The "Global 100" is out, a joint production of The American Lawyer and LegalWeek, which of course are now conjoined under the umbrella of IncisiveMedia. 

It ranks the largest firms through three filters:

• Highest gross revenue for the most recently concluded fiscal year
• Most lawyers (or FTE's), and
• Of firms which place on both of the first two lists, a third list of highest profits per partner

Compiling the first two "Top 100" lists results in a total of 113 firms being covered. 

The numbers are impressive:  15 firms are over $US1-billion in total revenue.  The median revenue of the 100 is $543,750,000 and the average is $674,485,000.   I have been writing for years here at "Adam Smith, Esq." that the time is long past not to treat our firms as sizable enterprises (with all that implies in terms of professional management and even the dreaded "corporate-ization"), but these numbers drive home the point as never before. 

The next observation to make is the continuing domination of the lists by firms headquartered in the former British Empire.  I wrote about this last year, when it was 98 out of 100, and this year it's only marginally different:  97 out of 100.

• 75 American
• 17 UK
• 4 Australian
• 1 Canadian
• And the non-Brits: France's  Fidal (88), Spain's Garrigues (96), and the Netherlands' Loyens & Loeff (98).

The reason?  I believe it's fairly obvious:  Anglo-Saxon common law has a particular genius for innovation.  Imagine trying to structure a complex multi-jurisdictional project financing vehicle under French Civil Law.  I'm no expert, but I don't think it could be done.  Not only does the common law presume that the wishes of voluntarily transacting private parties should be honored, every time such a transaction is challenged and either enforced or overturned, we have future guidance for our behavior. 

The enduring story of note, however, is the powerful rise of the UK's Magic Circle.

For several years recently there had been a running argument about whether the Magic Circle firms' investment in building out global office networks was a brilliant recognition of what the economic repercussions of the end of the Cold War meant or, conversely, a desperate and doomed attempt to escape their intrinsically limited domestic market.  (The end of the Cold War has precisely what to do with this, you might be asking?  The complete discrediting of centralized, socialist planning economies, is what, opening previously-skeptical countries to the marvels, or at least the power, of capitalism.   Our former Federal Reserve chairman has a few words to say on this topic.) 

Famously, Partha Bose argued in the November 2005 American Lawyer that the elite British firms faced stagnation, or worse, as US firms "cherry-picked" their most lucrative corporate and M&A practices, and as work on debt and equity issues in the EU became commoditized ("The Tragic Circle").    Today, needing to revise his history, Bose says "A lot of the Magic Circle firms' increase in profitability and new growth has to do with Gordon Brown," referring to the rise in the value of sterling during Brown's tenure as chancellor of the exchequer. "The big jump in profits has been driven by the pound." 

I invite you to scour his 2005 article for references to the weakness or strength of the pound; I did so without success.

For my part, I favored the "globalization imperative" side of the debate, albeit not as strongly as I should have in retrospect.  When the Fortune 500 and the FTSE 100 are in pursuit of sizable cross-border transactions, there's no substitute for law firms with a serious, local, on-the-ground presence capable of matching the scale of the client's proposed deal.   There were reasons" to be skeptical, two in particular.  Both have been disproven.

• "The elite New York firms used to say that the big U.K. firms are so big that they can't get their profits up," says Tony Williams of the consultancy Jomati, who is a former managing partner of Clifford Chance. "Well, they can and they have. The last couple of years have shown that size is not an impediment to profitability."
  
• The other reservation was that building out a network of offices in places other than New York and London where premium rates can be charged would, per se, be dilutive of profitability.  (Managing partners have said that to me, point blank.)   But in reality it's more complex than that. 
  Sure, if your local offices are doing purely local work, you'll be collecting local-market rates and be doomed to local-market profitability. 
  But by contrast if your local offices are deployed as team members on global deals, clients are insensitive to the implicit blend of local rates and, in fact, will pay a premium for the complexity of the deal.

In a profile of how Tony Angel has transformed Linklaters, this very point becomes crystal clear.  (The article is by Michael Goldhaber and is in the October 2007 American Lawyer.) One of his avowed goals is to re-orient the firm towards cross-border work and to increase the revenues from such deals.   Three years ago Tony began tracking the proportion of billings tied to more than one country (emphasis mine):

"Over the course of last year the firm advised its targeted global clients from an average of 20 offices, across an average of 16 practice areas. More global, Angel has found, means more profitable. For every extra office involved, the effective billing rate rises, because clients demand fewer discounts and agree to more premium fees for cross-border deals. 'Number of offices is a proxy for complexity.' If a matter is too small, simple, and domestic, Angel sniffs."

Now, you don't achieve hard goals like this without some direction from the top, which has predictably alienated a few.  The chief complaint is that partners have sacrificed autonomy in their ability to pursue clients of their choosing.  And some people value that above what could result from the discipline  Tony has instilled:  "Says another refugee at a major U.S. firm: 'By the numbers, I made a bad decision. But I did the right thing. I enjoy my work. I can pursue whatever client I want, and no one will stop me. I admire Tony and his model works. But he made the place into a big machine.'"

But Tony is unapologetic and offers one of my favorite phrases in defense:  "'Strategy is not saying yes to everything,' he says. 'Strategy means saying no. If we're going to be a global law firm, there are some things that we must stop doing.'"

A great profile, and a fabulous story.  But it begs the big question:  Have all the trains left the station?  Is it too late to emulate the Magic Circle and establish a truly global footprint?

Some U.S. firms departed alongside the Magic Circle, of course:  Baker & McKenzie, DLA, Jones Day, Latham, Sidley, White & Case among them.  Yes, each of these firms of course has done "globalization" very much in its own way, but this is not a piece about the virtues and demerits of the paths each of those firms has chosen—that's for another day.  Another—very sizable—cohort of American firms have serious, and admirable, international presences, albeit on a scale smaller than the exploded diasporas of some of the firms I mentioned. 

I'm asking a different question:  If your firm does not have a credible three-continent international presence today, is it too late?

My answer is:  If you're in a senior position and well into your career, it may well be too late for you to see it.

With vision, tenacity, and discipline, it's never "too late" in an absolute sense.   If you doubt this, look at how Toyota (including of course Lexus) has transformed itself over the past 40 years.  Then again, how many Toyota's are there?

As I've written before, it has (at least) the following defects:

• It's extraordinarily manipulable, with especially toxic consequences for firms whose approach is to hack away at the denominator while taking few or no steps to grow the numerator.
• Its ascension in the constellation of financial measurements to the one star that outshines all others owes more, I believe, to its inherent sexiness quotient than to its intrinsic merit as a metric that reflects strong or sustainable performance or growth.
• And its unintended consequences have been dire.

Moreover, most of you seem to agree with me.  When I asked you point-blank whether PEP was a proper measure of success, you rejected it by a more than 2-to-1 margin.  Indeed, the only option that amounted to wholesale endorsement ("Yes; I believe it's highly accurate and highly informative") garnered just over 1% of votes, while "At one point it was informative, but it's outlived its usefulness" captured  18% and "Absolutely not...the Emperor has no clothes" took another 45%.

That said, it's unhelpful and feckless to mount an assault on an incumbent (be it in politics or financial accounting) without nominating an alternative, so let me throw out a candidate for consideration.

Or, actually, not just yet.

I want to hold my fire on nominating my favorite candidate to first discuss an enlightening McKinsey piece, "The new metrics of corporate performance:  profits per employee."   If you think that "profits per employee" should be translated in law firm land into "profits per lawyer" and that profits per lawyer is dangerously close to PPP, you're exactly right.  Which is why the McKinsey piece deserves examination.

They of course start from the premise that our traditional GAAP methods grew up in and still reflect to this day the assumption that the world is made up of manufacturing firms ramping up widget production and bending metal:

"Let’s get right to the point: companies focus far too much on measuring returns on invested capital (ROIC) rather than on measuring the contributions made by their talented people. The vast majority of companies still gauge their performance using systems that measure internal financial results—systems based on metrics that don’t take sufficient notice of the real engines of wealth creation today: the knowledge, relationships, reputations, and other intangibles created by talented people and represented by investments in such activities as R&D, marketing, and training.

"Increasingly, companies create wealth by converting these “raw” intangibles into the institutional skills, patents, brands, software, customer bases, intellectual capital, and networks that raise profit per employee and ROIC."

And they follow with a fabulous statistic.  If you make the rough and ready assumption that the "intangible capital" of a company is its market capitalization minus its book value, the intangible value of the world's 150 largest companies in 2005 totaled $7.5-trillion, vs. $800-billion 20 years earlier in 1985.

We may thumb our sophisticated noses at the down and dirty, obsolete assumptions of GAAP, but when it comes to driving decision-making, we are probably more in GAAP's thrall than we would care to admit.  One of the most powerful behavior-modification force fields GAAP exerts is that we amortize capital investments but we expense intangible investments.  Thus:  Buy a new desk, a new computer, or build out a new office?  Painlessly amortized.  Pay a partner shadow points to mentor associates, or send senior lawyers to executive education courses?  Direct hit to the bottom line.

Now, neither you nor I in our lifetimes can change GAAP.  But McKinsey recommends this:

"To boost the potential for wealth creation, strategically minded executives must embrace a radical idea: changing financial-performance metrics to focus on returns on talent rather than returns on capital alone. This shift in perspective would have far-reaching implications—for measuring performance, for evaluating executives, even for the way analysts measure corporate value. Only if executives begin to look at performance in this new way will they change internal measurements of performance and thus motivate managers to make better economic decisions, particularly about spending on intangibles."

In corporate land, if the highest level of overall  profits is the goal, but "profits per employee" is the interim metric, you can drive profitability either by improving productivity per employee and/or by hiring more employees. Microsoft takes the first approach, Wal-Mart takes the second.  Thus:

This charts profit per employee on the vertical axis (in $thousands) vs. employee headcount on the horizontal axis (in thousands) and shows, for example at the extremes, that NTT DoCoMo generates about $225,000 in profit for each of its 30,000 employees, while Wal-Mart generates about $6,200 in profit from each of its 1.7-million employees. 

McKinsey goes on to examine overlap among the largest 150 global firms between:

• Net income and market capitalization:
  • The finding is that 17 of the top 30 firms on each measure overlap
• Total income and market capitalization per employee
  • The finding is again that 17 (a slightly different 17) of the top 30 firms on each measure are on both measures.

An interesting intellectual excursion?  I think so.  We've learned something about the value of talent as opposed to the value of bricks and mortar.

But if I don't like PPP, and if "profits per employee" --> "profits per lawyer" --> "profits per partner," then what do I like better?

Stay tuned.

So it's probably incumbent on us to offer, briefly, our thoughts on the front-page story this morning, "Hard Case:  Job Market Wanes for US Lawyers," reporting that for the great majority of law school graduates unable to land jobs with BigLaw, the prospects are bleak.  Consider:

"A slack in demand appears to be part of the problem. The legal sector, after more than tripling in inflation-adjusted growth between 1970 and 1987, has grown at an average annual inflation-adjusted rate of 1.2% since 1988, or less than half as fast as the broader economy."

And there's more bad news to spread around:

• New-JD output is growing:  In 2005-2006, 43,883 JD's were awarded, up nearly 16% from 37,909 in 2001-2002.
• There are more ABA-accredited US law schools:  196 today, up 11% since  1995.
• Student loan overhangs are growing, now averaging about $55,000 for graduates of public law schools and $85,000 for private school grads.
• For a variety of reasons (some arguably laudable, such as tort reform), solo and small-firm lawyer income has been declining in real terms for a decade or more.
• According to ABA data, there was one lawyer for every 572 Americans in 1971 but one for every 264 people by 2000.

The WSJ's Law Blog also has a companion story, and the overall tenor of the comments is a schizophrenic mix of jubilation and gratitude that the story is finally being told, contrasted with some genuine tales of disillusion and even misery.  Read them at your peril.

But to me the real story is that there's a BigLaw market and there's a non-BigLaw market.  They are two separate markets, bifurcated, that do not speak to one another.  More precisely, candidates for the first vs. the second local maximum on the curve below are drawn from entirely separate cohorts.

This is from the Empirical Legal Studies site (courtesy of my friend Prof. Bill Henderson) and shows the distribution of 22,665 salaries of full-time employed law school graduates as tracked by NALP.  The first local maximum represents about 22% of all reported salaries, in the $40-$50,000 range; the second local maximum reflects another 17% of reported salaries in the $135-$145,000 range (remember, this is 2006 data, so it predates the $160K bump.)

That is not to say law schools couldn’t do a better job of actually disclosing what happens to their graduates, which is what the front-page WSJ article expends a lot of ink on.

That, in fact, is in line with the philosophy of the US securities laws (which I love, in case you didn't know—at least pre-Sarbanes-Oxley):  “You can do anything—so long as you disclose it.”

The annual "Adam Smith, Esq." Reader Survey is actively in progress, and I sincerely urge those of you who haven't taken the two to three minutes it takes to complete it to do so right now. 

The point of the survey?  Two-fold:  I want to learn more about you, so as to better tailor the content of the site to your interests, and you get to tell me both what recommendations you'd offer me and, perhaps more importantly from your perspective, what the most pressing/important strategic, business, or financial issue facing you or your firm is.  Let your voice be heard; take the survey now.

Meanwhile, an interim report on what we've heard on precisely that last question, which reads verbatim thus:  "The most pressing/frustrating strategic, financial, or business issue facing me/my firm is."  Herewith follows a distillation of what you've been telling me.

Associate retention is a tremendous challenge for many of you.  Comments include (all exact quotes):

• associate compensation:  lockstep or merit?
• the position of associates in BigLaw, of course
• insane associate salaries
• and many many others who just said "associate retention" and left it at that.

This has been an issue I've devoted extensive—but perhaps still insufficient—attention to on "Adam Smith, Esq.," and I'll vow to do even more about it.  Fair warning:  I have no snappy answers on this one.  To a large extent we are facing a collision between an irresistible force and an immovable object whose constituent components are attitudinal, generational, and financial, and which is perhaps not susceptible of an enduring resolution absent a re-examination of underlying business models.   In short, this has been long in gestation and may be long in solution.

The War for Talent  is an ongoing challenge, perhaps more pressing now than ever.  Comments included "Finding and attracting top-level talent to a small boutique firm," and "attracting talent at the salary levels our firm pays."

Knowledge Management was mentioned by a large number of you, as something that firms have to do well but that very few in fact are managing to accomplish.  Technology and upgrades of same were a close second in this area.

Business development and marketing are perennial points of pain, and "some things never change."   The only fault with the bromide that "some things never change" is that in this case it's false:  This is getting worse.   Here are some more direct quotes:

• Business Development. Almost all law firm management issues are ultimately directed toward growing the top line (associate retention, training, marketing, strategy, etc.) It would be good to hear about this at both the individual level (aside from the standard cliches of "write articles, give speeches, network, and ask for business from all your friends," what other business development strategies do partners use) and at the firm level (what steps have been taken by national firms such as Latham and Kirkland to become more prominent and self-sustaining; how do firms organize and manage their practices and partners to maximize business opportunity).
• Continual pressure on fees and use of procurement.
• The pressure from clients for ever more efficient, lower price, better quality services compounded by the impact of procurement officers who don't understand and show little inclination to want to learn.

Just last week I learned of a Fortune 100 company whose panel for evaluating outside counsel consists of three people:  An associate general counsel and—two purchasing managers.  This is indeed only getting worse, and I'll try to bring back tales from the field that may be helpful to more of you.

The Hollow Middle haunts some of you. Faithful readers of "Adam Smith, Esq." will know what the hollow middle refers to, but for those who don't a quick refresher.  An increasingly prevalent industry structure sees firms migrating both to the high end, high-value, premium quality level, and to the no-frills, low-end, commodity level, with little comfortable territory remaining inbetween.   For example:

• Cars:  Toyota, Honda, Nissan, Chevy vs. Lexus, Audi, Mercedes, BMW, Ferrari, Porsche
• All wine/beer/spirits:  Budweiser vs. micro-brews, generic vodka vs. single-malt Scotch, magnum generic "chardonnay" vs. subscriber-only "Screaming Eagle"
• Financial services:  No-fee free checking for life  from Wachovia vs. private wealth management from US Trust.

And you get the idea.  My hypothesis is that our market is going in the same direction.  Here are some verbatim comments reflecting that same point of view:

• What happens to mid-sized firms in Europe - will they disappear over the next ten to fifteen years as a result of the inflow of US and UK firms? What should our US strategy be, with many former sources of referrals now setting up shop next door? And if mid-tier firms are to stay, what will their role be?
• The polarization of the market (the shrinking middle with more and more work being classified commodity/low fee or bet-the-company/high fee
• "Mid-Market Mush" or "why bother with a platform that's mediocre?"  Our practice group is very strong and we're not sure whether we should be a boutique or stay in the firm.

Since this is already a theme I have been sounding for some time, expect to see more coverage of it here as its impact spreads.

Finally, we have what emerged as the most important concern of yours by far—head and shoulders above anything else I've mentioned until now.  And that is:

Management.   Law firms are intrinsically complex to manage, and you are painfully aware of that.  (Indeed, the truth of that observation might be said to be one of the foundational reasons why "Adam Smith, Esq." exists.)   The theme that emerges is that lawyers just plain are not predisposed to cooperating in the management imperative.  

Aside from seeming to have been inoculated with some vaccine that provides lifelong resistance to management in general, the presumed structure of rewards for partners today—divvying up all the profits at the end of the year and leaving the firm's balance sheet essentially back at zero —works strongly against investment, a long-term outlook, or a strategic perspective. 

Here are some of your comments and worries:

• Ineffective management. Rainmakers are not always the best communicators or managers
• 1. Lack of firm leadership; 2. Partner apathy in "running a business" beyond simply collecting a bonus; 3. Lack of strategic planning
• Persuading lawyers to understand that hiring a consultant is not (always) an admission of failure, but can be a way of creating / seizing an opportunity
• Transition from older partners to younger partners and division of income amongst the same.
• Continuing to find ways to motivate all of our partners and to have them recognize we're all in a state of continuous change.
• Firms competing in a global economy. Firms realizing they have to act more like corporate America
• The lack of real understanding as to how law firm organisations need to change to get the best out of people; the impact of globalisation on law firms.
  [And finally, perhaps my favorite:]
• Balancing the desire to grow as a firm versus the desire not to change. Our firm is looking to grow, and most everyone supports the notion, so long as nothing changes for the individual.

Much food for thought.  One implication is clear: I shall never lack for topics to discuss here on "Adam Smith, Esq." 

Your comments have been remarkably candid, serious-minded, insightful, and just plain human. 

As I've written before in various contexts, I believe our profession is currently undergoing a sea change in the structure and composition of the industry that will transform it in ways that will endure for essentially the remaining working careers of most of us. 

You have, if anything, confirmed the strains, pressures, and uncertainties of being in the center of this rapid transition.   The settled certainties of our parents' world are indeed long gone.

Having some inexplicable instincts alerting me to this coming vortex many years ago, I continue to find it fascinating beyond measure.   Please continue to share your thoughts with me, either through the Survey or, more directly, by email.

Over at LegalWeek, the big buzz this past week was all about the results of the annual survey they conduct of US firms operating in London which showed that 47% of respondents would consider a UK merger, up from 39% a year ago and just 29% in 2005.

The story was also picked up by their sister site law.com as well as footnoted in The New York Times' "DealBook." 

So, is it a story or isn't it?

Looking at the actual results, you see a lot of firms responding to the point-blank question "Would you consider a merger with a UK firm?" not with the presumed yes or no but coyly or demurely with "Undisclosed," "Unlikely," "Possibly," and so forth.  No word from LegalWeek how these Delphic responses were tabulated.

Be that as it may, there are some indisputable realities about the world in 2007:

"CMS Cameron McKenna managing partner Dick Tyler commented: “We have had more courtesy calls from US firms in the last six to nine months than the last 18 put together. There is a critical strength you have to reach and realistically if you want to have a strong corporate practice, you need employment, pensions, etc as support.”

And:

"Abrahams Russell recruitment consultant Greg Abrahams said: “This is driven by London becoming arguably the leading financial centre in the world and the closing gap between UK and US profitability. With the dollar/sterling exchange rate as it stands, there is more demand on the US side for a merger than on the UK side.”"

This also tells a true tale of the cultural obstacles to be overcome before a hypothetical deal could happen:

"Legal snobbery remains one of the biggest hurdles facing any transatlantic merger. It was snobbery and mutual suspicion on both sides that derailed the negotiations between Ashurst and Fried Frank Harris Shriver & Jacobson a few years ago. The same cultural problems dogged the Clifford Chance(CC) tie-up with Rogers & Wells.

On this side of the Atlantic, CC was accused of aiming too low. But more than a few big billers at Rogers & Wells had precisely the same attitude towards CC – understandably, some might argue, given the magic circle firm’s virtually non-existent profile in the US at the time."

Rather than put undue stock in ex cathedra statements of open-ness towards entertaining a merger, I'd prefer to focus on what US firms are actually doing in London, and one thing they're doing in increasing numbers if taking on trainees (those would be first-year associates, to you):  57% do so this year vs. 51% last year, and some firms with larger London presences (notably White & Case, the single largest firm there by lawyer headcount in the City) has been taking on nearly 40 per year for the past decade. 

Why does this matter?

Simple:  It's a sign of a genuine and enduring commitment not just to the City—where high-value transactional work is the celebrity model everyone wants to be seen in the company of—but to building a lasting and mature practice with the full range of capabilities required to be taken seriously as a local player and not just a wealthy visitor. 

There's another dimension:   Taking on trainees implies adoption of a different time-frame than the more conventional US approach of picking off lateral talent to ramp up quickly—always a two-edged sword in any event.  It's a far longer-term perspective, as it means investing in a talent-development pipeline that may not see serious results for 5,  10, or 15 years.

And that's why it tells you something:  US firms are, at long last, evidently deadly serious about being players in London in the long haul.

If you're like me, you have to wonder why it took so long for US firms to hear this wake-up call. Those who got there early (just for example, Cleary in 1971, White & Case soon after) have established leads it will be difficult to match. I have no blinding insight into why US firms ignored the patently obvious London marketplace for so many decades, but now that they are beginning to realize that even the world's richest domestic legal marketplace is only a one-legged stool on which to build a serious 21st-Century practice, they may be ruing their shortsightedness. At least they came by it honestly.

But this brings us back to whether the "US Ready to Merge!" soundbite is accurate, and I think not.  I certainly think there's far far less to it than the credulous might believe.  Why?

I still  perceive a marketplace not quite ready to "clear," or, perhaps more precisely stated, a marketplace where potential players have still-too-widely divergent perceptions of value, fit, and cultural congruence.   Does this make sense?  At a rational, objective, and economic level, none whatsoever.  If a merger would generate all but undeniable benefits for both parties, perception should matter not.  Yet we all know it does, sometimes to the point of obstinance, and a refusal to countenance even deals that, on  paper,  make tremendous sense.

Analogous is what we have seen in the past, and may see again, in the US residential housing market:  When prices fall drastically in a  particular region or metropolitan area, people who bought at the top demonstrate almost insurmountable aversion to selling their homes for less than they paid for them.   Economists (and I) will tell you this makes no sense.  The house is worth whatever it's worth, and what you happened to have paid for it is utterly immaterial. 

But as we can read in today's NYT, what economists believe and how people behave are two different things.  Consider this study from about 15 years ago:

"From 1989 to 1992, prices in Boston fell sharply, with condominium prices dropping as much as 40 percent. For a great many of those who bought condominiums during that period, selling could be done only at a significant loss. And, basically, many people refused to sell.

[A] study, “Loss Aversion and Seller Behavior: Evidence From the Housing Market,” [which] appeared in The Quarterly Journal of Economics in November 2001, gathered data on almost 6,000 Boston condominium listings from 1991 to 1997 and showed that for essentially identical condominiums, people who had bought at the peak and were facing a loss generally listed their properties for significantly more than those who had bought at a time when prices were lower.

"Properties listed above the market price just sat there. In the Boston market over all, sellers listed their properties for an average of 35 percent above the expected sale price, and less than 30 percent of the properties sold in fewer than 180 days. In other words, much of the market went into a deep freeze as many people held out for market prices that no one would reasonably pay."

Back to the US/UK law firm merger market:  What is the lesson? 

The lesson is that economic realities ought to trump sentimental notions such as not wanting to sell your house for less than you paid.  But they don't always.  People kid themselves, and do things like putting their house on the market at a price so high that it will sit there for a year or more, ignored or rejected.  If you really want to sell your house, price it at the market.   You won't have long to wait.

My suspicion is that the US/UK merger market is closer to Boston condominium-owners in 1992 than to an active, vibrant, and clear-eyed market.   Lots of people may say they want to dance with the pretty girls, but they're sitting on their hands.

Now, my question:  Had you been me, what would you have wanted to tell these students?  Let me know.

Regular readers will know that I recently became Regional Director of the Managing Partners' Forum for their first US foray, here in New York.   This is how they describe their mission here:

"The MPF is the world's leading association of managing partners from across the spectrum of professional service firms. In New York we have created a local organisation that provides top-calibre educational and networking opportunities for all its members. By introducing thought-provoking and cutting-edge best practices that are transportable from one sector to another, we are dedicated to enhancing leadership and the status of the management team."

Our first event is now scheduled for Thursday, October 18th, at the New York offices of White & Case (1155 Avenue of the Americas @ 43rd Street), from 8:00 am to 10:00 am.   You can read more about it here, but they describe the highlights thus:

"Following a series of successful events in New York over the past year organised by the MPF International Panel, we are delighted to announce the inaugural session of MPF New York, kindly hosted by White & Case.

Whilst MPF events are generally member only, this inaugural event is open to all professional firm leaders at no cost .

Bruce MacEwen and Robert Millard of the MPF Research Committee will be joined by a leading managing partner to present the findings of a groundbreaking MPF survey on the strategy setting process at professional services firms worldwide. The leaders of over 100 firms responded to the 78 question survey, covering:

• Attitudes towards strategic planning
• Responsibility for formulating strategy
• Sources of data used when formulating strategy
• Tools used in formulating strategy
• Assessment of opportunities and threats facing firms
• Frequency, duration and time horizons when formulating strategy
• Overall satisfaction with the outcome

This is a unique opportunity for NY-based leaders to listen to the findings, and then share insights, case studies and war stories relevant to the survey with their peers."

For all of you in the New York area who could potentially make it to the offices of White & Case, it would be my great pleasure to meet you or to see you again.  Please check your calendar, and get in touch with me if you have any questions.

It's from The Wall Street  Journal's article about a "Power Couple" developing some of the key downtown Beijing real estate in preparation for the 2008 Olympics.  He (Pan Shiyi) is a media legend in China for having risen from being a farmer so poor he had to beg for food while she (Zhang Xin) is a Cambridge-economics educated former Goldman Sachs investment banker from Hong Kong and New York.

The WSJ  story is about how they do, or do not, pull strings to gain access to prime Beijing real estate, how their marriage works, how they do, or do not, network, why Mr. Pan keeps a very popular blog about China's real estate industry, why he and not she is the face of the company, how they operate under the rule of law and without undue government interference, and who has the better business judgment.

But none of that relates to our simple text.

The text follows, and while its call-out is "5 Tips from Zhang Xin for Doing Business in China," I commend it to you as more along the lines of 5 tips for life:

1. Believe you are the most privileged person for being in the right place, at the right time.
2. Enjoy competition; there is always plenty.
3. Enjoy a healthy dose of insecurity; always try harder.
4. Never think too much about wealth; it's a means for advancing civilization.
5. Go to bed early.

The slightly unconventional phraseology helps, I find.

Further affiant sayeth not.

Booz Allen & Hamilton's strategy + business  has just such an article, The New Complete Marketer. 

Given that we're temporarily in the land of consumers, let me first provide their bullet points and then attempt to translate them into our world.  Based on Booz Allen's research, five themes emerged identifying characteristics of the best CMOs. (OK, they actually list six themes, but one of them, about partnering with a multi-media savvy ad agency, is a bit off point for us.) Quoting, they:

• Put the consumer at the heart of marketing
• Make marketing accountable
• Embrace the challenges of new media
• Recognize the new organizational imperative
• Remain adaptable

Swell.  Now let's interpret what this means for law firms.

Clients first

Focusing on clients means viewing the service your firm provides from their perspective and ensuring it's aligned with what they really anticipate, need, and expect from a premier law firm.  At Procter & Gamble, it means getting into laundry rooms at customers' homes and "really, really hitting on that [the information gleaned]," says Jim Stengel, P&G Global Marketing Officer.  At FedEx it means that a key part of marketing's job is “speaking up on the customer's behalf and ensuring that what we have to say is taken seriously,” according to Mike Glenn, executive vice president of market development and corporate communications.

This isn't necessarily easy.  Even at P&G, once again known as a nimble organization after a decade or so in the doldrums of comfortable market leadership, "it took nearly a decade to reposition to reposition the client at the heart of our business."

But we're starting.  More and more firms—particularly the ones that have a tradition of innovative approaches to their business—are launching "client relationship" programs, distinct from conventional marketing efforts. 

Accountable Marketing

The ROI of marketing has long been a thorny issue and I confidently predict it will remain so for at least the rest of the careers of most of you reading this. Booz Allen found that 90% of its marketing respondents identified it as "a major challenge, and the leading factor, by more than a two-to-one margin, that brings marketers under increased pressure from management."

So there is no magic bullet.

But that's not to say judgment cannot be exercised and inferences drawn.  I suggest you approach evaluating marketing's impact in two ways:  First, are prospective clients more predisposed towards your firm than they seem to have been in the past?  And second, how do existing clients evaluate their satisfaction with your service?

The first—prospects' predisposition—speaks to your firm's overall reputation in the marketplace, which is or ought to be influenced by your overall marketing efforts.  Recently The Wall Street Journal had a rather devastating article (devastating, at least, if you live in Detroit) detailing that fully 54% of US car buyers would not consider a domestic car.  (22% would not consider an import, and the remainder would consider both.)    Detroit finally realizes, as Rick Wagoner of GM put it, that "just building a great product and putting it out there isn't enough." 

If you're building a great product and no one is paying attention, you need marketing to change perceptions.

Second, how existing clients view your firm is less the purview of marketing than, I suggest, client relations.  That's why this emerging specialty should be on your radar if it's not already.

The Challenges of New Media

In consumer packaged goods land, new media can mean SMS'ing from your cellphone the secret code that changes the Times Square billboard display.

That's not what we're talking about.

But we are talking about finding your clients where they really are—be it on the online home page of The Wall Street Journal or in the shuttle lounges at Reagan National, LaGuardia, and Boston Logan.   And, increasingly, it could be communicating with them through the medium of a firm-sponsored blog on issues of specific interest to them.  If you try this, my advice is:

• Keep it highly focused:  Inbound project finance to China, for example, not "your corporate practice."
• Edit it with a very light touch.  It must have a tone of voice, a true character, and not be a PR or jargon-laden mouthpiece.  Hypocrisy will be detected in a heartbeat.
• Encourage feedback and even push-back; freely acknowledge corrections; respond promptly to inquiries.

Does all of this sound high-maintenance?  Well, yes, it is; but the potential connections you make can be invaluable.  Just don't go into it underestimating the demands for regular maintenance and feeding of the beast going forward.

Organizational Imperatives

Primarily, this means that marketing can no longer be an island.  To paraphrase Richard Nixon about Keynesians, "we're all marketers now."  If marketing is just viewed as "help with the RFP" or "get closer to the client" support, you're wasting their time and talents and you should face the fact that you probably in your heart of hearts don't believe in any of this and just want to be left alone to practice law. 

That's a fine and worthy choice.  Just don't expect to build, or sustain, a great firm down that path.

So what does it mean to "embed" marketing in the firm?

Booz Allen probably describes it best (emphasis supplied):

"Marketing does much better when it's incorporated into the greater business, say these thought-leading CMOs [from P&G, Yahoo, and Foster's beer]. It can drive growth more quickly if it is fully integrated with the different functions, and it can do so in a way that previous CMOs never realized was possible. For a CMO to be fully effective, all of senior management must have clarity about the marketing mission. The high degree of turnover in marketing leadership — and, indeed, among the subjects interviewed in this book — demonstrates the fragility of that shared understanding. "

Remain Adaptable

It's a truism that the market environment is ceaselessly changing and our firms must adapt to it—just ask a private equity hotshot how the world changed over this past summer in the wake of the subprime meltdown's spreading fear, uncertainty, and doubt throughout worldwide credit markets.  But that type of adaptation is fundamentally uninteresting:  It's reactive and dictated by external events.

The interesting type of adaptability is that we initiate from within our firms, sensing the beginnings of a shift in the market winds, being attuned to clients' emerging needs, or—better yet—to needs they haven't even been able to articulate.

Is it realistic, or even desirable, for your marketing or client relationship people to have a voice in charting the course of the services your firm provides?

I believe that, if you think those folks truly understand your clients' desires for service (and if they don't understand, we need to have a different conversation), then  you'd be crazy not to take advantage of that perspective.  This example, of the evolution of P&G's famous Pampers brand, may seem beside the point to law firms, but I believe there's a serious message about the discipline of drilling down from a superficial, appearances-mostly, view of what clients want to a far more fundamental understanding of what they're truly concerned about, what motivates them to action, and how you can demonstrate that you profoundly "get it":

"Several years ago, Procter & Gamble’s disposable diaper division was organized around the science of fluid absorption. “We had an entire R&D organization focused on fluid absorption, its speed, [its effect on] skin health, and so on,” explains Jim Stengel. The most important question on the table for P&G’s diaper scientists was, How can we make diapers stay drier longer? Yet under the tutelage of marketing leaders like Stengel, the company realized that the primary value it offered to parents wasn’t technological — it wasn’t limited to dryness or containment. Consumers were looking to Procter & Gamble for improvements in the overall development and health of babies. “That creates all sorts of new needs,” he says. “Babies wear a diaper 24/7 for almost three years…. But when you ask, ‘How do we know we’re better for a baby’s development than our competitors?’ — that means your competitive set changes, your market share changes, what you’re looking for in your equity changes.” The R&D lab and marketing team had been close before; now they became inseparable as they tackled innovative approaches to diaper fit and feel. And with a question on the table about baby development, the brand began a new round of market growth."

I leave the analogies to your practice and your clients to your own insight into their industries and the strategic, financial, and marketplace challenges they're facing.  

But if nothing else, you should take away this lesson:  Your firm does not provide "collateralized debt obligation" structures, or "employment litigation defense" or "executive compensation counsel."   

If you're good, you provide insight into the evolving landscape of your clients' businesses, and the legal architecture—always informed by strategy—best suited to your clients' posture tomorrow.

For you faithful readers who've been with "Adam Smith, Esq." for at least a year, you will know that with the fall season comes the annual "Adam Smith, Esq." Reader Survey.  For those of you who've discovered "Adam Smith, Esq." in the past year, this is your chance!

The survey will be open for about a month (yes, I'll remind you again), and I sincerely urge all of you to take two to three minutes to fill it out.  Why?

• One lucky survey respondent will win a $200 Amex Gift Check (sign up at the completion of the survey).
• If you haven't already, you can subscribe to my monthly newsletter (again, at completion of the survey).  The newsletter:
  • is free
  • contains material you will not see on this site, and
  • I guarantee the confidentiality of your name and email address—I will not sell, rent, or share your information under any circumstances.
• As you know, "Adam Smith, Esq." is free, so I rely on the kindness of advertisers to help pay the way, and the Reader Survey helps me ensure that any sponsors I might entertain for the site are at least of potential interest to you.

So take a couple of minutes to do me this small favor. Again, all your information will be kept strictly confidential.

Thanks in advance.

Bruce

So observes McKinsey in The evolving role of the CMO, but I suggest if you substitute "managing partner and executive committee" for "CEO and board members"  you'd have an accurate description of the law firm landscape in this precinct at the moment.

While the half-life of CMOs at law firms had been notoriously short, a glimmer of improvement appeared to be on the horizon in the last few years as firms became more comfortable with the marketing function, and as CMOs imported from other industries got their sea legs and began to understand how to apply their own form of professional discipline to our idiosyncratic industry. 

This "meeting of the minds" between senior firm management and CMOs has so far been a two-way street, with CMOs in law firms acclimatizing themselves to the law firm environment, and executive committees realizing marketing is an indispensable component of a high-performing firm.

Now, let's up the volume.

Two trends that are playing out in the consumer sector (as McKinsey reports) are finding their analogs or mirror images in law-firm land.  The first trend is the increasing reliance of consumers on the Internet to research everything from cars to electronics to prescription drugs online before making a purchase.  And "research" online, need I remind you, includes unvarnished opinions from untraditional sources as well as consumer manufacturing and packaged goods' companies' classic push marketing efforts.  Your firm's reputation is no longer yours to control.  (Well, it never really was, but the velocity of potential commentary has increased dramatically.)

The second trend is even more germane to our industry:  One of the most powerful components of fallout from increased access to information is to accelerate the trend—seen across a myriad of industries—towards a bifurcated industrial structure, with a low end and a high end, but very little middle.   As McKinsey puts it:

"But the change in consumer buying habits is broader. The proliferation of distribution touch points and the more rapid growth of the low and high ends of the market at the expense of the middle are forcing marketers to take low-cost, time-saving, “facts-only” sales approaches and, at the same time, higher-value, more service-oriented approaches."

To paraphrase, clients' law firm selection process has changed.  You can offer them two value propositions:  The "low-cost, time-saving," direct, commodity approach, or the "higher-value, more service-oriented" track.   Beware being neither.

But to get back to marketing:  What does the increasing availability of information, from traditional and unconventional sources, mean for a law firm trying to manage its reputation? 

Traditionally, there has been a divide between marketing, focused on customers; public relations, targeting the press; and, where needed, regulatory affairs, targeting state or other regulatory bodies with jurisdiction over a firm or influence over its activities.  And, traditionally, these functions reported to different people or were independent in how they acted and didn't necessarily communicate about or coordinate their efforts.

This must change.  Increasingly, all intersect with each other and require an integrated response.

Where, you may be asking right about now, are the partners in all of this?

They're at the heart of it. 

First, by embodying and exemplifying the principles, reputation, and values of the firm, and projecting those characteristics every hour of the day with every client and prospect, every associate, staff member, and potential lateral.

Second, by being the living, breathing manifestation of the firm as you strive to win new business and to cement connections with current clients.   The firm can spend itself blue in the face on marketing efforts, but, if the partners cannot deliver the professional, intellectual, and empathetic human connections required to persuade a client to entrust an engagement to the firm, all is for naught.

And what can the firm chair or managing partner and the senior firm leadership do to advance the marketing cause?

• Make sure you truly and deeply understand how clients and prospects view your firm.  The image you're trying to project may not accord with the perception being received.  Understand what influencers, traditional and otherwise, may be saying about your firm, and bring them to the table.  It perhaps cannot be said too often that the primary task of firm leadership is to communicate—to internal and external constituencies.
  
• Ensure the CMO is connected to the people who matter within your firm.  Make sure the CMO is included whenever senior firm leadership comes together.  After all, they can't project a progressive and accurate image of your firm unless they're getting today's news.
  
• Lastly and most importantly, think through the marketing effort with the CMO.  As McKinsey puts it, be a "thought partner."  If you truly want your marketing organization to mirror the excellence of your firm, your CMO—and more importantly, the audiences your marketing department is addressing—deserve no less.

Which is why it's instructive, and a bit of a closet relief, to look back at an article like Some Principles of Knowledge Management, published over ten years ago (fall 1996) in Booz-Allen's "strategy+business."    Assuming one can get one's mind past the archaicisms (the "World Wide Web" appears in the third paragraph), many of the ten principles enunciated remain true—for better and worse—today.

Let's take a quick tour back through the time machine.

1.  KM is expensive (but so is stupidity).

Did you know that McKinsey's objective is to spend 10% of its revenues on developing and managing intellectual capital?   It may sound a truism today to say that knowledge is what we sell, but how many years (decades?) did it take American industry to learn that quality was not an expense—it was a feature?  Ignorance and forgetting are costly in the same way that poor quality products and services are costly.

Last month I heard the keynote at ILTA 2007, delivered by Captain Jim Lovell, commander of the poxed Apollo 13 moon mission.  Aside from telling the enthralling tale of nearly a week's worth of nonstop improvisation by Houston Mission Control and the crew, using systems for purposes they were never designed for and relying on such high-tech tools as duct tape and an old sock to maintain their air supply, he dropped an aside that has stuck with me.   Noting the tremendous majesty of the three-stage Saturn V rocket launching them on their way to the moon, he remarked that, "It was a far far better launch vehicle than the shuttle:  More reliable, more powerful, more flexible, and even a smoother ride.   But you know what?  NASA couldn't build a Saturn V today.  We've forgotten how."

2.  KM requires both people and technology.

I can't resist, so permit me to start with this quote from the article:

"Computers that think are almost here," a Business Week article recently announced, adding that "the ultimate goal of artificial intelligence--human-like reasoning--is within reach."

And Brazil is, and always will be, the economy of the next decade. 

We all know that computers are superb at capturing, copying, and distributing information.  Just ask the RIAA.  But people are unmatched, and probably will be as far as the eye can see, at synthesizing unstructured knowledge.  As our KM tools within firms become more sophisticated, we've realized that one of the key functions has to be what the techies call "expertise locators," meaning the system has to be smart enough to point us towards our partners and colleagues who actually know something about what we're trying to research.  The system, in other words, has to have built in to it a function you want to use when the system fails.

3.  KM is highly political.

This flows directly from the observation that knowledge is power, to which I would only add that in a law firm, knowledge can be revenue.  It doesn't get more political than that (in the wrong sort of environment, I mean, which of course is not remotely the case at your firm.)

The other dimension to the "political" component of KM is the economic one of free-riding.  Why should I contribute to a knowledge base when, by hypothesis, the only material I can add is stuff I already know—which does me precisely no good.

4.  KM requires knowledge managers.

The Brits, of course, have known this for a long time, in the form of "professional support lawyers," and I'm not sure what has taken us so long to admit they have a point.  Interestingly, the author reports that even as of 1996 several companies had committed to establishing the post of Chief Knowledge Officer, and they're name brand companies:  Booz-Allen & Hamilton, McKinsey, Andersen Consulting, Ernst & Young, Price Waterhouse, Hewlett Packard, and A.T. Kearney. 

5.  KM benefits more from maps than models, markets than hierarchies.

This I take as the author's rather indirect way of saying (correctly) that one cannot anticipate in advance the rivers, streams, and byways through which knowledge will flow and it's best not to try to straitjacket it into fixed categories in advance.   Models and hierarchies tend to be brittle, whereas maps and markets are open-ended, flexible, and capable of evolution and even radical change.  One of my favorite examples of this is the trusty old Dewey Decimal System where the "200's" are devoted to religion. 

And of course, it is wildly Christianity-centric.  (A Scots Presbyterian, I can say this.)  201 through 289 are all related to Christianity (e.g., #232,"Jesus Christ and his family," and #254 "Parish government & administration").   Not until #290 do we reach "Other and comparative religions," and "Islam & religions originating in it" was deemed to have plenty of running room as it was assigned #297 all to itself.

6.  Sharing and using knowledge are often unnatural acts.

This may be my favorite—and the author wasn't even discussing lawyers.  (His case study was Hewlett Packard.)   I can't really improve on his summary of the problem here, so I'll let his words speak for themselves:

"If my knowledge is a valuable resource, why should I share it? If my job is to create knowledge, why should I put my job at risk by using your knowledge instead of mine?  We sometimes act surprised when knowledge is not shared or used, but we would be better off assuming that the natural tendency is to hoard our own knowledge and look suspiciously on knowledge that comes from others. To enter our knowledge into a system and to seek out knowledge from others is not only threatening, but also requires much effort."

7.  KM means improving knowledge work processes.

If this sounds a little too Delphic, recall that it's a business school professor talking, but let's try to unpack his meaning for a moment.   Essentially, he's saying that knowledge in firms is not created in a vacuum; it's created for a  purpose (drafting the brief, setting forth the terms of the acquisition, specifying covenants in a securitization indenture).  In corporations, it's things like market research, product design and development, and order configuration.

His point is that KM will be improved if the flow of "knowledge work processes" is improved.  Does the first-year associate take a stab at the first draft of the brief, or the third-year?  Who does edit #1?  Edit #2?  When does it go to the client?  These actually are business processes, and you're performing them today.  You might pause and give a moment's thought to whether they're optimal or whether they're "because we've always done it that way."

8.  Access to knowledge is only the beginning.

Libraries are ubiquitous, but they're not crowded.  (Have you looked at your firm's library lately? I predict it's almost empty.)

What's needed is what my friend John Alber calls "actionable knowledge;" knowledge you can use this very minute.  This isn't an academic exercise, after all; the goal is to get the work product out the door, having it reflect the impeccable quality your firm aspires to.

9.  KM never ends.

Despite the risk this principle runs of sounding slightly revolting, I'll just allude back to our Dewey Decimal System example and leave it at that.  Knowledge is—assuming  you're any good—a moving target, with ever increasing ambition in terms of scope, subtlety, and complexity.

Did you ever think back to something you did 10 or 20 years ago and ask yourself how you could possibly have ever been so young and dumb?   That's the point.

10.  KM requires a knowledge contract

I take issue with this.  It's irrelevant, and, as they say in the military, "OBE" (overtaken by events).  What the author was referring to, or fearing, was the issue of whether the organization, the individual, or the client "owns" knowledge, and he fears that a proliferation of policies will be required to specify what is whose.  He even offers this somewhat snarky remark:  "Perhaps the greatest problem with increased KM is the increased population of lawyers it will engender. Intellectual property law is already the fastest-growing legal field, and it will only grow faster."

Where does this leave us, back from our tour in the time machine?

Many of the challenges of KM are, indeed, timeless, lying, as they do, at the intersection of human nature, competitive dynamics, and the pressures of client service.  Our technological tools have surely improved, by orders of magnitude, and our cultural predisposition to acknowledging the value of KM to our firms and our own individual careers has also surely improved, albeit not by orders of magnitude.

KM remains essential to us because knowledge is what we sell.  It remains problematic because computers can't do it alone (come on, admit it, you wish they could, don't you?), and because the qualities that distinguish the competent journeyman from the counselor extraordinaire are ineffable. 

Here's hoping they always will be.

Update, 11 September:  A reader from the UK, who has spent his career in knowledge management at name-brand firms, writes:

As ever Bruce a good article and some of the issues in KM are timeless.

However I believe that in a few years time in-house legal PSL's may well become a dying breed. Over in the UK - I understand that a lot of the PSL recruiting is being done by the likes of Lexis-Nexis and Butterworths as they are steadily looking to do on line precedents for the law firms.

From my experience they aren't there yet but in 2-4 years they will be. I think PSL's will want to go and work there - maybe for a sense of a proper career structure - but also for work life balance which we hear so much about.I think that David Jabbari at A & O's comments on PSLs and them developing a career structure but also getting more involved in Business Development will be the way for most of the major London law firms to go rather than just as legal researchers.

I still also believe that law firms don't fully understand knowledge management and are looking for an IT solution as much as possible so that they don't have to deal with the people based issues.

They also I think want closure and have something solved and put to bed - they don't want it to be an on going process - so maybe that is why they dislike KM.

Sharing knowledge is an unnatural act - but as I have mentioned before people do share knowledge for a variety of reasons - but primarily in my view they do it based on reciprocal altruism - or as I call it the Godfather approach -i.e.they expect the person who has received the knowledge to return it at some time in the future when asked for it.

They also need to look at the way that they appraise their staff - although they may say that they appraise people on a range of issues - effectively and this is borne out by my own research the culture of the firm usually drives it to have its lawyers appraised on how many billable hours they achieved and that they didn't have too many black marks against their name.

A lot of partners are not very good at being coaches of growth and learning - but perhaps the short term view that a lot of partners have by being rated on their PEP figures in a league table doesn't help to look to developing the future.

I'd also like to add that I think that good knowledge sharing in a firm can also help a firm to innovate. I spoke about this at a conference in April about the barriers that firms put up that stop knowledge sharing are the ones that also are a barrier to innovation.

I thank readers for writing most sincerely; do not think this remotely smacks of a throw-away line.  Indeed, reader feedback is one of the most professionally rewarding aspects of life here at "Adam Smith, Esq."  So if any of you have had a thought and hesitated or sat on it without writing me, "snap out of it."  (Yes, the immortal line delivered by Cher in Moonstruck.)

Update: 13 September.

Another regular reader from the UK writes:

I have been mulling over your article on KM for the past few days, but was brought up short by the comment you added from a reader yesterday.

One of my current projects is to take a long hard look at our PSL group. Not because there is a perception that they are not useful, but because they, like everyone else in the firm, need to deliver better value year on year. The firm's expectations are not constant. The PSL role here will, I think, be different in 18 months time, just as the roles of associates and partners have already altered to fit the needs of more demanding clients in a tighter market. However, I think it is a leap to say, as your commenter does, that the PSL is dying out. Rather, the role is evolving away from providing generic know-how towards activities that add more value to the firm. This is healthy.

Some of his other comments about law firm KM suggest either that my firm is more enlightened than I thought, or that your reader has only been exposed to very traditional (and hide-bound) attitudes in other firms. I have always found it difficult to reconcile the widely-held view that "lawyers don't share" with my experience of people who are dedicated to client service. That dedication is not always reflected just in the work-for-fees relationship. Sometimes it is altruistic. I also regularly see altruism between colleagues -- sharing pieces of critical market or legal knowledge in order to allow someone else to improve their client relationship or work quality. That is one reason why we work in firms, rather than as sole practitioners. (If you haven't already read it, John Roberts's book on The Modern Firm makes this point much better that I could.)

On the IT point, I have noticed that in firms that are dominated by IT lawyers tend to identify KM with IT, rather than being a question of personal engagement. Again, I suspect that attitude is changing, as is the notion that KM should be a closed process. However, if firms do take that view, they are significantly out of step with KM thinking elsewhere. There is a long and dishonourable history of lawyers (in practice and academia) being too inward-looking and ignoring critical developments in other areas, but my impression is that we are getting better at seeing value in what other professions do.

Coming back to your reader, I think the behaviour he describes would find no favour with Adam Smith. Surely firms that turn against better KM behaviour (effective sharing of know-how and practice experience, sensible focusing of staff on value-bearing activities, humane management of elevator assets) will generate more value for themselves and for the wider economy in the medium and long term?

And here we are with another update on 14 September:

Great post Bruce, probably should be required reading for law firms everywhere.

I'd like to add that from my own experience, I think that most law firms have fallen into the same failure patterns as the rest of the corporate world. Closing the knowledge gaps then closes performance gaps and improves processes. Lack of knowledge strategies designed to close knowledge gaps results in lack of any real successes in KM. And that's why for example, with some of the most expensive search appliances in place, law firms still struggle with basic problems like finding the right document.


Dr. Dan Kirsch
COO & Board Member
Knowledge Management Professional Society (KMPro)