Post #738 – Friday, July 3, 2015

Is Your Firm Facing A Leadership Transition?

Do these sound like some of the questions that all new Firm Leaders are likely to be asking themselves:
• Am I really clear on the reasons why I accepted this position?
• How can I be sure that I have correctly understood what is expected of me?
• Which tasks should be a priority and which can be put on hold?
• Who am I going to meet with first and what am I going to say?
• Have I defined the challenges facing my firm and determined an approach to dealing with them?
• When can I begin to introduce change and what is my initial plan of action?
• How do I make sure that I have the support I need from the partnership?

If you are (or know of a firm that is) facing a firm leadership transition or even introducing a new office managing partner taking charge of a larger office, please have a look at www.first100daysmasterclass.com.

The next program is scheduled for Thursday, August 13, 2015, at Gleacher Center, the University of Chicago, and we are now accepting registrations. Have a look at the day's agenda, the faculty, the testimonials, and extensive course materials, the follow-up support and your total satisfaction guarantee.

Thus far, over 70 firm chairs and managing partners have experienced and can attest to the value and benefits of the program--including leaders from notable AmLaw 100 and AmLaw200 law firms. In fact, we received these gracious comments from a couple of those attending our First 100 Days session:

"I was struck by the synthesis of the issues you presented. It was amazingly clear and comprehensive, given the breadth of the topic and the short time available. I was delighted to attend the event and I learned a lot from it."
Hugh Verrier, Chairman - WHITE & CASE

"The First 100 Days Master Class was concise and insightful. I quickly learned the difference between being a practitioner and a Firm Leader.  I was thoroughly impressed with the scope of the topics discussed."
ONE YEAR LATER - "I continually refer to that one-day class as the best thing I did to prepare for my new role."
Vincent A. Cino, Chairman - JACKSON LEWIS

Few experiences can be as overwhelming as taking on the firm leadership role for the first time. We repeatedly hear about how everything changes in unexpected ways. It is not about shifting from being an office head or member of the executive committee to the next rung on some leadership ladder; it's a quantum leap into a new reality. Brand new Firm Leaders need all of the practical, impartial, and time-tested advice they can get. 

Post # 737 – Thursday, June 11, 2015

New Book Offers Practical, Insightful Advice on Succession Planning

I am indebted to Steve Taylor for his gracious review of my latest work.  Here is an excerpt:

Patrick 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.

It’s 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.

The 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.

Excerpted from Critique written by: Stephen T. Taylor, Senior Editor
Of Counsel, The Legal Practice and Management Report  -  Vol.34 • No. 6 • June 2015

Post #736 – Monday, June 1, 2015

Why Do 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, 2015

Structure Your Practice Groups For Performance

I 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.  

When 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?  

Of 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 . . . “No!”  

So much for the fresh start, or for their experiment in getting PGL 2.0 on track within this particular firm.  

But 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, 2015

Why Law Firms Need Non-Executive Directors

Until 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.

In 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.

Law 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.

I 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 for improvement.

Key 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.

It 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.

Lawyers 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.

Perhaps 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.

Rant #733 - Saturday, May 2, 2015

Barriers To Collaboration

An 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 Professor Gardner:
 

RE: Why It Pays To Collaborate With Your Colleagues (March 2015 Issue)

The subject of collaboration within professional services firms is a critically important topic and I believe worthy of a couple of supplementary points.

Firstly, 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.

Secondly, 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.

Gardner’s 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, right!

The 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.

Thirdly, 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.

Finally, 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 near future.

“If 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.”

Consequently, this mindset sadly reduces the possibilities of collaborate undertakings between certain partners in any professional service firm.

Post #732 – Saturday, May 2, 2015

Signs The U.S. Economy Has Stalled

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 quarter

• Our 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.

• According 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 States?

• 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

• Procter & 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 better”?

• 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 Available

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

In 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.

Stimulating 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

Every 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 & Feld

Regardless 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: dsmallwood@ark-group.com quoting the ordering code DS-E1 (Orders must be received by 5pm April 8th)