I've writtten before about using blogs (and wikis and RSS) as knowledge management platforms in law firms, but for my Edge International presentation last week in London, I developed the following diagram which encapsulates my thinking on this:

Three of a firm's most important functions—Knowledge Management, Business Development, and use of Existing Resources—are shown as primary activities, each with some overlap with the others.  The intersections are:

• Where KM meets Business Development, "Scratching the Itch," or being able to show a client your firm's thinking on an issue they are facing at that very moment.
• Where Business Development meets Leveraging Existing Resources, "Showing You Our Thinking," which is not only the most effective but essentially the only credible way to demonstrate your firm's all-around smarts (merely reciting or asserting it cuts no mustard).
• Where Leveraging Existing Resources meets KM, "Professional Development."

Blogs support all these indispensable strategic functions, and are therefore at the universal intersection set.

Update: 1 Nov, 8:20 am Thanks, Malcolm! [A colleague's take on the above post. Best line: "A resource is an asset with a job."]

Also: Think about your firm's stored repository of knowledge as something your professionals need to be "fluent" in; and profit will follow.

The leading vendor, at least in law-firm-land, is arguably Redwood Analytics.  While it will never be the purpose of this post or any other—indeed, , and is contrary to the policy of "Adam Smith, Esq." writ large—to endorse any particular product or service, I felt obliged to give those seeking more background some form of starting point for their own research if they wish to delve in to how "BI" software actually works.  The rest of this post assumes you have at least a layman's familiarity with its capabilities.

The lead story in the current Law Firm, Inc., "Analyze This," is unfortunately a superficial and essentially unhelpful overview of the topic which does a disservice to BI by emphasizing its pitfalls if used mechanistically without so much as an allusion to its power and subtlety if used with nuance and sensitivity. 

The primary example in the article is that of a "senior partner," clearly afflicted with tunnel vision, who has proudly analyzed the profitability of his firm's trade association practice group and found it unimpressive:  While a steady and consistent driver of billable hours, there was zero premium work and little or no ability to work the magic of leverage.  Given the intrinsic nature of trade association practice, this should be a surprise to precisely no one.  The senior partner's conclusion?  The head of that practice group was grossly overcompensated.

Overlooked in the "senior partner"'s analysis was that this group annually generated one or two "seven figure" antitrust litigations that were billed at full rate.  This leads to the "duh" observation that "overly rigid" profitability analysis leads to "faulty conclusions."  Indeed:  And if the football chains were 9 yards long or 11 they would lead to faulty first-down analysis; this is not, as they say, "rocket science."

But BI, properly engaged, is rocket science.

What's the #1 top-of-mind metric for all law firms?  Love it or hate it?  Profits per partner.

What is BI all about?  Analyzing profitability.  If you agree with (a) and (b) above, can you seriously afford to ignore it?

The LFI article has, for all its disappointing skating-over-the-surface, one solid point:  BI can be kryptonite, and using the results of BI intelligence without discernment or studied reflection on how it will be received is inviting caustic and self-destructive backlash in the ranks of your own partnership.  The issue that's interesting, then, is not whether a mechanistic and rigid approach is the proper one—since when was that the ideal approach to anything?—but on a more granular basis, how does one use the intrinsic power of BI to help your firm stand out from the crowd? 

Finally, I must take violent exception to this:

One final point: Firms should consider restricting access to profitability analyses. Lawyers are trained advocates but often have limited financial acumen, and may misuse analyses. In addition, lawyers end up keeping score. This can lead to internal dissension...

And another thing: As a friend of mine likes to say, "every confidante has a confidante." So one trusted insider leaks to someone else, who leaks to someone else, and before you know it everything is essentially common knowledge within the partnership but with the nasty additional dimension that management now stands accused of trying to hide the ball, as well.

BI stands at the crossroads of many issues "Adam Smith, Esq." is all about:  How to professionalize the management of sophisticated law firms.  And believing that that conflicts with legal professionalism is, as my new good friend Tony Williams says, "Arrant Nonsense!  Arrant Nonsense!"

The wonderful Robert Frank has the hockey-player story.  (Frank has been a professor of economics at Cornell since 1972, and co-authored Principles of Microeconomics with our Fed Chief heir apparent, Ben Bernanke; if you ever see his byline, you owe it to yourself to read at least the first paragraph and see if he doesn't draw you in.)

Frank recounts the hockey-player mystery as analyzed by Thomas Schelling, just-announced Nobel Prize winner.  In 1978, Schelling asked why, since all hockey players left to their own devices will prefer to play without a helmet, in secret ballots they nevertheless vote strongly in favor of mandatory helmets.  In other words, why do individual preferences diverge from group preferences? Putting it differently, if as a group players think the rule is a great idea, then why don't the players just don the helmets on their own absent the rule?

The answer takes us into territory where the Invisible Hand breaks down.  Any individual (rational, utility-maximizing) player believes he can play marginally better without a helmet—seeing and hearing more acutely.  The IH would therefore posit that all aggressive players would discard their helmets for the perceived competitive advantage:  A slightly higher chance of winning is valued more than the increased safety a helmet provides.  But of course, once no one is wearing a helmet, no one has a relative advantage in the game—and all that has been accomplished is to raise the risk level for all.  Thus secret ballots mandate helmets.

Similar "beyond the Invisible Hand" logic applies when it comes to associates' workloads.  If everyone else is leaving the office at 5:00 (i.e., wearing helmets), I can stand out from the crowd by working 'til 8:00.  Once everyone is working 'til 8:00 (doffing their helmets), my competitive advantage disappears and the only result is 2,200 hours/year minimum for all.  As Frank says pithily, "The invisible hand assumes that reward depends only on absolute performance. The fact is that life is graded on the curve."

Now turn to the flip-side of associate hours:  The "going rate."  Legal Week is covering the possible eruption of a salary war in the UK (more precisely, a one-time salary spike), where Allen & Overy recently fired a salvo by hiking starting salaries, and all are holding their collective breath to see whether others will follow suit.

"Haven't we been here before?!" you are asking:  Indeed we have; the profitability of many US firms took a lasting hit after the dot-com-driven spike from $100,000 for $125,000 in 2000.  So this time around, we know better, right?  Maybe not.  This is the dilemma:

• Law firms have very few controllable (variable) costs. 
• Of their fixed costs, compensation is far and away the largest piece of the pie; real estate is next, and essentially everything else is immaterial.
• But the war for talent is one that, on pain of resigning the firm to second-rate status, simply must be won at any cost.
• When associates are in short supply, as they evidently are now in the UK, guess who gains the upper hand at the imaginary bargaining table?

A brief digression on "in short supply:"  In a tautological way, demand and supply are always equal, in the sense that the number of associates who start at City firms (supply) is identical to the number who are hired (demand).  Observations about "tight" or "short" supply refer not to this static arithmetic truism but to the underlying changes in the marketplace:  Here, the fact that corporate, M&A, private equity, and funds work are all ramping up and four years ago in the downturn many UK associates were shown the door.

So is there any alternative but for City firms to follow A&O's lead?  Isn't the inevitable handwriting on the wall?

I invite you to participate in the following thought experiment:  Permit yourself to ask if there might not be something other than $$ (or ££ or €€) to entice associates to come, and then to stay, at your firm?  After all, in the Maslow hierarchy, money can satisfy physiological and safety needs, but not belonging, esteem, or self-actualization needs. 

Realistically, any City (or AmLaw 200) lawyer expects to work hard and concomitantly to be paid well.   But how many hold out any prayer, much less expectation, of enjoying a feeling of belonging, of, dare we say, loyalty to their firm?  (We're discussing associates, but experience with lateral partner moves confirms the indisputable value loyalty has in the marketplace:  No partner will move for, say, a 10% bump-up, in a stratosphere where 10% could be real money.   Loyalty is the counterweight.)

Absent any sense of belonging, we have highly paid but miserable people; with a sense of belonging, we might aspire to well-paid but happy people.  This would require a firm and consistent commitment to recruiting people not just with the right technical skills but those with the right cultural and behavioral profiles.  (Or, to paraphrase Legal Week, we would need to break the syndrome of "hire for the technical, fire for the behavioral.")  I stress "consistent:"  Creating a:

• palpable,
• meaningful,
• credible

firm identity that differentiates you from your peers takes both vision and hard work. 

The good news is that, when the tough times return, as they will, you will have a reputation (a marketplace asset every bit as real as its counterpart, loyalty) that will enable you to stand apart from the firms whose recruitment and retention policy amounts to "pay them now, shoot them later."

And you don't have to get partners in all the City firms to agree to this by secret ballot; you can do it starting in your executive committee.  Then you will be playing hockey without a helmet while all around you are encumbered with their gear.

The raison d'être of the trip, as mentioned, was to meet the other partners of Edge International:  That meeting was this past Saturday and Sunday at the Naval & Military Club hard on St. James' Square in London.  Virtually everyone made a presentation, including me, and at least insofar as the others go, I can say at an unsurpassed level of intellectual and professional stimulation. 

The scope and depth of the presentations was far too varied to summarize, so let me tantalize.  One presentation focused on the cross-cultural differences among countries, always something germane for global law firms, and awareness of which is too often honored in the breach.  Here's a hypothetical question:

"Which way of perceiving a company would you regard as the most “normal”:

"A.  A company is a system designed to perform functions and tasks in an efficient way. People are hired to perform these functions, sometimes with the use of machinery or other equipment. They are paid for the tasks that they perform.

"B.  A firm is a group of people working together. They have social relations with other people in the organization. The functioning of the organization is dependent on these relations."

Consider your answer.  Ready? 

I have the advantage of having seen the chart first-hand, so here's how to decode it:  In the US and UK (the two bottom bars), 90% of people think the "normal" view of a company (note the question is "normal" not "desirable" or "ideal") is as a system to perform functions.  But in China, Japan, and India (bars 2 through 4), roughly 80% think the normal view is as people dependent upon social relations working together.  Next time you're tempted to ignore cultural differences and barge ahead assuming they'll all come out in the wash, think again.

Sincere and public thanks to all the Edge-ites who were so welcoming.

Friday morning, thanks to an introduction from Bruce Marcus, I met Nadia Cristina, managing editor of professional marketing, "the worldwide journal for marketing professional services."  We talked largely about blogs in the context of professional service firm marketing, and I learned that blog adoption in the UK is like text-messaging adoption here:  Almost nowhere.   Americans blog; Brits text-SMS—but not the reverse.  The venue was near the Bank tube stop in The City, near the "gherkin" (a/k/a the Swiss Re headquarters, designed by Sir Norman Foster).

Finally, Monday afternoon into early evening I spent nearly two of the most professionally luxurious hours I've enjoyed recently with Tony Williams, founder of the Jomati consultancy in London, and former global managing partner of Clifford Chance and, subsequently, the late Andersen Legal, where he earned the UK's Partner of the Year award in 2001 for personally seeing to it that virtually 100% of the lawyers and staff were successfully relocated to new positions elsewhere in The City after the Enron implosion brought this early experiment in MultiDisciplinary Practices to a screeching halt through no fault of its own. 

Does Tony share the view that running a law firm like a business is an unprofessional approach?  "Arrant Nonsense!  Arrant Nonsense!"  Glad I asked.

For now, I can report with delight that the trip has exceeded my expectations on all fronts: On the business front, I have gotten tremendous enjoyment--and intellectual and professional stimulation--from my new best friends at Edge International. (Prior to this trip, the only one I could credibly claim to know reasonably well was Gerry Riskin, whose decision to pursue a career as a legal consultant deprived the world of an otherwise truly gifted stand-up comic.

An unexpected bonus was making the acquaintance of the remarkable Alan Hodgart, a McKinsey alum (and not a lawyer) who is to strategy consulting for law firms as Thomas Edison was to inventing--they don't get much better.

On the personal side, the couple of extra days I squeezed in mean that I'm now fully comfortable thinking of London as a second home, and there's tremendous emotional, cultural, and aesthetic reward in being able to notch another world-class City into one's mental image-map.

Until later, thanks for your forbearance.

Reminder:  I'm off to London this afternoon for a week (back in the States Wed 26 Oct). 

The main business purpose is to meet all the good people at Edge International that I have not yet had the fortune to get to know in person.

As a bonus, I'm going to meet the famous Tony Williams of Jomati.  Tony, an underachiever, was merely managing partner of Clifford Chance during the period it merged with Rogers & Wells in New York and Punder in Germany, following which he became worldwide managing partner of Andersen Legal.   Earlier this year, I had this to say about Jomati.

Blogging while across the pond?  No promises, alas.  While, as always, I will try my best to be diligent, I will be at the mercy of the gods of WiFi hotspots, who can be miserly or generous.

Jim Taronji, an antitrust partner at Howrey, sent me the following email about the billable hour poll, which I am taking the liberty of reproducing in haec verba because it's so thoughtful and articulate:

"Eventually, the "billable hour" will go the way of the Model T (just a curious novelty from the past). Why? Because that's what corporate clients really want. They want certainty in billing because that's what they need for internal budgeting purposes.

Law firms will continue to resist until they are forced by their large corporate clients to accept it.

The smart law firms will get ahead of their clients and accept (dare I say, "offer") flat fees for each project, with a "change option" for unplanned situations.

Professional service providers do this now with a detailed "Statement of Work" that is created by the service provider and the client. It lays out what will be done and when, the number and level of human resources devoted to the project (times the number of hours each person will devote to completing the project, times their hourly rates), and additional costs (travel, copying, etc.). The end result is a budget that is agreed on by both sides. Any changes to the "assumptions" will result in a change in the final cost of the project.

What this requires is for the relationship partner to work with the client to understand the "scope of work" upfront so that he/she can prepare a project management matrix that identifies the number of partners, associates, staff attorneys, paralegals, administrative staff needed for the project, the work that each will undertake, the number of hours each will devote to completing their tasks (by quarters, then drilling down by months, to come up with an annual "budget" number), and an estimate of additional costs (and when they will be expected to be incurred).

Once the annual "budget" or total project cost (if less than a year) is determined and agreed upon, that's the amount the firm will bill to the client each month and that is the amount that the client will wire transfer to the firm at the beginning of every month.

Net result, the firm no longer has to put together a monthly invoice (saving administrative costs), the firm will get paid by wire transfer at the beginning of each month (saving carrying costs), and the client won't have to review huge invoices with daily recitations of work performed by each person billing that month (saving time for inhouse counsel to do more productive work).

These savings to the law firm will compensate for the "unbillable" time it will take to prepare the matter budget.

Will this "sea change" happen overnight? No! But it WILL happen. The clients demand it and there is no reason why law firms can't deliver."

I agree with Jim that the demise of the billable hour, if it ever comes, will be primarily client-driven.  I am less confident that the precise contours of the Post Billable Hour World will follow Jim's template, but it's both a carefully specified model and one that has been proven to work in other professional-service contexts.

Thanks, Jim!

The Clementi Commission reforms appear closer than ever to reality, and their implementation could be as early as next year.  For those of you who are only recent visitors to "Adam Smith, Esq.," the UK's Clementi reforms will, in an utterly fascinating-to-watch real-world experiment, permit law firms to obtain capital from outside investors and even, mirabile dictu, go public through IPO's, as well as partner with accountants, management consultants, and others.

From a public-relations standpoint, the reforms are being touted as "absolutely consumer-driven," according to the BBC:  "I don't see why consumers should not be able to get legal services as easily as they can buy a tin of beans."   And for the first time, regulations will restrict "claims farms," a/k/a ambulance chasers.

And if you're reading this via RSS or otherwise aren't on the site's home page, you'll need to go there. The poll comes down on Wednesday.

Thanks!

How do I know it's unexploited?  From experience and observation, but now as well from confirmation by the Financial Times.  According to Tony Angel, Linklaters' managing partner, the firm has decided to re-start its alumni relations program, and they "are not alone in letting such a program drift," according to UK consultants.  In terms of high return at low cost, tapping into your alumni network can hardly be beat:

• a very small percentage of all the people you invest in so dearly actually achieve partnership, and even then some depart;
• according to a survey of people who belonged to the alumni networks of 49 accounting firms and 51 law firms, 70% said they had never been contacted in support of marketing efforts, even though they thought they would be;
• one-third volunteered that they'd be happy to help business development, training, or recruitment; and
• more than 80% said they'd recommend their former firm as a place to work.

What's going on here?  The article suggests a strange—but I suspect accurate—reason firms don't use their alumni networks to more strategic effect:  Lawyers are shy about asking for help. 

The good news for all of the shrinking violets out there is that the best way to begin is with a dedicated alumni website (Gibson-Dunn has one in the works). 

The rewards should be enough to overcome your fear of looking needy.  Linklaters, quite interested (who isn't?) in expansion in Asia, uncovered over 100 alumni already there.  Of course, to actually make something of this untapped resource, you're going to have to get on a plane and buy some lunch, drinks, and dinner.  But suck it in and get started.

These people are, literally, waiting for the phone to ring.

If you're still wavering, I'll close with this (true) story:  When my mother was growing up on a ranch in eastern Washington state (still in the family, by the way), her older brother was torturing himself over whether or not he should ask a particular girl to the prom.  Finally fed up with his vacillation, she pointed out the brutally obvious:  "Look, Donald, as things stand you're not going to the prom with her.  What's the worst thing that can happen if you ask?  Right..."

Trust McKinsey to have asked the question.  First, they explode a few myths of leadership.  To begin with, there is no such thing as The Mythic CEO, or managing chairman.  (Aren't you relieved?)  No one person can do it all, and since one's daily round of actual contacts is perforce limited, with any decent-sized organization one has no realistic choice but to really on trusted lieutenants to get the word out.

Nor can you assume that all it takes to create a high-functioning team is to assign some seasoned managers to the right slots and let nature take its course:  "Teams don’t magically coalesce overnight."  But they've studied what it takes to bring a team together, and the good news is it has nothing to do with behavioral interventions, facilitated workshops, team-building retreats, or any of the other touchy-feely snake oil solutions that make my teeth ache just thinking about them.  Instead, with a refreshing "just do it" attitude, it turns out the best way to build a team is, well, to act like you already are one.

McKinsey, of course, puts it a bit more diplomatically:

"The most effective teams, focusing initially on working together, get early results in their efforts to deal with important business issues and then reflect together on the manner in which they did so, thus discovering how to function as a team."

For starters, it helps to make sure everyone agrees on where the firm should be headed.  Do not assume you can take this for granted.  At one McKinsey client, five top executives were asked to list the companys top 10 priorities:  Of the (alarming already!) total of 23 they came up with, only 2 appeared on every list and 13 appeared only once. 

Once everyone knows where they're going, the focus must be on the big picture.  Resist the temptation to second-guess more junior management; don't re-run analyses, and in general stay out the weeds.  Devote yourselves, instead, to (a) nurturing talent; and (b) driving significant growth initiatives.  If it takes hard conversations to get everyone on-board in this effort, have those conversations; that's what you are presumably being paid for.

Even if you  have a coherent, high-functioning team in place, realize that nothing in life is forever.  In other words, plan for renewal.  Be open to new sources of ideas, approaches, and techniques that aren't necessarily within your comfort zone.  Insularity is deadly.  And the best way to improve the team's performance is not to retreat to your analytical cloister, but to jump in, do your best, reassess, and jump in again:

"Teamwork is a pragmatic enterprise that grows from tangible achievements. The action-reflection cycle—supported by improved direction, interaction, and renewal—complements the work style of most senior teams. [T]his approach pushes them to address their own performance just as directly and forcefully as they would address other business performance issues."

And of course for those of you reading this through RSS or as a direct link to this post alone, remember you have to actually go to the site to find the poll.

Enjoy.

With this year's award of "The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel," a/k/a the Nobel Prize in economics, to two masters of game theory, a brief recap of what game theory is and what it means for managers contemplating and deciding on strategies is in order.

"Game theory," roughly speaking, is the study of how people make strategic decisions when interacting with others in conflict with them.  Among its more fetching intellectual attributes is that it can generate results that at first blush are counterintuitive.  A classic example is Cortez' decision to quite conspicuously burn his ships before engaging in battle with the Aztecs:  "What could he have been thinking?!" is the reflex reaction.

He was thinking two things:  (1) For the Aztecs, they interpreted his bravado as confirming that Cortez was very optimistic indeed about his chances in battle—for whatever reason that might be—and were loathe to engage.  And (2) for the Spanish soldiers, with retreat not an option, their motivation to stand and fight furiously was redoubled.  The general form of this principle is, Sometimes limiting your options increases your odds of success.

Still more generally, game theory recognizes that the theoretical model of individual, rational, utility-maximizers operating in a static vacuum is far removed from the real world, where utility maximization is only one among several human  motivations (including, importantly, preserving self-esteem), and that actual decisions are made in a soup of others, who are guaranteed to react dynamically and change the landscape in ways perhaps not foreshadowed by one's initial decision.

So, for managers, this means precisely what?  That any strategic analysis must include the likely reactions and counter-reactions of your competitors, your clients, and even your own professionals and staff.  McKinsey discusses this in the context of a duopoly chemical industry, where both competitors are contemplating whether or not to build a new plant.   In a fashion vaguely analogous to the famous Prisoners' Dilemma game, it appears to be in the interest of each company to build their own new plant—if the other guy doesn't as well—it's likely that two new plants will be built, and the industry will be left with excess capacity, loss of pricing power, and a net decrease in profitability. 

As McKinsey notes (the article is quite cursory), a full-blown mathematical model-cum-solution is unnecessary for managers to benefit from the "what next?" line of thinking that putting on one's game-theoretic hat should yield.  The key insight is:  "Look forward and reason backward." 

If it's good enough for the Nobel committee, it should at least be worth considering by your executive committee.

Well, that was quick; I'm back from jury duty.  Actually, not "back," rather "deferred" (until some time in January).

The issue, about which they give you eminently fair and civilized warning, is that there's an outside chance one could end up on a trial lasting as long as two weeks (beyond two weeks, I infer although they did not say, is a "special circumstance" which judges will deal with individually outside the normal parameters of jury duty).  Since I'm going to London for 5 days a week from tomorrow, that ruled out my ability to promise I could serve.

London?, you ask:  Indeed.  My good friends at Edge International are convening for an all-hands meeting on the 21st and 22nd, and they have graciously invited me.  I will be doing a presentation about the use of blogs, wikis, and RSS in professional service firms.  The estimable Gerry Riskin, of course, already has one. 

Extracurricular events may include a concert at the Royal Albert Hall, and will certainly include The British Museum, The Tate, and extravagantly long walks in one of the world's greatest pedestrian cities.   Stay tuned for photos.

Obligatory, I suppose:

• While lawyers are less than 1% of the population, we evidently make up 5—6% of blog writers and readers, putting us behind computer professionals and students.
• "It's all words, that's all the law is."—Scott Turow.  And, my favorite:
• "Blogs break down the barriers."—Denise.

Once something is in The New York Times, with its own patented reality distortion field, that something is True.

First off, why are "mergers here to stay?"  Essentially, because law firms want to more or less match the geographic footprint of their clients:  And as the F500 and FTSE100 are increasingly global, so must be the top-tier firms that serve them.  That, in any event, is the take-away from this Financial Times piece.  How could any firm—even one of the statute of Latham & Watkins—lure a partner from Wachtell?  Because Latham's global reach was "eye-opening;"  not to mention that your own far-flung partners are invariably more responsive than outsourcers.

Michael Bray, present at the creation of Clifford Chance/Rogers & Wells/Puender, talks about the extraordinary change in the time between the Coward Chance/Clifford Turner merger in 1987 and the 3-ring-circus in 2000.  For starters, the CC/CT merger was conducted in absolute secrecy, complete with a dedicated "safe house," and no leaks to the legal trade press (which, one senses Bray feels, grew in aggression over the time span).  

What's the hardest part of a merger?  To the surprise of no one, it's integrating cultures.  What's interesting about the British/American/German challenge Clifford Chance faced in 2000 is that the Americans were, ultimately, viewed as the cultural outlier, with the Brits and Germans closer to each other in tonality and approach than either were to the Americans.   What does it take, on the ground, to work through the cultural integration?

"You have to drive through some of those things fairly early on because you have a window of opportunity.

"There is the euphoria of getting the merger done, and there is the market thrust that comes from it. But then you actually have to make it work, so people have got to work together and you have to drive some changes through.

"If you do it too fast, then you suffer; but if you do not do it fast enough, then you lose the opportunity.

"Of course, that involves issues which affect the way people run their daily lives, and most people will tell you that change is great, we should have as much of it as we can, but don’t touch me.

"... There are some people who will go and who will not make the grade in a merger." [emphasis supplied]

In other words, not too fast but not too slow, not too brutal but not too accommodating, and not too radical but not too timid.

A tall order.

What, then, would Bray do differently?  One word:  Communication—"it is a very, very difficult issue."  They didn't spend enough time on it before, during, or (initially) after. 

I have now heard this from veterans of essentially every firm that's been through a merger. 

Astute, alert, analytic, absorbent as lawyers are, we don't seem to getting this. 

Mergers are here to stay:  Communicate.

The "Collected Intelligence" of the Blogosphere at work:  "Kay, MacEwen, & Riskin."  And see also. 

Can you imagine pulling this off in the off-line world?  Me neither.

The American Lawyer's annual associate (dis)satisfaction survey is now echoed across the pond, as Allen & Overy reveals its associate ranks suffered a 25% attrition rate last year and, in response, it's accelerating its exploration of an alternative career path to that of partnership—something akin to "of counsel."  The fundamental problem is simple:  It's taking longer and longer for fewer and fewer associates to make partner.  

Casting this in terms of a net present value analysis may seem cold or insensate, but I believe people (certainly people smart and accomplished enough to be A&O associates) can evaluate their careers rationally, and when the probability of a payoff is lowered and the time to its achievement increased, you don't need your HP 12C to tell you the investment you're making towards that goal just increased in cost.

Put in more human terms, here's the dilemma:

"Older partners were willing to dedicate their lives to all-night drafting sessions and mind-numbing document reviews because there was a realistic chance of claiming the partnership prize. But junior lawyers who responded to our survey now calculate the odds of partnership as a "crap shoot." And partners aren't giving their younger colleagues any incentive to work harder, associates say. Many treat their associate ranks as replaceable billing units, which are easily eliminated in a downturn, instead of as potential long-term members of the firm. "Why should we kill ourselves for you? We now know we are completely fungible," [says a WilmerHale associate]."

"Respondents to this year's survey billed an average of 2,072 hours in 2004, and reports of 2,300 or 2,400 hours were plentiful. Law firm leaders, in contrast, worked 1,800 hours or less when they ascended the ranks, say associates. American Lawyer data on associate hours would seem to agree. When we surveyed midlevels in 1986, associates reported billing only an average of 38 hours per week, 16 percent less than their counterparts today."

Given the relentless pressure on firms to boost or maintain the PPP numbers, is there anything to be done?

My honest answer is:  I desperately hope so, but I don't yet know what it is.

Consider this nascent study, just getting off the ground, being conducted jointly by the American Bar Foundation and the NALP Foundation under the direction of Joyce Sterling, a professor at University of Denver Sturm College of Law—a 10-year longitudinal career study of 5,000 lawyers who graduated in the year 2000.  Its primary finding to date:  "The malaise that new associates experience appears more acute at the large-firm level."  Specifically, associates in firms with 250 or more attorneys are the least satisfied with the nature of their work.

But wait:  The results are more powerful still.  My friend Prof. Bill Henderson of Indiana University School of Law/Bloomington, and I developed a correlation analysis based on last year's AmLaw associate satisfaction survey.  What we found is that, across the board, PPP is strongly negatively correlated with every measure of associate satisfaction—at highly statistically significant levels.  

In other words, the better it is to be a partner at firm X, the worse it is to be an associate.  Specifically, the following indices of associate satisfaction showed high negative correlations with PPP:

• "associate satisfaction" [overall]
• "interest level of work"
• "partner-associate relations"
• "openness of finances"; and, strongest negative correlation of all:
• "communication toward partnership status."

Ironically, the only associate satisfaction question which was positively correlated with PPP was—what else?!—benefits and compensation.

This topic is, it's fair to say, one of the most pervasive, most complex, and without doubt most important facing our profession.   Associates are the future. 

How long can this go on?  ("This" being the syndrome that the most miserable associates are at firms where partners are, or should be, happiest?)  The answer may well be, "indefinitely," in which case we can continue to be a profession that consistently over-indexes on alcohol abuse, divorce, mid-life crises, and other key indicators of social, emotional, and, dare I say, spiritual, health.   Or are there better ways? 

I intend to explore the second question as best I possibly can.  Feel free to join in.

So this weekend we have The American Lawyer's release of its annual survey of mid-level associates, and Business Week's cover story on "how to recruit, train, and hold on to great people."  The survey, with responses from nearly 6,000 associates, can be summed up thus:

"[it provides] a glimpse of what upper management and youngish associates think of each other. Sometimes it's not pretty."

"'There are very few companies that feel they have an excess of talent,' says Paul Rogers, a partner at consulting firm Bain & Co.  At the same time, business has gotten tougher, and companies are counting on their people to be flexible enough to move at today's accelerated pace, yet creative enough to excite consumers around the world..."

Indeed.  And so corporations are doing everything they can—spending $50-billion a year, one estimate has it—to uncover, nurture, reward, and promote talent.

As hierarchies flatten, corporations become more global, and competition intensifies, who can afford to skimp on developing talent?  Yet these are some of the things associates had to say:  A mentor delivering "feedback" "just yells at me."  "It is easier to hack into the CIA computer network than to learn about executive committee decisions that affect everyone."   After pulling all-nighters, one's reward is to have partners demand immediate changes to the work without explanation.

Can the associates be partly to blame for not taking the initiative?  Consider:  "One Proskauer Rose midlevel brought to her last semiannual review a wish list that included requests for more writing and deposition experience and a mentor for business development skills. They kind of laughed and said, 'You shouldn't be worried about [these things]' at my level. It was frustrating: It was like talking to dead air,' she says."

The Business Week piece, by contrast, painstakingly recaps the heroic steps companies such as Schlumberger, Dell, IBM, Johnson + Johnson, and, inevitably and famously, GE, take to identify, nurture, and reward talent.   But if I can leave you with one and only one take-away, it's in this graphic, "What Not To Do," and especially the toxic habit of assuming that management of people means criticizing their shortcomings rather than reinforcing their strengths.  Study after study has shown that the best managers spend 80% of their time trying to amplify people's strengths rather than mending their weaknesses.  As BW puts it, "Copy them."