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Post #908 – December 13, 2021
The Truth is Starting To Come Out – Beware a 2022 Inflation Tsunami
While firms may experience a prosperous 2021 and looking for more of the same going forward (it's been forecast that in 2022, law firms will push hard for double-digit rack rate increase), inflation is roaring at a pace not experienced in most people’s lifetimes. Saturday’s WSJ front page screamed that inflation is NOW the highest in 39 years. Last week’s Corporate Board Survey shows deteriorating C-Suite sentiment, expecting lower growth and higher interest rates. And, the definition and method for calculating inflation has deceptively changed over time in ways that obscure this issue.
What do I mean? Well, the former definition focused on the amount of currency being created, the source of inflation; whereas the latest definition focuses on rising prices, which is more a symptom of inflation. Meanwhile the FED has quietly increased the money supply for over 70 years without it showing up too much in increasing prices . . . until NOW. Since inflation is measured by changes in the Consumer Price Index, an index that tracks the average price of a basket of goods and services we purchase, the precise method of doing so has also changed. I’m told that if inflation were calculated the same way today as it was in the 1970s, our inflation rate would currently be CLOSER TO 15%!
Keep in mind, Governments have an incentive to understate inflation. Since pension entitlements and welfare payments are often indexed to inflation, understating the true rate of inflation can help government reduce its financial liabilities.
For the US economy, run-away inflation could eventually be devastating, producing a deep economic recession. America is awash in debt, and higher rates will place many borrowers in financial distress. US government debt currently stands at around $29 trillion; while US corporate debt stands at over $11 trillion; and the combined debt of households and non-profits is currently in excess of $17 trillion (as if any of us really understood what a trillion dollars represents). And since the US dollar is the global reserve currency, most attention has been focused on the American situation. However, we need to understand that high inflation is a global trend and therefore could cause a severe economic contraction as interest payments rise and spending falls.
Contemplating action sooner rather than later, before everybody wakes up to the real threat posed by inflation, may allow you to position yourself. You need to ask:
- How will we manage rapidly rising costs across most elements of our practices from travel to in-office expenses?
- How do we ensure that we retain our best talent without incurring more double-digit compensation cost increases?
- Is our strategy (which client industries we serve, what specific services we provide and why they choose us) still sound for 2022 and beyond?
Post #907 – December 9, 2021
Making A Shockingly Unimpressive Impact
I was reading how salaries had now reached $1 million for global CMOs, and then happened upon a magazine published exclusively for CEOs where I came across 2-page interviews with four firm leaders of NY-based BigLaw firms. Here was the first question posed to each:
Question: “How do you define your difference and what sets your firm apart in the industry?”
FIRM 1: “Our people, expertise and the cross border global nature of the firm are what set us apart. We are a global elite law firm, advising on some of the most significant marquee disputes and transactions that shape our clients’ businesses and the industries in which they operate. Our successes point towards excellence and our robust global platform. Our lawyers and staff operate with a mindset of distinction and dedication throughout everything they do.”
FIRM 2: “Our difference starts with our attorneys and their commitment to our clients. Our priority is understanding the businesses of our clients and letting that dictate our legal strategy. We also value retention and relationship-service as a key to success – we have some clients who have been with the firm since its inception, and many who have worked with us for decades over hundreds of matters. These institutional relationships continue to grow not just because we provide clients with excellent legal advice, but because we care about their growth and success.”
FIRM 3: “Our core strength is our consistent, intense focus on teamwork. It sets us apart in the industry. We delivered exceptional client outcomes last year against the backdrop of a tremendously uncertain environment and a scary time for us all personally, and this is a testament to our guiding values. This level of teamwork is only possible because we have exceptional people. The spirit of our people, who are skilled, creative and innovative, and our dedication to our clients, no matter the circumstance, is what made the year we just had happen. We operate in a way that makes our institution unique.”
FIRM 4: “We are a purpose-driven firm with an unparalleled reputation for excellence and professionalism. Our commitment to improving our communities and to fighting for social and racial justice dates back to our earliest days, long before such efforts were popular. We don’t try to be all things to all clients; we focus on five areas where we lead the market. Our firm’s entrepreneurial spirit and adaptability enable us to not just survive challenges and uncertainty, but to thrive.”
What shocked me was these leaders each wasting valuable space, in a preeminent CEO publication to deliver such a trivial, unimpressive message.
So, where are those million-dollar CMOs helping their firm leaders get proper media interview training?
Post #906 – December 6, 2021
Can Business Schools Really Help You Develop Leaders?
As the war for talent is in a “crisis mode,” I was intrigued to see one international firm launching a “new MBA level program with a group of business schools to give Associates executive leadership training.” My first reaction was . . . Not Again!
Now business, as an academic subject, is all about things that are logical, rational and analytical - it is fundamentally about knowledge. It can be learned by reading books, analyzing business cases, studying relevant theories and discussing the applicable principles involved. Thus, we sit in classes and intellectualize, but never have to deal with those messy, idiosyncratic humans.
Leadership is really a behavioral skill, that is about whether or not you can actually influence individuals and teams to accomplish anything. So, it requires putting people through a set of processes or simulations where they have to experience and react to a real-life scenario, try out different approaches to the situation at hand – thereby developing their emotional self-control, interactive style and determining what might actually work best when dealing with different people.
I’ve watched a number of firms link up with prominent business schools in an effort to train their people. These lawyers may be learning about business, but when it comes to leading, it is a case of the blind leading the blind! And esteemed academic, Henry Mintzberg, professor at McGill made this same point in his excellent book, “Managers not MBAs”. He also was “totally against this notion that you can separate managers from leaders, which implies that leaders don't have to manage, and means that leaders don't have to know what is going on intimately in their organization - which is wrong.”
This had me wondering what might happen if we got back to basics and started really managing our people. Let’s start to hold accountable those with managerial responsibilities to deliberately and intentionally engage in one-on-one coaching with those on their teams. Ever hear the old adage that “people don’t quit jobs, they quit managers?”
For example, let’s ask each lawyer to divide their client work into three categories: LOVE this stuff; Guess that’s why they call it WORK; and If I could only get this CRAP off my plate. Now, exercise effective coaching to help your lawyers identify which matters turn them on, then help them get more of that kind of client work.
Imagine a concerted effort to start HELPING people grow their skills, get the kinds of work they desire, and succeed in building their expertise . . . NOW how many would want to leave that kind of environment?
Post #905 – November 29, 2021
Leadership Horse Races Rarely End Well
We’ve all been reading about talent wars, unprecedented levels of turnover and how various firms have reacted. Meanwhile, I’m intrigued to read in this week’s legal media that the “Clifford Chance Managing Partner RACE is Down to Three.”
From having worked with numerous large firms on their leadership succession issues, I know first-hand that having a contested election isn’t necessarily a negative, it only becomes highly problematic when it becomes public and political. In this case, partners are set to go head-to-head to succeed Matthew Layton, the firm’s current firm leader. The media are loving it and this is when it all begins to go off the rails!
First, it can become quite distracting to everyone in the firm as it is politicized through continuous speculative discussions amongst partners. This is when things begin to heat up as our various candidates move from subtle campaigning to having their friends become more overt in canvassing for their support. Factions develop, emotional discord creeps in and rivalries become intense. It is not uncommon for partners to take sides for or against particular candidates which can result in overt behavior that deters teamwork and knowledge sharing.
And what do the clients think . . . or does anybody care? In one instance because I was involved in overseeing the process, I had all of the candidates quietly confer with their largest clients. One partner upon asking his important GC client “What would you think if I were to let my name stand as a candidate to become the firm’s next Chair?” came back to the nominating committee to report that his client’s response was “Think again!” This GC was making it very clear that if this partner were to proceed, the legal work would be moving to some other firm.
Finally, in looking at who might best assume the leadership mantle, firms will tend to gravitate to those who are legally talented and gifted rainmakers. In these kinds of contested situations a highly valued partner who loses may ultimately take it very personally (who likes to be publicly humiliated?) and decide to leave your firm. It should be no secret that headhunters usually swarm whenever firms go through highly contested elections because they know that there will inevitably be fallout.
So, Clifford Chance may have just painted a bulls-eye on two of its Star Partners.
Post #904 – November 29, 2021
An Explosive Legal Micro-Niche: FinTech.
There is a dramatic changing of the guard taking place in the Financial Services Industry that will impact every law firm serving clients in that sector. From opening accounts to insurance underwriting and credit profiling, FinTech startups are flipping conventional business models. With significant venture capital dollars flowing into the FinTech ecosystem, “challenger” banks are threatening to wipe out banking behemoths faster than Blackberry was taken out of the cellular telephone market. 1 out of every 5 Venture Capital dollars went into Fintech thus far in 2021 (2700+ deals in US, 1800+ in EU and 110 in Canada) with 206 Global Fintech Unicorns.
Here are a handful of over 20 Micro-niches:
• Asset Management. Ever heard of buying stocks or mutual funds without having to pay a commission fee? FinTech companies like Robinhood are enabling investors to trade for free in exchange for their data. They forward this data to high frequency traders who can then influence the price of the asset.
• Alternative Insurance Underwriting. Two people with the same height and weight, both non-smokers and who don’t drink alcohol will be given the same life insurance premium. However, one might be an exercise freak, while the other a couch potato and more likely to die of diabetes. Now with intelligent and self-learning algorithms, InsureTech companies can determine whether or not to give insurance, provide different terms and conditions, and offer alternative payment options.
• Digital Banking. Imagine your traditional brick and mortar bank going completely online — no physical office, no bank tellers, no mail. Challenger banks are now offering no-frills individual and business bank accounts through a complete digital infrastructure.
• Peer-to-Peer Lending. Peer-to-business (P2B) lending is when a business borrows money from one or multiple individuals. FinTech companies create platforms to match borrowers with lenders and usually take a fee from the borrower’s repayment.
• Small Ticket Loans. Banks and other lenders don’t want to underwrite smaller ticket loans because of the low margins and high costs in setting up and recovering them. FinTech companies are delivering impulse buy mechanisms (buy now & pay later, or BNPL) and one-click buy buttons on e-commerce websites to enable customers to buy quickly without having to enter any form of authentication or credit card details.
Corporations are increasingly vulnerable to the acceleration of technology that’s eating every industry — and nobody is staying in their lanes. With capital flowing like never before, the number of insurgents poised to eat an incumbent’s lunch are multiplying every day.
Post #903 – November 29, 2021
There is No Vaccine for a Lack of Leadership.
There are few people out there with bad intentions, but there are firm leaders with bad habits. Last week I spent an hour on a call with the Managing Partner from a 200+ lawyer firm who was seeking my counsel on succession planning and specifically with replacing their practice and industry group leaders, many of whom were very senior and had been in their roles for well over a decade. After being briefed, I began by asking five very basic questions:
First; do these group leaders have a formal, written job description? Answer: “No.”
Second; do these leaders have a clear understanding of precisely how many non-billable hours they are expected to spend leading and managing the people on their teams? Answer: “No.”
Third; have you provided these team leaders with any organized leadership training within the past three years, to help them enhance their individual performance? Answer: “No.”
Fourth question; have these leaders be given any written expectations, (such as you must, as a group, meet at least once per month) of what your firm’s leadership is expecting of them as team leaders? Answer: “No.”
Fifth question; do you, as the firm leader, meet with all of your team leaders to have them share and discuss their particular leadership challenges and successes with each other, at least once quarterly? Answer: “No.”
Final and very serious question, why are you bothering to even have practice and industry teams? Are these simply TINOs (teams in name only)?
Now, let me not leave anyone with the impression that this was, in any way, an isolated incident, or that the answers that I most often elicit from firm leaders, to these five questions, are wildly different in most other discussions that I’ve had.
It is still the case in too many law firms that we form these teams and then we say to the team leader we want you to manage this group; and we are very good at demanding that our people perform, but are distressingly useless in helping our people succeed. This is not a system designed to obtain measurable results.
So I guess the GOOD NEWS for those of you reading this is that your firm may continue to prosper in spite of itself, as most of your competitors perform just as pathetically. Or as my good friend, David Maister used to say, “the savings grace for today's typical law firm is that they only have to compete against . . . other law firms.”
But SADLY, that is rapidly changing! So, what are your plans for 2022?
Post #902 – November 15, 2021
Identifying Potentially Lucrative Legal Micro-Niches.
On my Twitter feed (@ConsultMcKenna) I’ve been identifying a number of Micro-Niche areas of opportunity that I do not see many law firms exploring. Here are 11 that I identified in just the past 3 months:
Companies in North America added a record number of robots in first 9 months of 2021. Factories and other industrial users ordered 29,000 robots, 37% more than during the same period last year, valued at $1.48 billion.
• Combatting Deepfakes
IMAGINE a video emerges of a CEO doing something ungodly - from being an insurance industry threat to advancing the need for repetitional management, deepfakes are becoming a reality & can lead to a dip in some company's stock.
• Alternative Finance
Think equity crowdfunding, initial coin offerings (ICOs), tokenization, and special purpose acquisition companies (SPACs) - many driven by the decentralized finance (DeFi) movement via a public decentralized blockchain network.
• Satellite Industry
This Industry may be moon-bound (as in 10x by 2030, according to McKinsey). There are many new live satellite imaging data use cases for small- to medium-sized businesses on the horizon.
• BNPL - "Buy Now - Pay Later"
Reshaping how people shop in the US and Europe, it’s remarkable that BNPL growth has found an untapped market of people who can’t or won’t use credit cards.
Finance firms have long struggled to reach young and new customers but now Wall Street Influencers are making $500,000, topping even the Bankers. These are social media influencers that use platforms like TikTok and Instagram to make financial advice digestible for younger audiences.
• Cryptocurrency Regulation
SEC Chair Gary Gensle asked Congress for more resources to help oversee the cryptocurrency sector. "Funding-wise, we could use a lot more people", adding that there are 6,000 projects in the space, many of which qualify as securities.
• Food and Beverage Lawsuits
The Food and Drink Industry is facing a swarm of Class Action Lawsuits. In June, Post agreed to a $15m settlement for marketing sugary cereals with healthy claims. Meanwhile, McCormick is facing a $3m settlement for advertising artificial ingredients as “natural.”
• Climate Change Litigation
A water-dwelling plant is the lead plaintiff in a novel lawsuit against the Minnesota Department of Natural Resources (DNR) as the White Earth Band of Ojibwe asserts its sovereignty.
• 3D Printed House Construction
A batch of new houses across California is selling unusually fast. In the past two months, 82 have been snapped up, and the waiting list is 1,000 long. The collaborators behind these houses, are able to erect one in less than 24 hours.
• BioPharma Accelerates Growth
January 2021: 60 vaccine candidates in clinical trials. July 2021: 105 in trials, with 184 in the preclinical phase. New vaccine platforms, such as mRNA & viral-vector platforms, have been validated, enabling new approaches.
Post #901 – November 7, 2021
Where Your Industry Group Initiatives Really Fail
Unfortunately, all too often firms tend to view industry groups as a marketing platform rather than
as a means of understanding the client’s business problems and providing them with the kind of
knowledgeable services they need.
Don’t let these seven factors be how your clients describe your industry initiatives.
This article is an excerpt from my soon-to-be-released
new 17 Chapter / 200+ page e-Book entitled,
"Industry Specialization: Making Competitors Irrelevant"
Post #900 – October 21, 2021
Why Did Lawyers Ever Adopt the “Transactional” Label?
I’d heard this a number of times over the years from clients but was struck by an article authored by the editor of strategy+ business (PwC) wherein he states that “Transactional has become something of a DIRTY WORD in the business world. It suggests a short-term, one-off mindset and a commoditized approach to value. Nobody wants transactional relationships.”
Meanwhile if we search “transactional lawyer” we get over 200,000 Google results and are informed that “A transactional lawyer is also known as a business lawyer, and transactional lawyers counsel individuals and organizations on the legal issues generated by their business dealings.” We are even informed that as a young lawyer “if you are not sure you want the life or work style of a litigator, then maybe you should consider the practice area of transitional law.” So I guess it is a practice area, the one that in the old days, used to be called Corporate or Business.
What Does the Word “Transactional” Really Mean?
A true transactional undertaking is built upon an expectation for reciprocation – and by its definition it suggests strongly that there is absolutely NO interest in building a relationship or seeking to collaborate on any long-term basis. Both individuals are concerned only with how they will each benefit. Individuals are self-serving, such that the lawyer wants to ensure that they can get as much money as possible for a set amount of work in return. Within any transactional undertaking, bonds are broken the moment one party does not hold up their end. Therefore, these undertakings tend to be highly fragile.
Now is that really the impression your firm wants to project? And how do you label yourselves Transactional Attorneys while also claiming to be obsessed with delivering value and client service which tends to be RELATIONSHIP driven.
A true collaborative relationship is meant to be long term where both parties are willing to make sacrifices for the sake of their bond. They are both concerned with the perspective, interests, and needs of the other party and have a commitment to each other’s success. To a certain extent, individuals are willing to give without expecting anything in return. This helps to build a strong longer-lasting attachment that is difficult to break.
If we really care what client’s think, and accept that the term “transactional” may be undignified, maybe we need to expunge this term from our collective vocabulary. WHAT DO YOU THINK?
Post # 899 – October 13, 2021
Thought Leadership Research Results
My colleagues at Thinkers360 announced the release of their 2022 B2B Thought Leadership Outlook Research Report. The purpose of the research was to better understand current and future trends with regard to both thought leadership creators – such as individuals, agencies and brands – and thought leadership consumers; and their plans for 2022.
SOME KEY FINDINGS
• For those consuming thought leadership:
- It’s all about Insight and Relevance – The key is insightful (95%), forward-looking (90%) and relevant (89%) content that’s engaging and impactful.
- Authors (52%), Academics (39%), Influencers (36%) and Consultants (35%) are the primary sources of thought leadership content.
- Building subject matter expertise (84%), informing strategy (82%) and aiding decision making (75%) are the main motivations
• For those creating thought leadership:
- Competitive differentiation (81%), brand perception (80%) and client trust (74%) are the main business benefits of thought leadership content creation.
- 63% consider thought leadership a Top 3 Priority or higher within their sales and marketing strategies for 2022.
Thinkers360 is an opt-in network of the world’s foremost thought leaders — including academics, advisors, analysts, authors, consultants, executives, influencers and speakers — with over 100M followers on social media combined.
As I was involved in the initial development of the survey questions and the promotion of this research, I’m pleased to share a copy of the survey results here - https://files.constantcontact.com/fb719862701/414cb19b-9930-4eb1-a396-53b23faeda39.pdf
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