As some of you doubtless know, I'm a Stanford Law graduate and, both on general principles and more pointedly with undying gratitude for the rigorous and exciting analytic education it gave me, a loyal one.  (Stanford could learn volumes from Princeton when it comes to alumni loyalty, but that's another topic, and not one for the pages of "Adam Smith, Esq.")

Today I'm here as a Stanford Law alum to deconstruct a column (picked up as well by the WSJ Law Blog) by Larry Kramer, the Dean, which prefaces the current issue of The Stanford Lawyer, and to tell you that what he has to say is shockingly naive or shameless pandering to the dark and caustic forces of political correctness or, conceivably, both.  First, an extended excerpt from what he has to say:

"The focus of this issue is the state of our profession.  And that is a worrisome topic.  I have occasionally remarked, though only in small settings before today, that the state of the legal profession brings to mind Rome, circa A.D. 300. On the surface, it looks grander and more magnificent than ever, but the foundation may be about to collapse. It’s meant to be a joke. But the uneasy laugh this comment invariably elicits suggests that it may be closer to the mark than any of us wishes.

"Certainly our profession has changed profoundly in the past generation. The basic structure still looks the same: Most lawyers practice in firms, most firms are partnerships with cadres of associates, most work is performed for hourly fees, and so on. Yet it’s the traditional model on steroids: Big firms employ thousands rather than hundreds of lawyers, with offices around the world. Partner/associate ratios have changed dramatically, particularly if we focus on equity partners, while legal work has become increasingly specialized and expectations for billable hours have soared.

"Such changes have consequences. Clients, especially corporate clients, are less willing simply to pay what firms charge and much less willing to subsidize the training of young associates. Technology has exacerbated this trend, enabling clients to do for themselves things they used to need from outside counsel. Making a practice profitable has increased demand for lawyers to bill hours, which has, in turn, forced firms to raise salaries, which has further increased the need to bill hours.  Partly as a result, new associates seldom join firms intending to stay for more than a few years.  Lateral hiring has   exploded, undermining the culture and sense of community of many firms.  And factors like these have stymied or undone progress that was just beginning to be made in advancing women and minorities into the top ranks of legal practice.

"Twenty years ago, most lawyers would have scoffed at the idea that profitability, much less profits-per-partner, should be the measure of success and prestige. Yet that is where we are. Law firms are run like businesses by managing partners and committees whose time is almost wholly occupied with, well, managing. And competition is fierce: to be bigger, pay more, bill more hours, and open more offices. To be more profitable.

"Does anyone actually want this?  The lawyers, managing partners, and general counsel I meet are deeply concerned about what's happening.  Yet they feel unable to stop it, powerless to resist the stifling market forces that drive their decisions.  And for good reason, because the problems are complex and exist at every level.  Students say they want a better work/life balance, yet invariably choose the firm that ranks highest in The American Lawyer's list of the top 100 law firms. ...  And on and on.  No one can be blamed when everyone is to blame.

"I have no answer to this.   ...  "

Now, Dear Reader, are you asking yourself whether you haven't heard this same cri de coeur before?  And indeed you have, from any number of variously illustrious sources, Dean Kramer being only perhaps the most recent and  high-profile. 

We hear it in the "professionalism vs. corporatization" debates, in the "intrinsic invaluable culture vs. merger mania" debates, in the "home grown vs. lateral opportunity" debates, and, as the good Dean says, "on and on."

It's time to for me to draw a line in the sand.  I'm here to tell you this is nonsense on stilts.

• The Fortune 500 and the FTSE 100, BigLaw's core clientele, have long since gone global. 
  • Law firms should therefore not follow suit?
• The total share of all private-sector corporate profits earned by the Fortune 500 has been on a 30-year upward trajectory (even while their share of total private sector employment has stayed all but constant).
  • The AmLaw 100 should not therefore experience a similar growth path?
• We have been taught at Milton Friedmann's knee, among others, that the purpose of a business enterprise is to maximize shareholder value.
  • The partners being the functional equivalent of shareholders of a law firm, who is to gainsay what we are witnessing?
• "Law firms are run like businesses by managing partners and committees whose time is almost wholly occupied with, well, managing."
  • Shall we then return to the days of managing on the backs of envelopes, at kitchen tables, and on the train while commuting?  How, exactly, did that serve the interests of, say, Coudert Brothers, Jenkins & Gilchrist, or Dewey Ballantine?
  • Is Athenian Democracy the way to manage a several-hundred-million-dollar global enterprise?
  • Are lawyers, on average, actually very good at dabbling in management?  Is anyone any good at dabbling?
• "And competition is fierce: to be bigger, pay more, bill more hours, and open more offices. To be more profitable."
  • You bet.  We call it "client service."  Clients are global and want us to match their footprints.  I have yet to hear of one firm opening one office not in response to articulated client demand but because it suited the firm's egos—strike that:  I should have said, one "well-managed" firm.
  • Pay more?  Quelle horreur!  Perhaps to meet the market rate?  Perhaps to attract a significant lateral?  I would be surprised, but perhaps the Dean could disabuse me, if Stanford Law doesn't take market rates for law professors into account in its hiring decisions.
  • Bill more  hours?  Again, the constable is shocked.  To be sure, there are human and economic limits (which I would be the first to proclaim we are running up against), but working hard comes down to two things:  (a) client service; and (b) learning and practicing the craft.  There's a reason medical residents, surgeons, and emergency room doctors pull heroic hours, as do others in all demanding walks of life including our own corporate clients and, if we were smart, ourselves in  younger days taking advantage of blessed institutions such as Stanford Law School.
• "Lateral hiring has exploded..."
  • Actually, that horse left the barn about 20 years ago and in recent years the trend has been fairly flat.  But I view the lateral market as both one of the great exerters of centrifugal-force on firms that don't have the cultural or economic resources to exert countervailing communal forces, and as a genuine liberating influence for aspirational individuals who, through the passage of time and the evolution of their practices and client bases, find themselves through no fault of their own in the wrong firm.  Would we wish them locked in forever?  Isn't bilateral employment-at-will the most humane and liberating (meaning supportive of individual freedom) policy we could hope for?
• "Technology has exacerbated this trend [of economic pressures on firms], enabling clients to do for themselves things they used to need from outside counsel."
  • And the problem would be....?
  • To be sure, technology "exacerbates economic pressures" on virtually every pre-existing business model.  That's part of its charm.   And part of the charm of capitalism itself is to inflict creative destruction. 
  • Technology, lest we forget, is also perhaps the most empowering force for good (and for evil—al Qaeda recruits online like nobody's business) our generation has experienced.  I for one am  not about to choose to roll back the clock.
• "Among my hopes for the coming years is to develop a program in 'the business of law'...," the Dean concludes.
  • May I suggest that program—which is devoutly to be desired, and for which I hereby volunteer to participate in its development and/or realization—begin with a realistic look at the economics of BigLaw today where, for example, the implication of a $160,000/year starting salary means an all-in cost for a first-year associate of about half a million dollars?
  • It must also begin with a realistic view of the international landscape in which BigLaw  operates.  As the Dean himself says in today's New York Times, "Globalization means you have to better prepare lawyers to work in a global context."   What meaning can "a global context" possibly have if not that firms must match their global clients in scope and capacity?
  • Finally, what can "professionalism"  and "preserving the qualities that attracted so many of us to the study of law in the first place" (from the Dean's concluding sentence) mean if not accompanied by the hard, thoughtful, time-consuming, dedicated, demanding work required to attain the heights of the profession—work for which there is no substitute or shortcut?

Further, "the business of law" program, and everyone reading this column, should recognize the Dean's views are far from  universal:  So far from universal that, in my experience, he is in a distinct minority. 

Virtually everyone I talk to and meet with, whether they admit it out loud or not, celebrates the larger canvas on which firms operate today, is engaged as never before in the challenges and opportunities of management, and is pedaling as fast as they can to figure out the contours of the 21st Century legal industry and position their firms accordingly.  I for one cannot imagine a more exciting period than today to be engaged in "an inquiry into the economics of law firms."

Far from "powerless to resist the stifling market forces that drive their decisions," the people I know embrace the market and in fact try to get ahead of it.   As Charles De Gaulle famously reminded us, "it's a mistake to be on the wrong side of history."  And as Adam Smith would doubtless adapt it today, "it's a big mistake to be on the wrong side of market forces."

But this debate concerns so much more than the ineluctability of market forces:  It concerns aspiration, vision, drive, and, yes, client service. 

Simply put, globalizing firms are not wrong.   They are aspiring to serve their clients, whose needs are morphing in the Flat World we now know we inhabit.  I just remarked that it's a "mistake" to be on the wrong side of trends in one's world.  But in this case, to fail—as the Dean would evidently have us do on purpose—to strive to serve our changing and globalizing clients' highest-order legal needs would be worse than a mistake.  It would be a moral, a professional, and only last an economic, failure.

Update 2 November:

I sent the Dean a note linking to the article within a few hours of publishing it and received the following in reply, which I offered to publish and he gave me permission to do:

Hi Bruce:

I had already seen the blog and considered writing you.  So I'm glad you reached out.  I think you misunderstood the import of my letter and the issues I was trying to raise.  I am not opposed to the globalization of legal practice.  Nor am I a Luddite who wants to preserve or restore some lost, imagined golden age.  I am, however, acutely conscious of the rising dissatisfaction felt by so many lawyers, and I see the shifting patterns in what our graduates do and, more importantly, aspire to do.  I wanted to raise these issues to see whether there are ways to continue operating in a modern global economic environment without at the same time having to sacrifice so many of the great qualities and virtues of practicing law.  Change has happened very rapidly in our profession.  As recently as 20 years ago, a 200 lawyer firm was considered huge; today it's small.  Expected billable hours have gone from 1600 to 2200 at the top firms in the same period.  Legal practice needs to serve clients working in a multinational context in a world where everything is more specialized and so the demands on lawyers are greater.  But can we find ways to do that while making the experience better for individual lawyers?  The opening point in the letter:  that despite these enormous changes, the basic model remains the same--that our profession has adapted to these changes by, in effect, becoming the traditional model on steroids---is not meant as a call for the legal professsion to turn its back on change.  On the contrary, it's meant as a call to change more:  to find different and better ways to adapt.

Of course I don't know enough to say what those should be on the ground.  I am, however, privy to some really interesting efforts and experiments underway, things like Axiom Legal Services (which is discussed in the issue) and a variety of others.  We want to start exploring some of these models.

The law school is changing in response to many of the same pressures.  Only the first year will remain as it was, while the second and third years will become very different experiences to meet the needs of today's profession.  Can the profession do the same, and can we in the academy help figure out how?  Those are the sorts of questions my letter intended to raise.

Best,

Larry

As always, I am delighted to hear from readers—especially those I identify by name!—and I thank the Dean for contributing to this discussion.

On a separate note, it has been a matter of no small interest to me that I have gotten more emails, and even the odd phone call, in response to this column than to any other in recent memory.  And the reaction has been without exception extremely positive, typically along the lines of, "Finally somebody said what I've always been thinking."  In at least one AmLaw 25 firm, the managing partner circulated this column to all of his partners and reports that "many wrote back with comments that basically counted as 'wow.'"

Last week I was able to attend a panel discussion sponsored by ALM Events on "Developing the Next Generation of Law Firm Leaders." Moderated by Aric Press, the panelists were nothing if not qualified to speak.   They were:

• A.B. Culvahouse, Jr., Chair of O'Melveny & Myers
• Peter Kalis, Chairman and Global Managing Partner of K&L/Gates
• Barton Winokur, Chairman and CEO of Dechert, and
• Alfred Youngwood, Chair of the firm and of the Management Committee of Paul Weiss.

Their remarks about the state of our profession and our industry were as informed, articulate, and divergent as any I've heard in the space of a single hour within recent memory.  Herewith your scribe's attempt at recounting the highlights (along with some editorial comment appended).  In the order in which they spoke:

Winokur

"There are certain characteristics of lawyers which do not lend themselves to leadership." 

A few years ago Dechert hired a consulting firm (unidentified) to interview 45—50 partners on a variety of topics surrounding leadership, including their failures and successes in that area in order to determine perceived commonalities among high- and low-performing "leaders."  Bart observed that there are some characteristics which cannot be changed, or learned, such as integrity, but that there are others which can be learned, such as being comfortable with and having strong instincts about personal interrelationships.

The second part of the consultants' engagement consisted of three 3-day weekend workshops offering a cohort of tests and some "360" reviews.  In the end, 16 people evaluated each of the leadership candidates on 72 separate characteristics, such as "ability to listen."  It should come as no surprise that essentially everyone (they're lawyers, after all) ranked in the bottom 5% of the population in terms of sociability.  If you have to deal with people as a leader, this can pose a problem.

Nevertheless, Bart reports, one of the more marginal performers, upon discovering these results, immediately realized why they had felt "outside their comfort zone 95% of the time" and was able to adapt and even to capitalize upon that understanding, becoming one of the firm's star performers subsequently.

Kalis

"Law is a very mature profession and a very immature industry." [Editor's Note:  I fully intend to steal that phrase, albeit with due attribution, many times to come.]

"We are engulfed in the indicia of that immaturity."  For example:

• We are running several-hundred million dollar a year enterprises capitalized by passing a hat among our friends.
• Consultants to the industry are immature and rely more on anecdote than empiricism.
• [With a nod towards Aric Press, editor-in-chief of The American Lawyer], the most publicized financial metric dominating our industry is divorced from an understanding of how firms operate, is divorced from generally accepted accounting principles, is not reported consistently or with accuracy, and reveals little or nothing about the ongoing financial and economic well-being of firms.
• We look for our leadership of these firms to the "last man standing" principle, rather than looking for the best possible leader within (or outside!) the industry.  The leader of a firm must be, for starters:
  • an equity not an income partner
  • of a certain age—not too young and not too old
  • the leader or a key player within only some specific practice groups
  • etc.
• We do not do what other firms outside law do when they need a new CEO or Chairman, which is to look well outside the firm—including going up to Fairfield, Connecticut, to steal a Vice President from GE. 
• Leaders in our industry identify themselves because the opportunities to lead are ubiquitous and dispersed, from hiring, evaluations, talent development, leading offices or practice areas, etc.—and many of these roles are open, at least in cabined form, to associates as well.
• Law firms should think of themselves as laboratories for leadership development.
• The hegemony of business school thinking "is one of the most pernicious intellectual straitjackets of the 20th and now of the 21st Centuries.  It is simply beyond false that business schools teach collaboration and law schools do not.  Law school is the definitive collaborative and teamwork training ground.  Imagine the experience of getting out a volunteer-staffed Law Review, in the context of huge-ego professors and unrelenting deadlines."
• The best way to identify leaders is to put them in a position to fail, and preferably to fail spectacularly, with blood on the floor (ideally their own).  And then to see whether they can recover and win back trust of their colleagues.

Culvahouse

More leaders can be made than are born.

When he became Chair of O'Melveny in 2001 he hired McKinsey to undertake a strategic review of the firm, and they recommended (and O'Melveny followed) that the firm be reorganized away from having the most powerful or, conversely, the most disposable, partners in charge.

Starting next year he will implement the "No 2 Jobs Rule," which means that no partner can have two jobs:  If you're office manager or on a key committee, etc., you can play one and only one role.  This is intended to end the Casablanca police inspector's famous fall-back of "round up the usual suspects."  In other words, spread opportunities for leadership more widely. 

Practice Group Leaders are "the point of the spear," and not office managers.  If office managers are on top, they put the wrong teams out there.  If PGL's are on top, they put collaborative (read: the right) teams out there.

O'Melveny has now contracted with the Kellogg School of Management at Northwestern to create the O'Melveny & Myers Executive Leadership forum, consisting of (among other things) week-long programs for PGL's.   Another component will encourage risk-taking and "a bias for action." 

Succession planning? 

Start late.  There is of course planned and unplanned successions, but don't start planned succession planning too early.  Yes, "lawyers like the known," and therefore there's always anxiety over succession.  But don't succumb to it.

Youngwood

Al will retire at the end of 2008 and started more than three years ago to pick a group from which his successor would be chosen.  It's now down to two or three people.

At Paul Weiss, there's a tradition of contested elections for almost everything.  And in accord with that tradition, there is no nominating committee.

If some of the other firms are "immature," in a business sense, "then Paul Weiss is a very immature firm."  [Laughter.] 

In terms of compensation, there is no "billing" partner, no "origination" partner, and essentially a tightly fixed lockstep for the first eight years of partnership; after that, the lockstep remains all but fixed with just very tiny differences thereafter based on legal skill and contributions to the partnership.

85% of the partners at the firm are home-grown and 85% of the partners are resident in New York.

There are no plans to open additional offices, although Shanghai remains a possibility.

The firm has had one weekend retreat in eight years, which was at a resort, and partners complained that they couldn't go home for the evening.  Added Alfred drily:  "It will probably be another 8 years before we have a retreat."

Question for the Panel:  Should Managing Partners Also Have an Active Practice?

Al:  If you have a global firm (a category into which he notably does not place Paul Weiss), it's probably difficult to have any practice.  But he reports having spent 600 to 800 hours last year practicing, and thinks there is a "large value to that" because it connects you to your partners' everyday concerns.

Bart:  I like to keep my hand in, but it can be difficult.  He'd like to practice more if he could "because it's fun."

A.B.:  I think it's important for maintaining the respect of one's partners to keep an active practice going, even if it's far far less than full-time.  "Besides, your clients are far more appreciative of what you do for them than your partners ever are."

Pete:  Aside from himself, K&L Gates also has a Global Development Partner and a Global Integration Partner; all three are full-time.  He doesn't realistically see how it could be otherwise, and he also notes that he does not believe that the respect one has earned as an impeccable practitioner "is a wasting or perishable asset; it's an enduring asset."

Question for the Panel:  What Will Be the Key Challenge of the Next 5, 10, or 15 Years?

A.B.:  We need to "live in the external world," putting our best talent in front of the client community and not focusing on internal debates.

Pete:  The tremendously powerful centrifugal forces at loose in the profession must be resisted by even more powerful efforts to create a centripetal equilibrium.  There are also two romantic notions of "professionalism" abroad, one of which is arrant nonsense and the other of which is to embraced as an inspiration:

• The hokum romantic notion was most recently expressed by Stanford Law School's Dean Larry Kramer (as picked up on the WSJ Law Blog) who lamented:  "Twenty years ago, most lawyers would have scoffed at the idea that profitability, much less profits-per-partner, should be the measure of success and prestige. Yet that is where we are. Law firms are run like businesses by managing partners and committees whose time is almost wholly occupied with, well, managing."
  He could not be more wrong; this is pathetic whining posing as analysis.
• But the admirable side of the profession is embodied, for example, in former Republican Attorney Generals of the US testifying recently before Congress that the President cannot claim executive powers that exceed  constitutional bounds, and who insist that "the rule of law" has meaning and teeth.  This stiff-spined and consequences-be-damned integrity is the antithesis, by the way, of what some "captive" practitioners do to stay in a client's good graces by nodding vigorously that a planned transaction has their oracular legal blessing even if it runs right up to ethical boundaries and, if it does not actually cross those boundaries, would be the type of arrangement one could never live down were it to appear on the proverbial front page of The New York Times.

Bart:  "Alignment" will be the challenge.  By that he means getting people on board with the firm's vision for its future.  Separately, he notes perhaps an even bigger threat, which is the "clear progressive breakdown of trust that used to exist between lawyers, firms, and clients.  There are some examples of where that trust is intact, but there are many many more examples of where that trust has broken down."

Alfred:  "I have a less cosmic vision. For me, the challenge for the firm will be how, in a more inter-connected world, we can remain the true, classic, law firm partnership we have always been.  I noted, for example, that our partner compensation system was in place when I became a partner 37 years ago, and it will remain in place when I leave." 

Now, how do you view these observations?

I'll give you the "Adam Smith, Esq." view, at the risk of misinterpreting or traducing what each of our four intimate observers really intended:

• A.B.:  Firms can be managed, but only up to a point.  Leadership is ineffable, but the right conditions (such as "no 2 jobs") can be put in place to cultivate its emergence.
• Bart:  Leaders can be made.  Systems can be effective.  People and firms can change.
• Alfred:  This I hold true above all else:  It ain't broke.
• Pete:  It's past time to begin emulating the grown-ups.

Yesterday I was privileged to run a session at Hildebrandt's Sixth Annual Forum for Law Firm Management—"Getting a Seat at the Table"—Aligning Technology to Law Firm Business Strategy here in New York. 

My session was on "Sorting out IT Governance in Mergers," and I want to share the learning with you.  But preparatory to that, you need to know that we had the benefit of the experiences (and the senses of humor) of several high-profile veterans of Big Firm Mergers, including Don Jaycox, now CIO of DLA Piper US LLP, and formerly CIO of Gray Cary, who now has nearly three years of perspective on that celebrated three-way firm merger (DLA + Piper Rudnick + Gray Cary).  Also, with barely three weeks of perspective on events, in attendance was the CIO of Dewey & LeBoeuf.

By the way, wondering when IT is brought into the loop on the merger? Answers ranged from after the deal was all but sealed to months and months in advance of any actual negotiations.

With the enthusiastic and even impassioned help of those in the break-out session, here is what we distilled out as lessons for a CIO or IT leader going through a merger.  [Editor's note:  The discussion focused almost exclusively on mergers of equals or near-equals.  A merger of Very Big with Relatively Small was viewed as an acquisition requiring only a solid dose of project management skills to get through the period of deep-sixing Small Firm's systems and importing Big Firm's.]

Ruthlessly Prioritize

Under no circumstances will you have enough time to do everything you want or even think you need to achieve, so make sure that your rigorous focus is on the things that matter most.

Short, Intense Pain Beats Mild, Extended Pain

Need to integrate two document management systems each containing millions of records?  How about doing it across all your offices over a single weekend?  (Yes, this is a true story.)  Need to integrate half a dozen disparate phone systems, running everything from Cisco VOIP to Avaya, Northern Telecom, and even Rohm?   Make sure it's done by midnight of the effective date of the merger.

Conversely, if you want your marketing or IT department (again, true stories) to be dysfunctional for 18 to 24 months, just make sure the pre-existing incumbents from both firms remain in limbo for that period of time while management dithers.  One CIO present reported that his reaction to an indication that "co-CIO's" would be in place for an extended period was to go to his Managing Partner and say, "Fire me if you'd like; but do not under any circumstances have co-CIO's."  (He ended up top dog.)

Rise Above Politics

In almost any system you can name, from document management to time and billing to KM, you will find yourself saddled with two points of view each arguing the clear superiority of the system that just happens to be theirs.  Get past it.  Not only do you need to pick "best of breed" (keeping open the possibility that the winner will be "none of the above"), but you need to cement your credibility with senior management.  Yes, even though your credibility might have been unquestioned at your predecessor firm, you will be an unknown quantity to a significant number of decision-makers at the new firm.  And never forget that, as one veteran in our session put it, "one 'oops' trumps ten 'attaboy's'." 

It's 90% People, 10% Technology

The first important piece of fallout from a merger—or even talk of a merger—is that people become uncertain, anxious, and desperate for information, to the point of glomming on to every rumor that comes down the corridor, plausible or otherwise.  The second piece of fallout from this is that productivity drops through the floor.  And the third piece of fallout is that your best people—with the best prospects—begin taking calls from headhunters and, unless you act fast, departing.  You will then be left with the mediocre and sub-par performers.

So stop it from happening. This means getting on the road (in the air) to reassure people—truthfully, of course—that their own jobs are secure and that in fact the future under the combination will be brighter, more prosperous, and more challenging than before.  There's no substitute here for one-on-one face time.

Achieve High-Impact, Psychologically Powerful Changes on Day One

Have one unified website, one email address protocol, one phone-dialing protocol.  Yes, yes, you're allowed to put the whole thing together under the hood with baling wire and duct tape, but the appearance to end users  must be of a one-firm firm.

And another thing:  Strive for a succession of small, visible, wins.  Nothing will reinforce your credibility more convincingly than showing you and your team can achieve designated milestones on time and on budget.  (Conversely,  nothing will undermine you faster than promises unkept, so make sure you're realistic about what you can achieve.)

This discussion reminded me of an analytical model comparing alternative models of IT decision-making.  Here it is:

• Business Monarchy:  Highly efficient, but can lead to suboptimal IT architecture.
• IT Monarchy:  Leads to superb IT architecture and procedures, but may not align with business practices.
• Federal System:  IT, practice groups, office heads, etc., all have input:  Far and away the least efficient and also the most likely to generate the worst overall decisions.  But attractive to some participants since everyone has a seat at the table.
• Duopoly:  Business leaders suggest  what they need or want; IT responds with what they can provide, and a genuine dialogue ensues.  Typically a smart choice.
• Feudal:  Partners get what they want.
• Anarchy.

In general, the federal model is the least  effective, because it's the most time-consuming, bureaucratic, and prone to suboptimal politically-motivated decisions.  On the other hand, it's the most open in terms of  input (a/k/a "democratic") and therefore sometimes difficult to avoid in a law firm culture.

But if you can?  Strive for duopoly.  And:

• prioritize
• favor intense short-term pain
• eschew politics
• focus on people, and
• go for high-impact wins.

This past Thursday morning at the offices of White & Case, I had the opportunity to participate in presenting the results of a survey of how professional service firms (primarily law  firms) set strategy.  Held under the auspices of the Managing Partners' Forum, of which I am now the New York regional director, the 8:00 am — 10:00 am meeting addressed such issues as:

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

Which brings us to our topic for today:  Cognitive dissonance, or, to be more specific, our profession's truly impressive talent at suppressing same even when the internally inconsistent positions are being enunciated by the same people in the course of the same survey.

But let's back up and start with some of the survey results. 

 Over 100 individuals responded to the survey, 40% of whom were the managing partner of their firm and another 47% of whom were a senior partner or the business-side Executive Director, COO, or CFO.  Nearly 60% were from firms with more than 250 fee-earning professionals, and another 31% were from firms of between 51 and 250 fee-earners.

Asked what their most pressing strategic challenge was, nearly 80% cited "increasing client demands and downward pressure on fees."  Another 70+% said essentially the same thing, with a different spin:  "Increasing levels of competition within the profession."  So I take that as the most salient description of the environment these firms are trying to address through their strategic planning process.

Next, we asked how much of strategy is actually executed:  Here, about 40% of North America-based firms happily replied "most of it."  But 20% also replied somewhat cryptically "as much as we required," and nearly another 40% candidly reported "less than we would have liked."  A follow-up asked how satisfied they were with achieving pre-determined strategic goals: roughly 2/3rd's reported "satisfied" or "very satisfied," but 1/3rd chose "dissatisfied."

Bear with me through a couple of more data-points and then we get to the good stuff.

Asked about strategy's effectiveness in "creating meaningful differentiation from competitors," well over 50% said they were "dissatisfied," and less than 10% reported they were "very satisfied."

On the seemingly positive side, however, over 75% reported they were "satisfied" or "very satisfied" with getting the firm's employees to "buy into" the plan, and essentially the same figures held true when asked about partners' buy-in (vs. employees).

 But strategy should not exist in a vacuum, right?  So we also asked about people's satisfaction levels with its impact on two key financial metrics:

• "dissatisfied" or "very dissatisfied" with its impact on top-line revenues:  Almost exactly 50%
• the same, with respect to profits:  About 40%.

Finally, the bottom line question:  How satisfied were people with their strategy's impact on "improving client satisfaction with the firm?"  Over 75% reported "satisfied" and another  10% "very satisfied."  No one chose "very dissatisfied."

Where, then, does this leave us?

With, I submit, a severe disconnect between our optimistic (delusional?) belief that our strategic process is "improving client satisfaction" and the overwhelming number of us who report that "increasing client demands" is primary among the pressures on our firms.

For another perspective on this same disconnect, I commend to you the 18th Annual General Counsel Survey from Inside Counsel magazine (July 2007), which opens with the observation that there is a "collision" at hand in form of "law firms under pressure to make more money butt[ing] up against general counsel locked into budgets that won't bend."  Here's the table that sums it up, to my mind, which is the "overall" law firm report card as viewed by the 862 in-house counsel and 135 firm attorneys responding:

Disconnects are also apparent on specific components of client service.  For example, on the question whether service levels have improved over the past five years:

• 68% of law firms say yes, but only 29% of in-house counsel
• 15% of law firms say no improvement, but 35% of in-house counsel.

"Most law firms pad their bills:"

• 39% of in-house counsel agree, 24% are unsure
• 72% of law firm respondents disagree, 18% unsure.

"Law firms are actively seeking out ways to reduce the costs of their services:"

• 70% of in-house counsel disagree, 19% unsure
• 56% of law firm respondents agree, 20% unsure.

"Law firms make too much money:"

• 38% of in-house counsel agree, 40% unsure
• 76% of law firm respondents disagree, 15% unsure.

Finally, 77% of inhouse counsel say they're under strong pressure to reduce spending on outside counsel, but only a third of them believe that law firms understand this constraint.

Is there hope for bridging this divide?

I think so, and I'm going to suggest it comes from as old-fashioned a source as there is in our profession, from a value that must, or should, date to the first days when it ever began dawning on people that this thing called lawyering might be tantamount to a profession.

To approach that conclusion, here's the last data I'll present from the Inside Counsel survey, namely hiring criteria for selecting outside counsel, ranked in order:

1. Quality of work/Responsiveness (tie)
2. Creative solutions
3. Billing rates
4. Providing preventive counseling
5. Multiple practice areas
6. Alternative fee arrangements
7. Diversity/National reach (tie)

Setting aside rates and alternative fee arrangements, which speak to pure economics and not service levels, and also setting aside practice area and national reach, which are typically irrelevant from the perspective of an inhouse lawyer hiring a firm to help with Matter X today—by hypothesis they handle the practice area in question and have the geographic reach required—the list reduces to:  Quality, Responsiveness, Creativity, and Preventive (read: holistic) counseling.

What do those boil down to?

Supreme levels of client service and consummate professionalism.  Sound familiar?  Wasn't this what you signed up for when you first became enamored of the profession?  Isn't this what you find most fulfilling today?  Don't your most admired colleagues aspire to precisely the same?

Wherein, then, lies the problem?  Why do we think we're doing so well promoting client service and clients think we're doing so poorly?

Communications, of course, is the answer; we're not communicating very well at all, which is a rather appalling failing considering how verbal and articulate we all presume ourselves to be.  It may be that we're not communicating on the frequency or wavelength clients are listening in on or want to pick up on.  If so, the answer may be that our firms need to invest more in client relationship development.  (This is different than traditional marketing.)

Does your firm have a Client Relationship Director?  Should you?

What do the stories "Qualcomm Meets a Stern Judge" and "Banking Giant Pioneers Adviser League Table" have in common?

The first is about Southern District of California U.S. Magistrate Judge Barbara Major coming out swinging against lawyers involved in the by-now famous and tremendous discovery fiasco by Qualcomm, involving its failure to turn over hundreds of thousands of documents to Broadcom.  Among other things, Major had this to say:

• [This constitutes] "gross misconduct on a massive scale"
• "If there isn't some kind of sanction, there's no deterrence. How can this possibly be tolerated in the age of digital evidence?"
• [Absent an explanation,] "the inference is that Qualcomm intentionally decided not to search for these documents"
• And my own personal favorite:  "At best, the documents reveal a massive responsibility deflection and an incredible breakdown in communication of leadership between [the] client, the attorneys and among their counsel."

Henceforth whenever anything goes wrong hereabouts I intend to ascribe it to a "massive responsibility deflection."

She reserved a ruling on sanctions just as, apparently, Qualcomm has reserved deciding whether some malpractice litigation might be in order.

Now, I don't know what the real story is at the bottom of this all but unbelievable imbroglio, but one of the smartest observers I know of this scene proposed to me that it was a foreseeable breakdown "where everyone's responsibility is no one's responsibility."   He may be right; and people may be suffering severe court sanctions, at the very least, as a consequence.

The second story reports:

"Banking giant UBS has launched a radical review of its global legal advisers in an attempt to slash costs and become one of the first top financial institutions to formally grade law firm performance.

"The review, UBS’ first in five years, is set to shrink the bank’s cross-border panel. [...] The Swiss-based bank said the move is in response to increasing legal bills which now account for 1% of UBS’ total annual revenues." 

Now, 1% of UBS' revenue ~ US$400-million.  To put this in perspective, if you or I could start a firm today dedicated solely and exclusively to UBS' total legal spend, our firm would be around #65 on the AmLaw 100.

And there's more:  For several  months, at least 100 of UBS' in-house counsel have been scoring outside firms on a 1 to 5 scale across seven criteria including speed, quality, and cost.  As UBS' GC, Peter Kurer, put it in what would be pluperfectly obvious in any other relationship, "the bank's legal bills were too large not to be analysed and that it was important that both firms and clients take steps to improve efficiency."  Once the point scoring system accumulates sufficient data, it will begin to come into play in determining which firms stay on the panel and which are invited off. 

Now, what do these two pieces have in common?

The clarion call embedded within each demanding highly professionalized and full-time management of critical activitiess within your firm:

• Qualcomm's "massive responsibility deflection" calls for your firm to have a dedicated General Counsel.
• UBS's tightening up of its panel criteria and partial quantification of the basis for selection calls for your firm to have a vibrant and energetic partnership among your CFO,  your Director of Client Relations (you have such a person, of course, do you not?), and key relationship partners to the client, all in service of delivering not just legal services of impeccable quality but client service of impeccable quality.

If you are still enamored of the antique notion that talented and whip-smart lawyers can handle all these challenges in their "spare time," when they're not serving clients, be prepared to find yourself on the wrong side of an angry US Magistrate Judge, or of a calculating and determined General Counsel with a budget sizable enough to vault one of  your competitors into an altogether different league, leaving you proud, comfortable, and irrelevant.

As McKinsey drily puts it, "leaders seldom meet greater demands on their skills than they do when they embark on a major change effort."  Indeed, when surveyed last year about the most recent radical change effort they were involved in, 10% admitted it had been  "mostly" or "completely" unsuccessful, and just over one third deemed it   "mostly" or "completely" successful.  I feel confident predicting you would find that low rate of success unacceptable with practically any other serious organizational initiative.

So let's talk about how to drive radical change.  Many things can go wrong, of course:

• A confusing proliferation of issues under the umbrella of the mandate for change, where focus on the essential impetus is lost.
• An indisputably needed and worthy aspirational goal, supported by clear communication as to its urgency, but undermined by lack of follow-through and sustained support.
• A starry-eyed focus on the desideratum with insufficient regard for the organization's actual capacity to get there.

First, here's McKinsey's conceptual map of what's involved.  Then, we'll unpack its  component parts:

I'm congenitally allergic to formulaic approaches such as this, but I present this because I think there's genuine value here.  This one is best read from the inside out. 

Start, therefore, with aspiration.  What must we achieve?  What is the goal?  Why is it worthy?  Why does it beat the status quo?  Why, indeed, is the status quo unacceptable in the long run?  Most important of all, perhaps, why now?  What that we treasure and value will be threatened or undermined if we do nothing?

Next comes—this is the good news and the bad news—leadership.  Leadership, as usual, has two faces, two components, two phases.  The first is simply to identify the  aspirational goal, the justification for the transformative effort.  Sometimes this takes no "leadership" at all; it's simply obvious.  How much "leadership" does it take for the Republican and Democratic Presidential candidates to determine that dealing with the Iraq war is a focus of their policy?  (Real leadership would be bringing up an issue that's not  top of mind for most voters, but which could actually have a tremendous impact in the long run, such as the entitlements burden, the dysfunctional tax code, or the plethora of well-intentioned regulations that cumulatively undermine our international competitiveness.)

Assuming you've identified the menacing problem, and the desired future state that would enable your firm to triumph over that problem, the second phase of leadership becomes a relentless, impassioned, clear-eyed, and unrelenting campaign of communication.  At every opportunity—and sometimes with no obvious opportunity—you need to preach (I use the word "preach" because there's an imperative to this campaign) the need for transformational change, the unsustainability of the status quo, the virtues of the future state, and your stout confidence in the firm's ability to navigate from here to there. 

Behind the "communication" campaign is a far more demanding intellectual and institutional task:  Mapping the plan of battle to accomplish the transformation.  For one thing, it may have to be done in steps.  For another,  you yourself may find the question, "Where to start?" daunting.  If your firm is in something of a crisis, these questions are both more pressing and more difficult of satisfactory answers.  But this "battle plan" is essential in order to:

• make the change seem attainable, through a series of small steps each of which is indisputably achievable
• reduce anxiety; "where will I fit in?" should be answered by the plan
• and not least, give people a vision of the value of the transformation, and the rewards for sacrificing the comfort of the status quo.

A useful trick McKinsey suggests as part of the battle plan is to envision what the firm will look like at the halfway mark.

Psychologically, this has the truth of embodying a goal we may feel is more attainable than the ultimate goal, while also describing a firm that is not unrecognizably dissimilar to the firm we know today.  Further, it has the virtues of acting as what negotiators like to call an "anchor:"  A set place in the bidding that serves to focus attention away from extraneous and outlying possibilities. 

Let's make this concrete with an example.  Suppose your firm is 75% litigation and you want to bring the practices more in balance towards 50/50 litigation and corporate/transactional.  The "halfway point" might not be 62.5% litigation and 37.5% corporation (an arbitrary splitting-the-difference type of halfway point), but it might be something more concrete and readily achievably, such as getting 50% of your summer associates to opt for the corporate department, or ensuring that 50% of your lateral partners are corporate hires. 

But metrics and measures will take you only so far.   To "win hearts and minds," you need to tell a story.  The story needs to be one you write yourself—and in plain English forming complete sentences:  No bullet points.

Use metaphors and analogies, and loudly celebrate examples of the new type of behavior you want to encourage.  The story also must:

• be true to your firm's heritage;
• explain the need for change—especially critical if business as usual seems like an option (and indeed may be an option, at least in the short run);
• describe individuals' contribution to that change, and why it's in their best self-interest;
• and, most important, outline an inspiring and energizing vision of the future, making people want to be there and participate.

Even with all these stars aligned, your task of course has just begun.  Driving to the successful end state you envision is going to take a sustained campaign supported by a high level of energy.  You don't have to take my word for it.  Just glance at this striking graphic:

This tabulates the percentages of respondents who had experienced a performance transformation in the past 5 years who were completely or mostly successful (yellow bars) or completely or mostly unsuccessful (blue bars), when asked the critical question:  How good was your organization at sustaining energy during the transformation?  

McKinsey points out that 57% of those who experienced successful transformations maintained high energy while on 15% of those who failed at transformation did the same.

To my eye, the most vivid contrast emerges if you aggregate all the positive responses ("successful" at some level) and all the negative responses ("unsuccessful" at some level).  Here, the booster rockets to success of the transformation process that sustained energy-behind-the-effort provides is unmistakable:

• 86% of successful transformations were supported by high sustained energy, whereas
• 64% of failed transformations were accompanied by low energy levels.

What does this abstractly laudable notion of "energy" mean?

Presenting visible results.  You can't turn around the whole firm at once, so maybe you should start with a laboratory of a practice group or a client team.  If their transformation becomes visible and emblematic, it will have inspirational power.

Another option is to recruit evangelists to the cause:  Practice group leaders, main-line partners, or conspicuous associates and staff who have bought into the vision and whom others will perceive as ambassadors of the firm.  Enlist them as your apostles for the change and get them preaching on the road.

Finally, have and display great faith in the people of your firm.  My own experience is that people rise (or fall) to the level of expectations you have for them.  Add to this that people—especially people in high-performing organizations such as sophisticated law firms—are ambitious, curious, and want to learn and be capable of doing more.  The transformation effort is one way to enable them to do just that:  Learn and become more capable.

So if you're facing the challenge of radical change, you may be tempted to temporize, stand back, procrastinate, aim low, or doubt your firm's ability to pull it off.

Doubt not.  Challenge your colleagues.  Tell them why; tell them where.  Aim high.

I've written about them before, in "20% of our group's value is quitting," "Social network analysis release 2.0," and "Who you know or what you know: How about both?", but today I want to take a different spin on this. 

McKinsey has just validated the value of social networks in a new article, "Harnessing the power of informal employee networks."    What do they bring new to the table?

  First, they simply reconfirm what we already know:  That through the informal networks in your firm flow rivers of information untracked by anything on the organizational chart.  Call them communities of practice, peer groups, or no-name ad hoc spontaneously precipitating assemblages, they exist and they are in their own way highly functional.

Second, if you believe we're in the business of knowledge sharing, the intangible power of these networks ought to be a priority for you—a priority, that is, for you to nurture, cultivate, and advance.  They go a long way towards explaining how work actually gets done in your firm.   I've called it the "Ask Sally" phenomenon, and I believe it's ever-so-real. 

When a lawyer or a staff member at your firm needs to know something both tangible and actionable that they don't know and need to know, whether it's who the working contacts at a client are for a specific matter or which associate last re-wrote a section of a brief, the most convincing and reliable source is usually along these lines:  "Ask Sally; she'll know." 

In other words, we rely on talented co-workers, in informal networks, to get our jobs done. 

This much is scarcely surprising.  The question is how you as a leader can reinforce these informal networks.

Here's the problem, as exemplified in this graphic:

This is a real case study from an energy company.  On the left is the formal structure, headed by SVP Jones, with a fellow named "Cole" well down the hierarchy and, were he not highlighted by McKinsey, functionally invisible.  On the right, by contrast, is the informal structure, showing Cole at the center of the way people get work done, and, were it not for a serendipitous direct connection to Cole, Jones would be all but left out of the loop. 

Now, McKinsey has their own complexified protocol for how they recommend we might do this, and to be fair, I'll summarize it here.  Then, I have another idea.  But first, McKinsey:

• "Redesign processes to eliminate or reduce noncore interactions"
• "Companies typically underinvest in the capabilities needed to make networks function effectively and efficiently." [So invest more.]
• "The greatest limitation of these ad hoc arrangements is that they can’t be managed."  [So prepare to manage them.]
• Finally, to be fair, McKinsey has an engaging table contrasting matrix organizational structures with formally reinforced social networks.  I'll paraphrase their findings here:

One of the questions I'm asked most often by firm leaders is whether the ideal organizational structure is:

• by office
• by practice group, or
• by client/industry

My answer is usually a form of "it depends what you're trying to achieve," but in actuality my default answer is that all three interact in mutually reinforcing ways if properly understood, somewhat along these lines:

• Office managing partners need to be aware of and attuned to the specifics of their local marketplace.  This is particularly germane when it comes to recruiting, knowledge of local law schools and centers of business and economic power, and familiarity with nonprofits, foundations, and charitable and civic organizations.
• Practice group leaders are responsible for professional development, cohesiveness of the group, spotting new and emerging trends (and, no less, senescing and declining areas), morale-building, and talent spotting.
• Client/industry leaders—which would be my first choice if you could only organize your firm in a single dimension—are responsible for staying abreast of developments, staying in touch, being ambassadors, and ensuring the firm understands its clients' businesses and conversely that clients understand the firm understands.

But back to social networks.

An impact of globalization has been to make matrix organizations increasingly dated and even irrelevant.  Globalization increases both uncertainty, in the business environment, and the number of channels of "inputs" you need to stay attuned to to have a prayer of making sound decisions.  In this environment, matrices reveal their brittleness, and social networks reveal their flexibility. 

Without going so far as McKinsey does and proposing the calculated introduction, maintenance, and support of formal professional networks, one can readily envision small steps in that direction that could make great sense.  For example?

I've long believed that client intake is one of the most profoundly strategic activities a firm undertakes on a day to day basis.  Your client intake procedures do nothing less than shape the future demand pipeline for the firm.   If it's an automated conflicts check and an accounting munchkin OK'ing credit, you are sorely losing a tremendous opportunity.  How to improve this and give it more of a flavor for grown-ups?

I just learned today that Latham recently instituted an internal wiki devoted to client intake.  The immediate advantage is that the wiki begins to constitute institutional memory.  "Let's see, I think we had a potential client like this a few months ago; what on earth did we decide and why?"  Check the wiki.   Now this is a social network with legs.

And I have another idea.

It's partly prompted by a reader who wrote a few weeks ago to note that, as an associate at a well-known Washington, DC based firm, he had to commandeer a conference room for a few weeks to conduct a major document organization.  As it turned out, this particular conference room doubled as the informal office-away-from-the-office of a partner, who spent a large part of his day taking calls, dealing with clients and opposing counsel, briefing associates, and conducting the usual business a partner would conduct.

Now, you may be thinking:  What a recipe for disaster!  How could the partner get his business done and the associate get his document organization done, both in the same room at the same time, jealous about turf, no doubt, and trying to avoid the social impropriety of overhearing things or pretending not to listen while listening as intently as possible?

The answer, as reported by my correspondent, was that it was perhaps the single most valuable learning experience he had as an associate—and the partner minded not a bit, even seemed to enjoy the company.  What did the associate learn?  Simply put, how a partner deals with clients, opposing counsel, and associates.  At least to a great degree, he learned these things.

Which gave me the idea to institutionalize this type of ad hoc social networking. 

Traditionally, partners would share not just an office but a desk; this tradition ostensibly began in the offices of UK banking firms,  but why couldn't the concept behind it—collaboration—be revived to advantage today? 

Now, while sharing a desk may be extreme, sharing an office, or, more realistically, a conference room on a long-term basis, might not be so extreme.  We all need room to spread out once in awhile; why not make it a social instead of an exclusionary occasion?

I'll conclude with an economic reason for doing so:   Have you looked at Class A rents lately?  I thought so.  As your firm has occasion to move or to redesign its existing space, consider how to maximize shared/collaborative space and how to minimize—within reason, of course—private/un-shared space.   Management consulting firms, accounting firms, architectural and advertising firms—never mind the likes of Google, Apple, Intel, and Cisco—have all shown the way over the past decade to get away from the corner office/cookie-cutter office hierarchical antique model and to adopt and embrace the fluid, open-space model, that encourages people to spontaneously interact, to fortuitously connect, and even to serendipitously overhear. 

Are all those firms wrong?

Antique English Partners' Desk

Update: 12 October, 4:45pm

A reader writes:

Hi Bruce,

A good summarization of the importance of people in the knowledge process.

One additional point that I'd make is that while in the above example it is evident that Cole is a "hub" in the social network, you ALSO need to understand why that is and what kind of hub Cole is. For example, is Cole a hub between all of those people because of overall knowledge...or is it also related to the fact that Cole may serve as the bridge between the different parts of the organization? Perhaps Cole's background is such that Cole has the knowledge necessary to discuss situations or issues with Drilling and Production. Or it could be as simple as Cole's kids in the same soccer league with the folks in those areas, so they know each other well. And while it is hinted at above -- not all social connections are necessarily positive. It could be that Cole has some sort of administrative control (check-valve) over the other areas, so they have no choice but to connect to Cole.

In typical Social Network Analysis (SNA) it is important to also include arrows which then indicate flow. In the example I cannot really know for certain whether Cole is the source of knowledge, or if instead Cole is an active seeker of knowledge. Cole could be a conduit, or a bottleneck. Hard to say.

But what is clear is that there is a network which is undocumented and certainly not understood. The real issue unfortunately comes to head the day that Cole's kids no longer play soccer with the kids of Jones, Cohen, Shapiro, etc. Then the "shadow organization" which exists will grind to a halt. Everyone will wonder why but they'll almost certainly get it wrong.

Regards,

Dan

Dr. Dan Kirsch, CKM, CKEE, CKL®, MKMP, CKMI® Chief Operating Officer Knowledge Management Professional Society (KMPro) http://KMPro.org

email: COO@KMPro.org

From the TimesOnline (UK):

"Peter Bloxham, the former head of restructuring at Freshfields Bruckhaus Deringer, has lost his landmark £4.5 million age discrimination claim against the elite City law firm."

This was a long-awaited and closely watched decision, and Bloxham appears to have lost rather resoundingly:  Not only was the Tribunal unanimous in its ruling, it went out of its way to say that Freshfields' policies laid out in its revised pension plan—which Bloxham was challenging as discriminatory—"not merely met" but "comfortably passed" the crucial test of whether they were (under the statute in question) "a proportionate means of achieving a legitimate aim."

I'll explain the slightly recondite circumstances of Bloxham's claim, and the UK law in question, but the key takeaway is that this is a refreshing and extremely welcome injection of common sense into an area of law hitherto quite uncertain. 

Here's the background: 

Under Freshfields' previous pension plan, partners with 20 years as such became entitled to a lifetime annuity equal to 10 points on the firm's lockstep.  Importantly, this liability was "unfunded," meaning it was borne by partners still at the firm.  Although theoretically open-ended, the liability was capped at 10% of total profits, a cap which projections said would be reached by 2018.

Now, a 10% haircut on total profits is material in anyone's eyes, and would increasingly be seen as an albatross by aspiring partners as the burden became heavier.  This is precisely the type of issue that should occupy the attention of senior firm management.

So, in 2006 Freshfields revised its pension plan to reduce future pensions for partners who were then younger than 55—as was Bloxham.  (Those 55 or over by April 30, 2006 were entitled to a full pension for life under the terms of the previous plan.)   Bloxham could choose either to retire at once with 80% of a full pension, for life, or remain past age 55 at which point he'd only be entitled to a much less generous pension for 25 years. 

He claimed that the amended plan essentially "forced" him to retire and furthermore that he had not been offered a lucrative consultancy package as an alternative to leaving.  Freshfields' defense was that: (a) no one was "forcing" him to retire or to do anything else; (b) he had so vehemently scoffed at the consultancy package that making a formal offer of it would be a nullity; and (c) most importantly, the steps taken to revise the pension plan's impact on future earnings were measured and reasonable.

Prior to the new age discrimination rules taking effect in October 2006, the UK had no laws specifically addressing age discrimination.  The  fascinating aspect of the new law—unlike, sad to say, US age discrimination law—is that age discrimination is permitted (technically, it's a defense to a charge of discrimination) so long as the discriminatory policy in question was "a proportionate means of achieving a legitimate aim."

The contours of what precisely that key phrase means are, of course, scarcely self-evident, and this is the first ruling on the question in a matter involving partnerships.   More important for Freshfields even than its vindication in the Bloxham matter is that there are commonly believed to be a large number of otherwise similarly-affected partners waiting in the wings, ready to sue, had Bloxham prevailed.  (Bloxham has the right to appeal, and many expect he shall.)

Here's some of the reaction to the decision courtesy of Legal Week:

"Commenting on the ruling, Ronnie Fox, employment specialist at boutique firm Fox, said: 'There will be a lot of relieved senior partners around. This is an extensive case to judge, and people will be looking at it for guidance of a general nature as it is the first real test of the regulations.'

"Farrer & Co. employment partner William Dawson said: 'That he was treated differently on the grounds of age was not the issue -- the question was whether they could justify it.  This is a great result for Freshfields, and it is the result I was hoping for. If they had come out with a different result it would have created difficulties for the profession and for all partnerships.'

[...]

"In a statement, Freshfields' joint senior partner, Guy Morton, said: 'It is a pity that this misguided claim was ever brought to the tribunal. We are pleased that the tribunal has recognised that both the reforms to our partner pension scheme and the procedures through which they were adopted were fair.'"

My own reaction?  As noted, an eminently welcome breath of common sense and fresh air into the hothouse environment of age discrimination litigation. 

Understand, of course, that discrimination of any form is devoutly to be eschewed—and that there's on the whole not much more of interest to say on the matter.  (I'm reminded of "silent" Calvin Coolidge who, when asked his views of sin on leaving church one Sunday, replied in total:  "I'm agin it.")

The trouble with anti-discrimination as a principle is that it's a knife that can cut far far too broadly.  Obviously, we "discriminate" all the time for perfectly laudable purposes when we extend job offers to students high in their graduating classes and not to those further down, when we promote high-performing associates to partner and not their disappointing brethren, and, for that matter, when we pick Olympic team members or create best-selling authors.

The UK law comes with the recognition that not all discrimination is per se condemnable or unjustifiable, an insight stunning in its simplicity and dismaying in its lack of statutory US counterpart.  While "a proportionate means of achieving a legitimate aim" may not qualify as lapidary prose, we all have an intuitive grasp of what it's driving at.

And, just as the Constitution is famously not a suicide pact, so anti-discrimination laws must not become destroyers of enterprise value or shackles upon managerial judgment and discretion.

I use "brand new" advisedly.  I would be the first to confess I may have missed something like it beforehand (and if you're aware of any analogs, please let me know), but what they published is:

• remarkably ambitious,
• truly practical and useful,
• without precedent online or off, and
• the end result of an impressive investment of time and resources by the firm.

"It" is Proskauer on International Litigation and Arbitration:  Managing, Resolving, and Avoiding Cross-Border Business or Regulatory Disputes, an e-book, with all that implies—you can search it, download it, email links or excerpts, copy and paste, etc.  And, of course, from Proskauer's end, they can (and vow to)  update it. 

What is "new" about this?

More on that anon.  But first, I learned most of what you're about to hear about this from Louis Solomon, the Proskauer partner who had the gleam of the idea behind the e-book in his mind 21 months ago, and who I was able to spend some time with to get the background for the story.  (He reports that he was aided immeasurably by Jennifer Scullion, a senior counsel at Proskauer.)

Louis has been doing international litigation for a long time—starting about 25 years ago when Pepsico (Proskauer's client) wanted to terminate an intransigent bottler in Taiwan.  The longer he's been doing it, the more he had come to realize that there's not much written about the rules of the road for international litigation:  Certainly nothing comprehensive, nothing by way of a "practical treatise."

So he decided to get the Proskauer Litigation Department to write the treatise, and began with a one-page outline; the first meeting attracted all of six people.

As they set out, a key decision upfront was write it with a decidedly practical bent:  "We discouraged footnotes and multiple case citations; but we still wanted it to be comprehensive."  So, for example, how do you actually obtain jurisdiction over a foreign entity or in a foreign court?  How do you actually enforce a foreign judgment?  And how do you do everything that comes in between those two end-points?  The result is a  28-chapter e-volume with nearly 50 Proskauer lawyers as contributors.  (Lou contributed four of the chapters himself and edited the rest.)

What types of "practical" questions?  Well, for example, did you know (I did not) that inhouse counsel in France aren't considered counsel, so no attorney-client privilege attaches to their communications?  Or, that patent examiners working for a manufacturer in Sweden are likewise deemed outside the scope of privilege—but if a US challenger sues to invalidate a patent their internal communications are presumptively privileged?  (Can you say, "asymmetrical playing field?")

There are a litany of other areas where, as Lou charmingly puts it, "the law is quirky."   Examples?  At least in the 2nd Circuit, which of course covers our home town of New York, foreign litigants can come to the US and take discovery in aid of their overseas matters without regard to the "relevance" requirement of Federal Rule of Civil Procedure §26(b)(1).   No, the 2nd Circuit has not "interpreted away" that requirement, at least not on its face; it has instead decided that since 28 USC §1782, "Assistance to foreign and international tribunals and to litigants before such tribunals," does not contain an express relevance requirement, none obtains.  Quirky indeed.

Here's how Proskauer introduces the volume:

"Commerce in today’s world pays little heed to traditional geographic boundaries. Manufacturing, marketing, and distribution routinely criss-cross the globe. The Internet has all but obliterated historical national and state borders. These realities -- especially given overlapping, diverging, or converging regulatory regimes -- have led to a vast increase in the number and complexity of international or cross-border litigations, arbitrations, and regulatory investigations or proceedings.

"Cross-border business and regulatory disputes present unique challenges. Yet there does not exist for the client or practitioner any comprehensive treatment of the issues arising in managing, resolving, and avoiding controversies affecting multiple jurisdictions.

"Our objective here is to fill that gap by providing that essential reference guide. Proskauer has a long and extraordinary history in international practice. The specific contributing authors to this Guide, members of Proskauer’s Litigation and Dispute Resolution Department and International Practice Group, have helped shape the very law and practice in the topics treated.

"Our aim is not towards the bookish or academic. We have tried to write a resolutely practical guide, emphasizing the concrete and strategic over the theoretical, the lore as well as the law, the unique opportunities presented by international matters as well as the challenges. We intend to maintain this Guide as a timely compendium of current best practices as well as our most creative approaches to tackling new developments.

"We are publishing this Guide in e-Book format, over the Internet, for ready access and for ease of updating as the law evolves in this dynamic area. For this project to succeed and meet the needs of our clients, though, it must be interactive. Please, direct questions, comments, or reactions to any of our authors, to our Editor, Jennifer R. Scullion, or to the Editor-in-Chief, Louis M. Solomon. We look forward to hearing from you.

New York City, September 2007

To get a real flavor of how comprehensive the volume is, I'll list just a very few of its 28 chapter headings:

• Securing US Jurisdiction
• The Role of Comity
• Choice of Law
• Discovery Abroad for US Proceedings
• Discovery in the US In Aid of Proceedings Outside US
• Privilege Issues
• Cross-Border Legal Ethics
• Extraterritorial Application of US Laws (Employment and Securities Laws)

You get the idea.  But, as Lou observes, "today there's no such thing as a small litigation—not with e-discovery."  So comprehensiveness is not really negotiable.

If you're like me, right about now you're wondering how on earth Lou was able to marshal the substantial resources to make this happen—and on top of that to persuade risk-averse lawyers to publish it online as an e-book free to all comers.

First, he argued the internal benefits for the firm:

• Clients need practical, real-time advice;
• Proskauer lawyers need to write more (Lou and I both subscribe to the belief that you probably don't fully comprehend something until you have to write about it);
• International practice is an area where Proskauer has genuine depth of expertise;
• Senior and junior lawyers need more opportunities to work together; and
• The project could foster the development of mentor/protege relationships.

Second, he argued the external/reputational benefits for the firm:

• Merely by producing this Proskauer would be seen as strongly capable in this area;
• By offering valuable intellectual property for free, Proskauer predisposes prospective clients to come back for more (why does Zabar's give free samples of cheese?);
• Most importantly, Lou told me with no small degree of passion that a key goal of the project was, and is, to "contribute to the debate, to participate in the dialogue."  How so?  "International litigation presents  courts all the time with issues and decisions where the law is, to put it charitably, not fully formed.  Courts struggle with this; they sometimes don't know how to approach an issue.  We wanted to suggest ways to think about these things.  In my experience, courts will never ever penalize a lawyer for taking a view in an unsettled area of law;  you're allowed to have an intelligent opinion.  Lawyers are allowed to further the profession without running afoul of judges."

What about the objection that this stuff is our bread and butter—how can we give it away?? Lou's answer, as mine would be, is that in fact no potential case or controversy in the real world is so simple that simply referring to a treatise will suffice to guide your action.  Or that if your question really is that simple, Proskauer wouldn't charge you for answering it anyway, particularly if the answer can be as short and sweet as "See Chapter 6."

Once the project got underway, the support by the firm itself was astounding, even inspirational, reports Lou.  He estimates that an average author devoted north of 100 hours to writing his or her contribution, and while segments came from nearly every corner of the litigation department, two chapters were also  prepared by the corporate department, on—what else?—avoiding litigation.  

"Nearly 50 authors @ roughly 100 hours apiece!?," you're thinking?  That's right; I told you this was a serious undertaking by the firm.   Although they did not track time to the 0.1 of an hour (Lou didn't track his own time at all, in fact), Lou reports that his "best estimate is that the firm has made a several million dollar investment, closer to mid-seven figures than low-seven figures."

Is this a model for the practice of law in the 21st Century?  Emphatically so, I believe. 

But be  forewarned:  Before attempting this at your firm, understand that to do this is a professional exercise at the highest level of ambition.  It's crystal clear to me from talking with Lou that it's also a labor of love (or, it had better be).  He confessed that he and Jennifer made people go back and hone their language "again and again; there was scrupulous editing and constant re-working."  And I believe it shows. 

Now that it's online, you be the judge; see for yourself.

Update (5 Oct, 6:00 pm). When I originally spoke with Lou, I asked what clients' reactions had been like and he replied that it was so new there essentially hadn't been time for any reaction. 

Well, here's the first report.  I'm not at liberty to identify the client, but suffice to say it's one of the largest multinational corporations in the world, in a business that affects all of us every day.  This comes from a senior in-house counsel and was entirely unsolicited:

"have skimmed through your guide.  it is terrific!  i think it's well done, great for issue spotting, well written, well organized, user friendly, etc. quite a lot of work, i cannot imagine how you fit it in!

"i have circulated it to my intl division colleagues and have forwarded it to a litigation dept colleague who has been dealing w some intl investigations/litigations. i'm sure she'll forward it within the lit department (and they may very well have been sent an announcement directly)"

So, for all the managing partners and practice group leaders who might still be rolling your eyes at the multi-million dollar investment Proskauer made in this guide, I have a question for you:  "What price client loyalty on that order?"  Put differently, how likely do you think it that that multinational will start giving its international litigation to a firm other than Proskauer?

You have one last week to take the Annual "Adam Smith, Esq."Reader Survey

I promise that it takes no more than two to three minutes, and that's if you dawdle.

• One randomly-chosen respondent will win a $200 AMEX gift check. Don't miss your chance to, conceivably, win something for the first time.
• It's your opportunity to tell me how to make "Adam Smith, Esq." more focused on your issues and your needs for the coming year.  And
• You can also share with me (anonymously, of course) what you believe to be "the single most pressing strategic or financial issue facing you and/or your firm."

Believe me that I read every single response, several times, and refer back to it repeatedly during the course of the year.

Take the Survey!

Thanks.

Some of you may have seen the piece that ran in The Recorder about 10 days ago with the attention-getting headline, "In Salary Twist, Firm Pays More--and Less."  (It was also picked up by the WSJ's Law Blog, as the "Associate Compensation Story of the Day.")

The story profiles the ingenious associate compensation policies of Duval & Stachenfeld, a 50-lawyer New York based firm.  Other firms may well have tried such unorthodox policies before, but I'm unaware of any other firms of significance using them today.  Here's what they do:

• First-year's start at $60,000 (and no, I did not inadvertently drop a leading "1") and are placed in the two-year long "opportunity associate" track;
• After nine months, they go to $80,000 and then get $10,000 raises semi-annually.  No later than the end of their second year, but sometimes as early as at the end of their first year, they are promoted to the "full associate" track where the firm pays them the going market rate.  (The "going market rate" is currently determined by what Cravath is paying—plus $10,000 as a sweetener.)
• Assuming mutual satisfaction all around, they stay on the full associate track for the duration, until eligibility for partnership in their 7th to 9th year, with the 8th year being the expectation.

What's going on here?

While the Recorder's article lays out the basic parameters—which I found deeply intriguing, inventive, and potentially mold-breaking—when I read through the comments to the WSJ's Law Blog piece, which are filled with what borders on vituperation (samples follow), I found myself compelled to learn more on my own, and so I contacted Bruce Stachenfeld, who was gracious enough to give me more background on the plan. 

Full disclosure:  Bruce and I overlapped for a few years in the 1980's when we were both associates at the late Shea & Gould, but we had not been in touch since and, aside from some banter about what really caused the demise of that wonderful firm, that circumstance has affected the content of this piece not one syllable.

First, the promised samples of vituperative comments:

• Sounds like indentured servitude to me
• Sounds like a major bait and switch
• Partner greed masquerading as concern for clients
• Warning to associates! 90% of the firm’s associates are new grads. THEY DON’T HAVE ANY SENIOR ASSOCIATES. Based on their demographic data, they use you for a few years and fire you before giving you the raise
  
  But we have a few supporters:
  
  
• From my perspective, there is no downside. The starting pay is more than what I’ll make at a small firm, and if I make it to the third year I get paid as much as a Cravath associate.
• I know a lot about this firm having dealt with them frequently. [...]. It ends up being a win-win even for the associates that don’t “make it” - the training and reputation of the quality of this firm’s work enabled each and every one of them to get jobs in top-tier firms after getting 1-2 years experience at this firm. It actually is a system that works great for the associates, clients and partners - in almost all cases, everybody wins.

When I spoke with Bruce, I asked him where the plan came from, how it was working, how clients have reacted, and what the motivation for going off the conventional reservation was.  Herewith a distillation of our conversation.

They started the plan in 2003 "as an experiment."  But it "has worked out incredibly superbly."  Here are the statistics:

• Class of 2003 (the first year it was in effect):  Hired 5 associates; 4 were promoted and one left
• Class of 2004: Hired 9 associates; 4 were promoted and 5 left
• 2005: Hired 4; 2 were promoted and 2 left
• 2006 & 2007:  Still in the program; too early to say.
• Overall, of the 9 promoted from "opportunity associate" to full associate, 8 are still at the firm and one left post-promotion.

These numbers are no worse, and arguably better than the average attrition rates across the AmLaw 100.  The most widely publicized statistic on that issue (courtesy of NALP) is that 62% of starting associates are gone by the end of their fourth year.   Perhaps more to the point, Bruce repeats that if you track only associates who leave after the initial two-year period, they have lost only one.  He believes the firm has more mid-level and senior associates, proportionately, than the average firm.  Here's the distribution:

• 7th year: 1
• 6th year: 1
• 5th year: 1
• 4th year: 2
• 3rd year: 4
• 2nd year: 2

And out of a total of 25 associates currently at the firm, 11 have graduated to full associate and 14 are still "opportunity associates."  (I asked where that phrase came from, and he said that it reflected the thinking that the program offered opportunity both to the junior associates and to the firm.)

What do clients think?  "Those that know about it are extremely positive.  But understand, this is not meant to be an exercise in morality, but a business tool. We don't have to bill out junior associates at stratospheric rates to cover their costs and so clients  don't have to pay for relatively inexperienced lawyers.  On the other hand, by the  time lawyers are in their third to fifth years and above, they're providing truly valuable service and that's when clients benefit most.  We chose to focus our money on associates who matter most to clients."

How do you recruit?  What do you tell students?  Bruce replied that they generally go to about ten law schools and "we look for people who just barely missed making the cut at Skadden.  We look for the most highly qualified people we can find, but still, face facts, you never can know how good a lawyer someone is going to be until you start working with them."  Bruce became animated, telling me, "Look, historically these are not second class people but incredibly good.  Clients like them; they're eager; they work hard; they give it their best shot."

And how many actually make it through to partnership?  "We tell them that if they're still here in the fifth year that partnership is theirs to lose, not theirs to win.  And the proof of that is that of the ten equity partners in the firm, three rose through the associate ranks. In the  past five years, not a single person who's come up for equity partner has been passed over; prior to five years ago one associate left the firm shortly before being considered for partnership."

What else would you like to tell me?  What else should people know about this model?

"We've actually started something new; we're just launching it.  We call it our 'major/minor' practice group focus.  We want every associate to have a major practice group, where they'll spend 90% of their time, but also a minor practice group, for 10% of their time.  Look, law is a cyclical business, so if you're 90% real estate and let's say there's a slump, maybe you can pick up on your 10% bankruptcy practice and fill the gap.  It's just an experiment, again, but so far we like the way it's shaping up."

And finally, I ask why they embarked on this experiment to begin with.

"Our goal is simply to build one of the greatest law firms in the world.  I mean it! 

"Skadden is one of the greatest law firms in the world, but their business model is different than ours.  Their model (as I understand it) presumes that associates will start there and work for a few years and likely move on after having received excellent training.  They don't really expect that a significant percentage of starting associates will become partners.  It's a win/win for the associates, who get to put Skadden on their resume, and Skadden, which gets to hire plenty of star associates.

"Our model is different.  We hire people expecting (and hoping) that they will be qualified, and want, to stay for the long term.  In order for us to succeed with this model we need to treat our people with absolute respect, integrity and total hones