to believe
that it is useful. For
example, in the recent selection of one new Firm Chair for an AmLaw 100 firm,
five finalists were shortlisted from an original 11. They were then all then subjected to six hours
of psychometric testing, including a battery of online questions and an
interview with a consultant.
Meanwhile, Mark Rigotti, Chief Executive Officer at Herbert
Smith Freehills reported to me:
We have used testing as
part of the selection of the most senior leaders, via an external
provider. This included two psychometric
tests and in depth interviews intended to identify capabilities, preferences
and potential for the role ahead. As
some one who went through these I found them very helpful in thinking about
first how I would go about my role and secondly about the people needed on the
Executive team to have a diverse balanced set of skills. We also use some tests to assist with
leadership development, rather than selection of leaders. The experience with theses has been
reasonably good with a number of people finding them helpful in working out
what to leverage and what to work to improve their individual
effectiveness. Of course all these tests
and tools don't make decisions or guarantee perfect leaders - they can enable
And from Fredrick Lautz the Managing Partner at 450-lawyer
Quarles & Brady, I was told:
During my term as managing partner, we
have had two instances of which I am aware where we used psychometric
testing. Several years back we put a cohort of younger partners who we
thought had leadership potential (roughly 30 attorneys) through a multi-day
leadership training program with coaching follow-up. And then two years
ago, in the course of considering more regular leadership training for our
current and pipeline leaders, we engaged a psychologist to conduct psychometric
testing on a pilot group of current firm leaders, including attorney leaders
and staff leaders. In evaluating the attributes and qualities of our
pipeline leaders and looking at the current stages of their careers (most of
them have fairly long careers ahead of them and are not in a position to give
up their current practices to run the firm), we decided we needed to reshape
our leadership structure to design roles with responsibilities, expectations
and levels of commitment which better fit those who we would expect to succeed
to the leadership roles.
Finally, from William Henderson, Professor of Law at Indiana
University I received an incredulous query –
is a law firm wating until election to leadership to use psychometric
I have a lot of experience
using these types of tools, both as an educator and doing projects for law firms. Their primary value is in lawyer / leadership
development. Firms ought to be
developing their leadership (and their lawyers generally) through psychometric
tools that map onto an overall talent model.
That said, when it comes time to make a selection decision, there is
nothing better than past performance data based on clearly delineated
standards. Apply those standards to past performance data and the promotion
decision becomes both obvious and accurate. Cravath understood this in the
1920s. McKinsey then copied the model in
the 1930s from first-tier law firms. The
short-term focus on revenue generation has obscured this logic. Yet the logic pays enormous long-term dividends.
I firmly believe that if the role of your Nominating
Committee and Board is to assist these candidates in building their
self-awareness to be the best firm leader they can be, it is a very valuable
exercise. Your next firm leader’s self-awareness builds from honest self-appraisal
about emotional strengths and vulnerabilities; values and attitudes,
personality traits and unresolved conflicts.
You best candidate is a total person, not just a set of skills
performing a role.
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