The Legal Week article that discusses this hypothesizes that the Top 10 prematurely thought the post-crash clouds were parting and ramped up capacity (and expenses) accordingly, but I'm not buying that explanation.  Why would they bet wrong on the economic cycle and the next 40 firms bet right?  (Economic jargon digression:  Cyclical and seasonal trends are just that, and are contrasted in the argot with "secular" trends which are long-term and immune from cycles and seasons.)

With intellectual honesty I aspire to, the author implicitly admits that being big cannot, in and of itself, mean misjudging the market:  The largest US firms with a serious UK presence saw average profits per partner increase 10%.

Is here.

The AmLaw 200 (it's actually the AmLaw 101—200, but that's nitpicking) is out and if "a few anecdotes make a trend," let us be among the first to claim such an insight:  The AmLaw 200 is no longer a ghetto for small firms in big markets or big firms in small markets, but instead is announcing through the very conspicuous number of $1-million+ profits-per-partner members that you don't have to be big to be rich.  To be specific, in the past four years of publishing the AmLaw 200, only one firm broke that threshold; this year seven did (vs. 32 firms in the AmLaw 100).

How did they do it?  I'm actually going to be working on some regression analysis of the numbers in the near future to see if anything statistically significant can be said, but for now one strategy seems to be, "Specialize."  (Of course, as many mutual fund managers learned to their dismay ca. spring of 2000, picking the wrong specialty horse—say, dot-coms and telecoms—can demonstrate the power of that strategy in an unintended direction.) 

Another factor that is highly suggestive (again, we await statistical analysis) is not having a two-tiered partnership, with equity- and non-equity partners.  Counterintuitive as this appears at first (isn't leverage always good?), there may be cultural and psychological factors distinct to sophisticated law firms that make the value of unity and cohesion superior to the financial-ratio advantage a two-tiered system would introduce.

In the meantime, here's the revenue distribution graphically.  Note how much smoother it is (what a surprise!) than the AmLaw 100's.

Interestingly, there are some similarities, starting with high fixed and low marginal costs, and a "perishable" service:  An hour not billed today will in all likelihood not be recovered tomorrow.  And, according to this Financial Times survey snapshot, London firms, at least, are embracing this reasoning.

But then again, far be it from me to hypothesize that law firms face the laws of economics like other industries.

After all the Sturm und Drang surrounding implementation of Sarbanes-Oxley, how "reformed" are corporate boards?  According to Ira Millstein, not very.

How could this be?  Chalk up another one to human nature:  "My impression is that management does not like reform and so complies and complains and resists....[Moreover,] management never much liked boards."  Nor is it fun any longer to be a visible public-company director.  Once board membership was limited to "cronies," "harmless academics," and the occasional obligatory "woman or minority," but now CEO's cannot be so confident their board will be a lap dog.

Still, management has a virtual hammerlock over the nomination of directors, and since a nominee can be elected with a single vote (say, the CEO's) even if all other shares vote "withhold," there is no incentive for management to change its ways.  Millstein proposes an ingenious reform:  That nominees must win a majority of all votes cast, so that "withhold" essentially becomes "against."  At first glance, I like this enormously:  It has the lawyer's (and the economist's!) virtue of drastically changing the behavioral incentives by "merely" changing a procedural rule.

Imagine if "none of the above," as a ballot-box option, could defeat actual candidates for the Congress and Presidency of the United States.  Now there's a thought experiment for you.

What is the proper role of a CIO in a law firm (or in a large corporation)?  Too often, the answer is painfully unclear, and it reflects the "can't live with it, can't live without it" attitude many non-geeks have towards technology.  If technology (and thus the CIO) is primarily seen as a necessary (and expensive) evil, one rarely opens one's mind far enough to discern the genuine business value technology can provide.  CIO's who become enablers of this downward-spiral viewpoint often are tempted to justify their departments through "governance" measures:  Lines of code produced, goals met on time, etc.  But the truth is that:

CIOs don't get fired for not having enough governance. They get fired for not getting the job done.

In McKinsey's coinage, the Next Generation CIO is one who can see beyond the essential IT hygiene of providing efficient and effective systems and keeping them running cost-effectively—what they label the "supply" side of IT.  Rather, this visionary CIO embraces a role on the "demand" side of IT as well, working with business-side leaders to help define the future role of IT and to truly integrate the business unit managers' understanding of what they need to accomplish with IT's ability to deliver tailored applications.  How exactly does this happen?

• Business leaders and CIO's must agree on a common language, and that language is financial.  IT investments must be strictly analyzed in terms of their bottom-line impact.
• Shared accountability:  An IT failure is not solely to be laid at the feet of the CIO, nor is an IT success story his trophy to polish.  IT failures come from mis-alignment of the IT capability with what the business needs to get done, and successes conversely come from proper alignment.  Blaming or crediting just one party is irrational (albeit tempting).
• An insistence on innovation:  The job of a CIO is to separate the fads from the opportunities, and to amplify the signal-to-noise ratio coming from new technology advances, so that business leaders can truly understand trends and long-term threats and challenges.

How likely is this to happen? 

I predict it will depend on a fundamental change in the background of CIO's:  If more come from "Renaissance" backgrounds, with exposure to economics, marketing, strategic thinking, and other more-mainstream business skills, rather than rising up from the ranks of the coders, things will change.

According to Deloitte, as much as 70% of the work involved is done manually; technology now is mature enough to cut that by 30-40%, according to this article.

It's not sexy and it's not going to win your CFO a promotion, but it's all part of "making the trains run on time" as efficiently and transparently to the partnership as possible.

Bad news:  According to this Legal Week article, out of 12 criteria by which sophisticated clients evaluate law firms, #3 on that list is far and away most important, but it ranks 7th in terms of how those clients grade their firms.  What can firms do to improve clients' opinion of them?  Among other things:

• stay in touch even when there's no active engagement on the front-burner;
• focus "like a laser," as the bromide has it, on This Individual Client's needs in terms of marketing—generic whitepapers and brochures don't cut it;
• give serious consideration—and we mean serious, all-hands partners meetings—to considering adoption of "retrospective" value billing; clients will pay handsomely for successful results delivered in short order, but resist paying even a discounted rate for an interminable deal that's ultimately a loser.

To that last point, as one candid Brit client put it:

"Charging by the hour is a damaging thing for law firms to do, but they make a lot of money, so why should they change when schmucks like us are prepared to pay?" observes one client

You have been warned.

The question of interest is who's doing it well and who's doing it poorly, and what lessons can be drawn?  Asian Legal Business did a nice "35,000-foot" survey last April (I should have picked this up sooner) that admirably ventures beyond bromides and generalizations to make some points that sound trenchant and just plain right:

• For UK- and US-based firms to succeed in Asia, they must be "glocal"—combing global reach and throw-weight with an intensely local knowledge of the market.
• The article takes a nice swipe at an Economist survey of global law firms from last February that essentially posited that UK firms' profitability suffered from excessive numbers of and concentration on foreign offices, whereas US firms' more conservative extra-territorial approach and domestic concentration boosted profitability.  Guess what?  UK firms have little realistic choice; compared to US firms, they have no sizable domestic marketplace to rely upon, and growth perforce means looking abroad.
• The longer firms have beachheads in Asia, the more their partner and associate ranks are populated by locals.

The article almost slides into cliche at the end when it remarks that global expertise is communicated and shared more rapidly today than ever before, and, accordingly, that the quality of representation available in (say) Singapore is ascending steeply:  But this commonplace also has the characteristic of being true, and is a phenomenon a myriad of other industries have already experienced. (The article does not say this, but I do: It is a theme of this blog, that the economics of legal practice is not presumptively different than the economics of other sophisticated professional service firms, or other service firms, or other sectors of the economy at large.)

I commend the article to anyone with a material international presence, and especially to firms in or looking at Asia.

But I have bad news for Yanks and Brits allergic to foreign languages:  You better give serious thought to learning Mandarin; it's not yet table stakes, but outside of Hong Kong, it would be very handy.

The UK-based Adam Smith Institute has as its stated mission:

[To be] the UK's leading innovator of practical market-economic policies. For over 25 years it has been a pioneer in the worldwide movement towards free markets, public-sector reform, and free trade.

As such, it presents a tremendous wealth of information, including, among other things, exhaustive background material on Adam Smith himself, together with the full text of The Wealth of Nations and The Theory of Moral Sentiments.

One of their adroit blog-meisters alerted me to a new post listing the Top 10 Scots of all time.  Guess who comes in at #1?  I rest my case.

I propose to start a periodic dialogue on the role of marketing in law firms, what's wrong with it, how it could be fixed, and why (IMHO) it's a woefully underappreciated expertise—and the fact that I'm married to a senior marketing and advertising executive has nothing to do with my motivation!  A good place to start is this piece by a Kellogg Business School professor discussing what's wrong with marketing in much of corporate America and what needs to be done.   My own personal god among writers about management, Peter Drucker, once said that the only two functions of a firm that matter are "marketing and innovation."   I take that as meaning that innovation is the only (credible, enduring) way to distinguish oneself from the competition, and that without marketing to explain the precise benefits of your innovative products and services to potential customers, you are wasting your time.

Perhaps the key "take-away" from the article is that marketing's "Job #1" is to understand the client, what they want, and how they understand "value."  This requires both analytic rigor and intuition; sounds like it could be an interesting place to be.

The Economist has an infuriatingly brief article referencing the annual ranking of the 50 "global elite" law firms by the British publication Legal Business.  First, to the article, second, to the first ever "Adam Smith, Esq."-faithful-reader-awards contest.

Legal Business's methodology in selecting its cadre of the "global elite" is a bit obtuse, but its key elements seem to include:

• being among the world's 50 most profitable (why not end the discussion right there?; for that matter, how can there be any criteria beyond this one if this one is taken at face value?);
• have a "disproportionately high number of Fortune 250 or FTSE-100 clients" (and who among these firms does not have a very high proportion of such clients, making the notion of "disproportionality" somewhat confounding);
• "be a leader in its home jurisdiction" (see above);
• "be regarded as serious competition in [key practice areas] by the top firms on both sides of the Atlantic" (see above),
• etc.

Among other things, these perverse criteria succeed in excluding Wachtell-Lipton from the listing altogether, since it has only one office, in New York.   In any event, the faithful Economist scribe endeavors to do what he can with the resulting list and ventures two hypotheses about what characteristics might equate to, or at least correlate with (there is a difference, of course) higher profits-per-partner:

• being "relatively" small, in this case < 850 lawyers (cf. the Magic Circle at 2,300—3,000 lawyers); and/or
• keeping your international headcount relatively low:  Evidence for this is that Slaughter & May, the most profitable of the Magic Circle, has fewer than a quarter of its lawyers outside the UK, whereas Clifford Chance, the least profitable, has nearly two-thirds abroad.

What does this all add up to?

First of all, let's again hear it for the home town!  Of the top 10, 8 are New York powerhouses (in rank order:  Cravath, Sullivan & Cromwell, Simpson-Thacher, Davis-Polk, Skadden, Cleary, Shearman & Sterling, and Latham & Watkins [OK, New York-centric, I would argue]).  Only two UK firms make the top 10:  Slaughter and May at #8 and Herbert Smith at #10.

Second, I don't have a clue how to analyze or gain insight into this further without being able to read the actual article and, with any luck, its source material.

This brings me to The First-Ever "Adam, Smith, Esq." Reader Awards Challenge. 

The key publication at issue, Legal Business, is not available on-line (trust me, I've tried) and a one-year print subscription costs a lofty £495, for 10 issues.  For that price, I could take my wife to dinner 10 times, even in New York (Econ. 101 labels this my "opportunity cost" of a subscription; I label it a vastly preferable way to spend the money).

Thus the Reader Award Challenge:  Any reader who subscribes to Legal Business and is willing to forward copies they're finished with to me wins:

• an "Adam Smith, Esq." T-shirt (design of which is in development); and
• drinks on me next time you're in New York.

There will be only one winner, to wit the first respondent.  All decisions of the judges, as they say, are final.

Lockstep, modified lockstep, or free-for-all?  (Then there's always the Jones-Day model, which appears to be completely "secretive.")  Asia, it appears, is just coming to grips with a problem that has bedeviled US and UK firms for a long time, and one that shows no sign of admitting to a snappy solution.

According to the referenced piece in Asian Legal Business, several trends are intersecting as the legal market on that side of the globe becomes increasingly exposed to international competition:

• pressure to adopt at least some form of the US-invented "pay for performance" has increased;
• this is particularly true among younger lawyers;
• and is even so among formerly universal-lockstep Australian firms; and lastly and most importantly
• a "modified lockstep" needs to be administered with a combination of outstanding sensitivity and discipline, with one eye on the essential notion of transparency and individual merit and the other (beady, gimlet) eye on the issue of whether an individual excelled or a practice benefited from an astonishing environment.

The bottom line?  Adam Smith himself could barely have said it better (although he might have said it more elegantly than this English-as-a-second language interviewee): 

People see less of a need to sacrifice for someone else's benefit with the hope of receiving some sort of payoff some day. [They're] more interested in being compensated now for the value they actually add.

A tragic loss of common values? An inspiring call to bring out the best? That is for you, dear reader, to decide.

In the wake of the Freshfields disqualification from the Marks & Spencer takeover battle, Legal Week has published a feature on conflicts, which is worth reading in its entirety.  Among the salient points:  Clients appear deeply conflicted (no pun, etc.) about what even constitutes an objectionable "conflict."  For example, when asked the completely straightforward question, "What is your attitude towards a firm you've engaged for a particular piece of advice acting on the opposite side?", the replies break down:

• never acceptable:  30%
• presumably unacceptable without my consent: 20%
• always acceptable with my consent: 40%
• not a problem at all:  10%

More interestingly from an economic perspective is whether clients don't in fact benefit from the expertise of a firm that has a large "market share" in a particular industry?  Developing a sophisticated and cutting-edge nanotechnology practice, for example, is not for the faint of heart (or the shallow of pocket):  Why wouldn't a nanotech startup want to avail itself of the best advice on the market?

Strict notions of conflicts also permit a pernicious form of gamesmanship—certainly where they are backed up by strict ethical sanctions.  When Tony Soprano was about to divorce Camilla, he "retained" every high-powered divorce lawyer in New Jersey, so that, in a series of vignettes which struck one as either cruel or brilliant, Camilla learned on phone call after phone call that the hot-shot lawyers she wanted to hire were conflicted out.  Please explain to me how this advances the cause of justice or enhances the image of the bar.

I believe a thorough re-think of the notion of, and the ethical and economic justifications for conflict "jurisprudence," is in order.  The economic justifications have long eluded me; now the ethical ones are seeming murky as well.

This Legal Week article discusses techniques for achieving that notorious "buy-in" for decisions where the partnership essentially has to embark on long-term changes.  I will claim to stand second to none in my appreciation of the thorniness of achieving true partnership embrace of a long-term change strategy, but I nevertheless found the article, fascinating as its topic is, curiously inert.

The problem may be as simple as the author's self-serving perspective:  He's apparently an advisor to law firms who is recommending that, at a retreat to consider such major decisions, the firm employ the objectivity of someone with "no axe to grind" as a facilitator of the discussion.  [Perhaps I should write an article recommending established legal bloggers should be chosen as such facilitators.] 

But beyond that, the author sticks to process tools and stops short of wrestling with what it means to be subtly attuned to the partnership's moods, its fears and aspirations, its attention-deficit-disorder coupled with its laser-like focus when it so chooses.  In a word, he stops short of life.

But the gravity of this issue cannot be overstated; think of this post as a reminder of its importance and a vow to find more thoughtful approaches.

CIO Magazine, normally what I would characterize as a publication with a somewhat retiring approach to matters, headlines on this month's cover, "The Sarbox Conspiracy."  Who's conspiring against whom?

A brief historic detour, first:  When F500's and their like began implementing ERP [enterprise resource planning] systems in the '80's and '90's, they were IT installations subsequently "owned" by IT, and the CIO thus usurped many critical financial controls from the purview of the CFO.  Now, the playing field may be reversing:  The "dark agenda" is that CIOs "fear Sarbox has become a stalking-horse that CFOs are using to assert control over IT and displace the CIO as the company's business process expert."  Perhaps an alarmist view, but it's hard not to sympathize with the CFO who asks, "'Who signs on the bottom line?,' his voice shaking with emotion."

Boys and girls, please....   As I've ventured before, there's a way to make lemonade out of this, and General Counsels and outside firms should be leading the way.  Think of this as an opportunity to competitively distinguish yourself from everybody else piling into the Sarbox-compliance arena.  It may be the case today, as an AMR survey reportedly found, that 74% of Sarbox compliance efforts are being led by finance and only 4% by IT, but the remainder are apparently led largely by legal.  I believe that percentage should be far higher.

Why?  Not because of lawyers' superior business insight or analytic acuity—not even because, lest we forget, Sarbox is a law—but because the salient risk a Sarbox compliance-failure poses is primarily to the enterprise.  I do not mean to minimize the human reality of criminal liability for the CEO and CFO, but let's also recognize that they have now taken those jobs eyes-open to such an eventuality.  I insist, instead, on the enterprise's self-interest as the guiding lens through which Sarbox compliance must be contemplated and executed.  And what is a more appropriate domain for the General Counsel and critical outside counselors?

For the plain fact is, as the article in a more temperate moment notes, that "Sarbanes-Oxley means CIOs and CFOs need each other more than ever."  The Sarbox opportunity is to move intellectually and conceptually beyond the perils and menaces of failing-to-comply, and to seize the chance to move a corporation's internal financial and data controls to a new plane of reliability, assured integrity, and end-to-end transparency.  Let enlightened outside counsel lead the way.

EDDix LLC, a research and publishing company based in Milford, CT, has just released its "Top 50 Legal Blawgs" worldwide, and I am delighted to report that not only did they include "Adam Smith, Esq." in their "Top 50," they also singled out 16 of the 50 as "MUST READING"—including Adam Smith!

Specifically, their review says:

Adam Smith, Esq ... "an inquiry into the economics of law firms" is Bruce MacEwen's outstanding bLAWg. Bruce writes intelligently about issues central to understanding why the business of law is the way it is, identifying and very effectively addressing the factors that are re-shaping the landscape ... and/or not. (btw, we're not so shallow as to be taken in by the slick site presentation ... well, maybe a little)

The others in the Top 16, most of which I hope you're familiar with, are:

• Bag and Baggage (Denise Howell)
• blawg (Bill Gratsch)
• Ernie the Attorney (Ernie Svenson)
• How Appealing ( Howard Bashman)
• Instapundit (Glenn Reynolds)
• Jurist Paper Chase (Bernard Hibbitts)
• Lessig Blog (Larry Lessig)
• myShingle (Carolyn Elefant)
• Overlawyered.com (Walter Olson)
• ProfessorBainbridge.com (Stephen Bainbridge)
• Robert Ambrogi's LawSites (Robert Ambrogi)
• SCOTUS (Goldstein & Howe)
• The 10b-5 Daily (Wilson-Sonsini)
• The Virtual Chase (Ballard-Spahr)
• The Volokh Conspiracy (Eugene Volokh)

Congratulations to one and all. 

For those of you who may not be familiar with the work of David Maister, I implore you to introduce yourself to his thinking by taking a look at his latest book, First Among Equals.  David is, simply put, a High Priest in the dark art of managing Type A professionals.

For those who know David's work and those who don't, I happened across a two-year-old article of his, "Whither the Global Law Firm?", which proves the trenchancy and staying power of his analysis.  Pulling no punches, David writes that he has "always been skeptical" about the ability of firms to effectively go global, given that "most law firms are still in kindergarten when it comes to management."  [Don't say I didn't warn you.]

What's the problem with global firms?  Among other things, conflicts:  When London tells Frankfurt it has to turn down a lucrative client, and then penalizes Frankfurt at year-end for missing its numbers, "that's when the cannons and nuclear bombs come out."  Nevertheless, more firms than the market will be able to bear are all seeking to be among the select few:  Among other things, it's easier and sexier to do a high-profile M&A deal or steal a celebrity practice group than it is to coach know-it-all professionals on the long-run virtue of truly exceptional, and selfless, client service.

Pop quiz:  Maister asked a convention of F500 GC's how many of their outside law firms had ever volunteered to sit in periodically with senior in-house lawyers to get to learn their business better and to find out what kept them awake at night.  The number who had was.....?

0.

Most readers of this blog have probably heard that California Governor Arnold Schwarzenegger's budget proposal calls for the state to take 75% of punitive damage awards, on the stated ground (putting the state's desperate need for revenue to one side) that since the purpose of "exemplary" damages is to make a punitive statement about the defendant's egregious misconduct, the goal is achieved even if the individual plaintiff does not collect in full.  Surprisingly, according to Columbia Law School Associate Professor Catherine Sharkey, eight states already have "split-recovery" statutes.  But consider their possible second-order effects:

• After a punitive damages award, but before appeal, the parties will have an almost overwhelming incentive to settle for $X where: X > [(Compensatory Award) + 25%(Punitive Award)] discounted by (odds of overturning the award on appeal).  By settling at a level that essentially guarantees the plaintiff what they would net after the state's take, and by characterizing the settlement as fully compensatory in nature, Pareto-optimality is achieved as between the parties.  (Glossary detour:  A "Pareto-optimal" outcome is one where every party is at least equally well off as before, and at least one party is better off—here, the plaintiff is equally well off and the defendant is far better off because they only shell out 25% of the punitives instead of 100%.)
• As well, since judges and juries will know about the state's take going in, might not this cause punitive awards to grow rather than diminish?
• Or consider the altered landscape for contingency-fee agreements:  Will the plaintiffs' firms be willing to stick with one-third of one-quarter of what they used to get?  Will the firms interpret (or re-word) their agreements to call for complete confiscation of the punitive amount since the client wouldn't be seeing anything until 33 cents had been received, and now the payment maxes out at 25 cents?

You get the idea.  Odds of this being enacted?  Beats me.  Odds of its having the intended effect?  Vanishingly small.

What has this to do with law firms?  Consider a firm that converts from a traditional general partnership to LLP status.  This commentator argues that there will ensue a change in the accounting treatment of what we might call "unpaid-out profit," and that the consequence will confound banks, sully the firm's reputation for profitability, and generally cause mischief.  The issue is this:  In a general partnership, earnings owed to partners are treated as reserves of the partnership (perhaps in a partner's current account, but an asset nonetheless).  But, in an LLP, that same money is treated as a liability of the LLP to the partner.  Voila:  Net capital is slashed at a stroke.

Not so fast.  Unless financial innumeracy is even more rampant than I sometimes fear, this change is both transparent and utterly immaterial.

If you find yourself in a loan conversation with a banker adopting the commenter's view, a word of advice:  Short his firm's stock.

"Meritocracies can be very divisive," pronounces this British analyst, in arguing that the most rational and effective partner compensation model, indeed the "undisputed model of choice,"is the "modified lockstep."

But isn't "modified lockstep" an oxymoron?  Like "across-the-board equal performance bonuses?"  Well, yes and no; the problem is of course that compensation schemes are creatures of the firm's culture, and in turn join in a feedback loop that supports or undermines that culture.

Examples of pure-lockstep firms that work resoundingly well are, for example, Cravath, Cleary-Gottlieb, Davis-Polk, and Wachtel.  These firms place collegiality high if not first in their list of cultural values, and the lockstep system both reinforces that value and helps ensure that potential partners who give other values primacy (for example, "pay me for performance") will self-select away from those firms.

Still, the dual realities of globalization and practice specialization mean that at times seizing opportunity means paying up for lateral hires—and this, according to the author, is where the "modified lockstep" becomes inevitable in order to attract top global talent.  But wait:  Aren't we in the process of watching precisely this model self-destruct at Clifford Chance, which has lost almost 40 partners since January 2003?  I actually don't think Clifford Chance's experience condemns the modified-lockstep; that firm has seemed to me, at least since the nearly-indigestible acquisition of Rogers & Wells, to be laboring under its own burdens.

No, I think the modified lockstep is indeed here to stay, if for no other reason than that the alternatives are far worse:  Pure "eat what you kill" can devolve into "Lord of the Flies," and pure lockstep (like, I would argue, tenure in much of higher education) can stifle initiative.  If a firm's innate cultural bones are strong enough so that all can see that outsize rewards to the few redound to the long-run benefit of all, then the modified-lockstep is not only the best of a bad lot, but an essential ingredient to growth through delivering genuinely superior expertise.

With the publication of the 2004 AmLaw 100 this week comes the inevitable desire for prognostications about the future.  The American Lawyer has obliged with a piece predicting, among other things:

• increasing pressure for "strong on strong" mergers (Wilmer-Cutler/Hale & Dorr and the rumored Coudert/Squire-Sanders, for example);
• approaching and backing off from resistance at the magic $1,000/hour billing rate (a psychological barrier but not an economic one, in my opinion);
• the increasing visibility and importance of practice group leaders, as the fundamental connection between a firm's strategic management objectives and their implementation; and lastly
• the importance of "people skills."

"People skills" is one of those phrases, like "pro-active" or "[I have some] concerns" that puts my BS detectors on stun, but the author of the article wasn't trying to be articulate, he was only trying to say lawyers aren't generally good at something (to wit, massaging expectations of clients, those you report to and those who report to you).  I agree, and I also agree that cultivation of that human ability is paramount to succeeding exceptionally, not just moderately.  Easier said than done.