Over the Christmas week, I read an Altman Weil report: 2018 Law Firms in Transition An Altman Weil Flash Survey.

It is certainly worth reading. I found this quote interesting:

Most law firms continue to plan for short-term, incremental improvements in performance, while deferring or slow-walking more forward-looking actions to address long-term, systemic threats.

And this one even more interesting:

In 69% of law firms, partners resist most change efforts. – 2018 Law Firms in Transition

Finally, here was one of the bold headings in the report:


Pay close attention to the firm’s greatest asset – human capital

 

So, what is changing?

  • More firms are merging,
  • Law firm revenue in big firms are increasing, but, there still a problem
  • Law firm size is greater
  • There are thousands and thousands of more lawyers
  • Senior partners are coasting to retirement and law firms are not developing the next generation

Merger mania. I recently read an American Lawyer article titled: Mid-Market Moves, ‘Serial Acquirers’ Drive Law Firm Merger Mania. Here is a quote from the article:

Almost every law firm we work with is actively considering its merger options in 2018, and some large firms are becoming serial acquirers.

Increased revenues per firm. I also recently read: BigLaw Growth Back in a Big Way. It included this quote:

After years of solid, if unexciting, 2 to 3 percent revenue growth, the American Lawyer’s Global 100 experienced 6.4 percent growth, amassing $105.7 billion.

More lawyers. In 1951, there were approximately 200,000 lawyers in the United States, 1 for roughly every 700 people in the nation. Skip forward to 2018 and there are 1.34 million licensed lawyers representing 1 lawyer for less than 200 persons. At this rate we are not far from the day that there will be a one-to-one relationship between licensed lawyers and American citizens.

Size of law firms. In 1960, there were only 38 law firms in the entire country with more than 50 lawyers. By 1985 there were more than 500 firms of that size or bigger. Today, a 50-lawyer firm is considered a small firm. In most cities, a firm that size is a relatively recent start-up, a merger candidate or a highly specialized boutique. Today’s largest law firms include thousands of lawyers. The average number of lawyers in the Am Law 100 is 781.

Increased Profit per Partner. Not too long ago, partners who claimed a $250,000-per-year share of profits, considered themselves well-off. But in today’s high-end, highly competitive world of business law, this would be a dangerous level of performance for a firm of any substantial size. Consider the PPP of the nation’s 100 largest law firms: In 2006, for the first time, a majority of America’s 100 top-grossing firms had profits per equity partner of $1 million or more. In 2018, 74 of the top 100 firms exceeded $1 million.

Litigation. Because large law firms are so focused on increasing profits per partner, they no longer want the kind of work that provided opportunities for young lawyers to go to court. I can remember when I started, a group of associates met at the courthouse frequently as each of us had small insurance subrogation cases, or court-appointed criminal defense cases to litigate. Now, I know litigation associates who become partners in their firms without ever trying a case. Needless to say, that can be disheartening for a young lawyer who aspires to try cases.

Firms are not Managing Transition:

In the Altman Weil report, this startling statistic appeared:

Almost 40% of firms surveyed attribute chronic lawyer under-performance to partners who are ‘coasting into retirement.’ The absence of rigorous management of lawyer and client transitions is a huge, ongoing problem in the legal profession as Baby Boomers extend their careers ever longer.

Law firms are becoming bigger and richer, and young lawyers are earning more than ever before, which seems more cause for cheer than concern. So why is our money-hungry profession in crisis, why are law firm clients dissatisfied with the quality of the legal services and why are so many young lawyers disillusioned with the legal profession?

Law firms are growing – and closing – at record rates, and our entire profession is being turned upside down. Many law firm leaders fail to recognize the need to change the main focus from profits and billable hours to clients and the development of the firm’s young lawyers.

I am reminded of our 2004 Olympic basketball team – talented losers. Compare that team to the first U.S. “Dream Team” that included Michael Jordan and Larry Bird. Those players never let their exceptional skills substitute for adherence to the game’s fundamentals.

Jordan, who often seemed like a one-man, high-flying, point-making machine, never forgot his philosophy,

“Talent wins games, but teamwork and intelligence wins championships.”

And Bird was a player so dedicated to fundamentals that he always showed up for a game hours before anyone else – so he could dribble the ball and detect any flaws on the court.Both men – and their teammates – recognized the power of focusing on the basket, not the scoreboard.

The 2004 U.S. Olympic basketball team included just as much talent but took a third-place bronze medal because they were less focused than the Argentine and Italian teams on the basics of basketball.

Partners in the 69% of law firms who are unwilling to change are focused on the scoreboard – The AM Law profits per partner – will ultimately lose to firms who those who understand the value of the fundamentals – training, motivating and retaining their best talent and providing exceptional service to their clients.

My old law firm held a retreat one year. The theme was “one-firm.” We even had tee shirts with the slogan on the back and firm name on the front. There was only one slight problem-The tee shirts told a lie. Our firm was a bunch of very talented lawyers operating independently from one another.

I was always fond of saying just suppose as a way of prompting thought of what we could become as attorneys, individuals and in terms of firm development. Here is the just suppose I thought we could become in my old law firm that would make it more like the slogan on the tee shirts.

Just suppose, your law firm’s purpose was: 

To enable our clients to achieve their business objectives and to provide maximum opportunities for our lawyers and staff to achieve their career dreams and goals.

Just suppose your standards (core values) included:

  • Our firm put clients and the firm ahead of our own personal interests.
  • Each lawyer is expected to invest a minimum of 2500 hours in billable and non-billable (investment) activities unless he or she is a part of the firm’s flex-time policy.
  • We will recruit lawyers and staff who have a burning desire to be the best they can be and we will invest in, energize and inspire them and provide them with the tools to be successful.
  • We will seek clients who have interesting work, significant needs for outside legal services and who can afford to pay for the services of our firm.
  • We will provide extraordinary service to our clients, working together as a team and supporting each other whenever possible.
  • We will seek to be the most innovative law firm to more effectively serve our clients.
  • Finally, if we are able to accomplish the above, in doing so we will build economic stability and profitability.

Just suppose your firm made decisions and judged conduct and performance on the basis of the purpose and standards/core values. In other words, just suppose these were not just hollow words and your lawyers and staff walked the walk each and every day and when it came time to make decisions on compensation, bonuses, and promotion.

I believe the key to success in any organization is to have a clearly stated purpose and set of core values and expectations that then become the basis for decisions and actions.

I read some time ago:

When clarity exists, everyone knows the guiding principles and the core competencies that most directly contribute to organizational and individual vitality and success.

You could build a strong firm around the concepts, have a heck of a lot of fun working together and build a sense of community that I feel is lacking in many firms now.

I loved practicing law in a law firm. Why? I wanted to be part of a team striving to get better. Now that I am recruiting lawyers, I want to place highly motivated lawyers in law firms that are striving to be the best the firm can be.

Several years ago, I wrote a The Practical Lawyer column Leadership For the Recession and Beyond focusing on leadership and how the recession changed law firms and the practice of law forever.

Nine years later, the economy is booming, but what I wrote back then still applies.

Is your law firm striving to become the best it can be?

If so, my bet is your firm leader has integrity, articulates a purpose other than profits per partner, clearly has a vision for the firm’s future, makes sure the firm is acting consistently with its values and holds people accountable. These answers are fairly obvious.

But, if they are so obvious why isn’t every leader doing what it takes for the firm to be successful?

1. Integrity

A law firm leader must be honest, ethical and credible. In their book Credibility: How Leaders Gain and Lose It, Why People Demand It, James Kouzes and Barry Posner reported the results of 1500 interviews with managers across the United States. When asked to identify the characteristics and attitudes they believed to be most important for effective leadership, the number one response was: integrity (leaders are truthful, are trustworthy, have character, have convictions).

2.  Purpose Beyond Profits Per Partner (the Why)

A law firm leader must be able to express the firm’s purpose. James Collins and Jerry Porras in Built to Last: Successful Habits of Visionary Companies Built to Last define purpose as “the set of fundamental reasons for a company’s existence beyond just making money.”

3.  Vision for the Future (the What)

A law firm leader must be able to express his or her vision for the firm in a way that creates excitement in the firm. Almost nothing energizes people more than feeling they are part of building something special. When President Kennedy expressed the vision that the United States would land a man on the moon by the end of the decade, people were energized and inspired.

4.  Culture and Core Values (the How)

A law firm leader must be able to both articulately express the firm’s culture and core values and to make sure the firm acts consistently with those core values. In Aligning the Stars, Jay Lorsch and Tom Tierney describe culture as “a system of beliefs that members of an organization share about the goals and values that are important to them and about the behavior that is appropriate to attain those goals and live those values.”

5. Accountability (the What is Expected)

A law firm leader must clearly articulate minimum standards. Actually, “minimum” is not the best word because the standards should actually be very high. Each person should know clearly what is expected of him or her and then must be held accountable with consequences for non-performance.

I am under the impression that law firms are not developing the next generation of law firm leaders. I am also under the impression that leadership isn’t something that most lawyers have in their DNA, meaning it needs to be developed.

I recently read a Forbes Magazine article: Why Leadership Training Doesn’t Work. I found the article interesting, in part because it supports my contention that one shot workshops are insufficient to develop the next generation of leaders or rainmakers.

If you are interested in developing your next generation, I urge you to read the article.

Here is a quote:

After two or three weeks, you might remember the concept but not how to implement the idea, and you’ll be lucky if you retain even two of the ten key points from the session. According to a Mckinsey & Company survey, adults typically retain just 10% of what they hear in classroom lectures. Cramming all the key learnings into one lengthy training makes logistical sense, but it greatly restricts learning retention…

Simply learning what to do over the course of one to two days doesn’t lead to acting differently in the long run.

Those of you I coached, or in firms where I coached know we worked together over 12-18 months. In our first group session, I taught you the concepts we would be working on in the future. You likely recall one of our goals was to make client development part of your habits.

You likely know there are well-respected leadership training programs out there.

Harvard and Columbia both have a program. I became online friends with the lawyer responsible for creating the University of Santa Clara leadership for lawyers program. I worked with a lawyer who is now a Global Senior Advisor with The Center for Creative Leadership.

I believe all the programs are truly excellent, but I’m not sure any of them change habits as envisioned in the Forbes article. So, suppose you wanted to develop your own program. Where would you start?

Years ago a well-known law firm asked me to help develop the initial leadership training for new partners. In my work with the firm, I created a Leadership Training Workbook. 

My workbook was in large part based on what I learned from reading many, many books on leadership. If you want to get started in your firm, or if you are a junior partner and want to start learning more on leadership, I hope you will find my workbook helpful.

Have you bought a Groupon or Living Social certificate to get a discount at a restaurant?

On the one hand, I’ve gone to restaurants I didn’t even know about before buying the discount certificate. On the other hand, I rarely have gone back and paid the full price.

What happens when law firms give discounts?

Giving discounts reminds me of Jos A. Bank. There is always a sale going on. A few years ago, I could have bought one sports coat or pair of slacks and gotten two for free. Over the years, when I bought something at the Jos A Bank store I was never sure I got the best deal.

If you give discounts, your clients will wonder if they are getting the best discount you give.

I never gave discounts. Instead, I gave extra services away at no cost.

For example, I offered to do workshops for my clients at no charge. I occasionally put associates in their office for a week at no charge.

I believe giving value for free is better than discounting fees. I also gave budgets for the work we were asked to do because I believed it was important for the client to be able to budget the outside fees.

I believe that:

  • 10% of legal work is bet the company and it goes to the best lawyers
  • 30% of work is commodity work and it goes to the lowest cost provider
  • 60% of legal work is based on relationships and it goes to the lawyer who is known, liked and trusted by the decision maker

Focus on either being the best in the world at something so you get the bet the company work, or focus on building relationships.

If you are doing commodity or routine work you better be able to do it cheaply.

Finally, if the economy demands it, lower your standard rate rather than giving a discount. If you do give a discount, you should anticipate your client will want a further discount when they receive your bill.

I coached Shawn Tuma in 2011. Back then I thought Shawn was the most innovative lawyer I had coached.

Shawn recently joined Spencer Fane where he is co-chair of the firm’s data privacy group. I spoke with him recently and discovered that over the last several months he had done many interviews and over next month he had several additional TV and radio interviews scheduled.

Here is a link to one of his interviews.

How did Shawn get these opportunities?

Put simply, he has built his practice using the social media tools available to all of you. I checked the morning I wrote this and he had 9998 followers on Twitter, just two short of 10,000. I’m betting he has over 10,000 as you are reading this.

If I was hiring lawyers for my law firm, I would prefer to hire lawyers who are on the cutting edge of reaching clients and potential clients. But, how many of those lawyers are there?

Lawyers and law firms are so slow to change. Some time ago I was doing research on change and I found these statistics:

Five  kinds of attitudes about change:

  1. Early innovators (2.6%), run with new ideas
  2. Early adaptors (13.4%), influenced by (1) but not initiators
  3. Slow Majority (34%), the herd-followers
  4. Reluctant Majority (34%)
  5. Antagonistic (16%), they will never change

You might think these statistics were collected in 2018. In fact, these statistics came from the clerk of Abbington Presbytery, outside of Philadelphia, over 100 years ago.

There have been more changes in the way you practice law and do client development in the last 18 years than in the 29 years I practiced law before that. Think about these changes that just cover connecting and staying in touch:

 

  • Smartphones and other mobile devices to stay in touch
  • Email alerts
  • Blogs
  • Podcasts
  • Webinars
  • LinkedIn
  • Facebook
  • Twitter
  • Youtube
  • Skype

Which category of attitude about change describes the lawyers your firm is hiring?

 

 

Last November Above the Law published an article titled: IN-HOUSE COUNSEL New Study: GCs Have Brought The Majority Of Work In-House.

I found this quote interesting:

51% of in-house legal teams report that more than half of their legal activities are now conducted internally. The biggest challenge in-house legal teams are trying to solve by bringing more legal services in-house is controlling costs, followed by completing tasks efficiently.

I am not surprised by the survey results. In 2018, the majority of clients want more and want to pay less. At the same time, they perceive their law firms are focused on what’s in it for the law firm rather than focused on what’s in it for the client.

In May, The American Lawyer published: Managing Partners’ Frustration Mounts as Law Firm Innovation Stagnates. 

A record 68.6 percent of leaders said the No. 1 reason they aren’t doing more to change their legal service delivery model is because partners resist efforts to change. That number has jumped from 44 percent in 2015, which made it the third most-cited reason that firms aren’t doing more to change.

Many law firm partners have made enough money to be content. They are not focused enough on what their clients want, need and in 2018, demand. I laugh at the vision of a law firm web page with the branding slogan:

“We Aren’t Innovative Or Efficient, But We Are No Worse Than Other Law Firms.”

So what can law firm leaders do about this?

Begin by focusing on your clients. Ask them to share with you ways you can deliver greater value. Listen to what they say and ask further questions.

When you are finished, gather a group of lawyers in your firm and brainstorm ideas on how to deliver greater value to clients. When you come up with a plan, figure out a way to make sure you are delivering greater value and continually ask for feedback from your clients.

And, finally…Reward Innovation and Efficiency.

 

Many law firms will find a lawyer who has clients with a variety of needs to be a great candidate for their firm. It makes great sense, but most law firms don’t take advantage of the opportunity. Why?

In a nutshell, most firms do a poor job of cross-selling. There are a variety of reasons cross-selling is challenging. One reason is most firms have no plan or strategy for cross-selling. As a result, at best it is done on an ad-hoc basis. At worst, clients resent they are being “sold.”

When I was practicing law, we hired a consulting firm to help us with our strategic plan and paid them more money than I ever imagined. One of the consultants told me,

Cordell, you need to ‘cross-sell’ your firm’s labor and employment lawyers and environmental lawyers to your construction clients.

I replied,

I think that really makes great sense, but you have it backwards. Our labor and employment lawyers and our enviromental lawyers need to demonstrate they understand construction labor and employment issues and construction enviromental law issues.

Later, at a partners’ meeting, the consultants said our marketing cross-selling strategy should be to “further penetrate” our clients.

I raised my hand, stood up and said: “I had taken a survey and my clients unanimously had reported that they did not want to be ‘penetrated’ much less ‘further penetrated.’

I had never heard penetration used in the context of marketing or cross-selling.

I later learned that “penetration selling” means increasing current client revenues through increased usage or additional types of legal work. The problem with it is that it focuses on client revenues rather than client valuable service.

 

Now that I am helping lawyers find the right firm and helping law firms find the right lawyers, I am reflecting more on what would motivate me to join a particular law firm if I was still practicing. I know what some of you are thinking:

Money

If that was all that motivated me, I would still be practicing law.

I was a practice group leader in my old firm. Once a month I was required to attend a meeting of practice group leaders and office managing partners.

I rarely thought what we covered was valuable. For the most part, we talked about economics and how we were doing financially. We did not brainstorm ideas on how we could better lead and motivate our lawyers, which in the end would make us more valuable to clients and more profitable.

In his book Linchpin: Are You Indispensable? Seth Godin references a poll of 20,000 creative professionals done by Richard Florida. He gave the professionals 38 factors to choose from on what motivated them at work.

Here are the top ten ranked in order:

  1. Challenge and responsibility
  2. Flexibility
  3. A stable work environment
  4. Money
  5. Professional development
  6. Peer recognition
  7. Stimulating colleagues and bosses
  8. Exciting job content
  9. Organizational culture
  10. Location and community

Godin points out that only one of the above is a clearly extrinsic motivator.

I am sure many law firms focus on it like a laser beam. In those firms, the popular notion is that the only thing that motivates partners is higher profits per partner and the only thing that motivates associates is compensation and bonuses. The survey would suggest there are motivators that have little to do with money.

Looking at the survey, what can your firm do to attract top talent? I know-compensation matters, but what else can your firm do?

It’s difficult to provide exciting job content all the time. I have done my fair share of legal work that was not exciting. I am sure you have as well. The location of the firm is where it is. So, not much can be done with those two motivators.

At the same time, law firms can easily provide challenge and responsibility, flexibility, a stable work environment, professional development, peer recognition, stimulating colleagues and bosses, and organizational culture.

Top lawyers old and young want to be challenged.

What else do young partners want?

  • They want the flexibility to be able to spend more time raising their children.
  • They want to feel secure knowing they will have a job.
  • They want to learn and develop their skills.
  • They want feedback when they need to improve and when they have done an outstanding job.
  • They want to work with lawyers they respect and trust.
  • They want to work for a firm that lives what it says is its culture.

As I attempt to help lawyers find the right firm for them, I wonder why so many law firms are not focusing on those motivators.

Is your firm? When was the last time you talked about any of these topics at a firm leaders/management meeting?

How do you recruit lawyers of the Millennium (or Y) Generation and how do you retain them?

Those were the questions I was recently asked by a recruiting coordinator of a major law firm. I think it begins by understanding them and how they are different from lawyers in my generation.

When I was in charge of attorney development at my old law firm, I sought to better understand the Y Generation lawyers. Here is my list of Top 10 things that are important to this group:

  1. They want to work for firms whose leaders do not take themselves too seriously.
  2. They want to work in a comfortable atmosphere, one in which they can be themselves.
  3. They want to work for firms where they have an essential contribution to the success of their firm and their clients.
  4. They want to work for a firm that values – and practices – community service.
  5. They want to work on teams and to make friends at a firm.
  6. They want their work to be interesting, and will get easily bored if unchallenged.
  7. They want their firms to provide them with the most up-to-date technology to better perform their work.
  8. They want and will seek constant and continuous feedback from their supervising attorneys.
  9. They want to be treated fairly – as they define it – and will place a very high value on it.
  10. They want – demand – sincerity from firm leaders.