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Post #412 - Monday, September 21, 2009
Your Next Move
I received this generous note today from Mike Watkins, author of The First 90 Days:
Patrick, I am delighted to let you know Harvard Business School Publishing is just about to release my new book, Your Next Move: The Leader's Guide to Navigating Major Career Transitions. The book extends the work of my previous bestseller, The First 90 Days, by focusing on the eight major transitions that executives experience during their careers -- including leading former peers, on-boarding, an international move, a re-alignment, and a turnaround challenge. I am sending you an early copy of the book. I have also just launched my new website, www.MichaelDWatkins.com, which provides information on my work. Be sure to check it out.
Given my concurrent passion and intensive bi-annual program for new managing partners, Mike just knows that I will (jealously) consume his new book as soon as it arrives.
Post #411 - Friday, September 18, 2009
Managing Partner Compensation and Reentry
Last March, together with Baker & Daniels Chair Emeritus Brian K. Burke, I co-founded what is now known as The LAB (the Managing Partner Leadership Advisory Board) – a forum designed to provide recently appointed managing partners with a source for obtaining pragmatic advice on their leadership questions and critical burning issues. The formation of this group was the result of suggestions made during our bi-annual First 100 Days master class for new managing partners and has proven to be a valuable resource for new leaders.
Here is the latest question in a series of different queries that The LAB members have now responded to:
As I am about to assume the position as our firm’s new managing partner at the end of this year, I have a couple of inter-related questions about compensation and practice reentry:
Firstly, what is the optimal approach to compensating the firm's leader? Secondly, what understanding about compensation during the managing partner's service should the firm reach with its soon-to-be managing partner before he/she takes office?
I would also welcome your group’s counsel on what understanding should the firm reach with its managing partner about his/her reentry to practice at the end of his/her tenure as the firm's leader, and what understanding about compensation should there be for the transition period during which the former managing partner is reentering the practice?
Read the entire question and response: Managing Partner Compensation and Reentry
LAB responses derive from its members' many years' experience as law firm leaders. Along with Brian and I, the LAB is comprised of the following distinguished current and former law firm leaders: Angelo Arcadipane (Dickstein Shapiro LLP); John Bouma (Snell & Wilmer LLP); Ben F. Johnson, III (Alston & Bird LLP); Keith B. Simmons (Bass Berry & Sims PLC); William J. Strickland (McGuire Woods LLP); Harry P. Trueheart, III (Nixon Peabody LLP); R. Thomas Stanton (Squire Sanders); and Robert M. Granatstein (Blake Cassels and Graydon).
Of Related Interest:
> The LAB Questions and Answers On Other Topics
Rant #410 – Friday, September 18, 2009
European Economic News
I’ve been on a client assignment over in Europe for the past week and it is always refreshing to watch their version of CNN and read economic news from a European perspective . . .
“From a technical perspective, the recession is very likely over,” Ben Bernanke assured the world after a speech at the Brookings Institute.
The European Take: Hmmm. Is there any point in saying something is 'technical,' unless you're just trying to put a pretty mask on an ugly reality.
Meanwhile the question is posed – How are banks in America posting "profits"?
The European Take: As so few in America seem to really understand, ‘mark-to-market’ accounting rules were repealed in favor of a fictitious slight of hand. Banks no longer have to list their distressed assets at the fire sale price they should be worth. Instead they get to record their value as the price they bought them, or what they believe they will be worth in the future.
In other words, it's like me refinancing my house, but doing my own appraisal and assigning it whatever value suits me. I want cash out? Just pad the value of the house. I can't afford a higher payment? No worries. I just pad my reported income. Two years down the road I can't afford my payments anymore? Easy. I just follow the same refinancing procedure all over again. But my family and I would only have one toxic asset to deal with. The American banks have them coming out the wazoo! They are still in possession of the faulty loans and derivatives that caused this entire mess in the first place. Nothing has changed - except the accounting!
Post #409 – Tuesday, September 1, 2009
The MBA Has Corrupted Managerial Practice
Everybody loves to draw some artificial, pseudo-intellectual distinction between management and leadership. I love to just evidence some decent examples of both. One of the new books I am looking forward to reading is the new work from Henry Mintzberg, simply entitled, Managing, scheduled for release today
Mintzberg claims: For years I have been asking groups of people in the management job, “What happened the day you became a manager?” The response is almost always the same: puzzled looks, then shrugs, and finally comments such as ‘Nothing.’ You are supposed to figure it out for yourself, like sex, I suppose, usually with equivalent dire initial consequences. Yesterday you were doing client work; today you find yourself managing the people who are doing the work.
Henry Mintzberg is a world-renowned business thinker. He first came to prominence with his book The Nature of Managerial Work. Currently the Cleghorn Professor of Management Studies at McGill University, he is also a visiting professor at a number of business schools including INSEAD and London Business School. He was the driving force behind the creation of the International Masters Program in Practicing Management, a unique business education program.
Mintzberg has a deserved reputation for provocative and controversial thinking. His book Managers Not MBAs develops one of my favorite themes: the shortcomings of the world’s gold standard in business education – the Master of Business Administration (MBA) degree. At a time when many major law firms have pursued collaborations with business schools, here is Mintzberg talking about the value of getting an MBA:
The MBA trains people out of context. It gives them the impression that you can manage anything. Because there is no context in an MBA program. Even when people have experience it is rarely used. The traditional style MBA does not use experience at all. Take case studies for example. Learning from case studies isn't experience, it’s voyeurism. People who are already practicing management can learn from cases written about other people. But people who haven't practiced management can't learn from them that easily. Worse still, case studies are not used just to expose people to other kinds of experience; they are used to force people to make decisions based on the most superficial of knowledge. What do the people know about these companies that they are forced to make decisions about? They read twenty pages the night before. There was a survey of MBAs in Business Week a little while ago. The MBAs named their favorite chief executive. It was a top five list and none of them had an MBA.
The dominance of the MBA as an educational standard has corrupted managerial practice. You have people coming out thinking they are prepared to manage, and they are not. And what is even worse you get people coming out who don't even go into management, they go into consulting or finance. They do an end run around management and end up leaping from consulting jobs, or financial jobs, into chief executive chairs. And I think the performance of many of them is just plain dreadful. There are exceptions, but a lot of them fail terribly.
What ii is, specifically, about an MBA education which I believe often makes people ill-equipped to be leaders in corporations . . . confidence without competence. Which to me is equivalent to arrogance.
MBA courses tend to attract people who aren’t necessarily sensitive to people issues. We have a lot of evidence that these are people more concerned with numbers, and getting themselves ahead, than dealing with people. There’s a wonderful quote which comes from an interview with Harvard professor John Kotter. He did a study of the Harvard MBA class of 1974, tracking their careers. A journalist asked him if the people he tracked were team players. He said no, they want to run the team, create the team and lead it to glory rather than be a member of someone else’s team. And that is the antithesis of team working, wanting to run the team.
We talk about top managers. But anyone who's on top of the team is outside the team, and doesn't know what is going on. We describe organizations as networks, and we talk about top managers, but anybody who's on top of the network is outside the network. That is exactly what the Kotter quote suggests. These people don't want to be part of the team, they want to run the team. It’s the obsession with having to be in charge. You know leadership should be earned. Leadership shouldn’t be granted because you have a degree and an old boys network.
Nobody has ever been made into a leader in the classroom. Courses that claim to create leaders are dishonest. You can't create a leader in the classroom. What you can do is take people and enhance their managerial skills, and enhance their understanding of their job, if they are already in positions of leadership.
And I am totally against this notion that you can separate managers from leaders. This implies that leaders don't have to manage, which means that leaders don't have to know what is going on intimately in their organization. Which is wrong. They have to be connected, and management is the way in which they are connected. Nobody wants managers who aren't leaders. So why would we want leaders who aren’t managers, leaders who don't know what is going on, who aren't connected. It's a phony distinction.
Post #408 – Tuesday, September 1, 2009
A Revolution In BigEd
The Massachusetts Institute of Technology has begun the most revolutionary experiment in the history of education . . .
It now gives away its curriculum to anyone smart enough to learn it. It has posted its curriculum on-line for FREE! These days, this means a staggering 1900 courses. And you can expect that number will grow. Students around the world can test drive the entire curriculum. This free site is not expected to reduce demand for an MIT diploma. It will increases it.
The end of the high-priced university training system may be in sight. It may take a generation. These schools are licensed agencies of the state. They will not surrender without a fight. But when the best science university in the world says "Come and get it . . . free!" the other schools have a major problem for justifying secrecy. This response -- "We offer a better program than MIT does" – is not likely to be widely believed.
This is proof to the academic world that MIT regards its program as the best, and dares any other institution to prove otherwise, where everyone can see and compare. MIT has publicly stiffed its rivals, who will forever need to play catch-up to MIT on-line. It will be: "We, Too On-line University." Any college that does not have all of its professors' classroom lectures on-line on YouTube or Vimeo or Blip.tv is saying, loud and clear, "We don't want people to see how incompetent our faculty really is."
The only downside: this free site may invalidate the Massachusetts Institute of Technology’s outrageous T-shirt: "HARVARD: Because not everyone can get into MIT."
Post #407 – Monday, August 31, 2009
On Law Firm Leadership and Accountability
A thought provoking post on The AmLaw Daily this morning from Ed Reeser.
Ed’s message: The challenge to leaders, and to the lawyers they lead, starts this October. That’s when: 1) projections for 2009 results will become accurate; 2) banks reset loan line amounts and conditions for 2010; 3) calls for capital are made; 4) partner compensation for 2010 is set; and 5) greater cost cutting may be proposed. How can the leaders rally support for this investment? In a word, accountability. Firm leaders must demonstrate their own confidence in their budgets and business plans by holding themselves directly accountable for the outcomes.
You can read the entire article: On Law Firm Leadership and Accountability
For my part, I believe that examining leadership accountability is particularly timely. Not only is the pressure to produce results (in a no-growth economy) increasing, so too is the realization that results cannot be achieved without a more disciplined commitment from leaders (read that to mean: firm leaders who commit 100 percent of their time to managing their firms) – and not just when they get time away from their individual practice. All firm culture flows top-down. As Reeser is correctly saying here, ultimately, accountability starts and ends with the ‘Leadership Partners.’
Post #406 - Tuesday, August 25, 2009
Planning For A Period Of Uncertainty
If you’ve had a chance to take your family for a drive this summer, you may have heard that familiar question: “Are we there yet?” And who amongst us isn’t thinking the same thing as we travel down the recession highway looking for road signs that point towards the promised recovery.
This prolonged economic slump is forcing many firms to explore an entirely new playbook for how they are going to deal with 2010. The proper role of any firm leader, in my view, is to have the courage to interrogate reality and the capacity to help your partners do the same – as unpleasant or difficult as that reality may be to face.
One year ago I authored a white paper intended to help managing partners interrogate the reality of the day entitled: Managing Through A Prolonged Downturn. In that paper I publicly submitted that "for the next five years, every time you think it's safe to get up and dust yourself off from this downturn, every time you feel like you've endured the worst of it, another piece of news is going to come along to freshly bludgeon you. This time the economic slowdown is going to be a lot different and, in many ways, a hell of a lot tougher."
Today, political pundits and the media are both claiming, "the recession has ended." So who am I to suggest that they are wrong? But I am going to!
Read my newest briefing: Planning For A Period Of Uncertainty
In this article I outline three of the major contributors to why this recession is going to continue for some time yet and why law firm strategists need to plan for a period of protracted uncertainty.
Post #405 – Friday, August 21, 2009
A Case of BigLaw Focusing On The New Normal
Twice annually I conduct a one-day master class for new practice leaders and my co-pilot is Jack Butler, the global co-leader of Skadden’s corporate restructuring practice. Now I can’t think of any practice group that could be busier than Jack’s, but for some unknown reason (that I’m enormously grateful for) Jack makes a couple of hours available to join me and supplement this consultant’s meanderings with a real-world perspective. This past Wednesday at the University of Chicago was no different, except that in this instance Jack opened up to my room full of newbies on some elements of what he considered critical to operating effectively in the “new normal.”
A couple of the highlights that participants found intriguing:
• A number of BigLaw firms have been quietly retrenching when it comes to their billable hour rates. Jack, and the members of his group, completely proactive on their part, have reduced the billing rates of every professional in their group this year (from 2008). Jack reported to the group that he reduced his rate by some $65 an hour without any formal announcement or fan fare. He told the group that this was part of the trend in the new normal. And to ensure that everyone completely understood the significance, he reminded them that there was absolutely no shortage of work for a group like his that focuses on distressed M&A. They could not be busier.
• Jack further explained to participants that alternative billing was not only something that Skadden and he supported passionately, but that he wished that his group could do all of their legal work on an alternative billing arrangement . . . as he was convinced that they would do far better financially. But unfortunately he found that most legal departments need a standard to judge against and they like hourly billing as the standard for the kind of work that his group performs. Jack reported that hourly billing is a threat only to commodity work.
• We were told about how Skadden has a firm-wide commitment to developing a “diversified model” for leadership. Apparently, not only does each practice group have the typical practice group leader, but now there are ‘issue leaders’ – one partner chosen / assigned in each practice group, for one specific issue (knowledge management, business development, etc.) and then expected to coordinate with their counterparts across the firm, to advance progress on their particular issue.
• Jack went into some detail on how the legal landscape is changing dramatically. He told us about how 125 of Skadden’s partners came together for an extended period between last Christmas and New Years Day, to contribute their thinking to what is now a 122-page book entitled: Navigating Tumultuous Times and available on the firm’s web site. The topics are arranged in 10 broad sections designed to provide clients with a blueprint to understand and respond to the current global situation. He further went on to explain how without voluntary attrition, most law firms are bloated with a leverage model that is severely under attack.
He concluded with reminding us that all law firms are now involved in some level of crisis management, that (unfortunately) the real economic challenge was still to come (in 2010), and that this is the moment that will really distinguish REAL law firm LEADERS!
Post #404 – Friday, August 21, 2009
The “New Normal” Survey
While American industry is struggling to get through what could become the worst recession since the Great Depression, Americans say that even after the recession ends, their spending will return to just 86% of pre-recession levels, which would take a trillion dollars per year out of the U.S. economy for years to come.
According to an in-depth survey of more than 5,000 people, conducted by Alix Partners and referred to me by my friend Jack Butler at Skadden Arps, Americans plan to save (and therefore not spend) an astounding 14% of their total earnings post-recession with the replenishment of their 401(k) and other retirement savings leading the way among their biggest long-term concerns.
Even if these findings are colored somewhat by the emotions of the day, Americans are definitely speaking loud and clear: They believe the “new normal” for the American economy going forward will be more like the early 1980s than the mid-2000s. These findings have deep and immediate ramifications for industries of all stripes, from consumer-facing companies to suppliers of all kinds to raw-materials companies to financial-services organizations. And, give what a big export market America is, they have huge ramifications for companies all around the globe.
Post #403 - Thursday, August 13, 2009
How Do You Identify Leaders?
I had the good fortune to spend a week with Professor Gary Hamel, some years back, at a strategy session in San Francisco. Gary is the author of a number of great books, his latest entitled: The Future of Management. He recently provided some interesting questions to consider with respect to the age old question of how to identify leaders:
The need to empower natural leaders is a competitive imperative. But before you can empower them, you have to find them. In most firms, the formal hierarchy is a matter of public record — it’s easy to discover who’s in charge of what. By contrast, natural leaders don’t appear on any organization chart.
To hunt them down, you need to know . . .
Whose advice is sought most often on any particular topic?
Who responds most promptly to requests from peers?
Whose responses are judged most helpful?
Who is most likely to reach across firm boundaries to aid a colleague?
Whose opinions are most valued, internally and externally?
Who gets the most kudos from clients?
Who’s the most densely connected to other partners?
Who’s generating the most buzz outside of the firm?
Who consistently demonstrates real thought leadership?
Who seems truly critical to key decisions?
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