• All partners are responsible  for  business development, regardless of the size or prominence of the city and office where they practice.  This  has the advantage of boosting mutual self-respect among the partnership,  and eliminates the risk that some will come to resent the notion that  they are pulling more than  their weight, or conversely that  others will lose sight of the pressures business development imposes and tend to take revenue flow for granted.
• Clients tend to get the lawyers from the practice areas and  geographies they really need.  In other words, clients' portfolio of demands for  legal service tends to align more  closely with what the firm can optimally provide.   For example, I spent some time this  week with the senior management of an AmLaw 25 firm's Portland, Oregon office, and they had at the ready any number of examples of Oregon-based clients who needed (for example) the services of  FDA experts in the firm's Washington, DC office, or IP experts in its Boston office.  They also reported that, on the whole, their  office seemed to "import" about the same amount of work as  it "exported"—with the advantage to clients being, again, access to the  degree of specialized knowledge that the Portland office alone would not be  able to sustain economically. 
• Talent recruitment and development is more powerful.  As with "importing and exporting" work for clients, recruiting and developing lawyers  is ideally a  two-way street.   Again, the Portland partners reported that  they could offer a different array of lifestyle choices and work/life balance expectations than, say,  the firm's  New York  office, giving talented lawyers who might have had enough of New York an alternative to leaving the  firm.   Conversely, ambitious Portland-grown lawyers  (who  had  either started at this  firm or been recruited laterally) knew that they could enjoy the luxury, the  stimulation and excitement, and  the challenge, of having  access to a wider stage than any of the other Portland law offices could provide. 
• In portfolio diversity there is strength and  resilience.  We are experiencing this right now as we watch the sub-prime  mortgage crisis threaten to  metastasize into a more general credit  crunch:   Woe is the structured finance lawyer this fall.  Yet firms with a more geographically diverse footprint for business generation—which implies and brings with it a more diverse portfolio of industries from which clients are drawn and a broader array of legal services they accordingly need—may well be better  insulated from  this particular ebb tide than firms more centralized in their practice on major capital markets headquarters.

Is, then,  the lesson of my conversations in  London that the "headquarters" model is a quaint anachronism, bypassed by economic history and  supplanted by the "network" model?

I believe it's more nuanced than that, although the general direction of the vector of globalizing firms is clearly towards the network, and it's really only the  velocity of that vector that remains open to debate.

The nuance is that there are a very few  firms (I hereby nominate Skadden as a candidate) whose practice is so focused that the headquarters/network distinction is beside the point.  Their geographic footprint, and the composition of  their business development efforts, "follows the money."   It follows the index of financial-services intensity around the globe and has no use for any other places that  do not  score highly on that scale.

The moral comes  down to execution, as it so often does.  Alternative strategies are often equally viable:   Just consider, in retail land, Wal-Mart and  Home Depot vs. Cartier and Tiffany.   The devil, or as  I prefer  to believe, the gods, are in the ceaselessly challenging details of  execution.    What are you going to do on Monday morning?

I'm neither an academic nor a regulator, and won't pretend to critique SOX from those perspectives. [For an academic perspective, I recommend The Sarbanes-Oxley Debacle: What We've Learned, How to Fix It, and for a regulatory view the best I can offer is the SEC's own "spotlight" page on SOX which is self-congratulatory, unedifying, analysis-free, and stale.]

My goal here is simpler: To deliver a clear and forceful warning from my time in London. The primary unintended consequence of SOX may be to help dislodge New York from its pre-eminent role as a center of global capital formation. And if we permit its fallout to continue without repealing or knee-capping its provisions, we will have only ourselves to blame. Among the critiques I heard leveled at SOX were:

• It encourages highly risk-averse management, the antithesis of American entrepreneurialism and innovation.
• Ironically enough—along with Regulation FD—it discourages corporate disclosure and communication with analysts and other commentators and observers since the statement not made cannot later be labeled misleading.
• The requirements for independent directors operate to disqualify anyone with actual experience in the industry and, perhaps, judgment, perspective, or insight.
• Worst of all, of course, the potential criminalization of accounting judgments—touching not just the corporation but senior executives—operates, as one managing partner put it to me, to make every publicly US-listed company long for the day when all they had to worry about were the quarterly earnings expectations of Wall Street: "Today, it's not the stock analysts you've got potentially looking over your shoulder, it's the US Attorney."
• Finally, there is universal consensus that had SOX been in place before the parade of the Enron, Tyco, and Worldcom horribles, they still would have happened. Why? Because one cannot legislate common sense or integrity. More than one person pointedly observed that fraud and misrepresentation have always been illegal and we've always known quite well how to deal with them. Piling SOX on top had the same practical effect as "making it illegal to break the law" (that would be zero).

Can I wrong about this? Without doubt. This is one of the occasions when I am more interested in reporting my cumulative impressions than I am in attempting to predict a trend with certitude. And I invite those of you with different perspectives to take issue with my report.

The good news is that London has never looked, to my eye, more vibrant, energetic, polyglot, and self-assured. If anything, its worst problem now is that all the hot properties are over-suscribed: From real estate to restaurants to hotel rooms, the city needs its own massive "Congestion Charge" to tamp down demand. Of course, for those of us who earn our income in $$, the ££ is already exacting something much like that charge.

If you plan to move there—and many of you may find yourselves doing just that—just make sure your unit of income will be the ££. You are permitted, however, to say a wistful goodbye to the $$ on your way over.

As we've known since October 19, Reed Smith reached agreement to merge with Richards Butler Hong Kong, nearly a year after completing its merger with Richards Butler (UK) in London.  The agreement will add about $60-million in revenue and a little over 110 lawyers in Hong Kong and a small office in Beijing (with a license application pending to open in Shanghai), and, most importantly for Reed Smith, puts it on the third of the three continents where global firms needs to be in today's Flat World. 

I wanted to get a fuller perspective on the deal than just the facts and figures, however, so a couple of weeks ago I spoke with Tom Todd in Hong Kong, a senior Reed Smith partner who has been driving the integration and who relocated from London, where he had been working on the Warner Cranston and then the Richards Butler integrations.  Tom originally is from Pittsburgh, but evidently hasn't been spending too much time there lately.  Tom joined Reed Smith straight out of Harvard Law in 1967, and thus has been with the firm 40 years.  His undergrad degree is in history from Williams, Phi Beta Kappa.

A bit of background for those perhaps unfamiliar with the players:  Tom was part of the senior management team at Reed Smith for many years through 2000, and, as of the mid-1990's, the firm's strategic plan had been to gain stature and scope in the Mid-Atlantic and Northeast states—all in one time zone.  While this may sound unambitious, it was not to last for long, and the firm at least was one of the first to link all its offices through a single computer network, demonstrating a commitment to multi-office operations and management. 

A consensus began to emerge that the firm needed to be in London, the ultimate result of which was the 2001 merger with Warner Cranston, a UK firm with 60 lawyers in London and 10 in Coventry.  

As Reed Smith's strategic plan has evolved, one pillar has remained unchanged:  To ensure that it revolves around its clients and their needs, particularly to ensure that Reed Smith has a significant presence in markets important to those clients.  Historically, key industries for the firm have included financial services (Tom is a partner on the relationship with Mellon Financial, and continues in that role following its merger with the Bank of New York in July 2007) and life sciences.  The Richards Butler/London merger added a focus on shipping, trade finance, and media.

Getting down to the Hong Kong Richards Butler deal, Tom's first observation was to cut through the swirl of media clutter (well, at least for those of you who follow these things) that has surrounded the extended period of uncertainty following Reed Smith's merger with Richards Butler/UK (London) and its conspicuous non-merger with Richards Butler Hong Kong.  [There are tax reasons why the two pieces of Richards Butler had been set up formally as separate legal entities, which are both too obscure and too irrelevant to go into, but that was why a merger with one was not automatically a merger with the other.]  

Suffice to say that immediately upon announcement of the London deal, the question on every observer's lips was, "So, when is Hong Kong?  Or is Hong Kong?"  Tom's rebuttal to this is that all deals take time—which he believes is a good  thing—and even the UK deal had taken about a year to bring to fruition.  The Hong Kong deal was not much different, at bottom, "except that we were doing it in a fishbowl—which, let's just say, never makes things easier."

So what has  Tom been actually doing to advance the prospects for the merger and now the integration of the two firms?  First, simply getting to know all Richards Butler/Hong Kong lawyers, their practices, and their clients.  Second, facilitating introductions back and forth between Richards Butler/Hong Kong and Reed Smith in the US and UK.  Third, meeting with clients to reassure, inform, communicate, and seek their thoughts.  And finally, sitting in on, but, he notes pointedly, not leading or running the activities aimed at combining the two firms.  (A formal integration committee will be established now that the merger is approved.)

And what exactly is so special about this?  Isn't that the way any well-run firm would do it?  Perhaps, but Tom reports, and I have no basis for disagreeing, that he's not aware of any other large firm that puts a senior lawyer on the premises of the merging firm for the explicit and dedicated purpose of facilitating integration.  He notes that his role is manifestly "not to run anything, and not to change them, but to provide the glue between the two firms and help them get to know each other."  I ask if he was involved in the negotiations leading to the merger and he reports firmly that he was not.  I gather he thinks it an advantage to have stood back from the process of negotiation per se and only to step in when the firm's leadership believes he could be helpful as a partner on the ground going forward.

"And how do you know that integration has been a success?" I ask.

"Well, our philosophy has always been to try to pick people we want to combine with because of their talents and their capabilities and their knowledge of their own local marketplace (and we don't believe we have all the answers).  Our intention, our hope, and at least in part our experience, has been that if you've made the right decision you will find out there are both people and processes that will improve Reed Smith. 
"And on that score I think our track record speaks for itself:   Just look at the key people now in positions of senior management at Reed Smith that came initially from other firms:

• Dave Duckhouse, our CFO, came from Warner Cranston
• Mark Dembovsky, our Chief Strategy Officer, also came  from Warner Cranston
• Roger Parker, our Managing Partner for Europe and the Middle East was the Managing Partner of Richards Butler
• Colleen Davies, head of our Litigation Department (nearly 800 lawyers) came to Reed Smith from Crosby Heafey in that 2003 merger.

"And I could go on."

I'm sure you have heard the same objection I have to putative mergers, or even to the very thought of a merger:  "Our firm's culture is such that we could never stand for being taken over."

I submit that mergers done right are the antithesis of takeovers.  Can your firm do them right?

This coming week, 11th—16th November, I'll be in London on business.    I'll essentially be headquartered in the City, staying at the Hoxton Hotel. 

Allen & Overy has been generous enough to provide me with an office while I'm there, and I'm told the phone # is [011.44] (0) 20.3088.7155.  I will also be carrying my UK cellphone, which is [011.44](0)7912.009126.  And of course, I'll have access to email, albeit only from my laptop and not from a BlackBerry or smartphone.

Although my schedule is pretty full at the moment, I would be delighted to hear from any of you in London who might want to reach out and say hi.  With luck, we could arrange a drink or a cup of coffee.

I hope to be reporting back frequently here on "Adam Smith, Esq.," as a primary purpose of the trip is to assess the view of the global marketplace from the UK perspective.

This is how the Times (UK) reports it in retrospect:

"This revolution did not go unnoticed. The Times reported under the headline 'Solicitors' merger creates City giant' that 'two of the City's biggest firms of solicitors are to merge to create the country's first ‘mega' law firm which will have a turnover of several million pounds'.

"The use of 'mega' was key. With one bound the two constituent firms had overleapt to double the size of what had previously been the biggest firm, Linklaters & Paines. The natural order of things had been changed dramatically."

The change in the way the profession would come to operate can scarcely be overestimated.  Again: 

"Above all, it helped to usher in a new kind of lawyer - multicultural, multilingual and multinational in outlook of a type you will now also find also at Linklaters, Allen & Overy, Freshfields and Herbert Smith. In other words, as different as possible, says Chris Perrin (now the firm’s general counsel), from the stereotype of the stuffy, conservative, cautious, uninspired solicitor that had prevailed hitherto."

And of course there were skeptics at the time.  A common jibe was that combining two second-rate firms wouldn't make them first-rate.  And while that may have carried a sting because it carried a grain of truth, the fact was that the  marketplace—the international financial and business community—was beginning to demand a firm with international presence and scale, and the Clifford Chance merger, ideally conceived, was a response to that demand.

"'I recall an American saying to me that whichever law firm could produce the first cross-border legal product to an international standard would instantly create a following,' says [Jeremy] Sandelson [today Clifford Chance's London Managing Partner].  'We did it and that’s exactly what happened.'"

Following the merger came of course the challenge of managing the enterprise.  Geoffrey Howe, managing partner starting in the early 1990's, saw the need for, and acted fairly decisively to bring about, a more business-like approach, bringing in professionals other than lawyers to oversee certain critical functions, introducing systems and processes and carefully monitoring and evaluating the effectiveness of individuals. 

"The trick we had to pull off," he says, "was to introduce a decision-making structure that produced results without killing off the ethos of partnership." 

Today the expectation that major firms will by definition be global is scarcely challenged, which is one reason the Clifford Chance merger deserves a moment's reflection.  The certitudes we take for granted today were not always so. 

This should be humbling for starters—if we think we're so smart today, how could we have been so blind then?

But I'd like to suggest it should also be inspiring, and encourage us to question received wisdom.  What elements of what we take for granted today will look archaic twenty years hence?

Not to leave you hanging, I'll venture a few nominations for assumptions that will change dramatically before our careers are over:

• That a top-drawer US/UK merger will never happen.
• That there are inherent limits—managerial, structural, in terms of conflicts, etc.—to the size of global law firms.
• That lawyers have nothing to learn about handling their practice and their relations with clients from non-lawyers.
• That law firms have no need or use for capital beyond what can be readily raised directly from partner contributions.

Care to nominate some of your own?  If not, you can just read Tony Williams' "Ten trends that will shape the legal market," which include:

• Erosion of profitability at mid-tier firms
• Technology enabling projects to become "unbundled."
• Clients' driving fundamental change in how law firms  operate.
• An increasing segmentation between basic information and advice, available online or for fixed (and low) fees, and those  who can truly deliver exceptional value.

Why listen to Tony?   He was formerly managing partner of Clifford Chance.

Today's WSJ has a front page story "Perform-or-Die Culture Leaves Thin Talent Pool for Top Wall Street Jobs," which discusses the dearth of talent—or at least, talent deemed publicly acceptable—"for the biggest jobs in finance."

"It's a weird state of affairs that these phenomenal global companies can't self-reproduce executives,' says Glenn Schorr, a financial services analyst at UBS AG. 'It is a function of the culture and the leadership or lack of leadership' at each firm, he says."

The peg for the story is of course the departures of Stan O'Neal as head of Merrill Lynch and, over the weekend, Chuck Prince from Citigroup, leaving in their wake ad hoc "interim" arrangements while hasty searches for replacement CEOs are launched under the klieg lights.

One plausible reaction to this story is of course to question the premise that the talent shortage is actually so dire.   I'm sure the situation is precisely as the omni-competent Journal describes it if you go along with the presumed, extensive, laundry list of requirements that credible candidates must be able to check off:

• Coming from a leadership position at a similarly-sized global financial institution;
• Without a black mark on their resume from having been in the neighborhood of a profit shortfall and its attendant fallout;
• Able to relate as well internally in corporate communications as externally with the analyst and shareholder community;
• Highly versed in the nitty-gritty of finance;
• And, if an internal candidate, someone who ideally is widely known outside the firm.

Few individuals are likely to possess all those characteristics, so if they constitute the height of the bar, the story is surely correct.

Now, if this doesn't put you in mind of succession planning at your firm, I'm not sure what would.  But before turning to law firm land, one additional reality of Wall Street, which you may view as charming or perverse or merely reality, as you will, is this:

"Roy Smith, a professor of finance at New York University and former partner at Goldman Sachs Group Inc., said Wall Street chiefs, obsessed by their stock price, are quick to let go anyone whose unit has a bad quarter. That may show their boards that they are aggressively managing their subordinates, but it means talented executives who make mistakes can be quickly shown the door."

We don't have such a hair-trigger mentality, so presumably we may have some more practice group leaders or other individuals likely to be deemed Managing Partner material hanging around, but the question remains what the criteria for selection ought to be and how formalized succession planning should be.

In terms of criteria for Managing Partner in waiting (a concept I will criticize in a moment), today they are quite familiar and have been described jocularly by one AmLaw 25 firm leader as "the last man standing" decision making process.  The ideal candidate:

• Will be not too old and not too young;
• Will be an equity as opposed to an income partner;
• Will be, if not "home grown" at the firm, an incumbent of long standing;
• Will have led, or had a senior role in, one of a handful of practice areas deemed critical to the firm;
• Will be viewed by his/her colleagues as a consummate practitioner; and
• Will not have obviously alienated any significant proportion of the partnership and will not have strong opinions about the future of the firm at odds with conventional wisdom.

Can you see how we, like our Wall Street brethren, begin to arrive at very very short lists of plausible candidates?

This, I'm here to tell you, makes no sense. 

We are donning blinders, of our own volition, and irrationally limiting the candidate pool to those almost certain to produce negligible impact as leaders.  If you think the Wall Street criteria are unduly self-limiting (as I do), how are ours any more rational?

The criteria that really matter, I suggest, are these:

• An intimate familiarity with the peculiarities of our profession and our industry;
• A larger—dare I say non-lawyerly?—perspective on business, strategy, finance, and marketplace realities; and
• "Stature," to be sure, in the eyes of the partnership, without which the collaboration, dialogue, and buy-in essential to any material initiative will be stillborn.

What is missing from this list? 

• The  "home grown" component.  And why, again, is that so necessary given the custom and practice of corporate America of recruiting heavily outside its own four walls?—without seeming, overall, to be the worse for it.   Understand that I'm not proposing or recommending that a suitable candidate would come from a firm utterly unlike yours in scale or practice scope, but if the Boeing --> Ford transition is plausible (Alan Mulally), or Hasbro --> eBay (Meg Whitman), why wouldn't a senior post at, say, one AmLaw 50 qualify one for a senior post at another?
• The non-negotiable sine qua non that the candidate be an active practitioner.   Again, it doubtless helps build the "intimate familiarity" I list as the first criterion above to have practiced, but why do we assume one still is?   Might it not be more likely that someone who has already doffed the practitioner's hat for a role in executive management has demonstrated a predilection for management?

I submit that the harder one looks at the unspoken assumptions underlying the conventional laundry list of requirements (the "last man standing" model, that is), the more irrational they appear.

I promised a word on succession planning, or having anointed a presumptive "Managing Partner In Waiting," and despite having lived most of my life believing to the contrary, this is my view today:  Don't do it.  Don't be too eager to narrow the funnel of potential heirs apparent; and don't embark on a search, formal or sub silentio, until you absolutely need to.

Why not?

• Don't make a lame duck out of your current leader.
• Don't narrow the back of the envelope candidate pool until you are staring directly into the face of the competitive landscape, the firm's inherent capabilities, and the marketplace trajectory that the successor will actually be facing—which you cannot know until that day arrives.
• Don't foreclose the ability of people to grow and, yes, the ability of other people to shrink.   Someone deemed callow or shallow when your way-in-advance planning engine kicks into gear may be  the soul of statesmanship by the time the fateful day arrives.  The reverse, we know too well, can also happen.
• Don't let anyone get too cozy; don't let anyone assume they have it locked up.
• As  important, or more so:   Don't discourage anyone from aspiring to greatness. History is replete with figures, from Washington to Lincoln to Truman, who had massive responsibility thrust upon them when the smart money was still focused on their rather small-bore backgrounds and inadequate preparation.  (And, infamously, it was the "best and brightest" who led us into and into and into Vietnam.)

Successor selection is, when you come down to it, more art than science.  And it's faux science to draw up a checklist of must-have's and see who produces the most colored circles under the "yes" column. 

As for what matters most, I defer to Dennis Weatherstone, former chairman of J.P. Morgan, who is given the last word in the Journal article:   Granted, he says, "the number of candidates for these positions is somewhat limited" and experience is "always valuable."  But he sees the key in something else:  It's more important, he avers, to find a CEO who can "anticipate change." And maybe the one best able to anticipate change is one who has less of a vested interest in the status quo. Just a thought.

Update 7 November:

In response to a few reactions by readers, permit me to clarify the difference between "succession planning" and "leadership development." 

While I may believe you can have too much of the former, you can never have too much of the latter.  Indeed, in my fantasy life I envision in the future the emergence of a law firm akin to GE—a corporate management finishing school seeding its vice president progeny across the economy, bringing their trial-by-fire pedigrees with them.

The  distinction becomes clearer with reference to Harvard Business School Professor Joseph Bower's new book, The CEO Within:  Why Inside Outsiders Are the Key to Succession Planning (Harvard Business School Press, 2007).   Over at HBS Working Knowledge, his views on succession planning and leadership development are nicely summarized in "Why Is  Succession So Badly Managed," and on today's WSJ opinion page he follows through with "Avoiding a Succession Crisis," where he writes:

"But what I found [in my research] is that many firms have not instituted a process for managing the development of potential leaders. Many have not even thought about the process of selecting a leader when the time comes for change. [...]

"This situation is hardly optimal -- not when global competition and technical change, in the context of an active market for corporate control, make the job of CEO about as tough as it ever has been. Companies need world-class efficiency, constant innovation and a customer orientation. This requires a group of talented, dedicated people working as a team across business units and country boundaries.  To get that kind of organization you need continuity in leadership."

To "continuity" in leadership I would only add:  Breadth, and excellence.

Wouldn't it be miraculous if your firm prepared so many talented leaders that it could afford the departure of many of them to elsewhere in the industry?  Now that would be fulfillment of my fantasy.