And this is apropos what exactly?  His telling the background story behind their merger with Reed Smith.   What's impressive is the forthrightness and optimism with which Parker, and Richards Butler, approached this "rationalisation" (a/k/a consolidation).  Where many managing partners, or firms, might view this with trepidation, uncertainty, and hand-wringing, Parker saw it as an "exciting" opportunity and embarked on a concerted three-year campaign to position Richards Butler for a merger.

How does one do that?  The same way one manages any business to make it more attractive to suitors:

• monitor costs relentlessly
• clean up the balance sheet
• improve cash flow (by, e.g., accelerating billing and collections and improving the quality of receivables)
• insist upon, and enforce, a clearly articulated strategic positioning.

The last may be the hardest, as it requires consensus among the partnership to establish and genuine discipline to carry out.  But Parker is clear that "rapid revenue growth without focus on strategic positioning [can harm] the quality of earnings, potentially a long-term issue" (emphasis supplied).

We also learn how Parker and his colleagues approached the all-important issue of the cultural challenges that a potential (now, actual) merger could pose.  Make no mistake:  The financial "hygiene," specified in the bullet points above, is a necessary but by no means sufficient condition for a firm intent on merger to meet.   Those are things that, in any well-oiled firm, should be practiced as a matter of routine.

The make-or-break challenge is, rather, the cultural one.  What does Parker have to say?  Note his nuance:

"We embrace debate but it must not be the seed of discontent and distrust. Management has a duty to lay out its thinking and plans and to answer questions. Abuse or shorten this process and debate becomes a harbinger for division. Division turns into rift.

"But debate must be managed. A major international merger is, for any business, a seismic shift."

And the key to "managing" debate is to rigorously keep one's eye on the business issues, and not the subjective, emotional, gremlins that can affect rational decision-making.

As Parker puts it, "business concepts can become clouded by subjective thought:"  Suddenly a merger is no longer a major milepost in the execution of a long-term strategic plan, but instead it represents a "loss of control," a "loss of independence," a "takeover." 

Parker will have none of it.  Consolidation is the order of the day; all ahead flank:

"Be in no doubt: the game is worth the candle. We have chosen to partner with a dynamic and well-led organisation that shares a common vision of the impact of the globalisation of legal services, is culturally compatible, has a track record of making mergers work and gives us reach and investment resource to fuel our global ambition.

"Most important of all, we create opportunity for our people and our clients. Human spirit desires to grow and embrace change and the uncertainty and challenge that it creates. As one of our paralegals commented: "We can work with new ideas and new people.""

Are we listening to a lawyer here?

Yes, we are listening to a 21st Century lawyer—in a larger, more capable firm on a carefully thought out, realistic 21st Century trajectory.

OK, you're going to have to trust me on this one:  It's a story about leadership taking off from an Everest expedition.

What rescues it from almost certain death-by-cliche is both the high-quality source (Knowledge @ Wharton—now available as podcasts, in case you hadn't heard [pun intended]), and the integrity of the people it profiles, including the woman responsible for HR over Pfizer's 120,000 worldwide employees, who lived the first eight years of her life destitute on a sugar-cane farm in Puerto Rico.

I find insight in the piece by its contrast and juxtaposition of the improbably-disadvantaged Pfizer SVP of HR with one of the world's all-time greatest mountain climbers who has reached the summit of Everest no fewer than five times, the last time carrying enough IMAX camera equipment to record the event in mall-suitable 3-D.

But more than that, it's how these people talk about what leadership means to them.  First, the Everest/IMAX story:

"In May 1996, Breashears and his team faced a special challenge: making an IMAX film about their journey. Carrying and maintaining hundreds of pounds of filming equipment meant that planning was even more meticulous than usual. "We went to that mountain with a great plan, an elegant plan," said Breashears. For one, it was flexible. "A good plan makes you nimble, not stuck. Ours gave us options ... wiggle room."

"By rehearsing extensive "what if" scenarios long before they got to the mountain, the team was ready for the unexpected. So when a freak storm hit the day they were to approach the summit, Breashears' team turned back while other teams kept climbing. With the summit just within reach, the temptation to go on was enormous, Breashears recalled, especially since the team had already spent weeks on the mountain, passing through all four base camps and acclimatizing their lungs to the thin air. Yet, as Breashears noted, "We had to climb on the mountain's schedule, not ours," an acknowledgment that probably saved his life."

As for Sylvia Montero, the Pfizer SVP of HR, her big break came after her family moved to New York City and her high school guidance counselor, at a stroke, gave her the power to get beyond the "subtle messages" that children internalize about how someone who's poor and a member of a minority "can't compete" with the prosperous and well-born.

What did her guidance counselor do? Urged her to apply to Barnard; whereupon she received a full scholarship.  But by sophomore year she was pregnant, married, and felt she was a "co-ed by day" and living "in a drug-infested tenement" at night, commuting between her two worlds by subway. 

It was then that she decided:  "I chose to actively participate in what happened to me."

Read that again.

Back to Breashears:  Above all, as a leader he both looks for and exemplifies humility.  As to his team:  "I look for talented people who believe in their craft, not those who are looking for praise," he said. "The most important quality is selflessness."  I devoutly hope that "talented people who believe in their craft" describes some of the better lawyers at your firm.  And as for the leader himself?  No grand visions, thank you:  Humility, again. 

"The kind of leader I want wakes up and asks, 'What did I do wrong yesterday, and how can I fix it today?' Your team doesn't need to like you, but they have to trust and respect you," he said. "A leader who puts his interests first is a highly demoralizing force."

Then there are the rare authors who actually have something to say, and today we're looking at Robert Caro, the Pulitzer Prize-winning historian and biographer who talked to Harvard  Business Review about lessons from Lyndon Johnson's leadership style.

Interestingly, Caro not only wrote exhaustive biographies of LBJ, but also of Robert Moses, the famously autocratic czar of New York City public works projects for 44 years, whose mission was to remake the City in his image—and the legacy of whom those of us who live here enjoy, descry, and take for granted every single day.  Caro's blunt in his choice of subjects:

"To use biography [to explain power], of course, you have to pick subjects who understand, and whose lives show they understood, how to acquire power and use it.   I picked two men to write about: first, Robert Moses, because he understood urban political power—how power is used in cities. Robert Moses was never elected to anything in his entire life, but he held power in New York City and State for forty-four years, enough power to shape the city the way he wanted it to be shaped.

"Then I turned to Lyndon Johnson because he understood national political power—understood it better, I think, than any president since Franklin Roosevelt. If you pick men like that, and find out and analyze how they got power and how they used it, you can get closer to an understanding of the true nature of power: how it works in reality—its raw, unadorned essence."

Wait a minute, you're saying:  I thought we were talking about "leadership" here, not about "power." 

Caro thinks that, at the highest level, they're indivisible: "Many people want to be leaders, but very few are leaders in the sense that I mean it: using great power for great purposes."

How, then, did LBJ assimilate power unto himself?  By befriending—and more than befriending—the most powerful people in the institution.  First in the Texas legislature it was Alvin Wirtz, in the US House it was Sam Rayburn, and in the US Senate it was Richard Russell of Georgia, leader of the Southern block.  He became, as he himself described it, a "professional son" to powerful men.  He would flatter, he would go out of his way to "just happen to be" in the Capitol every Saturday when Russell, a bachelor and a lonely soul, would be there, he would tell Russell, a baseball fan, that he loved baseball despite LBJ's having no interest in it whatsoever.

Isn't this sheer manipulation?

Indeed; but LBJ employed these tools to achieve what he envisioned:  Civil Rights (surely his finest hour), the War on Poverty (unwinnable, but his heart was in the right place), Vietnam (a searing, scarring, terrible misadventure of wasted and betrayed blood and treasure).   And Johnson knew how to read people (watch their eyes, don't listen to their words). 

Aspects of this exercise (Caro's exercise, that is) in comprehending power and how leaders wield it are profoundly repellent, but we also find ourselves leaning in, responding to the irresistible magnet of the story of a rise to greatness.   Here's how Caro summarizes what he's up to:

"All my books are about power and about how leaders use power to accomplish things. We're all taught the Lord Acton saying that power corrupts and absolute power corrupts absolutely. But the more time I spend looking into power, the less I feel that is always true.

"What I do feel is invariably correct—what power always does—is reveal. Power reveals. When a leader gets enough power, when he doesn't need anybody anymore—when he's president of the United States or CEO of a major corporation—then we can see how he always wanted to treat people, and we can also see—by watching what he does with his power—what he wanted to accomplish all along."

All of my readers, and all of your partners and colleagues, are, I am confident, benevolent, wise, and possessed of the utmost in generous and humane spirits.

But it doesn't hurt to know how two of the 20th Century's greats got where they were, either.

—Nigel Knowles, Joint CEO of DLA Piper Rudnick Gray Cary, writing in Legal Week.  

This is prelude to Knowles describing the week-long executive education immersion program DLA Piper organized in conjunction with Harvard Business School last October.   It's a ground-breaking program, as is Reed Smith University, and I've written an article to be published soon in a variety of media about "Innovation in Law Firms," citing both DLA Piper's initiative and Reed Smith University.  [Regular readers:  Stay tuned—you'll see it here first.  And non-regular readers:  Here's a reason to become a regular, or subscribe to my monthly newsletter at the very least.]

But back to DLA Piper's post-merger integration issues, and why should we care, with or without Harvard Business School's involvement?

Essentially, Knowles and his colleagues at the top of DLA realized that, while law firms may excel at developing—or at least at throwing out those who don't develop—leadership and business generating skills, we've entered a new era.  It's no longer sufficient to promote the gorilla rainmakers or (conversely) the non-controversial glad-handers to the executive committee. 

Firms that want to play on the national or the multinational stage today need to develop leaders, on purpose.  It does not tend to happen by accident, at least statistically speaking.  And I assume you do not want your firm to be a statistic.   Knowles again:

"One of the major personnel challenges for law firms is identifying and nurturing its potential leaders. The identification is often easy, but turning these talented legal professionals into the corporate management of the future is less straightforward."

The DLA Piper/HBS collaborative retreat lasted a week and ran from 7:30 am to 8:00 pm or later, and included 56 senior people, including the joint chief executives and senior partners from 11 different offices in nine countries.   If nothing else, this demonstrated the firm was putting its money where its mouth was.

• developing strategy and aligning the firm to achieve it;
• professional development (in alignment, to be sure, with the firm's strategy);
• leaders, culture, and managing change;
• and all of the above capped off by and illustrated, made concrete by, business case studies.

My view?

The DLA Piper Rudnick Gray Carey merger is perhaps the most audacious of the last five years, if not longer.  They have an "integration" challenge beyond the scope of what any firms have previously tackled.  Given lawyers' instinctive immune-system response rejecting the foreign antibodies of professional firm management (read:  HBS), one should, by rights, be skeptical.

But I'm actually a believer; I think they'll pull it off, and that they'll set a new bar by doing so.

What's your bet?

Eric Beinhocker, a fellow at the McKinsey Global Institute (a "think tank," in the oddly quaint but apt phrase), is out with what may be one of the most provocative books on economics in several years—though admittedly I haven't even seen a copy yet.  "The Origin of Wealth:  Evolution, Complexity, and the Radical Remaking of Economics," essentially discards the physics-like analogies of classical economic theory, premised on a closed system eternally in search of equilibrium, where change is assumed to be an exogenously generated disruptive shock, for a biology-like analogy of internally-generated evolutionary change and complexity.  As one early reviewer put it:

"[H]e outlines an open, adaptive system with interlocking networks that change organically, reflecting the interaction of technological innovation, social development and business practice. Wealth is created to the degree that this interaction decreases entropy in favor of "fit order" that meets human needs, desires and preferences."

In an excerpt over at HBS' rich Working Knowledge site, Beinhocker explains what applying this template to the exercise of strategy formulation might mean.   To paraphrase, the challenge is how to create strategy "in an unknowable universe."

Strategy formulation is a favorite topic of mine, because I view it as both absolutely indispensable and typically botched—or, to be more diplomatic and probably more precise, misunderstood.  As I've noted, it's not an exercise ex cathedra intended to produce a document for the ages, but rather a continuous discipline of being truly attentive to the marketplace and the larger economic and legal environment, and ensuring that your firm is light enough on its feet to respond to perceived potential opportunities with agility.

What is "the marketplace?"  Actually, there are two that really matter to your firm:  The "supply" marketplace of law school graduates, lateral recruits, and conceivably merger partners; and the "demand" marketplace of clients and industry sectors.  An example from each:  Given that the number of lawyers in the AmLaw 100 has roughly doubled in the past ten years, while the number of graduates from, say, the top 30 law schools is essentially unchanged, what are you going to do differently about recruiting first-year associates?  Or, what does the ascent of the biotech industry mean for your practice group mix?

As far as responding to potential opportunities:  I'm of the view (so, evidently, is Beinhocker) that it's smarter and more effective and safer to place a large number of little bets rather than a few big bets.   As he puts it:

"Rather than thinking of strategy as a single plan built on predictions of the future, we should think of strategy as a portfolio of experiments, a population of competing Business Plans that evolves over time."

Another way of thinking of this "population of competitors" is as a portfolio of options—and I expect, and hope, that Beinhocker's book will be devoured by professional investment and money managers.  

But let's make this concrete, which is exactly what Beinhocker does with a fascinating retrospective analysis of what Microsoft did between 1987 and 1990 as MS-DOS came to the end of its natural technological life-cycle and the next generation of multi-tasking, graphically-oriented Operating Systems were vying for supremacy.

Start simply by recalling that while the Galactic Redmond Empire seems firmly entrenched today, in 1987 Microsoft was a relatively minute $346-million company looking down the barrel of at least three well-funded and hitherto successful competitors:  Apple, with its elegant and very well-received Macintosh; IBM, feverishly working on OS/2; and a consortium of AT&T, Xerox, Hewlett-Packard, and others, pursuing a new flavor of Unix for the desktop PC.

Beinhocker takes over from here (emphasis supplied):

"We can imagine the options that Microsoft faced at this point. Option one: Gates could make an enormous "bet the company" gamble by investing in building a new operating system called Windows and attempt to migrate his base of DOS users to the new standard, ideally before a competitor would reach critical mass with its own system. Option two: He could exit the operating-system part of the market, cede that to his larger, better-funded competitors, and instead focus on applications for which Microsoft's small size and nimbleness might be more of an advantage. Or, option three: He could sell the company or otherwise team up with one of his major competitors. While Microsoft would lose its independence with option three, such a move would probably tip the balance of power in favor of whichever company he chose to partner with.

"All these options would involve big commitments to hard-to-reverse courses of action and involve major risks. The conventional wisdom is that Gates chose option one, and the big bet paid off, enabling Microsoft to continue its dominance of desktop operating systems and spend the next decade fighting antitrust regulators. But that is not actually what happened. What Gates and his team did was much more interesting—they simultaneously pursued six strategic experiments."

In other words, rather than consulting the usual Delphic oracles (McKinsey, to be sure, among them) for the one unitary vision of the future, Microsoft launched a series of  competing business models and watched their adaptive success, reflecting twists and turns in the computing marketplace, until it became apparent that Windows 3.0 had evolved into the most "fit" and deserved prominence.

The temptation from nearly 20 years on is to ask, "How hard was that?", but at the time Microsoft took it on the chin from investment analysts, the business press, and even some of its own baffled employees.  "Can't Gates make up his mind?"  "How can I be competing with a group down the hall?"  "Microsoft has no strategy; it's adrift."

In my experience, the only way to make the strategic exercise real, to give it meaningful traction on the front lines, is precisely to prepare for an array of uncertainties.  Rather than declaring, "It would be great if we could acquire Firm X," learn everything you can about Firm X (and ideally Firm Y and Firm Z as well) so that if it looks as though Firm X would entertain an overture, you have already analyzed and envisioned what that would mean and are in a position to move faster than anyone else.

This Beinhocker story explains what I'm driving at:

"I once worked with a very gruff, pragmatic senior executive who claimed not to believe in strategic planning, saying that it was a bunch of "pointy-headed nonsense." He was also very successful. [...] One day, I saw the advance materials for a strategic planning off-site and noticed that the analyses prepared by this executive and his team were by far the best in the binder.

"The next day, I asked him, given that he had claimed not to believe in strategic planning, why he and his team had put so much effort into the analysis. His reply was, "I don't believe in planning. I do this so that we have prepared minds."

The only trouble with this is that it's hard work.

More than hard work, it requires you to get your senior people together for day-long mano a mano sessions discussing their alternative visions of the future.  Those discussions:

• need to proceed from facts and figures, not just opinions and predispositions;
• and that background material should be assembled and prepared by the senior people; while underlings and consultants can help, the selection and presentation of what's deemed relevant needs to be done by the decision-makers themselves; and lastly
• the ultimate purpose is to learn. It's not to decide on budgets or proposed headcounts; it's to explore, debate, analyze, and ultimately to generate a population of experimental mini-business plans you can unleash into the ecosystem and see which grow and which wither.

After all, it's biology, not physics.

Courtesy of Korn/Ferry and Harvard Business Review, we have some insights.   Yes, they're from corporate-land, not law-land, but since the principles are primarily derived from human nature and not from the specifics of the context, we can apply their learning.

The first thing you need to know is that if your decision-making style does not change, your career will (or should!) stall.    Starting out, one's style needs to be prescriptive, decisive, directive, and command-oriented.  Things need to be done today, if not yesterday, and incremental consensus-building is not the way to go.  But, as the authors say: 

"We found that decision-making profiles do a complete flip over the course of a career: That is, the decision style of a successful CEO is the opposite of a successful first-line supervisor's."

As one rises through the ranks, two simultaneous evolutionary changes should be occurring in your approach to decisions.

In the public, outward-facing mode, you need to become more open, inviting, inquisitive, and inclusive:  "it becomes more about listening than telling, more about understanding than directing." 

But at the same time, in your private, thinking/analytic mode, you need to become more decisive—once the pipeline of information that you've hopefully opened up in public has saturated you with alternatives, creative choices, and

Failing to understand, or to navigate, this transition can cause intense stress.  You need to shift from thinking everything needs to be resolved more or less on the spot to inviting dialogue, input, and disagreement.  They describe the shift as it occurred to "Jill:" 

"We saw the impact of this transition in the case of Jill, a second-level manager for a large petrochemical company. When we initially met Jill, she was a first-line supervisor in a power-generation facility at the company. When we met her again, she had earned an MBA and was managing a department that functioned as a liaison between an operating unit and company headquarters.

"In a casual conversation, Jill told us that she was enjoying the job—now that she had figured things out. At first, she had found her new responsibilities confusing and distressing. But one morning she realized that although she had important things to do that day, none of them had to be resolved immediately. She could take some time, collect information, and seriously consider her choices. This was in sharp contrast with her previous job, where every day things had to be decided and done on the spot. Just recognizing the difference eased the stress considerably and opened Jill's eyes to the change needed in the way she handled decisions."

Do not view this as "soft," intangible, or touchy-feely research.  Failing to adapt appropriately has real consequences.  Indeed, according to our authors, the "bottom 20%" of managers get permanently stuck.

How, then, to assess how you're doing?  I suggest you ask your colleagues and peers for an honest, totally candid, opinion.  Scary?  Then have courage:  The career you save could be your own.

 Courtesy of Harvard Business School's Working Knowledge, we have "Scanning for Threats and Opportunities," which nicely encapsulates the difference between "active" and "passive" scanning of the competitive and marketplace horizon.  The example they take off from involves a medical device company asking itself if emerging drug therapies could take over the market for its devices, but the learning is of wider applicability, to be sure.  This is how they describe passive scanning for information:

"Because most of the data comes from familiar or traditional sources, this mode of scanning tends to reinforce, rather than challenge, prevailing beliefs.  Because these metrics are tightly specified and focused on current operations, they are the antithesis of active scanning. There is no room for exploration. This passive stance narrows the scan and dulls the curiosity. Unexpected and unfamiliar weak signals will probably be lost."

In contrast to passive is active scanning, where one poses a question to oneself (or one's firm) and proceeds to look for answers in whatever one normally comes across:  For example, an ad agency might ask everyone to start reading and viewing things from the perspective of what the impact of Tivo will be on the traditional 30-second ad.

For a law firm, the "active scanning" question might be:  What macroeconomic trends are emerging that suggest practice areas we want to develop in preparation for the next 3-5 years?  For example, who saw private equity and hedge funds coming?  If your firm didn't—especially after the passage of Sarbanes-Oxley in 2002—what were you thinking?

Then there's serendipitous scanning, where you purposefully expose yourself to material you wouldn't see otherwise.  Famously, when Buckminster Fuller was travelling, he would pick up a magazine at the airport bookshop at random and proceed to read it cover-to-cover on the plane, looking for new perspectives on life he was not otherwise exposed to.  This may seem a bit far out for you, but what if you made a point of packing your carry-on with reading material from the bedside tables of your spouse, your kids, and a random selection of your partners (trust me, they'll be flattered you asked!)?

The fundamental point is simple:  You and all of your firm-wide colleagues constitute an enormous collective antenna, a tremendous resource of "listening ability," which you can exploit wisely and well.  Empower people to listen, to "scan," as our HBS friends would have it, on critical issues to your firm.  Ensure they're listened to when they report back.  And it does, in the end, come down to this:

"People must engage in frequent and free dialogue for the necessary connections to occur spontaneously. This, in turn, requires a culture of trust, respect, and curiosity, plus the recognition that information sharing is crucial. Too many companies still operate in a mode where information is shared on a "need-to-know" basis only."

"Need-to-know" sounds like altogether too many law firms I know. 

Think different.

Jonathan Byrnes, a senior lecturer at MIT, with a Ph.D. from Harvard Business School, has a few thoughts on what it takes to become a "master" manager, coincident with the commencement season at HBS and MIT.

Properly, he starts with the historic understanding of a "master."  The progression, you'll recall, is apprentice --> journeyman --> "master."   Apprentices are, well, apprenticed to masters to learn the basics of their trade; when they have advanced sufficiently in skill and expertise, they can leave the master's workshop to journey, plying their trade.  Finally, as they become truly accomplished, they can aspire to produce one or more "masterpieces," an object of superb refinement, which, if the guild deems it worthy, entitles him to open his own house and begin to take in apprentices.

One of the finer points of this system—and a testament to its solid wisdom—is that masters have not only the privilege but the obligation of taking in apprentices, in order to perpetuate and refine the craft.  A closely related privilege, and obligation, is to continually seek to produce yet more "masterpieces," advancing the art of the trade.  Byrnes observes that, touring the great museums of the world today, all we see are these masterpieces, and not the countless hours of toil and training behind them, nor the intrinsic soundness of the system that both enabled and cultivated their creation.

So what has this to do with managing in your firm?

The analogy is, to my mind, spot-on direct.

Managers have two fundamental privileges, and obligations:

• to train, develop, nurture, and coach, the next generation of managers for the firm, who will eventually succeed them; and
• to create managerial "masterpieces," exercises in combining astute competitive and business intelligence with a nuanced appreciation of where client needs intersect with the firm's capabilities, to produce tactical and strategic initiatives that move the firm forward.

An indispensable prerequisite to growth as a manager (or as an apprentice, or a journeyman) is the chance to fail.  (And if failure is bad enough in corporate America, it's positively horrifying in law-land, where we're all perfectionists and all stupendously above average.)  If it's the case, as Byrnes relates of one of his clients, that "It's OK to experiment, but you better not be wrong," how much growth and learning would you expect to find? 

Contrast that with the fertile environment wherein the best idea truly does win:

"Every week, I receive e-mails from former students and readers seeking advice about business problems. These almost always concern difficulties in implementation. The correspondent has figured out a better way to do things, but can't get his or her counterparts and colleagues to accept it.

"Masterly managers, and those trained by them, are experts in implementation because they are oriented toward working through others and are receptive to others' ideas. An organization characterized by master managers is very receptive to change because the managers are conditioned to be open-minded and inquisitive. They are used to trying out ideas on others, and have been taught to view management as a process of give and take, a marketplace of ideas in which real value wins."

The goal, then, is for the "master" manager to be able to work so well through others that he or she can truly focus on the broad challenges and opportunities facing the firm, analyze and discuss them with candor in an atmosphere of trust, and drive the firm farther and farther ahead of its peers.

But first, you need to issue "permission to fail" cards far and wide.

Yesterday the WSJ had precisely such a column on its Op-Ed page under the byline of Henry G. Manne, dean emeritus of the George Mason University School of Law.

It's about behavioral finance and, at least as a "hook" for reeling in the WSJ readership, the argument for legalizing insider trading, expressed thusly at the conclusion of the piece (although that's really not what it's all about:

"We should rethink any current policies based on a view of pricing in which we exclude the best-informed traders and discard the wisdom of the many. For instance, we now have a new and more powerful argument than we had in the past for legalizing most insider or informed trading."

So I've told you what I think the piece is not about; what do I think it is about?

Primarily, the difference in economic analysis between Aggregate and Marginal behavior, and also, which is clearly more germane to readers of "Adam Smith, Esq.," the value of predictive markets.

Aggregate vs. Marginal behavior first. 

Mannes poses the fascinating question why, if "close approximation of the efficient market theory is still the most accurate and useful model of the stock market that we have," it's nonetheless the case that "the market-model claim of rationality often does not comport with actual human behavior."  How, in other words, to square the many many vindications of efficient market theory (the celebrated inability of mutual fund managers to beat the relevant averages over time, for example) with that theory's core assumption that investors behave rationally, when we know by simple cocktail party conversation that such an assumption is laughable?

Attempting to answer this (which, in your author's humble opinion, he doesn't finish doing—but there's a promised second part to the series), Mannes points to this as "containing the start of an answer":

"[I]n F.A. Hayek's classic "The Use of Knowledge in Society" (1945), Hayek (addressing the then-pressing problem of countering socialist doctrine) made the astute observation that centralized or socialist planning can never be economically efficient because it was impossible for a central planner to accumulate all the information needed for correct economic decisions ("correct" in the sense of displaying efficient market allocations of goods). The critical information, he noted, is too scattered in bits and pieces throughout the population ever to be assembled in one person's mind (or computer). Diffused markets, on the other hand, function well because the totality of relevant information, even subjective preferences, can be aggregated through the price mechanism into a correct market valuation.

"This insight of Hayek's has been a mainstay of market theory ever since it was advanced, but it remains merely an observation and a conclusion. It does not detail how new information gets so effectively impacted into the prices of goods and services. In other words, how does this "weighted averaging" get done? And why should we assume that the impact of rational participants would dominate that of irrational ones in markets?"

Mannes' answer is, essentially, to cite the thesis of James Surowiecki's "The Wisdom of Crowds," and its near-cousin, the value of prediction markets.

Why is this germane? 

Because (emphasis supplied):

"The literature on prediction markets makes clear that the more participants in a contest and the better informed they are, the more likely is the weighted average of their guesses to be the correct one. That is true, ironically, even though the additional participants have even less knowledge than the earlier ones. The only requirements for these markets to work well are that the various traders be diverse and that their judgments be independent of one another."

Back to "Adam Smith, Esq.:"  Why would your firm not create internal (or even external—what a concept!) prediction markets in areas such as which practice areas are expected to grow or to contract, where the firm should expand or dial back geographically, and which client industries/groups will be healthier or weaker in five years?

I would love it if you would hire me to make those predictions for you, and I certainly would enjoy walking through the thought process with your firm—but I am humbled by the new learning in economics, Mannes' article included, which instructs us that asking your partners, associates, staff, and even clients, what they "predict" is going to happen may be the most telling exercise of all.

Are you ready?

My friend Rich Gary has an enlightening column in the current issue of Law Firm Inc. in which he addresses "Ten Questions CMO's Must Be Ready to Answer."

If all CMO's came to the table prepared to respond to these as thoughtfully and thoroughly as Rich suggests they should, I suspect the job-tenure half-life of CMO's would immediately double or triple.

Rich seats CMO's squarely at the table.  He insists:  "Don't be afraid to speak up. You're a member of the firm's senior management team, and your opinion should be sought and valued on key issues."  Even if it means telling the managing partner that the firm offers no compelling value to clients! 

Rich also endorses a practice I see spreading, recently, among the more enlightened firms I work with: Client service teams. Client service teams form and re-form on the fly as a client's portfolio of legal needs changes. Your CMO should never miss a client service team meeting.

Most importantly, Rich approaches the CMO's job from a perspective deeply rooted in firm strategy, and the financial and economic realities of its practice areas, its approach to client relations, and even—critically—its partner compensation system.  Not that Rich recommends incorporating the CMO's evaluations of partners into the compensation calculation, but that he clarifies the essential connection between the inputs into setting compensation and the predictable outputs in terms of partner behavior.  Any CMO who does not understand the dynamics at play will be in a poor position to do their job.

Lastly, Rich reminds us that no matter  how professional, dedicated, creative, energetic, and visionary a CMO may be, all is for naught without the solid backing of the partnership:

"You must earn the confidence and respect of the partnership and be able to work with the partners in every office and practice area, whether they actively support the firm's marketing efforts or not. It's impossible to overstate the importance of this responsibility."

Ultimately, managing partners get the C-level executives they deserve.  Those who strengthen and grow their firms are astute at selecting talented people, putting them in fertile soil, and getting out of the way.

Although this is really by way of an update to the immediately preceding post, I think it's worthy of standing on its own because, while it raises essentially the same issue, it approaches it from a sufficiently different perspective that it deserves its own gravity.

A reader who requests anonymity (a request, by the way, that I will universally honor assuming I post the material at all) writes (emphasis supplied):

"Speaking as a junior associate at a mid-sized firm (but with many friends at much larger firms), I think there's another dimension to the issue of associate work-life balance and long-term (or even medium-term) retention that needs to be addressed in order to gain a more complete understanding of how young associate view these issues. Of course many of us are put off by the hours firms expect from us and the difficulty of making partner, but there's also a strong sense, at least among young associates I know, that, all else aside, making partner simply isn't worth it. It's not that my generation is opposed to careers in private practice, it's that we are very much aware of the fact that partners these days tend to work even longer hours than the already hard-working associates.

"Fighting for partnership might be worth it to us if high hours expectations were merely a hazing process through which associates must pass to become a partner (i.e., something akin a medical residency). It also might be worth sticking around to compete in a partnership tournament with long odds if we viewed the brass ring as a prize worth fighting hard for. The problem is that most of us simply don't view BigLaw partnership as worth the price. Sure, it would be nice to make $1 million a year (or more), but if that means getting divorced, never seeing our children, and having no life outside of work, BigLaw won't find many lawyers from my generation interested in fighting for such a "prize." If all we cared about was making as much money as possible, we would have gone into investment banking.

"That said, will firms still be able to find some people willing to pursue partnership under the current model of working as hard as possible to make profits as high as possible? Of course. But they should stop and think about whether those who choose to compete in the tournament (and, therefore, those who ultimately make partner) are really the best of the best, or if they're simply competent masochists willing to put aside their personal lives. Maybe this is exactly what BigLaw wants, because these are precisely the people who will bill the most hours and raise profits ever higher and higher. The clients, however, will eventually catch on and realize that these are not the lawyers they want as partners. Sophisticated corporate clients will figure out not only that the partners of 15 years from now are not necessarily the most talented lawyers capable of producing the highest quality legal work, but also that they are the types of partners most eager to perform unnecessary work for the sake of billing the extra hundred or thousand hours.

"So what can firms do? Create a place for lawyers who want long-term careers in private practice with reasonable hours – and don't relegate them to second-class "of counsel" or "service partner" status within the firm, unless they do not work long enough or flexible enough hours to be responsive to clients when necessary. This will require a reduction in profits per partner, but that's a misleading measure of firms' real profitability that is largely responsible for getting firms into the mess they're in now. Partners who work insane hours should be paid more if their contribution to the bottom line warrants higher pay. That's fine – most people my age who I know would much prefer to make $500,000 and have a life than to make $1.2 million and live at the office. Find a way to make this a real option, and not only will firms retain more associates and clients see a higher quality of legal work, but BigLaw will also go a long way towards addressing the gender gap among partners."

Our correspondent clearly has a point that the "tournament" for partnership resembles, as some have said, "a pie-eating contest where the prize is more pie," and that partners have never worked as hard as they do today—by most measures, every bit as hard as stand-out associates.

I also know, from my own experience as an associate at two BigLaw New York firms, that not all partners served as, shall we say, estimable role models one desperately aspired to emulate.  I presume law is scarcely alone in this suffering from this reality.

But the even more serious question our friend poses for the profession is the one about the quality of lawyers who self-select to remain in, and ultimately win, the partnership tournament.  Are they, as he colorfully puts it, "simply competent masochists?"   How would an Elihu Root, a John J. McCloy, or a Lloyd Cutler fare in today's tournament environment? 

Are we, in other words, knee-capping our future statesmen (and -women) of the bar in their youth?  Or is the passion that the Roots, McCloys, and Cutlers of the world bring to the profession oblivious to the clock, and is our friend's lament about "insane hours" utterly beside the point to the pillars of the profession?

The issue du jour (or should that be du decade?) is retaining associates who find the time demands and general stress of large law firm life insupportable.  Angel says it's "one-dimensional" to expect that munificent pay alone will be sufficient to stop attrition—and Linklaters provides emergency childcare and other benefits, including a concierge who can "meet the plumber" or take delivery of your new washing machine.

This is surely progress from what Angel calls the firm's "almost Dickensian" state of a few decades ago, but clearly he does not believe it's enough:

"The firm has set up working groups in Hong Kong, New York, Paris, Frankfurt and London to try to grapple with a question preoccupying much of the industry: "What is a law firm going to look like in 10 years' time?"

"Some critics of the profession also say the big firms are still failing to do enough to attract and cater for members of ethnic minorities and women, even though 60 per cent of newly qualified solicitors are female."

"People work very, very long hours," acknowledged David Childs, managing partner at Clifford Chance. "There is an issue: is this model sustainable in the long term?"

Then, we have the story of an Allen & Overy associate who left at age 30 to go inhouse, first at Deutsche Bank and now at Bank of America because his father had died young and the "excessive hours" kept him from "looking after myself a little bit more."

He puts the challenge to law firms bluntly:  Despite their booming profitability, they "need to work out a new deal for all the lawyers below partner level." 

I'll confess I have no glib answers to this; it's a structural difficulty created by client expectations for responsiveness, combined with the ineluctable financial arithmetic of the billable hour, colliding with women's prime biological and sociocultural child-bearing years, and with everyone's desire that life consist of more than the four walls of the office.  Even Caitlin Griffiths, the always-voluble and always-opinionated editor of The Lawyer, is at a loss for a snappy quote, despite her belief that:

"the profession is in danger of "eating itself". "I think people are quite freaked by that," she said, "because they have no answer to it.""

Ironically, I was asked just yesterday to help write a whitepaper explaining how a particular technology could make lawyers more "responsive" by increasing their ability to be reached 24/7. 

Until the day when senior leaders of our profession are prepared to take a stand—and a fairly united one it would have to be—and insist to clients that there are values other than and superior to "responsiveness," such as thoughtfulness, reflection, creativity, and distilled insight, both Tony Angel's and David Childs' worry about the sustainability of the current model are exceedingly well-placed.

I came away from both of these conversations more convinced than ever of the wisdom of the observation (David Maister has made it, although others may deserve equal credit), that Strategy means saying no.

These two firms know how to say no.  Has your firm said no lately?

Today, June 5, we celebrate the 283rd Birthday of Adam Smith, born in Kirkcaldy (pronounced kir-kawdy), Scotland, about 10 miles north of Edinburgh across the Firth of Forth. 

Actually, the precise date of his birth is unrecorded and unknown, but we do know that he was baptized on June 5, so that has become his "received" birthday, as it were.

You may celebrate—or not, but that would be a grievous oversight—in your own way, but I choose today to remark upon the publication of a new book about his life and thoughts, reviewed in The Telegraph. (Yes, for those of you who've followed or will follow the links, the name of the book is different in the UK than the US; and if anyone from the publishing industry can tell me why "Adam Smith and the Pursuit of Perfect Liberty" is preferred across the pond to "The Authentic Adam Smith:  His Life & Times" on this side, I'd be fascinated to hear from you.  Being completely promiscuous when it comes to all things Adam Smith, I'd buy the book were it titled, "What Adam Smith's Dog Had for Breakfast," but I digress.)

Amazon has this to say:

"The Scottish philosopher Adam Smith (1723-1790) has been adopted by neoconservatives as the ideological father of unregulated business and small government. Politicians such as Margaret Thatcher and Ronald Reagan promoted Smith's famous 1776 book, An Inquiry into the Nature and Causes of the Wealth of Nations, as the bible of laissez- faire economics. In this vigorous, crisp, and accessible book, James Buchan refutes much of what modern politicians and economists claim about Adam Smith and shows that, in fact, Smith transcends modern political categories."

Although I might not have put it in such a Manichean fashion (neoconservative = Thatcher/Reagan = unregulated business = laissez-faire), the publicist has a point, and it's the key insight into Adam Smith's thinking that I've always subscribed to:  He does, indeed, "transcend" categorization.

The Telegraph review makes the same point far more nicely:

"James Buchan's short, sharp biography makes a powerful case for thinking that, for Smith, these divisions [in his own thinking] were creatively enabling rather than self-canceling: they were what gave his writing its characteristic sense of balance and poise."

By and large, the Telegraph is laudatory, which is altogether fitting and proper for this June 5, 2006.

I leave you, gentle reader, with these two observations on this site's progenitor:  The reviewer describes Adam Smith's style as "modest, generous and urbane, with the occasional hint of wistfulness or acid," and sums up the book as "the perfect celebration of a man who did so much to alter modern economic thinking, and claimed towards the end of his life: "I meant to have done more." "

Happy Birthday.

"You write about lockstep and eat-what-you-kill, but you don't say a word about "completely black box" compensation. There are some firms in which partners are told neither how much their colleagues are being paid nor the precise basis for their own pay.

"Is that a clever way to avoid jealousies in a law firm with offices in many cities that must necessarily pay differential wages in different locations? Or, in the alternative, is it insanity? Or something in between?"

Our reader does indeed cite a fascinating case which falls under neither model I discussed (although my suspicion is that it's not as rare as one might think, so it does bear discussion).

Having been trained as a securities lawyer, where Disclosure is God, I used to think that you could never have too much transparency and that the model our reader cites is indeed "insanity."   (A non-lawyer friend once asked me if I could summarize the securities laws in 25 words or less—this was, blessedly, before Sarbanes-Oxley, a revolting, pestilential abomination grafted like a tertiary-stage malignancy onto the Delphic wording and structure of the '33 and '34 Acts—and my response was that the securities laws required only this:  "You can do anything, so long as you properly disclose it.")

But the more I see of how people actually behave, the more inclined I am to the view that a little opacity isn't such a bad thing, and that in fact the Total Ignorance position is internally consistent and probably has some merit.

Why?

Essentially, the more widely dispersed the firm (geographically, and "virtually," as in having a multitude of practice areas), the more difficult it is to make meaningful comparisons between what lawyers in different cities in different countries doing different kinds of law "should" or "deserve" to earn. Let's face it; Bologna is never going to be as lucrative as NYC, London, or Hong Kong, nor is real estate transactional work ever going to be as rich as project finance or private equity.

This in turn means that unless the firm imposes a Procrustean and extremely unstable across-the-board uniformity, disparities in the profitability of work done will be more or less reflected in disparities in the compensation of those doing the work.

Don't we all know that, and aren't we all adults?  What would be so bad about conceding, and even enumerating the extent to which, that's the case?  The problem is the all-too-human one which Warren Buffett has fingered:  "The only one of the seven deadly sins more powerful than greed is envy." 

In other words, it's difficult to have your nose rubbed in the fact that you're not at the top of the remuneration pecking-order—no matter how well-paid you are in absolute terms. Accordingly, I'm coming around to the view that it's defensible, even smart.

But there's another dimension entirely:  We've been discussing compensation schemes as if they were the only way to get people to behave in desirable ways, when of course nothing could be further from the truth, as David Maister nicely points out in a comment he left on my original piece:

"What lawyers continue to misunderstand is that reward schemes do a good job of making sure that rewards go the right people, but are close-to-irrelevant in *creating* performance. Too many law firm debates are about different ways to pay people of different "inherent characteristics" (the superstar, the mobile lateral, the developer of people) as if their contribution is unchangeable, their personalities and their preferences being fixed.

"What this debate ignores is the possibility of getting people to adapt their behaviors through guiding, supporting, helping, coaching, cajoling, inspiring, confronting and a multitude of other highly interpersonal activities called MANAGING people. It is because law firms don't want to do this that they fall back on trying to do the impossible: trying to influence behavior through the reward system, which, since it will, and must inevitably, remain a blunt, unsophisticated instrument, will always be inadequate to the task. The issue for law firms is NOT what kind of reward system shall we have: it's are we prepared to see this place managed in any other way besides through the reward system? Is there another way to get people to do things other than to say "Do it and I'll pay you!"

Characteristically, David is absolutely right.  We all know we do things for a million different reasons other than money, including boosting our self-esteem, seeking peer recognition, wanting to be a team player, for the pursuit of intellectual curiosity, enhancing our professional reputation, impressing a client, etc., ad infinitum.

But I'm also reading "Eat What You Kill:  The Fall of a Wall Street Lawyer," Milton Regan's gripping, harrowing, better-than-any-novel, painstaking reconstruction of how John Gellene, a rising-star bankruptcy partner at Milbank in the mid-1990's (racking up 3,100 and 3,000-hour years consistently), a Phi Beta Kappa and summa cum laude graduate of Georgetown and cum laude graduate of Harvard Law, neglected to disclose what should have been an easy-to-overcome conflict of interest to the US Bankruptcy Court and ended up in prison, a convicted felon.

While Regan has only begun to make this inexplicable personal and professional blow-up understandable, it's clear that contributing mightily to the pressures Gellene felt subject to was Milbank's transformation in the late 1980's from the quintessential lockstep-compensation, WASP white-shoe firm joined at the hip to the Rockefeller family and Chase Bank, to a firm of entrepreneurs bent on growth and diversification.

This transformation may have been—indeed, I would be among the first to suggest it probably was—one of Milbank's finest hours, but change has consequences, and, occasionally, tragically exposes a personality type incapable of adapting to the transition.

But back to lockstep vs. EWYK vs. the black box:   The bottom line for me is that compensation across the partnership over time must be perceived as fair.  People will push and jostle and beef about this that and the other small adjustment, but ask them if it's fundamentally fair in the long run:  If that acid test can be passed, the system works.

Early last week I interviewed Eric Sivin, a founder and principal of Sivin Tobin Associates, a legal search and recruiting firm based here in New York.  (And yes, that is their ad that has been running in the right-hand column of my site for a couple of months now—but this piece is not motivated by or part of any commercial considerations whatsoever; it's an effort to better understand the evolution of legal search from the perspective of someone who's been doing it for over 30 years.)

Eric is on the Board of Directors and Treasurer of The National Association of Legal Search Consultants (NALSC), which describes itself as "the only organization representing the legal search profession."   With 173 member firms in the US, Canada, and overseas, NALSC developed and adopted (nearly twenty years ago) a "Code of Ethics", which members must subscribe to.

Eric did not go straight into legal search, but, after Brandeis and NYU Law School, was a commercial litigator for 10 years, starting at Kronish Lieb.  An active intercollegiate debater and national semi-finalist in moot court competition, Eric hoped that being a litigator would allow him to use his skills of rational persuasion in real-life disputes but, as many of us also discovered for ourselves, the life of a litigator in a large New York firm rarely involves actually trying a lot of cases.

When Eric embarked on his career in legal recruiting, the industry was in its infancy.  At the time, there were only seven or eight legal search firms in New York, and very few if any elsewhere; the only work was placing second to fifth-year associates.  Lateral partner hiring was nonexistent.  Even firms that used recruiters for associate hiring did so "holding their noses."

Aside from social customs, also constraining lateral partner recruitment was the relative information vacuum (always an obstacle to markets' clearing efficiently).  The era was pre-The American Lawyer, pre- public information on law firms. 

Eric vividly recalls learning of an opening at a prestigious New York firm for a mid-level litigation associate and calling to ask if he could be of assistance.  When invited to help, he asked about expected salary levels, type of work, and representative clients:  Each and every one of those was "proprietary" and would not be disclosed outside the firm! 

Also, in those pre-Internet days, learning who actually worked at which firm could be like solving Rubik's cube, and the annual publication of Martindale-Hubbell was a red-letter day.  But even Martindale did not reveal all; in many cases, associates were not listed with their firm but only as individual attorneys admitted to practice in New York, in the back of the book.  One would then have to deduce from the office address (say, 919 Third Avenue) what firm they might be with (Skadden).

What a difference a few decades make.

Q.:  When, I asked, did lateral partner recruiting start to become a material part of the business?  A.:  It started to surface in the late '80's, was promptly kiboshed by the recession of the early '90's, and didn't really come into its own until the mid-90's. 

Q.:  Which practice specialties are hot now and which aren't?  A.:  Nothing is hotter than private equity, but securities litigation has been strong for a long time.  Various aspects of corporate law, especially financial services, mutual funds,  '40 Act and hedge fund experts are hot.  Real estate and tax work are just bubbling along, but specialists in tax aspects of real estate investment trusts will always find a home.  M&A is healthy, but not red-hot; and bankruptcy is actually cold, except for firms looking to staff up in the trough in anticipation of the next crest.  And IP, I asked?  IP is very hot; "it's nothing less than the present and future of economic growth," and it's an area where many major firms feel they do not have all the people they need; in other words, the "roll-up" of the IP boutiques by the AmLaw 100 has not completely played itself out.

Q.:  International?  A.:  Very strong; everyone is talking about the far east and China, "even if no one is making any money there."  And the demise of Coudert Brothers had everyone running around to seize opportunities.

Q.:  I assume some firms do lateral recruiting relatively well and others relatively poorly; what are the differences?  A.:  Absolutely!  The key distinctions are:

• Firms poor at lateral recruiting often really don't know exactly what they want or why they want it; they'll take people because their specialty is in fashion or because they come across someone unhappy, but with a nice book of business.  The problem is if there's no strategic fit, which "becomes self-evident during the process as the candidate receives mixed messages."
• Firms also vary in sheer managerial competence; some simply run the search process more effectively than others.  Searches extending out over five or six months or more "are not atypical; inordinate amounts of time go by and people lose interest."
• Some firms don't trust recruiters enough to give them all the information they need to accurately characterize a situation or to keep a candidate informed of where they stand.  A common situation is that of a firm marching almost up to the altar with Candidate 1 only to begin conversations with Candidate 2; and the most popular, if less-than-candid, method of dealing with this is simply to stop returning calls asking where Candidate 1 stands.  "These things happen all the time."
• Conversely, the best searches are when the recruiter and the firm actually work together, collaboratively, to define the position and the opportunity, and to map out what the profile of viable candidates would look like.

Q.:  Post-search, as well, I assume different firms handle the integration better or worse?  A.:  "There are certainly some firms that do this very well.  In the majority of cases, happily, it works out even if the integration is less than ideal—'good enough' does the trick."  Still, in most cases integration is "not done cohesively."  There are many reasons for this; lawyers are busy, they have the attitude that they're "professionals" and disdain "being business-like," there's not a corporate reporting structure or anyone to enforce follow-through on integration.  "Most firms could do a far far better job."

And, considering the amount invested in a search—from what can be an inordinate amount of otherwise-billable hours, to the recruiter's fee, to the reality of their being a three to six-month breaking-in period without any fees being collected—the lack of attention to effective integration is astonishing.

Q.:  Is there activity not on the lawyer side, but on the "C-suite" side, recruiting senior law firm management?  A.:  It's not something Sivin Tobin has chosen to do; we prefer to focus.  But yes, that's an increasingly active area, and firms are getting more sophisticated about the level of professionalism they need in their management ranks.

Q.:  Are dedicated legal search firms such as yours experiencing competition from the Korn-Ferry's and Heidrick & Struggles' of the world?  A.:  Sure, those firms are more interested than ever; let's face it, there's more money at stake.  But Eric doesn't believe they can compete effectively unless they change their fundamental, underlying business model.   They strongly prefer, if they do not simply insist, on doing exclusively retained and not contingency searches.  "You basically cannot do legal search for law firms strictly on a retained basis."  Why?  Because "without the constant contact and flow of information  on who's who, what they're thinking, how they'd respond to a hypothetical scenario, and generally just taking people's temperature," a recruiter isn't in a position to conduct an effective search.  Doing contingent searches ensures that the recruiter is in the marketplace talking to potential future candidates all the time.

Q.:  And the future of recruiting?  A.:  It's getting more and more professional all the time.  "When I started, I think I was the only recruiter who'd really practiced as an attorney," and now that background is extremely common.

So what is the economic function of legal recruiting?  Recall that I mentioned the difficulty of markets' "clearing" efficiently in an information vacuum.  The converse of that is that the more accurate, timely, comprehensive, and germane is the information at one's fingertips, the more one actually has a fighting chance of deciding wisely. 

Law firms are not in the business of keeping their finger on the pulse of everyone who might potentially join them some day, but when strategy and opportunity intersect, they need a hasty education on who might be receptive to an overture, how their practice has developed, and whether there might be cultural alignment between the firm and the potential lateral.   Good recruiters provide that essential information brokering function. 

I've remarked before that the dynamics of lateral partner mobility becoming a reality "changed everything," and recruiters are indispensable to that marketplace functioning well.  As such, the Eric Sivin's of the world have a vital place in the ecosystem we all inhabit.

In Trust-Based Selling, Charles Green (who co-authored The Trusted Advisor with David Maister), titles Chapter 7 (pp. 70—74), "Sell by Doing, Not by Telling," and relates the following story:

The "Chief Counsel of a Fortune 50 company" needed to hire outside counsel for a critical project.  Starting with a dozen firms, they narrowed the selection to three finalists, each of whom they invited in for a 90-minute presentation:  "The first two were very good; they had solid expertise, industry knowledge, and had done their homework.  Then came firm three."

They said:  "Look, we only have 90 minutes with you.  We can do our standard capabilities presentation—which we're happy to do, by the way—or we can try something different.  We'd like to suggest that we get started on the project with you right here, right now.  After 85 minutes, we'll stop, and you'll have first-hand experience of what it's actually like to work with us."

Agreeing to the exercise, what do you suppose the corporate team found? 

Competence, to be sure:  That much was "quickly clear."  But here's the valuable, differentiating part:

"As we worked with them, we got to know them better; instead of giving answers to questions, we had a dialogue. [...]  They came to listen and to work, and to show their smarts in real time, on our issues, not to report on theirs.  You just felt you could trust them."

What firm three was up to (and yes, for the record, they won the assignment hands-down) was capitalizing on the fact that buying a complex service involves two steps, which are too often confused:  First is screening and only then is selection. 

Screening is fairly mechanical, and done at a distance:  It's establishing that your firm has the "table stakes" to play.  Here, reputation within the industry, a personal recommendation from a well-placed individual, or even a highly informative and intuitively navigable website may be all you need to get to the next round.

But once you're in front of the potential client, you're into selection, which operates under different psychological rules:  They already assume you can get the job done from a technical and professional perspective, now it's time for you to demonstrate ("doing not telling") how you would apply your skills to the potential client's specific issues. 

Until you reach the selection stage, your expertise is, to be sure, germane, but it's also abstract.  "German engineering" is one thing; a test drive is another.  Offer the potential client a test drive.  Demonstrate that you're willing to stick your neck out, take a risk that they might not like what you can actually do, and take a chance on collaboration.  Make the abstract tangible.

We are all tempted, in offering our services, to over-rate the importance of expertise.  After all, we've all made tremendous investments in training, professional development, mastery of our micro-practice specialties, and so on.  And we've been rewarded for our deep grasp of technical fundamentals.

Reinforcing our temptation to focus on degrees, credentials, and past triumphs is, often, the potential client themselves, who—even if they're not sure how to evaluate the answers—will often ask technical questions because they think they "should," that it's the responsible way to make a decision.

But it's really about trust, about rapport, about establishing a relationship grounded in jointly exploring solutions to the issues at hand.  And the quality of your performance in that context is not any thing you can assert; it's something you can only display.

So next time, be firm three.  What do you have to be afraid of?

From the Journal of Economic Education (hat tip to "Truth on the Market") comes the first study I'm familiar with examining whether the choice of undergraduate major has any effect on a lawyer's career earnings.  And guess what?  If you major in economics, it helps; majoring in anything else makes no difference.

Here's the abstract, in full (emphasis supplied):

"Using nationally representative data, the authors examine the effects of preprofessional education on the earnings of lawyers. They specify and estimate a statistical earnings function on the basis of well-established theory and principles. Along with standard control variables, categorical variables are included to represent graduate degrees in addition to the law degree and an assortment of undergraduate major fields. Holding a Ph.D. or M.B.A. degree, with the law degree, is associated with significantly higher earnings in some sectors. Lawyers with undergraduate training in economics earn more than other lawyers, ceteris paribus, and economics is the only undergraduate field associated with earnings that differ significantly. The available evidence supports the hypothesis that economics training increases a lawyer’s human capital compared with other undergraduate majors."

That still doesn't mean Adam Smith would become a lawyer were he alive today; but I know in my heart that he would have an active and energetic blog.