Are "MegaFirms" Going to Self-Destruct?

"More Lawyers Flee Megafirms" is the intriguing headline from The National Law Journal, which sounds like an invitation to an article exploring the commonly-received-wisdom that the AmLaw 200 are consolidating--and debunking it.

Guess again. 

The article is replete with entertaining anecdotes from BigLaw refugees complemented by "no comments" and "unavailable to respond" from the firms they've departed.

Nevertheless, some insights can be gleaned:

"The movement of attorneys from huge to smaller law firms is becoming more common, said Harrison Barnes, chief executive officer of BCG Attorney Search, a recruiter. As big practices get bigger and pursue hefty clients to match that growth, many attorneys who service smaller clients find their careers at odds with their firms' strategic plan, he said."

And there's this:

"'Whenever you change the character of a firm's platform, lawyers inside the firm and outside the firm make decisions based on that new reality of the market,' [J. Terence] O'Malley [co-managing partner of Piper Rudnick's US offices] said."

Both Barnes and O'Malley make economically realistic comments:  Almost by definition, mega-mergers and the sudden shocking (well, at least not-bargained-for) shift in a firm's profile for a home-grown partner can be disorienting and, at least for some people, suboptimal going forward.  For them, it's not irrational to leave.

But the article misses the ripe chance to analyze the larger consolidation trend among the AmLaw 200 and to truly delve into whether it's reality:  Inevitable, desirable, or lamentable?  And whether if it's not reality, why:  Conflicts, insurmountable complexity, negative economies of scale?

But the question is out to the "Savvy Blawgers" panel:  What will the AmLaw 200 look like 10 years hence?  For some interesting perspectives on that, you'll just have to stay tuned.

Why New York, London, & Hong Kong Will Endure

Janet & I had the delightful experience of being able to meet Ernie Svenson, creator of the early-adopter blog "Ernie the Attorney," for drinks last night in New York—he was here for the weekend to see, among other things, the new MOMA (highly recommended).

Meeting fellow members of the blogosphere is, in my experience to date, 100% a home-run event.  For those of you who have blogs, reach out to people you've connected with; these are opportunities in the making.  For those of you who don't, reach out to people you know "off-line."   Fabulous as technology is, there is no substitute for face-to-face.  This gives me great confidence that cities like New York, London, and Hong Kong will endure, grow, and prosper.

Did I mention that I'm a city person?

Happy Memorial Day Weekend

Happy Memorial Day Weekend to one and all.  Although I'm not a fan of the new World War II Memorial in Washington (my favorite architecture critic described it as "inspired by Albert Speer"), the truths and liberties it stands for must be commemorated. 

(Yes, my Dad was a WWII vet--Army Air Force intelligence officer in Italy, shot down over occupied France and walked over the Pyrenees to neutral Spain, and up to the door of the US Embassy in Barcelona.)

Memorial Day Weekend is when Janet and I celebrate our anniversary—we were married Memorial Day Weekend, 1989; we make a point of staying in Manhattan—just us and the tourists.

Profits Really Do Matter; So Does the Society Within Which We Generate Them

Ian Davis, worldwide managing director of McKinsey, has a thoughtful piece over at The Economist attempting to mediate a truce between the evangelists of "Corporate Social Responsibility" and the Milton Friedman-ite school that "the business of business is business."  Starting from the premise that "It is time for CEOs of big companies to recast this debate and recapture the intellectual and moral high ground from their critics," Davis rightly points out that taking an absolutist stance at one extreme or the other (as some readers feared I had) is neither intelligent nor a guide to action, and suggests a way to recast the debate.

What's wrong with "business is business?"  For starters, if taken too literally it invites firms to overlook or ignore societal trends and emerging consensus's at their peril.  Merely mentioning the oil exploration and tobacco industries proves the point, as do the still-evolving public expectations of the pharmaceutical sector, the fast food industry, and big-box retailers.  Pretending that societal shifts are not germane to corporate strategy is an exercise in managerial malpractice.

Meanwhile, the CSR camp has its own set of blinders:  Calling for firms to report on diversity and sustainability, or to strike superficial and transitory partnerships with NGO's, is likewise divorced from what drives corporate strategy, and since firms know this, they typically park their CSR-responsive personnel safely out of the line of fire in harmless backwaters such as corporate communications or investor relations. And one must add that overlaying the entire CSR movement is also the repellent whiff of lugubrious and self-righteous jeremiads.

What "high ground" does Davis suggest?  Rather than having CEO's beat the rather pallid drum of "shareholder value," he suggests:

"it may be more accurate, more motivating—and indeed more beneficial to shareholder value over the long term—to describe business's ultimate purpose as the efficient provision of goods and services that society wants. This is a hugely valuable, even noble, purpose. It is the fundamental basis of the contract between business and society, and forms the basis of most people's real interactions with business."

And the defense of profits?  Profits are the signal that the firm is providing goods or services that society genuinely values, and doing so by using resources at least as efficiently as anyone else. 

Noble?  Indeed. 

Now what has this to do with law firms, you're asking?  It is to recall, lest we forget in worshiping before the altar of profits-per-partner, that the profession has a noble heritage in advancing the provision of justice—and that we can afford to remind the public of that at times.

Knowledge Management & Uncharted Professional Networks

Few challenges within sophisticated and far-flung law firms seem as difficult to get right as Knowledge Management, and I've recently been exploring some theories as to why this is so.  After all, lawyers of all people should excel at KM—information and expertise are literally all we have to sell—and one would think that a cohort that skews towards highly educated, left-brainy, articulate, and process-centric could do KM in their sleep.  Counter-intuitively, however, we know that we can't.

Pondering this from the 50,000 foot level, I'm prepared to propose a theory:  As social creatures distinguished from the rest of the mammalian order primarily by our capacity for language (and with the "invention" of civilization dependent foremost upon the invention of writing), we have evolved with a powerful tendency to learn through close associates in groups.   This means that, within a law firm, informal organizational networks should provide the most powerful—because most natural—platform for "management" (creation, storage, distribution, and re-use) of knowledge.

The problem arises when the informal networks do not map 1-to-1 to the organizational chart, and they never do.  Indeed, at Harvard Business School's "Working Knowledge," "How Org Charts Lie" tells precisely such a story:

"we are all dramatically affected by information flow and webs of relationships within social networks. These networks often are not depicted on any formal chart, but they are intricately intertwined with an organization's performance, the way it develops and executes strategy, and its ability to innovate. For most of us, networks also have a great deal to do with our personal productivity, learning, and career success."

What's this got to do with KM, again?  Start with first principles:  The goal of KM is not to curate and preserve "knowledge" for its own sake, but to get your talented professionals communicating, collaborating, and working together seamlessly, sharing assumptions about objectives and the elements of the toolkit needed to get there. 

But if the actual, functioning network diverges from the formal hierarchy, exhortations to collaborate better along the lines of the hierarchy will fall on deaf ears.  For example, if a senior associate has a reputation for knowing more than anyone else about drafting acquisition papers, it's far more likely that other associates will go to him for assistance than that they'll go to the partner they're actually working with on an acquisition.  Again, to quote:

"Most executives will tell you that effective collaboration is critical to their organization's strategic success. Most, in candid moments, will also admit that they have invested a great deal of time and money to promote collaboration, with few or no results. Often, managers undertake such initiatives without understanding the inner workings of a network, relying on an implicit philosophy that more communication and collaboration are better. For example, managers may implement collaborative technologies with the vague notion that they will help employees interact more seamlessly and that this will improve the quality of their work." [emphasis supplied]

Does this sound like any "failed" KM initiatives you've ever  heard of?

Now pretend you've accurately diagnosed the real networks-on-the-ground that matter at your firm; you're still not exactly home-free with KM. 

KM at law firms is 95% a cultural issue and 5% a technology issue.  The technology platform is necessary, but by no stretch of the imagination sufficient.  The greatest impediment to success of KM is often a culture of not-sharing, and if that's really and truly descriptive of your firm, you can stop reading now.  I wish you godspeed, because you're going to need it.

For the rest of us, assuming your firm's lawyers are willing to collaborate, or at least to say out loud that they understand its value, the hardest obstacle can simply be changing the way they work, if only in the slightest increment.  Since more or less the first time I ever thought of the issue, I've assumed that if contributing to a KM initiative requires a lawyer to spend as little as an extra five minutes at the end of a matter "feeding" the system, the initiative is dead on arrival. 

This is not irrational behavior:  To the contrary, the lawyer thinks or assumes they've internalized all the knowledge worth having about the matter, so a fortiori inputting it into the system will never do them personally any good.  Meanwhile, it's not billable time.

If you get to this point, you may be facing the challenge of altering behavior, which is known in the literature as "change management."  Daunting as it may be, it has and can be done.  McKinsey has lots to say on this, as will I.

48 Hours Left to Take the User Survey

The "Adam Smith, Esq." user survey comes down this Friday night.  If you haven't had a chance to spend the three minutes it takes, please do so.  Thanks!  Full report, of course, to follow.

100 Million "Missing" Asian Women

So this from Slate has nothing to do with law firms, but it's too delicious an economic commentary to pass up.   Asking, "What is economics, anyway?," the piece proceeds to analyze (and largely debunk) a sinister theory first put forth 15 years ago by Amartya Sen that there were 100-million "missing women" in Asia compared to what one would expect if boys and girls were born in equal numbers.  And  Sen darkly insinuated that this was attributable to the forces of misogyny in general, including female infanticide and even forced export of prostitutes. For want of a more convincing explanation, this has remained accepted, if still lore.

Comes now another economist to put forth a different, and innocent explanation.

One's human reaction is primarily relief that an alleged pattern of atrocities is evidently no such thing; the reaction of homo economicus is to be reminded of the uses, and abuses, of statistics.

Next on the KM Horizon: Simplicity (We're Serious!)

CIO Insight often is a good read because, for my money, they provide the clearest and most convincing links between "hey, that's cool!" technology and the delivery of hardheaded on-the-ground value to management.  Well, they've done it again, with an article entitled "The Rise of the Blog."  Oh, no, you're thinking, yet another bloviating article about blogs.  (If that's what it were, would I point you to it?  I hope by now we've established some reasonable expectations of "trusted content" here at ASEsq.) 

Rather, this looks at blogs—and the collaboratively-maintained databases known as "wikis"—as tools to enable coordination and project management among professionals.  Blogs and wikis share several attractive characteristics:

• they're dirt-cheap, even free ;
• magically intuitive to non-tech people (perhaps the strongest extant analogy was the ease of adoption of email) ;
• changes and updates are instantly available to anyone with online access (and, if appropriate, a username and password);
• since both have built-in RSS/subscription functionality, users can receive updates automatically without having to remember to go back and check (possibly to come away empty-handed); and
• with their search and categorization tools, they can grow up into powerful knowledge-bases over time.

Human nature gravitates to things with "no instructions required," and so it should come as no surprise that corporations from Lucent to Sun Microsystems have seen employees migrating away from massive and kinky project-management and collaboration tools dutifully installed and maintained behind the firewall to blogs and wikis started spontaneously by individuals and small groups.  As a technology director at Sun says, more than somewhat ruefully:  "Collaborative design groups are using wikis on their own, because they get lots of function with low complexity.  It's like pens and paper—you don't have to tell people what they can do with it."

Back to law-firm land:  How about wiki's on key clients?  On judges that seem to keep showing up?  On practice sub-specialties (§1031 exchanges, say)? 

Too flaky for your firm?  If that's your reaction, are "pens and paper" flaky?  Email?  Blogs and wikis are among the new tools in the technological arms race.  Are you going to let your competitors steal a march?

"Organizational Network Analysis," Or Why Your Litigators Don't Talk to Your Deal Lawyers

Professor Carley, as well as a frequent correspondent who I will identify only as the director of KM at an AmLaw 100 firm, have come through.  First, Professor Carley provided a working paper on the Enron email database, and told me that under the auspices of her position as director of the "Computational Analysis of Social and Organizational Systems" center the use and application of organizational network analysis tools is taught.

Second, my loyal reader pointed me towards the work of Rob Cross, a professor at the University of Virginia's McIntire School of Commerce (associated with the more familiar Darden school), who provides a handy-dandy summary of what one can learn about, and how one can improve, organizational dynamics through "making invisible patterns of information flow and collaboration in strategically important groups visible."

Let's dimensionalize this, folks, with a real-world case from Prof. Cross's practice:  A large consulting firm reorganized into four regions across the US from its earlier city-by-city structure, with the goal of being able to provide a broader and more diverse array of services to each client.  Eighteen months later, the question senior executives wanted answered was, how is the integration going?  Using organizational network analysis ("ONA"), they produced the following graphic representing the relationships across two of the new regions:

Any questions about which region had become more cohesive and which remained silo'ed in its earlier city by city footprint?

So what's in ONA for you?  Does integrating practice groups sound like a challenge you've ever faced?  And did you try to address it through exhortation and evangelism?  We can do better:  The tools are there for you to use, and they work.

Enron's 1.5-Million Emails: A Window Into Knowledge Management?

Today's New York Times has an article purporting to recount what patterns a few computer science professors have discovered in 1.5-million internal Enron email messages, drawn from the 1999-2001 period.  "Purporting" because the article is infuriatingly short on detail or analysis, although it does have this fun graphic:

 

Now, the uses to which such analysis could be put are staggering:  EDD is as obvious as the nose on one's face, but within a law firm I think a far more intriguing possibility would be to analyze internal and to/from client emails to see if they can shed any light on Knowledge Management.  Consider:

"Companies have organizational charts, but they reveal little about how things really work, Dr. Carley said. Companies actually operate through informal networks, which can be revealed by analyzing "who spends time talking to whom, who are the power brokers, who are the hidden individuals who have to know what's going on," she said."

Dr. Carley certainly sounds as though she should know a thing or two about organizational dynamics.  Her descriptive bio at the Carnegie-Mellon site says: "Professor Carley's research centers around areas of social, organizational, knowledge and information networks, organizational design, change, adaptivity and performance, computational organization theory, crisis management, social theory, impacts on information diffusion of changes in social policy and changes in communication technology, and mapping experts' and executives' knowledge networks using textual analysis techniques."

So what's the background to this story?  In 2003, the Federal Energy Regulatory Commission, which had authority over investigating the price and supply gyrations in the California energy market in 2001, posted the Enron email database online—I found it here:  Check it out.  As one of the few, and perhaps the largest, publicly-available email databases, it's obviously a ripe target for analysis.  As it turns out, one surprising aspect of these forensics is something that did not appear—guardedness.  As one professor put it:  "It wasn't a case of keeping a low profile.  They didn't worry about the story they were telling." 

Mens rea, anyone?  If I were Ken Lay's lawyer, I would have the good professor testifying for me tomorrow morning.

But as I say, the article's maddening for all that it leaves out:  You could as well assume the professors did their analysis through conjuring entrails.  I've emailed Dr. Carley at Carnegie Mellon to see if I can learn more and report back to you.  (Email the reporter?  Please.)

Give The Client What They Want? Not So Fast

Jim McGee, labeled by Buzz Bruggeman as "the smartest guy in America about Knowledge Management," not to mention a fellow Princetonian who I hope to see at Reunions at the end of this week, has a pithy new article up at the ESJ site reminding us that what knowledge workers do is a craft, not a production process.  The goal of production is to create more [Camry's, ThinkPad's, QuarterPounders] just the same as the last one, and as closely mirroring the client's expectations as possible.

The goal of knowledge work is to deliver to your client something that could only have been created by you.  But, as Jim points out, that may well deviate from what the client initially asked for or had in mind.  By analogy to Renaissance artists educating their patrons about the nature of art and music and not blindly diving into executing a commission, Jim points the way to producing a unique work product whose form is determined not exactly through negotiation but neither through full-bore collaboration.

And speaking of the Buzz/Jim connection, how's this for a distillation of what makes the blogosphere so powerful:

"Bruggeman cites Mostly McGee author Jim McGee with one of the ideas that explains blogging’s power: Bloggers, according to McGee, are the intelligent agents that tech tried and failed to produce with software that was supposed to go and fetch useful information for users. Except bloggers are human and they run around the Internet finding all sorts of stuff and share it interactively with whoever chooses to look for it."

Bruce Profiled on "LawCrossing"

The LawCrossing site just went live with a profile of me, written by the engaging reporter Regan Morris.  Here's a nice sound-bite:  "'I started out in stealth mode because there's always the dangerous possibility that you might not have anything to say.'  ...It turns out MacEwen did have something to say."

Anyway, for a little bit more about how "Adam Smith, Esq." came to be, go read the whole thing.

"Client at the Core:" A Serialized Book, Right Here

Yesterday I met Bruce Marcus, at a Starbucks outside Columbia University's main gates, a very convenient walk from home for me.  Venus even came along.  Bruce Marcus was most recently co-author of "Client at the Core," described on the leaf as "delineat[ing] the new landscape of professional services marketing and describ[ing] a new path for successfully competing in today's and tomorrow's markets."

I plan to summarize the book, chapter by chapter, in a series of future posts here (with Bruce's permission, of course!).  Chapter 1 is "If Something Can Change, It Will."  Stay tuned.

Shearman & Sterling's IPO

Across the pond, we're about to see an actual experiment that heretofore could only have been a thought experiment:  Thanks to the "Clementi Commission," non-lawyer third parties will now be able to invest in law firms—most dramatically, law firms could even go public through IPO's.

Before we can become sullied by actual experience with this newly-opened door, then, it's a matter of some urgency to forecast what it might mean.

A not-insubstantial school of thought holds, predictably, that essentially nothing will change.  Proponents of this view have more than sheer tradition on their side; for example:

• law firms are not intrinsically capital-intensive;
• to the extent they do need capital, any decently-run firm generates enough cash from operations to fund typical requirements handily; and
• third-party owners of "the wrong sort" could conceivably be viewed as posing apparent conflicts of interest with specific clients (for example, what if Goldman Sachs bought a large chunk of Shearman & Sterling, which traditionally has been a "go-to" firm for Morgan Stanley?).

Also, law firms in general—even the Magic Circle firms and the AmLaw 25—still remain creatures of economic cycles, with little guaranteed recurring income and the ever-present risk of stars checking out along with their client rosters, so they do not meet the classic profile of an attractive buy & hold investment.

But once you look beyond the BigLaw marketplace, different business models could surely evolve, serving clienteles other than the Fortune 1000:

• The H&R Block model, serving individuals with elementary, simple problems through walk-in locations.
• The Bank of America/Wachovia/Washington Mutual model, offering a slightly longer menu of services and hoping to establish "one stop shopping" customer relationships for all one's financial (read: legal) needs.
• The Smith Barney/Merrill Lynch model, with highly personalized service for wealthy indviduals and small business, backed by national research and branding.

Not only do these strike me as more than plausible, each is far more capital-intensive than a conventional law firm—in other words, candidates for public listing.

Let's end by batting away a non-issue:  The claim that one can't put a market price on a law firm.  Of course one can, using the familiar tools of financial analysis including the recent growth trends in revenue and cash flow, the strength and composition of the balance sheet, the dispersion or concentration of the clientele and the practice areas, lawyer and staff turnover, etc.  

Only one thing can be said for sure at this point:  Now that the Clementi door is open, some firm is sure to walk through it.

"Courage," or Why Profits Really Do Matter More Than Anything

Rarely, if ever, do I link to The Wall Street Journal, on the premise that the overwhelming majority of you have already seen it, so why point to what's been in front of your face?  But rules are made to be broken, so this morning I give you two WSJ links.

They have in common that they undergird the raison d'etre of this blog:  To increase the revenues and profits of law firms.   (Had you missed that?—sorry, sometimes it helps to state the obvious).  More importantly, this is a "have no fear" post:   Damn the Politically Correct Police, and stake your claim to superior financial results, unconflicted by duelling considerations (within, of course, the limits of law, ethics, and simple humanity).

The first WSJ link is to Alan Murray's brisk and refreshing reminder about what's wrong with corporations garbing themselves in the robes of "social responsibility:"

"What harm is there in companies taking more responsibility for social and environmental problems? Plenty, if you adhere to the theories of Adam Smith..."

Still have a soft spot in your heart (or head?) for global corporations voluntarily going "beyond compliance"—taking steps viewed in the wisdom of NGO's as beneficial to society albeit not required by law or regulations? Then I invite you to look at the 20th-Century's track record of creating wealth and alleviating poverty: Was it the indubitably well-intentioned socialist or heavy-handed paternalist "capitalist" countries that raised their citizens highest, or was it the more rough and tumble American model? And if that seems old news, look at what China has accomplished in the short years of the 21st-Century, by betraying communist principles (economically, if not yet politically), as opposed to, say, the previous 50 years being more or less true to communist principles.

But relatively unfettered capitalism can be hard, can it not, particularly on those at the bottom of the ladder?  Hasn't the MSM lately been full of articles undermining the American Dream's notion of upward mobility based on drive and determination?  It's hard for the least fortunate to get a leg up!  Well, as they say, it depends on what the meaning of "hard" is.   

Alan Reynolds succinctly points out the statistical and methodological flaws in the latest anti-Dream studies: "It helps to focus on a few reasons why some people earn more than others -- they work harder, and have more experience and/or more schooling."

• households in which two people work earn five times as much as households in which no one works
• households in which one person works full-time earn more than twice as much as those in which someone works part-time
• college graduates earn three times as much as high school dropouts
• experienced people (45-54) earn more than twice as much as those starting out (under 24)
• there are two workers per household in the top fifth of the income distribution, less than one worker in the bottom fifth

Still protesting?  Aren't the rich getting richer, etc.?  Yes, they are, and the shocking fact is:

"Since the Census Bureau overhauled the way it counts income in 1993-94 (making the figures incomparable with prior years), the share of income earned by the top fifth rose to 49.8% in 2000-03 from 49% in 1993-94."

Back to Adam Smith.  The title of his most famous book reads in full:  "An Inquiry Into the Nature and Causes of The Wealth of Nations."  In other words, he was concerned with the creation of wealth, and was at least in most of his published writings an agnostic as to how it was spent.  (Only after his death was it learned he had, in fact, donated a large proportion of his income to charitable causes.) The first order of business must always be to generate wealth; the distribution of it comes later.

It is only fitting to conclude with an excerpt from Smith himself (Wealth of Nations, Modern Library edition [1994], Book I, Chapter 1, pp. 12-13), which resounds with truth and, to our 21st-Century ears, that damnable political incorrectness.  But ask yourself this:  Is it preferable to grant people the power and liberty to seek self-enrichment, or to presume one knows their best interests and can provide it for them?:

"It is the great multiplication of the productions of all the different arts, in consequence of the division of labour, which occasions, in a  well-governed society, that universal opulence which extends itself to the lowest ranks of the people. [...]

"Compared, indeed, with the more extravagant luxury of the great, [a day labourer's] accommodation must no doubt appear extremely simple and easy; and yet it may be true, perhaps, that the accommodation of a European prince does not always so much exceed that of an industrious and frugal peasant, as the accommodation of the latter exceeds that of many a [tribal] king, the absolute master of the lives and liberties of ten thousand naked savages."

 

Survey Reminder

With only ten days left to take the "Adam Smith, Esq." survey, we have over 250 responses.  This is very gratifying and rewarding "viewer participation," and I encourage any of you who haven't checked it out to do so.  Many thanks again to all of you who already have.

I promise a full tabulation of the results shortly after it closes at the end of this month.  

"Savvy Blawgers" Query #3: Future Legal Industry Structure

"Savvy Blawger" Query #3 is now out for the assembled to mull over with, of course, their cogent responses reported back to you a few weeks hence.  The question for this go-round is:

"What will the industry structure of the (US-based) legal profession look like ten years hence?"

Not to be oblique about it, but I'm seeking the collective wisdom of the Savvy Blawgers on whether the much-bruited consolidation of the AmLaw 200 is for real, in their opinion, or whether it will run up against inevitable ceilings such as a fatal overload of "conflicts" or the inherent difficulty of managing a complex and far-flung enterprise.   With corollary questions such as, are clients or firms driving it, and if firms, what are they hoping to achieve?  Etc. 

Jargon note:  I'm using "industry structure" in the economic sense, meaning what is the makeup, distribution, composition, and market share of the industry players?  The "industrial structure" of the long-haul passenger jet market is simple:  Airbus and Boeing, each at 50% of recent deliveries.  By contrast, the industrial structure of the artisanal cheese-making industry is completely atomized.

Readers are more than welcome to weigh in with your thoughts:  "Comments" are open again, thanks to the comment-spam defensive miracle known as MT-Blacklist (which according to its log has turned away 3,992 would-be comments since I installed it about two weeks ago). 

Professional Development Is Not Just for Junior Associates

Are lawyers suffering "arrested development," as the cheeky title of a dead-serious article has it at Legal Week?  Professional development is one of the pantheon of gods whose worship is most often honored in the breach, or else by procrustean insistence that junior associates hastily choose a "specialty" in order to maximize their billable value.

In that and an accompanying editorial, the following question is essentially posed.  Given that:

• Cash compensation alone is necessary but not sufficient for career satisfaction;
• So long as the billable-hour model reigns, time pressures will continue relentless; and
• Pressure to focus on a niche practice is unabated,

then what can firms realistically do to address the "growing disconnection between employer and employee across the legal sector?"  The traditional partnership pot-of-gold looks increasingly distant and improbable, and is no release from time and practice pressures in any event—"a pie-eating contest in which the award is more pie," as skeptics put it. 

Business as usual is not an option:  "The transition from gentlemen’s club to 21st century business will continue, at pace."  So the pertinent question becomes not "what needs to be changed?" but rather the far more interesting one, "what skills do we need to develop in successful 21st-century lawyers?"

Technical expertise will always continue to be a given, your admission ticket.  But as technology continues its innovative march, as outsourcing begins to loom up faster and faster on the horizon, and as regulatory reforms (notably, the Clementi Commission in the UK) open new frontiers in law firm structures, what remains the characteristic which cannot be readily cloned, imitated, or grasped by a "fast follower?"

Simply, what it's always been:  Deeply trusting human relationships premised on the lawyer's ability to communicate with both sagacity and commercial and economic insight into the client's issues.  This is all the best firms have ever had to sell, and it must remain emphatically more so as commoditising forces nip and cut from below.

And with this you get a "development" bonus:  What could be more professionally satisfying?

Diversity Quotas & Signal-to-Noise Ratios

The New York Law Journal is reporting that, under the auspices of the New York County Lawyers Association, "more than 60" law firms have agreed to a written pact to report to their corporate clients the makeup of legal teams by "race, gender, ethnicity, and sexual preference," and that companies such as Coca-Cola, the Bank of New York, Merrill-Lynch, and Prudential, have signed up on the other side.

Thanks to the UK's The Lawyer, we also know the firms include Arnold & Porter, Bingham McCutcheon, Cadwalader Wickersham & Taft, Cleary Gottlieb Steen & Hamilton, Dewey Ballantine, Debevoise & Plimpton, Mayer Brown Rowe & Maw, Shearman & Sterling, Sidley Austin Brown & Wood, Weil Gotshal & Manges and White & Case.  (Volokh Conspiracy commenters have been all over the story.)

Now let's just stipulate for purposes of discussion that encouraging "diversity" is a virtuous and laudable thing, and that this pact brims over with the best of intentions toward advancing that goal.  Also, not being an employment lawyer by training, I'm the wrong person to ask whether it constitutes some form of impermissible employment discrimination, and the Volokh commenters have scarcely reached a consensus either. 

For example, would I, a straight Protestant white guy, have an actionable beef if I were repeatedly asked off juicy assignments in order to make the firm's numbers?  What if that pattern ultimately cost me a shot at partnership?  And presumably, firms are now going to need to poll all their partners and associates:  What if a gay lawyer had a powerful—and, in many circumstances, fully understandable—preference for staying in the closet?  What's his obligation to tell his employer the truth?  (He probably signed something agreeing to do so as a condition of employment, and the clients have now told the firm in no uncertain terms that his sexual preference is materially germane to the firm's business.)  Do you get triple credit for an Hispanic lesbian?   Can clients object to Arab or Muslim lawyers?  If the client makes sensitive anti-terrorism homeland-defense equipment?  But enough of these hypotheticals.  

The topic du jour here at "Adam Smith, Esq." is, what economic impact will it have?

In the short run, one should expect it to raise the desirability and market value of minority and gay associates—the supply of which for all practical purposes is fixed for the next 5 to 7 years, but the demand for which seems to have just gotten a shot in the arm.  The problem is that BigLaw associates are paid, if not in absolute lockstep, close to it (even bonuses, at most firms, are tied to quantitative billable-hour quotas).  So it's not immediately obvious how BigLaw Firm X could "outbid" a competitor for a 3L fitting into one of the protected classes. 

On the other hand, there are non-monetary aspects to compensation which rival or even outweigh the paycheck itself—desirability of assignments, "lifestyle" considerations, quality of mentoring, opportunities for professional development, exposure to key clients, etc.; this is clearly the playing field on which the bidding war will have to play itself out.  (Again, we're agnostic on the question of whether this is fair to the straight white guys, we're just trying to forecast how firms might rationally behave given this new set of client incentives.)

Will the supply/demand balance change in the longer run?  I have my doubts.  The marginal increment to the overall "package" BigLaw will be offering the minorities and gays is both too small in magnitude and too far in the future, from the perspective of a college graduate contemplating law school or another career.  Its then-present discounted value is probably close to zero, and barely amounts to "noise" when contrasted with the extremely strong "signals" (both pro and con) generated by the prospect of practicing law for 40 years. 

More specifically, the differential attractiveness of specific practice areas (tax, say, or M&A) will be a far more important determinant of the hypothetical minority-3L's precise career choice than any inchoate BigClient mandate, so I foresee no radical reworking of the distribution of minority/gay lawyers.

The truly interesting question is whether the actual quality of legal service delivered to clients by will suffer, improve, or not change.  The quick, if not glib, answer is that introducing any non-meritocratic criterion will harm service quality.  But again, I think the quality controls in place at any name-brand BigLaw firm will filter out any hypothetical deterioration in work product.  Remember, we're talking about effects at the margin of the margin:  We can essentially stipulate that any first-year associate actually hired by BigLaw was at the very top of their college class, scored at the top of the LSAT's, and graduated, if not at the top, then solidly enough, from a name-brand law school.  None of these people are technically incompetent—putting it more realistically, all are equally technically incompetent as first-year's, and BigLaw has found ways of working with that unformed clay heretofore. 

Is it possible, on the other hand, that the Politically Correct Police are right, and that since (as they would have it) diversity is a per se good, the quality of services will improve as more duelling viewpoints will be brought to bear, honing the blade of advocacy in the fire of conflicting opinions?  (Sorry, I have to confess that sometimes the self-congratulatory rhetoric of the PCP gets to me.) 

Again, for the reasons above, not likely.  Sure, a company might want a woman on its sexual-harassment defense trial team, or a gay on a sexual-preference defense team, but that was true years and years before this pact was announced, as a matter of elemental strategy.  For the arcane cross-border tax question, the complex structured-finance transaction, or the mind-numbing mega-merger due diligence, will the PC ratio of the team matter?   Hard to see how.

So an economic non-event?  Yes; except in the narrowest of sand-in-the-gears senses, that it's yet another thing unrelated to their core business that BigLaw has to keep track of and report on.  Sounds like something the firms' CIO's, not their CEO's, should focus on.

Models for IT Governance

My article in the May 2005 print edition of Law Technology News is now up.   It's essentially a recap of my coverage of the keynote address where I served as "blogger-in-residence" at the recent CIO/CTO Conference, co-sponsored by ALM and Harvard Business School Publishing.  

Succinct take-away:  The possible models for IT Governance are:

• Business monarchy (this is highly efficient but can lead to suboptimal IT architecture).

• IT monarchy (leads to superb IT architecture and procedures but may not align with business processes).

• Federal system (IT, practice groups, office heads, etc., all have input — far and away the least efficient and most likely to generate the worst overall decisions).

• Duopoly (business leaders suggest what they need, IT responds with what they can provide, and a genuine dialogue occurs: typically a smart choice).

• Feudal (partners get what they want).

• Anarchy.

In general, the federal model is the least effective, because it is the most time-consuming and bureaucratic. On the other hand, it's the most open in terms of input (democratic) and difficult to avoid in a law firm culture.  Duopoly is the optimal choice.

"Anecdotes Are Not Data"

If "three anecdotes constitute a trend," as journalists say, then I'm here to report an optimistic development.  First, as my friend Denise Howell reports, her firm, Reed Smith, announced yesterday the formal launch of "ComplianSeek"™.  I'll let Denise explain it: ComplianSeek is

"aimed at helping investment advisors effectively search their email — which, like it or not, has become a de facto record repository for these and all modern businesses — to help identify and keep track of items that constitute "books and records" under the Investment Advisors Act."

Secondly, Denise reminds us of an earlier Reed Smith technology/compliance initiative, which I have been derelict in not bringing to the attention of "Adam Smith, Esq." readers, the 50 State HIPAA Privacy Study—a web interface to decoding and understanding the notoriously complex HIPAA rules.  For example, search "New York State/Doctors/Security," and the federal and state rules pop up.  Beats taking a legal pad to the library.

Third, albeit in a slightly different dimension, Ron Friedman notes that a somewhat cryptic—but thoroughly intriguing—ad ran in Tuesday's Wall Street Journal announcing O'Melveny & Myers is seeking a "Director of Practice Development [so far so tame] and Market Information," which got Ron's attention—evidently, the ad expressly mentioned "experience working with CRM systems."   Could law firms finally be seeking competitive intelligence?  It certainly looks that way.

So what's the "trend," you ask?  Law firms adopting technology to serve their clients better, while advancing their own business interests in the bargain.  High time.

Lead By Getting Out Of The Way

Business Week asks "Has the job of CEO for a megacompany become too complex to handle?"  We might well ask, "Has the job of Chairman of an AmLaw 50 firm become too complex?  Is it asking too much to expect one person to occupy a position of stature and respect both within the firm and within the profession at large, to deliver ever-increasing revenues and profits per partner, to undertake expansions astutely and contractions humanely, all the while projecting a sunny personality?"  Business Week's answer is "no," as is mine.

How can that be?  Aren't the demands overwhelming?  Wise leaders recognize their job is not to do it all, but to shape and communicate their vision for the firm, encourage and reward behaviors that serve that vision, and to get out of the way.  This is leadership as "obstacle remover," as the article puts it.  To quote a (perhaps composite) figure in the piece:

"My job is to take away any obstacles that keep you from succeeding. Then, it's just you and the goal line. If there's an obstacle between you and any of our targets, I need to know about it."

This is actually subtler than it appears.

On the surface, all it amounts to is Chairman/CEO as red-tape-cutter-in-chief.  If the marketing department is stalling on delivering the presentation you've requested or IT is late with the report you need, just go to the Chairman and he'll get them in line, right?

But here's the genius of it:  You're never actually going to do that.  What you are going to do is work it out with marketing and IT, so you don't look like an extremely well-compensated crybaby.  Yes, you have been deprived of the excuse that because "us vs. us" is getting in your way, you can't attend to "us vs. them"—but so has everyone else.

There are just two more things:  This requires the leader to actually trust that the partners and key business-side people know what they're doing and can be let alone to do it; and it means any inherited dysfunctions within the firm need to be confronted even if it means breaking some china.  But that's what you as Chairman are getting paid for.

Canary in the Coal Mine

Sometimes, in the famous phrase, "a cigar is just a cigar," but other times I think you can read the tea leaves to suss out evidence of larger trends.

Such, in any event, was my reaction to this seemingly low-visibility story that a three-member "tax controversy" team is moving, in San Francisco, from Preston-Gates to Reed Smith.  What grabbed my attention is the reason:

"We needed a firm that does have stronger relationships with Fortune 100 and 500 companies based outside this area," Kleier said. "Preston is very strong in the Northwest, but for East Coast clients ... this is a better place to expand our practice."

Preston-Gates, at #100 in the AmLaw standings, is scarcely a marginal player. And that's precisely the point. If firm #100 doesn't have enough of a geographic or Fortune 500 footprint, the bell is tolling. 

At a conference where we were both speakers, I recently sat next to Louis Craco, who throughout his illustrious career heading the litigation department at Willkie-Farr also found time to hold every position known to man at the Association of the Bar of the City of New York, and I asked him what he thought the future of the AmLaw 200 is: "They'll become the AmLaw 20," he replied.

Portrait of a CIO as Leader

This is a longish story from CIO Magazine, but a valuable one as it lives at the intersection of two topics readers repeatedly express great interest in:  IT and leadership.

Essentially a profile of John Hummel, CIO of Northern California-based Sutter Health (41,000 employees, 28 hospitals, on track to spend $1.5-billion on IT in the next ten years), it explains with sympathy and insight how Hummel came to the realization that his job was not about keeping systems running, but about "managing the process" (barfy phrase, but a rare 'ouch' in the article) of getting physicians and executives to adopt new IT initiatives.  

Most importantly, it provides a window into how Hummel emphasizes communication above all else.  Because IT by its nature tends to generate projects that are long and drawn-out, with hair-raising price tags and no conspicuous short-term payoff, part of a CIO's job is to communicate with great consistency (and this goes for your team members as well) about why the project is justified.  As Hummel puts it, with less than subtle analogies to politics:

"I liken what I do to passing a bill in Congress," Hummel says. "By the time the senators and congressmen make their formal arguments on the floor, they've already visited all the people, done all the arm-twisting and made all the concessions they need to get that bill passed."

Beyond the (dirty word??) "politics" of the job is that Hummel has learned the lessons of being a true leader:

• earn trust over time
• under-promise
• meet deadlines
• demonstrate genuine flexibility
• listen carefully; and, my personal favorite:
• "Joyous, fun people attract you to their way of thinking."

 

Rules of the Road Behind the Scenes at "Adam Smith, Esq."

Trust is a classic example of a virtuous aspect of a relationship which can only be won painstakingly over time, but which can be destroyed in an instant.  Among the behaviors which support and build up trust are consistency, clarity, transparency, and a track record of "no surprises."

For the last week or so (since posting the reader survey), I've been thinking more than usual about the nature and make-up of "Adam Smith, Esq."'s readers, and your relationship to the site and indirectly to me—all very positive thoughts, I hasten to add!   So when I opened today's Sunday New York Times to see an "Editorial Observer" piece about ethics in the blogosphere, I was stricken by a pang that I have not stated to you, dear reader, in a concise and comprehensive fashion, my own rules of the road here.

Omission hereby remedied:

• Independence:  I have never even been approached, much less taken, a nickel, in cash or kind, to say anything in particular here or even to cover topic X, and I wouldn't dream of it:  So if the thought has crossed your mind, you can just plain forget it.  In fact, knowing my contrarian streak, you would probably shoot yourself in the foot if you even hinted along those lines.
• Advertising:  What I am in the habit of referring to as "that honking big ad" top right is served up to you and me through the good offices of ALM Media's legal blogging network, as a condition of my membership therein.  The beginning, middle, and end of my role in creating it was to cut and paste some code they emailed me into my master site template.  I have zero control over what appears there, what products/services are being promoted, if it's blue or green or purple, click-through rates, or anything else.   Since this is my site, not theirs, I do receive a small cut of the revenue from it, but by far the lion's share goes to them—in fact, that reminds me, I haven't actually seen a check yet.  Hmmmm....
• Attacks & Opportunities to Respond:  I hope, and believe, I have never "attacked" any individual or firm, but if I thought I was about to, I would surely contact them off-site in advance and give them a chance to tell their side of the story.  In the (exceptionally rare—as I recall, it has happened exactly once) case where a reader requested a "clarification" of a post, I immediately replied that I would put up any comment they wished to offer, verbatim, unedited, and in full.  They took me up on it.
• The In-box is Open:  I welcome reader response and indeed consider it one of the highlights of "Adam Smith, Esq." from my perspective.  Always feel free to contact me at bmacewen at nyc dot rr dot com.

If I've forgotten to discuss or disclose anything else, let me know! 

What KM and Legal Outsourcing Have in Common

My loyal correspondent Rob Hyndman pointed out a feature article in Legal Affairs, "Are Your Lawyers in New York or New Delhi?," which takes on the pregnant issue of outsourcing with, to my mind (and Rob's), fairly underwhelming levels of insight.  In fact, if you only read one of the two cited pieces, read Rob's.  Aside from some truly bone-headed mis-statements in the Legal Affairs piece ("The market for outsourced legal work is expected to reach $163 billion by next year...," for example, which is a figure higher than the total revenue of all U.S. law firms last time we looked), it amounts to a compendium of anecdotes, vignettes, and conspicuously self-serving quotes from vendors side-by-side with double-talk from presumed, or should we say accused, outsourcing clients, such as this blather from Microsoft: "[as] a global company, we are constantly working to improve our ability to serve our customers worldwide in the most cost effective, efficient manner."  I mean, who writes this stuff?  Are they on drugs?

Be that as it may, outsourcing is a live issue, and its prominence and impact will only grow, not diminish. 

So, what is to be done?  As Adam Smith himself would acknowledge, and David Ricardo would surely confirm, there's no going back.  Indian lawyers (not to pick on them, but that seems to be where the action is today)  are demonstrably talented, native-language English speakers with a common law tradition, can still afford three servants on their seemingly rock-bottom salaries, and conveniently work while we sleep.  Worse—if you want to look at things that way—is that technology not only enables the instantaneous communication that can make them as much a member of the team as your office-mate, but technology facilitates the redistribution and re-use of templates, model documents, work-flow processes, and so forth.   Once your firm's intellectual know-how is up for grabs, you can't put the genie back in the bottle, can you?

Not so fast; let's not panic.  Start by reversing your perspective and looking at all these developments from the client's viewpoint.  Taking a first-stab draft of a commodity document in India?  How, precisely, is that so different from doing the same with a first-year associate?  Automating (so much as possible) other commodity transactions (patent applications) or sub-pieces of litigation (interrogatories in a sexual harassment case)—this is neither a threat to your associates' professional development nor a threat to your revenues and gross margins. 

The larger point is that "India" represents, at a conceptual level, the equivalent of a basic knowledge management system.  What is KM, after all, but an attempt to make basic document generation more productive and efficient?  Nothing is wrong with that, and by extension nothing is wrong with taking advantage of what India can provide for the basic garden-variety items (which are intellectually uninteresting anyway, by definition).   This reminds me of politicans grandstanding about the loss of garment factories to Mexico or China:   Is your dream for your kids that they can grow up and go to work in a textile mill?

Let's not forget, people, that the law can and should be a noble profession—call me old-fashioned, I still believe that.   Judgment, reserve, foresight, clarity, wisdom:  Don't you aspire to these, for your own sake and your clients?   They can never be bottled, and they can never be outsourced.

Comments Are Open Again

Comments are back "on!"    Much as I hated to, and as antisocial as it seems in the blogosphere, I was forced for a lengthy interregnum to turn comments "off" thanks to the reprehensible phenomenon of "comment spam:"  After waking up several days in a row late last year to find myself obliged to manually delete dozens of "comments" advertising everything from Texas Hold-'Em Poker to p**** pills, I decided that exercise was bad for the soul and took drastic action. 

Comment spam is generated by automated bots whose sole purpose in their dreary and cheesy lives is to find blogs with comments open and to spew their bile.  But I have now installed two pretty wonderful Movable Type "plug-in's," MT_Blacklist and MT_Spamlookup, which, between them, seem to have solved, or 99.9% ameliorated, the problem.

I invite readers to test-drive the new commenting system and let me know if fails to perform as advertised.  Tech support is "in," as always, at bmacewen at nyc dot rr dot com.

Law Firm Blogs: A Contrary View

Are blogs by lawyers and law firms the hottest thing to appear on the marketing horizon?  Well, yes, and no.  (And both those articles are featured this morning on ALM Media's law.com.)   The first imagines that "Fred" can start a trademark-law blog that in Google's rankings will "catapult over" other trademark firm's sites, expensively search-engine-optimized by pricey consultants, "without spending a dime."  The second quotes the communications director at Stroock & Stroock & Lavan as saying blogs are "not appropriate" for firms the size of his (350 lawyers), that he's "not inspired" by blogs, and that they "don't seem like a good fit."  (In fairness, the second article also notes some success stories with firm blogs, and advances a key pro-blog argument that I can attest from personal experience has teeth—"It's an extra discipline...It's forced me to be very, very current.")

So, pick your poison?

At the risk of forfeiting my hard-earned membership-in-good-standing in the blawgosphere, I will venture that blogs will turn out to be no better or worse, no more compelling or lame, than conventional law firm marketing efforts.  Venturing into blog-land will prove to be no elixir if:

• you write about things clients don't care about
• at too turgid a length
• without an approachable and engaging voice
• or which are "yesterday's news."

For proof, look no further than to this Legal Week piece characterizing the vast tonnage of client-targeted publications "as a disappointing confluence of the late, the untailored and the ‘not focused on my business’," all at a cost rumored to be £3-million/year for one Magic Circle firm.   The good news is that we can do better.  And (astute readers will spot an "Adam Smith, Esq." theme here), we can do so by taking a page from corporate-land, in this case investment banks.

Having spent seven years working with the investment research divisions of, among others, Morgan Stanley, the author reports:

"Crucially, they face many of the same content-to-client issues that law firms do. They need to write content that is focused on what clients want to know. They have to cover all of the supporting detail, the content has to be reused efficiently and the process has to be as frictionless and quick as possible. The personality types writing the content are similar, too."

So what do they do that we don't?  In short, through automating—and deeply constraining—the generation of reports through MS Word templates, they permit the repurposing and reuse (as well as searching and indexing) of key "content."  The templates are designed to mimic the practices of the "best" newsletter authors and thus bring all the laggards up to their standards.  Concision wins pride of place:  "Take everything you write, halve it, summarise it, then edit the summary."

"Dumbing down," you protest?  Why don't you ask your clients which they'd prefer:  (A)  Something written by someone relatively oblivious to the context of the client's business, but thoroughly grounded in the minutiae of his area of expertise, or (B) something that gets to the point quickly and suggests concrete actions? 

Can you do (B) through a blog?  To be sure.  Can you do (A) as well?  Of course!—just give the spread of the blawgosphere some time.

Quick Update on the Reader Survey

So far (and it's barely been up two business days), we've gotten nearly 100 responses to the reader survey.

Way to go, friends!  I deeply appreciate those of you who have taken or will take a few moments to fill it out.

Needless to add, but for the record, a complete summary of the results will appear on "Adam Smith, Esq." when it's completed at the end of this month.  Here is the link again for those of you who haven't given it a shot just yet.