Law People

Can Introverts Lead?

Ronda Muir — Tue, 02 Feb 2010 18:47:55 -0500

Firms are placing their futures at risk if they cannot identify, develop and empower the next generation of leaders. So it is no surprise that more law firms are investing in leadership development. For example, according to PaLAW 2009's 14th annual Managing Partners Survey, cited in the November 23, 2009 issue of The Legal Intelligencer, the number of firms surveyed that provide leadership training at any level increased from 40.5% in 2008 to 67.7% in 2009, almost a 60% increase.

What does it take to be a good leader? And do we lawyers have what it takes?

There are numerous theories about the best style of leadership--see Primal Leadership (2002) by Goleman, Boyatzis and McKee for an informative evaluation of 6 major styles. Apart from style, Richard Daft, author of The Leadership Experience, cites numerous studies that have sifted out five recurring personal attributes of successful leaders: openness to experience, emotional stability, conscientiousness, agreeableness and extroversion.

If you look around for potential leaders in your firm, chances are few of your colleagues possess all five of those attributes. While conscientiousness is something lawyers tend to have in spades, openness to experience (also known as risk tolerance), emotional stability (or emotional intelligence) and agreeableness (aren't we hired NOT to be agreeable?) are all factors that in various studies lawyers tend to fall short on. Certainly, we have clear and robust data that most lawyers (over 70%) are introverts, rather than extroverts.

So can introverts lead? Successfully, that is?

There seems to be some hope. If the concern is that introverts tend not to be charismatic, outgoing personalities, Jim Collins's book Good to Great: Why Some Companies Make the Leap . . . And Others Don't provides some comfort. Collins discovered that glitzy, dynamic, high-profile CEOs are actually a hindrance to the long-term success of their corporations. Charismatic leaders are attractive to others, but they may be less effective in drawing people to the mission and values of the organization itself.

Collins contrasts Lee Iacocca, Chrysler's leader and spokesperson in the 1980s, with Colman Mockler, the CEO of Gillette from 1975 to 1991. While Iacocca almost single-handedly steered his car company away from disaster and put it on the road to prosperity, after his retirement Chrysler's profits faltered, and the company was sold to a German rival five years later. Apparently Iacocca had done little to invest in his successors or build a culture that would ensure the longevity of Chrysler.

In sharp contrast, Mockler made personal sacrifices and took substantial risks for the long-term success of the company and the profits of the shareholders, and he was so effective that $1 invested in Gillette in December 1976 was worth $95.68 in December 1996 and eventually earned a significant premium when the company was sold to P&G in 2005. Laconic and reserved, Mockler labored in relative anonymity for a big-time executive; he was a man who prioritized the success of his company over ego gratification.

Mockler and executives like him are examples of what Collins calls "level 5 leaders," those who are modest, self-effacing and understated, and display a workmanlike diligence—more plow horse than show horse, they set up their successors for even greater success in the next generation.

Leadership guru Peter Drucker goes further to say that "charisma becomes the undoing of leaders. It makes them inflexible, convinced of their own infallibility, unable to change."

So maybe we introverted lawyers, likely to be low on the charisma meter, may have some hope of mastering leadership. Certainly being people who think before we act and listen before we talk can be useful in leadership roles.

Successful leadership may also be enhanced by introspection--a natural for introverts. Leaders who scrutinize every aspect of their leadership and personality (and that of others) may be able to find internal motivations and assumptions that contribute to dysfunction and inefficiency.

Another way that introverts may be able to surpass the traditional leadership attributes is in their ability to "make sense." Wilfred Drath and Charles Palus at the Center for Creative Leadership explain that "most existing theories, models and definitions of leadership proceed from the assumption that somehow leadership is about getting people to do something." Essentially cheerleading. That is an effort that requires relish for and persistence in being extraverted.

But Drath and Palus reimagine leadership as "the process of making sense of what people are doing together so that people will understand and be committed." Leadership, in this view, is a matter of providing interpretation. Leaders can give people a lens and a language for understanding their work and experiences in light of larger purposes. They can help shape the mental frameworks of others so that those people see themselves as making contributions to the mission and direction of their organization, working in community for a common purpose. Here is an opportunity for the thoughtful introvert to make his or her mark.

In the corporate world over the past decades, leaders have produced greater organizational efficiencies by employing advanced analytics and defined metrics and systems. But most organizations that have successfully manipulated these resources are finding it difficult to extract even greater efficiencies from them over time. Many are turning to their human capital as the next source of growth. Yet many businesses are realizing the difficulty of identifying and developing leaders, particularly those who can lead this kind of productivity growth. For example, the 2008 IBM Leadership Survey found that over 75% of CEOs lamented their ability to identify and develop leaders to succeed them.

Law firms should take note.

Leadership involves not just leveraging the collective knowledge and expertise of an organization. Leadership is also about cultivating and nurturing human capital, particularly in such a talent-dependent industry as ours. Leaders who recognize the perennial needs of individuals to be appreciated, to be part of a community and to feel they are contributing to the greater good are more likely to be able to raise the productivity of their troops.

And even introverts can do that.

Muir to Speak on Business Development as Part of Partner Compensation

Ronda Muir — Mon, 01 Feb 2010 18:15:06 -0500

Ronda Muir is participating as a panelist in CCM's audio conference on "Compensation for Client Development: Tracking, Measuring and Rewarding for New Business Origination" being held at 2pm on Thursday, February 18, 2010. To register, please go to http://www.c4cm.com/lawfirm/compensation_client_development.htm.

Barbarians at the Partnership Gate?

Ronda Muir — Fri, 22 Jan 2010 13:15:07 -0500

The partner smack down has begun.

Here’s the most recent tally for equity partner announcements: Skadden, Arps named 8 new partners, down from 25; Debevoise & Plimpton named 2, down from 6; Weil, Gotshal promoted 3, down from 7; Cleary Gottlieb elected 4 new partners, half as many as in 2008; Ropes & Gray named one-third fewer with 8 new partners; Latham & Watkins cut promotions 25% to 23; Davis Polk & Wardwell named 4 partners compared to 6 a year earlier; Proskauer Rose named 4 to partnership, 1 less than in 2008; Gibson, Dunn & Crutcher named 11 new partners, compared to 13 in 2008; and Wachtell, Lipton, the most profitable firm in the country, named 2 new partners, down from 6 last year. The grand finale is that Cravath is making no new partners this year. Zero.

And it’s not just the firms based in New York and LA that are promoting fewer associates: Mayer Brown named almost half the number of partners compared to 2008, or 14 partners, down from 27, as did Paul, Hastings, naming 6 new partners, down from 11 the prior year. Kirkland and Ellis in October promoted 51 lawyers to non-equity partner (which all partners start out as), constituting a 27% drop from last year.

Clearly part of the reason for the recoil at making new partners is that law firm net income through the third quarter of 2009 was down 6.1 percent industry-wide, according to a survey by Wachovia Legal Specialty Group, part of Wells Fargo Corp, with top-tier firms experiencing a 4.3% decrease.

In reaction, firms have cut expenses, summer and associate ranks, delayed starts, reduced salaries and bonuses and have even cut the compensation of non-equity partners, in some cases clawing back additional capital contributions.

According to The American Lawyer, the number of layoffs stands at more than 2,900 associates since the start of 2008. The average summer class size was 20% smaller this year than last, and of those summers who got offers from Am Law 100 firms, all but a handful are looking at delayed start dates. Most firms have cut back sharply on recruiting for next summer; with at least nine firms, including Morgan, Lewis, Pillsbury Winthrop and Milbank Tweed, having canceled their 2010 summer programs in all or some offices.

Many associates still working have seen their compensation frozen or cut, typically by about 10%, or from $160,000 to $145,000 for first-year associates in major cities.

For example, Pittsburgh-based Reed Smith is reducing by 20% annual salaries and hourly billing rates for first-year associates and slicing all other associate salaries by 10%. The firm also has introduced merit-based promotion and has had two rounds of layoffs of more than 200 people over the past year. Reed Smith also recently told non-equity partners that they would have to contribute 15% of their base pay to the firm as capital or relinquish their partner status — a move estimated to save the firm $18 million.

Drinker Biddle & Reath has lowered salaries and enhanced training for first-year associates, replaced lockstep promotion with a merit-based program for associates and gone through two rounds of layoffs. Chairman Alfred Putnam notes partners will have made less in 2009 than they did in 2008 and that there will be continued downward pressure on compensation.

But Putnam says firms are loathe to cut partner compensation across the board. “You might have two or three practice groups doing well, and they might say they are not going to take a cut and if the firm makes them, they will just walk across the street [to a competitor].”

So what we have now is the perfect storm for producing class (law class, that is) warfare. Having made all the other conceivable cuts and reductions and clawbacks that partnerships can think of, a number of them are staring at nonetheless reduced partner profits. And those reduced profits look so bad, partners are not willing to cut them further by sharing with additional partners.

The implications of making fewer partners are not pretty, however. Boomers are going to be hanging on longer because of their career-centered lives and their reduced portfolios. Rumbling among the troops will escalate, young turks are likely to go elsewhere because of the uncertainty, new lawyers will have to carefully assess partnership portential before joining a firm and ever-younger clients will find themselves with aging service partners.

Of course, not all firms are cutting the number of partners they are making. Sullivan & Cromwell in October elected 5 new partners, the same as a year earlier. "We're obviously not going to stop making partners because of the financial conditions," said H. Rodgin Cohen, chairman of the firm. Obviously.

And a few brave firms are actually making more partners. Milbank, Tweed recently elected 5 attorneys to partner, up from 4 in 2008. "We certainly pay attention to the economy in making new partner decisions, but we also pay attention to the fact that we're strong enough that we should mostly be focusing on long-term investments," said Mel Immergut, Milbank's chairman.

Fried, Frank named 7 new partners, up from 5 a year earlier. The promotions followed a year where Fried Frank shrank firmwide more than any other law firm, according to data collected by The National Law Journal, with the number of lawyers falling 26.4% to 468 attorneys.

Partners may be tempted to wait out this “downturn” thinking it is a recession and not a reset, but eventually the prospect of lower profitability and therefore lower compensation for partners will have to be confronted and firms are at hazard if they do not deal with the implications.

What's an Hour Worth Now?

Ronda Muir — Wed, 13 Jan 2010 19:18:28 -0500

While no one in his or her right mind yet concedes it, let's just assume that the tides have turned and the billable hour is a thing of the past. What becomes of all the firm procedures and evaluation and promotion and compensation systems triggered or run by billable hours?

How do you tell your associates how much you expect them to work? What do you do about all those compensation systems--some affecting associate salaries and bonuses, but certainly many determining partner takehome--that require the input of some measure of billable hours--pro bono hours, firm management hours, marketing hours, hours of originated work, hours of work serviced, etc.?

As a Hildebrandt entry points out: "One thing is for certain... Bonuses based on the number of billable hours will have some unpleasant consequences in a fixed fee environment." In effect, firms will be caught paying their lawyers for the same inefficiencies that clients are complaining about. The efficient lawyers, with lower hours, will be the losers.

But changing incentives in an environment where there is no history of change can be challenging. Author Jim Collins suggests asking this question: "'What is the economic denominator that best drives our economic engine?" Every firm should be asking itself that question. Is it number of hours? Profit per matter? Profit per lawyer? Profit per dollar spent on labor?

So when that fateful time comes, what will the hour be worth? Frankly, given the jeers from the client galleries, what's an hour worth now?

More Accolades for "What the New Law Firm Looks Like"

Ronda Muir — Tue, 12 Jan 2010 13:29:09 -0500

From Mitt Regan, Professor of Law and Co-Director of the Center for the Study of the Legal Profession at Georgetown University Law Center: "I’m using your piece on 'What the New Law Firm Looks Like' for the Law Firms course that I will be teaching at Harvard Law School this spring. It does the best job I’ve seen of succinctly describing in one place the various trends that are likely to be transforming law firm practice."

So reassuring to see your offspring make it to Harvard!

You too can have the benefit of Ivy League-worthy insight. Now is the time to arrange for your managing partner, executive committee, general counsel or partnership to dialogue with Ronda Muir on what the new law firm looks like and where on that continuum your firm is headed.

Wishing You and Yours the Happiest of Holidays and a New Year of Prosperity and Peace

Ronda Muir — Wed, 23 Dec 2009 10:11:35 -0500

My sincere thanks to all of you who subscribe to LawPeopleBlog. I hope you have found useful information here this past year. May we prosper from the challenges that the new year brings and remember to be grateful for those opportunities. Healthy and happy holidays!

From Generalization to Specialization and Back Again

Ronda Muir — Tue, 22 Dec 2009 10:48:22 -0500

If you stay with it long enough, a practice that goes out of fashion will often come back around again. Those of us of a certain age remember when the first year or more at a big law firm was spent "rotating" around departments to get a good feel for the full range of legal practice. That quaint practice was drilled out of most firms with the arrival of big ticket associate salaries and the push for faster and higher realization of revenues on their time.

Now we hear from across the pond that Linklaters is proposing countering "damaging over-specialisation" by having junior associates spend time in different practice areas in their first few years, a practice that Allen & Overy is also considering and Slaughter and May has already adopted.

“There was an awareness that people are specialising too early and there’s a desire to see people get a more rounded experience in their early years,” a senior partner at Linklaters was quoted as saying. However, it was noted that the move "should not be seen as a reaction to the economic climate."

With due regard to that Linklaters partner's opinion, whenever this "new" practice is discussed at the law firms we advise stateside, it is raised expressly in the context of the current economic climate--one of the reasons being to position associates to be able to move more quickly out of and into practice areas depending on the firm's needs.

Non-equity partnership tiers have been the fastest growing population segment of law firms during the past decade, but those partners are sometimes specialists in areas where firms can no longer reliably provide sufficient work. And, like specialized associates, those non-equity partners are often difficult to re-deploy quickly to where the firm's work is. Many firms are therefore considering limiting or eliminating entirely that tier, moving to an all-equity partnership like back in the old days. Addleshaw Goddard intends to put that reversion in place next year. And a similar noise is being made as DLA Piper reviews its entire firm structure, with unattributed partners saying that the firm could move toward a single tier of partners, eliminating both tiers of income partners in its current model.

The wheel goes round and round.

Making it Personal

Ronda Muir — Thu, 17 Dec 2009 17:54:24 -0500

Following up on our November 1 entry "The Importance of Glue" is an article by Patricia Gillette, a partner at Orrick, Herrington & Sutcliffe, published December 9 in The American Lawyer, and reproduced below in its entirety.

"The Message That Will Seal Law Firms' Doom: 'It's Nothing Personal'

It's not personal.

This is the current mantra of law firms with regard to their staff members, associates and partners.

"Sorry, first-year associate, you won't be starting work when we said you would. Come back in a year."

"After careful consideration, tenth-year associate, we just can't make you partner yet. Maybe next year."

"We're sorry to do this, twenty-year legal secretary, but we have to cut back on costs and so we're letting you go."

The messages all inevitably are followed by the exculpatory: "It's not personal, it's business."

There is no question that change is coming to the legal profession -- in the way firms are structured for advancement, in the career expectations of associates and in how work gets done. But law firms have yet to come to terms with the fact that these changes might also impact profits, in the same way that changes to the medical profession affected the profit margins of physicians. As such, in many law firms, change is embraced as long as equity partners can continue to earn salaries that will be reflected positively in the almighty profits per partner competition. (And make no mistake that it is a competition, as are most things with lawyers. Thus, we see firms stretching the definitional limits of "profits per partner" as they vie for the top spots on the "list.")

In the resulting wreckage, personal connections are lost. Because what these firms fail to realize is that managing only to the bottom line is a short-term strategy. And while that might be OK with the megafirms that want to see their shadows cast further into the global market and higher up on The Am Law 100, it is not strategic and it ignores the reality of the changing market. Still, large law firms continue to march down this path. And that is the path that has led to the depersonalization of large law firms.

Depersonalization is what allows big-firm associates to come and go freely (no question, when the economy comes back, they'll start moving again). It allows powerful partners to take large books of business to competitors so they can make more money. And, in many of these firms, depersonalization means that quality work plays second fiddle to realization, and good citizenship and mentoring are trumped by profitability.

This phenomenon doesn't stop at the entrance to the law firm. It has spilled over to the clients. The lack of a relationship-driven business model permits clients to be arbitrary and fickle. Historical relationships are traded for "what have you done for me lately" and "how much did it cost." Years of good work and great results are thrown out for the low-cost leader, or a change in the general counsel. Because it's not personal ... not for you, not for anyone, not anymore.

Law firms used to be about relationships. Relationships between partners and partners, associates and partners, clients and lawyers. Law firms used to be about retention and growth of lawyers and client relationships, mentoring and development, loyalty to the institution and to each other and respect for those who came before. Law firms used to be about trust.

That trust, however, has been broken. Witness the demise of giant firms like Heller Ehrman, Thelen and Brobeck -- all big firms that appear to have traded their culture for currency. As a former partner of Heller, I saw our firm, with its rich culture of consensus and collegiality, collapse in part because some partners thought it would be OK to trade core values and firm identity for a moment at the top of a list; because some partners favored the elusive "global reach" over more realistic ambitions; and because some partners chose more immediate returns over the history and tradition of the firm. In big firms that have survived, loyalty is too often defined by the portability of a partner's business, associates are seen (and see themselves) as fungible commodities in whom no one has a stake, and fudging numbers of women and minority associates and partners is justified, if it gets the firm to its rightful place on yet another list.

Is this bottom line/list-driven model sustainable? The answer has to be "No." Because, it ignores what law firms need to fuel their engines: associates who are invested in the firm and the future of the institution. There is no question that the new generation of lawyers is relationship-driven -- social networks define their reality; connecting with others and sharing experiences is their passion. Money is important, but community is more important. Loyalty from young associates cannot be bought with law firm logo-emblazoned swag and big pay checks. It must be earned by good and meaningful work assignments, team approaches and a feeling of being an integral part of the firm.

If Big Law wants to have a sustainable and renewable model, these law firms will have to re-engineer their models. Some law firms are making efforts to do just that by:

Reconnecting with clients for the broader and longer relationship.

Looking at associates as valuable assets that have to be mentored, developed and retained by the firm incentivizing firms to deepen their relationships with associates through active mentoring programs, investing in training and instituting career development programs that recognize and support a nonlinear path to partnership.

Developing a skills-based evaluation and compensation system that rewards teamwork, productivity, quality work, loyalty and competence.

Valuing institutional maturity, diversity and historical contributions along with immediate returns by crediting nonbillable hours spent on broadening client relationships, rewarding partners for retaining associates and increasing diversity, recognizing the need to pass the baton through institutionalized succession planning on client relationships.

Finding ways to truly partner with clients so that law firms and clients have shared risks and rewards by encouraging and supporting alternative billing arrangements, knowing the client's business and recognizing its needs and seconding associates when needed.

Big law firms simply cannot continue to trade relationships with their associates and clients for the prospect of raising profits. In fact, firms that ignore this do so at their own peril. Firm leaders need to recognize that it is relationships and culture that bind people to their firms -- because, for the best and the brightest lawyers in big firms and for the clients who want quality legal work, it is personal."

Thanks, Patricia. Couldn't have said it better.

Muir to Advise in Patrick McKenna's ENABLE Program

Ronda Muir — Sat, 05 Dec 2009 12:09:27 -0500

Muir has been selected by Patrick McKenna (co-author of First Among Equals and Herding Cats) as one of a select group of law firm consultants available to advise law firm leaders under McKenna's ENABLE program--Executive Network of Advisory Boards for Leadership Excellence, which McKenna describes below.

"Now, more than ever, being a Firm Chair or Managing Partner and leading a professional service firm is a monumental task. Even more critical, how do you handle sensitive or strategic challenges when your previous experience has not adequately prepared you?

Corporate CEO’s who have used Advisory Boards rate them as "very effective" as sounding boards and sources of management mentoring. They also give these boards high ratings for offering ideas, influencing strategy, sharing business contacts, and providing business or industry intelligence.

The primary challenge to making Advisory Boards work for professional service firm leaders lies in recruiting and assembling a group of talented confidants willing to serve on these boards and then having an experienced resource available to help firm leaders get their Advisory Boards up-and-running effectively. The ENABLE program is dedicated to those two objectives."

For additional information, contact Muir at RMuir@RobinRolfeResources or McKenna at patrick@patrickmckenna.com.

Hiring into the Future

Ronda Muir — Fri, 27 Nov 2009 16:26:57 -0500

Hiring the right people is the first and most important goal in recruitment. And these days firms do not have the luxury of over-hiring and waiting a few years for the "keepers" to rise to the top.

A speech at the International Bar Association conference in Madrid last month reiterated the importance of an often-neglected part of recruiting: determining the personality and other personal attributes, such as emotional intelligence, communication skills, resilience and rainmaking ability, of potential hires to make sure they "fit" a firm as well as a firm's clients. In anticipation of that presentation, Janet Moore said: "I have been thinking how (most) law firms do not fully assess lawyers before hiring them... What if, as part of the hiring decision, law firms objectively and thoroughly assessed their potential hires?"

Or, we might add, if firms worry about scaring off recruits with such a sophisticated approach, what if firms used assessments as part of the orientation and integration process to better place new attorneys in practice groups and firm roles? Or used assessments to help their lawyers build individual career development plans and to inform professional development programs? Or used them to steer leadership development programs and succession plans?

There is a long list of assessments that have been successfully used for decades by corporations and consultants to the corporate world. Some shed light on business development propensities, others highlight personality attributes that help position a person in his or her most productive role and others predict and shape delivery and management style.

At a time when law firms are turning more aggressively to business schools for management programs to help their lawyers become better businessmen, it should be pointed out that business schools fairly uniformly require that their graduates complete some sort of personal assessment and take a class on how those attributes influence their team participation and management style--and can help them be more effective.

But an important step is doing the upfront work of identifying what attributes a firm is looking for in hires and how the firm can support the development of those attributes. “We want bright people, but we’re also looking for other qualities, like a sense of responsibility and a willingness to go the extra mile for clients,” as Cynthia Pladziewicz, Chief Development Officer at Dallas-based Thompson & Knight says. “We need to understand who succeeds here..." and “make sure we integrate our recruiting with our development process.”

Muir on the New Law Firm: IOMA's Thought Leader

Ronda Muir — Tue, 24 Nov 2009 12:36:39 -0500

The IOMA Law Firm Leadership Alert on November 19, 2009 calls Ronda Muir this month's Thought Leader, saying she "...presents as cogent an expression of what the future of law firms and law practice will look like as we have yet found." Her article is published in the December issue of the IOMA Partner's Report - a Monthly Brief for Law Firm Owners and will be the featured cover-page article in December's Compensation & Benefits for Law Offices newsletter.

The People Factor Critical to Reinvention

Ronda Muir — Mon, 16 Nov 2009 11:00:56 -0500

One of the important implications of Muir's article "What the New Law Firm Looks Like: The Reinvention of a Reluctant Industry" is that going forward firms will require the close involvement of sophisticated management professionals who are not necessarily or even preferably lawyers to help design and manage change. These critical players will not only assist in initially envisioning the goals of the firm and its related programs and in easing the various players toward them through the transition period, but will also remain important in ongoing firm management in order to make those initiatives fully operational and successful over the long term.

In the past many law firms have often taken a pass when it comes to building the depth and quality of their non-lawyer professional staff. For the most part we aren't that focused on these "unseen" professionals--there are going to be complaints about them within the firm anyway and rarely does a client interact with them. So the firm librarian could be a dud, and the head of recruitment simply cheerful.

We seem to realize marketing and technology advisers (and at the bigger firms, the professional development directors) have some importance, but still we often opt for less sophisticated, less expensive personnel who act more as placeholders than change agents, undercutting their potential effectiveness from the start. We tend to hire them young and tell them what to do and even sometimes how to do it. After all, lawyers are the ones who really head all of these areas: the non-legal staff are simply assistants and overhead to boot.

The problem is that lawyers are no longer the experts in all the areas that law firms need expertise in.

For example, Muir notes that firms will develop "serious project management skills that focus on evaluating and reviewing client goals (both fee-related and outcome-related) and managing matters to reach them." Such skills include the technological capacity and human expertise to analyze, bid on and track client matters, including producing interim progress analyses to manage staffing and expenses and keep the client up to date. Lawyers working on those projects need to be spending their time doing what they do best--providing legal services, and should rely on non-legal professionals to fine tune the timing and extent of those services.

Similarly, "staff managers" acting like purchasing managers are likely to be responsible for engaging and managing a complex and highly changeable array of lawyers and services for specific and often fixed-term projects. They will need the technology and expertise to manage a large database of information on individual lawyers, temp providers and outsourcers, produce contracts, evaluate performance and follow up complaints and contract violations.

Making "frequent and accurate evaluations of lawyers and staff and effectively using targeted training" are not only complex processes in themselves requiring careful analysis but become critical to morale and retention as these evaluations and trainings impact compensation in the new merit and competency models (see, for example, "The Issues in Moving From Law Firm Lockstep to 'Levels' Compensation"). And those charged with determining compensation based on multiple indices and complex formulas applied across numerous parties similarly need to have reliably sophisticated expertise. The mid-level partner who doesn't have a lot of client work these days isn't the best choice to run with these valuable, exacting tasks.

Finally, "building relationships, which is key to exerting leadership influence, will be more challenging," and firms are likely to require more leadership time from their leaders--whether firm-wide or practice group leaders--which implies more time diverted from practice to firm management and more reliance on professional assistance. Work assignment evaluation and management, leadership development, diversity compliance, client succession planning--these tasks can be taken on or assisted by non-lawyer professionals with the appropriate skills.

Of course, these professionals mean a rise in overhead--whether you obtain your expertise by in-house personnel or from outside consultants, another reason profits are likely to be diluted going forward.

But we lawyers can't effectively do all these jobs. We can't because we are not diverse enough in our approaches and talents (see "The Unique Psychological World of Lawyers"). We not only haven't been trained in the relevant areas--project management, talent evaluation, competency testing--but we also aren't likely to be naturally inclined toward or good at the process, patience and attention to the types of details that are required. Or if per chance there are lawyers among us who are so inclined or talented, we are not likely to know who they are.

There is the problem of overcoming the legal ego--it's not important if we can't do it well, and conversely, if it's important, then we can do it--but don't let that attitude be what keeps your firm from moving ahead. Good management these days lies in identifying and locating needed expertise, not in attempting to be it.

EMail Notifications Are Again Operational

Ronda Muir — Thu, 12 Nov 2009 10:55:27 -0500

Our host's email notification server has been down for several days and is only now operational, so you have not received notices of blog entries posted during that time. Rather than flood your inbox with notications, please browse the blog at your leisure to catch up on the latest entries--The Importance of Glue, Throwing out Consultants' Reports, and The People Factor Inherent in the Coming Reinvention.

Throw Out Those Consultants' Reports

Ronda Muir — Fri, 06 Nov 2009 11:35:07 -0500

We spend our days advising law firms and law departments about the changing landscape for their professional services. But just as the legal industry is in a state of transition, so is the industry that consults with the legal industry.

We at Robin Rolfe Resources are retuning our services in order to offer you cost-effective updates on the fast-paced corrections and counter-corrections occurring daily in the legal world. And we are going to do so without killing a lot of trees or landing in your bottom file drawer.

We can meet with your general counsel or managing parter, executive committee, planning committee, a practice group or the whole department or partnership to discuss trends and innovations--both successes and bloopers--in many realms of practice management: governance, client service, compensation, recruitment, lateral integration, retention, performance evaluation, motivation, promotion, training and development, leadership, morale, diversity, and succession, among others. Our own years of experience in practicing law and then advising practices of all sizes, coupled with an expertise in lawyer psychology, make us uniquely capable of providing sophisticated, up-to-date and practical advice.

We can meet for a morning, a day or regularly on a quarterly or other basis. If you need more extensive research or written advice, we can provide it. Regardless of the extent of our role, we are on your side of the table when you are analyzing the tough calls.

A much-heralded business author is working on a new book about reinvention and has concluded that both law and consulting fall into the category of needing to be reinvented. In both of our businesses, tomes on best practices should be relegated to the last century. Ours certainly are.

The Importance of Glue

Ronda Muir — Sun, 01 Nov 2009 18:55:32 -0500

Muir points out in her article What the New Law Firm Looks Like that building bigger firms does not necessarily produce better bottom lines. Of course for many firms long-term client development or other factors beside profitability fuel growth. And then there are some growing firms which in fact achieve greater profitability in spite of the odds.

K&L Gates is one of the firms that has managed to accomplish that. The product of a 2007 merger of Kirkpatrick & Lockhart with Preston Gates & Ellis, and then mergers with Nicholson Graham of London, Washington's Hill Christopher and Boston's Warner & Stackpole, the firm has completed since the beginning of 2008 three additional mergers -- one with Texas-based Hughes & Luce, a second with Charlotte, N.C.-based Kennedy Covington Lobdell & Hickman and the third with Bell Boyd, which took effect March 1, 2009, bringing together a total of over 1,800 lawyers. Over the same period, the firm opened offices in Paris, Shanghai, Frankfurt and most recently Dubai, among others, and established a relationship with Taiwanese firm J&J Attorneys at Law, for a total of 33 offices.

This astounding growth trajectory is true to Chairman and Global Managing Partner Peter Kalis's express intention to "grow aggressively," taking advantage of the firm's lack of short-term and long-term debt. Not only has growth been achieved but in this case the approach has so far proved profitable--revenues for 2008 were up 27% over 2007, while profits per partner for that year rose almost 7%, with first half 2009 continuing to show significant increases, again meeting Kalis's stated goal of increased profitability every year.

So if a firm like K&L Gates manages to do the difficult if not impossible by growing aggressively while increasing profits, what are the challenges?

Of course the firm has been through a few clouds, as there always are around silver linings. No firm, regardless of its size, can escape them. Microsoft Corp.'s list of preferred legal providers did not include Bill Gates's father's firm this year. While Microsoft GC Brad Smith had welcomed the original merger of the Gates firm and Kirkpatrick & Lockhart, former Microsoft GC William Neukom left K&L Gates last year, perhaps signaling something. Or perhaps it was simply time for a change. The firm did not add another DuPont "Meeting the Challenge" Award this year to those accumulated over the past few years. And K&L Gates has had its share of difficult client relations--MTV Networks noisily canned the firm as defense counsel a few months ago.

One insight into the challenges that the firm's success raises may be in a comment from K&L Gates' most senior trademark lawyer Mark Peroff, who left the firm last year for a smaller firm. "In my experience at K&L Gates," he was quoted as saying in explanation of the move, "the focus was entirely on making money. There was no glue among the partners." (Peroff also pointed out that in a smaller firm he could significantly lower his billing rate.)

There might be some who would question the importance of glue, both as to whether it significantly colors one's experience at a firm and also whether it adds to the bottom line, a discussion we will take up in a later entry. But Peroff 's comments raise the conundrum that many growing firms in fact face, and often without the benefit of rising profitability.

Every year the ranks of new hires, lateral hires, and various contract, counsel, income, equity and other lawyers shift, while there is simultaneous shifting among personnel at various offices. How to add so many bodies to various locations and still keep a sense of commonality if not collegiality among the players?

And similarly, if a firm hopes to improve profitabiliy, can it push bottom-line results persistently, making each person accountable for their own production, and still maintain strong relationships?

In other words, do our goals and policies bind us or divide us?

Sometimes glue is simply a commonality that keeps all the various firm systems running in decent working order. Sometimes glue produces real revenue through cross selling and enhanced relationship building. Sometimes glue is just that ineffable bond that keeps people from leaving.

It may sound pretty fuzzy, but it's important to consider the glue in your firm.

What the New Law Firm Looks Like: The Necessary Reinvention of a Reluctant Industry

Ronda Muir — Wed, 21 Oct 2009 15:35:42 -0500

Yes, Virginia, there is a future for law firms, but it is a strikingly different one from the law firm of the past.

Not Your Grandfather's Firm

What would have been bombshells ten years ago, and maybe even five years ago, continue to drop from the legal firmament: Double digit reductions in revenues and profits; big shops--Bingham McCutchen, Howrey, Orrick, DLA Piper, Morgan Lewis--shelve or reduce their reliance on lock-step promotions; many firms cut back or eliminate summer programs; salaries are frozen or reduced; behavioral interviewing becomes the newest buzzword in recruitment at Vinson & Elkins and elsewhere; old-line English firms Slaughters, Linklaters and Clifford Chance all acknowledge engaging outsourcers for their clients' low-level legal work, in some cases after years of deriding the practice; and English firms Addleshaws and Linklaters take steps to convert to all equity partnerships, while a number of American firms secretly consider it.

What the New Law Firm Looks Like

Muir's article What the New Law Firm Looks Like: the Necessary Reinvention of a Reluctant Industry reviews some of the areas where changes are sure to appear, and are often already in motion: the rise of merit compensation, multisourcing, non-lawyer stakeholders and the demands made on leadership generally and practice group management specifically; the decline of mergers, hourly billings, big real estate holdings, compensation generally, and fixed levels of staffing.

In other words, transition is the keyword. Your competitors are leaving no stone unturned in their search for an edge in a difficult market--neither should you.

Let us know what steps your firm or your outside counsel are taking to better position themselves for the road ahead. We will compile these results and pass on the best to you.

Looking at the Crystal Ball

Ronda Muir — Wed, 07 Oct 2009 14:14:32 -0500

If you haven't already seen this interview of Professor Richard Susskind, the author of The End of Lawyers?, by Barclay Bank's General Counsel Mark Harding, you should do so. Harding puts Susskind through his paces on what the practice of law is likely to look like over the next 20 years. Known for his expertise in applying technology advances to the legal industry, Susskind has the benefit of seeing the industry with an outsider's eye--one that both indicts and empowers.

Muir Leads APLF Roundtable on Leadership

Ronda Muir — Mon, 21 Sep 2009 14:50:32 -0500

Muir led an inter-active limited-attendance roundtable on Law Practice Management for Current and Prospective Law Firm Leaders at the 12th Annual Meeting of the Association of Patent Law Firms (APLF) in Chicago, Illinois on Thursday, September 17, 2009. Topics discussed included the distinction between managers and leaders, the importance of values-driven firm identity, the role of practice group leaders in moving the firm forward, and transitioning from consensus-led management to more executive approaches.

Convergence and Profitability, or Bigger is Only Bigger

Ronda Muir — Mon, 21 Sep 2009 13:31:25 -0500

One of the more interesting developments in the law industry over the last couple of decades is the emergence of the mega-firm. Or what might be called the strange case of the temporary triumph of the delusion of efficiency.

"Convergence," the short-hand name of the corporate model for managing outside legal fees by reducing the number of preferred firms, was developed originally in the early 1990s by DuPont and then trumpeted by interested advocates--primarily consultants--who benefited from advising both sides of the aisle. Law departments needed to know how to evaluate firms for their preferred list, and law firms needed to know how to get on those lists.

The theory was that dealing with fewer law firms meant that a company would have more leverage in negotiating fees and conditions with those few that they did hire, that the company would no longer pay repeatedly for bringing firms up to speed on its business, and that this more holistic global legal approach would benefit the company in both concrete and intangible ways.

Leading the way, DuPont reduced its 350 outside law firms to 41 and its 150 legal vendors to 4. Five years after the program's introduction DuPont reported that

Legal service expenses were reduced 39 percent from 1994 to 1997.
Litigation savings amounted to over $30 million in the last four years of the program.
Cycle time dropped from 39 to 22 months in two years and the docket was cut in half.
Legal staff requirements can be forecast accurately.
Purchasing power was leveraged.
More women and minorities are employed in the PLF and supplier firms.
True partnering was achieved: work is usually performed so seamlessly that outsiders have trouble distinguishing between DuPont's outside attorneys and in-house counsel.

Over 200 other major companies followed suit--General Electric's hundreds of outside firms were reduced to 140. Pfizer slashed its outside litigation counsel from 200 to 52. Pfizer eventually designated only 1 outside law firm to advise them nationally in some practice areas, a bold step again followed by others, such as Tyco and Honeywell.

Law firms were told that more types of business from a single client would guarantee a more consistent flow of work, again reduce the embedded cost of getting up to speed repeatedly and, with the more rounded view of a company's issues, ultimately make better lawyers of us all.

So law firms geared up to offer companies a broad range of legal services and it was only a short step from there to offering those services at locations all around the world. Whatever you need, we can do. Wherever you are, we are there.

Law firms started acquiring IP, land use and employment departments and boutiques to supplement their usual expertise. They opened offices in Hong Kong, Abu Dhabi and Omaha.

In 1992, an admittedly lean year because of a financial downturn, there were 9 law firm mergers, which accelerated into a record high of 75 mergers in 2001. By 2008, also a year of financial downturn, there were 70 mergers. And those numbers don't reflect the many acquisitions by firms that don't count as a "merger"-- acquisitions of groups of lawyers, practice groups or other pieces of firms. A 2007 Law Firm Inc. survey of AmLaw 200 COOs found that evaluating merger possibilities was the single matter on which COOs collectively spent most of their time.

Top US-based firms (NYLJ 250) grew from an average of 100 lawyers in 1985 to today's behemoths, topped by DLA Piper's 3,785 lawyers with 2008 revenue of $2.26 billion. As to profitability, before the current downturn, law firm revenues (along with expenses) had been ticking upward for years at double digit rates, fueled by pass-along billing practices that also rose without fail each year, resulting in compounded average growth in profitability of over 9%.

Corporations and big law firms seemed to be on to something. Consultants were in hog heaven.

But the economic slowdown has hit big firms particularly hard. Clients are turning increasingly to small and mid-sized firms who charge hourly rates 20-50% lower for large swaths of work that don't require legions of associates, firms which are also less likely to dump them because of the complicated conflicts arising from a global presence.

So where is the mega-firm now?

More than half of the 50 largest US firms have fired associates and staff in anticipation of or reaction to revenue declines and some firms, such as DLA Piper and Dewey & LeBoeuf, have cut year-end payouts to partners as well. Star partners at the country's biggest firms--DLA Piper, Skadden Arps--are leaving for smaller firms in order to offer clients more reasonable rates and avoid the thicket of conflicts. Regardless of the economy, the promise of cross-selling did not materialize and no one's sure if they are better lawyers for the mega-firm experience, or just poorer ones.

So did the DuPont Legal Model of convergence and its virtues fail?

If you ask DuPont, "the keys to the legal model’s success have been its ability to streamline legal representation through its designation of primary law firms (PLFs) and its commitment to the utilization of paralegals." And you should note that DuPont's current roster of Preferred Law Firms includes eight of the 100 biggest U.S. law firms but four times as many smaller firms, which General Counsel Thomas L. Sager says he prizes for their “flexibility and creativity” in billing.

Perhaps the real bottom line is, as was clearly stated in an analysis of law firm mergers done by Vanderbilt Law School back in 2005: “There are no obvious economies of scale or scope for law firms in a merger, where productivity is largely a result of billings by individual professionals.”

That conclusion has been born out by the financial statistics kept by Dan DiPietro of Citibank’s Law Firm Group, who said flatly at a recent conference forecasting future growth that "bigger has not yet proved to be more profitable."

Muir Leading APLF Leadership Roundtable

Ronda Muir — Mon, 14 Sep 2009 17:27:37 -0500

Muir is leading an inter-active limited-attendance roundtable on Law Practice Management for Current and Prospective Law Firm Leaders at the 12th Annual Meeting of the Association of Patent Law Firms (APLF) in Chicago, Illinois on Thursday, September 17, 2009. For more information or to register, go to http://www.aplf.org.