I'm in beautiful Seattle at present for the US Association of Legal Administrator's 37th Annual Educational Conference and Exposition. Yesterday, I took a small group of experienced law firm managers (including one from Nigeria and another from Brazil) through a very intensive workshop on how law firm managers might best cope with the challenges of this "globalized world" that we find ourselves in today. We looked at global trends and then focused in specifically on international cultural differences, how those relate to profitability drivers in law firms, and finally how firms might manage cultural differences so as to allow and even encourage cultural diversity, while keeping a core of profitability-driving cultural attributes in place. We ended the workshop with a case study featuring a hypothetical US law firm looking to establish business operations in China.

This morning and again tomorrow morning, I was also asked to present my now quite widely known session: "The World and the Legal Profession in the 21st Century."

As promised, PDF handouts of the slides are attached below. Please feel free to download them.

Download 1: A Brief History of Humanity - The Last 5000 Years

Download 2: The World and the US Legal Profession in the 21st Century

If you would like larger slides, please email me. The larger files are too big to upload to my blog but I'd be happy to email you a version with 2 slides to a page instead.

In addition, the slides of the Managing Partners Forum research project on strategy in law vs CPA firms and UK vs US firms may be found by clicking here.

Hope you find them useful!

Ever since I first became aware of strategy as a discipline, I have been a Tom Peters fan. (Disciple may be a better word.) I firmly believe that those who do the most good are not those who develop the most intellectually impressive theories and algorithms to solve the most complex business problems, but those who get the most important messages across in ways that the common [business]man can understand. Peter Drucker was one. So too Jim Collins. Love him or hate him, Tom is also right up there at the top.

This is taken off his blog today from a post by Richard King titled A Personal Top Ten Tom Quotes from London, translated ever so slightly into "professional-serve-firm-speak" :

1. Excellence comes from human beings doing things of value that clients find memorable.

2. Remember. You are the only human being in the world who can help this particular client at this particular moment in time.

3. The thing that keeps a firm ahead of the competition is excellence in execution.

4. Brand inside is more important than brand outside for sustained success.

5. Leaders' careers will usually be determined by their handling of one or two critical events that no one could possibly anticipate or plan for.

6. Make sure that you spend your time on the things you say are your priorities.

7. Tuck the shower curtain in and give away two-cent candy!

8. It's remarkable how quickly an excellent culture can be torn apart by poor management.

9. Irrelevance comes from always doing the things you know how to do in the way you've always done them.

10. If you love your firm and love what you do, you will serve your clients better—period!

Enjoy!

One of my favourite economist blogs, The Big Picture, has a post titled Creating Fake Alpha, that highlights once again a malady that western business just doesn't seem to be able to rid itself of. Namely, the inability to balance the need for short term rewards required to attract and retain talent, with managing the risks that rewarding short term profits at the expense of long term performance entails. A quote (of a quote, as it happens, but rather click through The Big Picture to get to it) :

"Then there is the central and controversial issue of how to pay people who work for financial firms. In blowup after blowup, compensation schemes based on short-term performance have encouraged traders, division heads, and C.E.O.’s to act recklessly.

In the typical case, a trader or executive places a bet that pays off immediately—or soon enough to increase the individual’s bonus or stock-options value—but exposes the firm to long-term dangers.

Examples include Merrill’s decision to step up its production of mortgage securities just as the outlook for the real estate market darkened and Bear’s refusal to keep an adequate reserve of cash on hand. Earlier this year, Raghuram Rajan, a former chief economist at the International Monetary Fund, referred to such behavior as “creating fake alpha—appearing to create excess returns but in fact taking on hidden risks.”

Anything new here? Of course not. If you'd like to see how many times this particular bit of history has repeated itself, read Alex Berenson and Mark Cuban's 2004 book The Number: How the Drive for Quarterly Earnings Corrupted Wall Street and Corporate America, which was about Enron and WorldCom (and before.) The tune changes but the song remains the same. If people are paid for short term results rather than long term performance, then human nature being what it is, at least some of them will "create fake alpha" to pad their pockets, at the expense of the firm's risk profile.

I wonder what the next cataclysmic corporate disaster to bring this issue to the fore again will be .....

"To business that we love we rise betime and go to it with delight"
Anthony and Cleopatra

Today marks the 444th anniversary of William Shakespeare's birth (on 23 April 1564.) It seems almost as long since I last blogged :(

The fact is, I've been heavily engaged with a strategy assignment that is very much within the category that Shakespeare meant when he wrote the above.

Freeport on Grand Bahama Island, where I am lucky enough to live with my family, is a unique place. It is a "privately owned" and operated city in terms of a treaty (the Hawskbill Creek Agreement) which was signed in the 1950s between the Government of the Bahamas and an American businessman, Wallace Groves. The city's controlling authority, the Grand Bahama Port Authority, is currently owned by two British families. I am coordinating the formulation of a strategy for a prospective new owner, namely the British banking and private equity magnate Roddie Fleming. It is a fascinating exercise. The strategy that I have been mandated to create takes a very long term view and has to be based on "triple bottom line" (economic, social, environmental) sustainability. It is focused not just on the return on investment for Roddie Fleming, but in very real terms on the needs of the people of Grand Bahama, the other businesses on the island and the Government of the Bahamas too. The very pinnacle of "best practice."

There are obstacles, but hopefully all will have settled down by the (northern hemisphere) summer and we will be able to start to execute what promises to be something truly worthwhile and fascinating. In the meantime, my work with professional service firms through Edge International has contracted to only the strategic planning work that I really enjoy and where I excel. Especially when it involves helping a firm get to grips with the larger challenges that are emerging in this first decade of the 21st Century. It really is great to be able to restrict one's practice only to engagements that one loves!

I will try to keep up a more frequent flow of blog posts too, now that I have "broken the drought."

Fellow "Top 3" law firm consultancy Hildebrandt together with CitiBank has just released a Client Advisory with similarly sombre views on the prospects for law firm growth this year, especially in the USA. Download it by clicking here.

If Citibank’s Law Group Head and friend, Dan DiPietro, is correct, US law firms may soon be battling unprecedented economic pressures. We believe that Law firms must immediately prepare by reassessing their strategies in order to:

• minimize the potentially firm-threatening impact and
• capitalize on competitive opportunities

1.    Strong Leadership

In ancient times, the Cherokee Nation had one chief who would rule during times of peace; another during war. The need for hard, courageous decisions, even sacrifice, is common to both recessions and wars. In both, strong leadership is critical if hard decisions are to be taken and actually executed.

2.    Ramp Up the Frequency of Financial Data Reporting

Things can change fast in a recession. Clients, under financial pressure themselves, terminate engagements. Revenues may contract. Debtor payment periods and write offs may deteriorate, putting pressure on liquidity. The firm’s key financial metrics must be monitored far more frequently than in booming times.

3.    Make the Hard Decisions Humanely and Fast

Layoffs, if required, must be quick and humane not only to preserve capital, but also to get the firm past this trauma quickly and focused on working forward again. Continued employment of underperformers must be carefully assessed. Where the market is no longer buying specific services there are two choices: retool (quickly) or separate. (Do not misinterpret this as a suggestion to rush to lay off people though. Long-term considerations suggest this is a last resort option for all personnel except those who ought to have been asked to leave years ago.)

4.    Get Practice Leaders and Client Team Leaders Focused on Short-term Action Plans

Actions must be executed more quickly than in “good times” and therefore designed for rapid implementation. Plans must be focused, systematic and disciplined. Those that will actually drive plans must be integrally involved in crafting them and managing their execution. Feedback and accountability measures are critical to ensure that the plans are executed, especially when they relate to the hard, courageous decisions (point 1.) Non-billable time becomes a valuable asset and must be actively managed to ensure that key tasks receive priority.

5.    Involve Your Clients

In recessions, client mobility increases. Client needs evolve more quickly as new threats and opportunities emerge. Firms need to go beyond simply expressing empathy and assuring continuing loyalty. They need to actively position themselves to meet emerging key client needs. This cannot be done without actively discussing business (not just legal) issues with clients. If you don’t have client teams in place for your key clients, now would be a good time to start!

6.    Manage Internal Expectations: Business as Usual Could Be Lethal

Remember the tale of the two frogs? The first is dropped into a bowl of hot water. It jumps out. The second is dropped into a bowl of cold water and slowly heated up. It doesn’t jump out and eventually dies. Similar procrastination has been the death of too many good firms. Leaders need to explain internally what is being done to weather the recession and the likely impact on the financial positions of your people. This knowledge will motivate your people to do what is expected of them rather than default to “business as usual.”

7.    This Too Shall Pass: Keep a Balance With Your Long Term Strategy

Think strategically about whether and where to cut short-term resources. Retaining some temporarily unprofitable practice areas and individuals may be advisable if they are important to your long-term goals. On the other hand, a recession is an excellent time to re-engineer or sever areas that have become less profitable but have been tolerated to avoid conflict.

The Chinese character for “crisis” consists of two symbols. One means “danger,” the other “opportunity.” While strategy may be more challenging during recessions, if you grasp the nettle, opportunities will arise to enhance your client mix and your talent base.

What can Edge do to help? Four things, primarily:

• help you assess the features in your current strategy that would need to change in order to “recession-proof” your firm and help you amend your strategy accordingly; and

• help you develop your strategy’s necessary action plans and facilitate the (likely difficult) discussions about executing those actions; and

• help your lawyers develop critical strategic business skills required to bulletproof your existing crown jewel clients from competitors. (Bulletproofing transcends mere “training” and involves a focused methodology that yields immediate results.)

• help you target market new clients whose current providers simply can not continue to satisfy them in challenging times.

Our best regards,
Gerry Riskin & Rob Millard

There's been (un)surprisingly little coverage of the World Economic Forum's current summit in Davos, in a US media apparently besotted with a 0.75% drop in interest rates and a $600 per person tax rebate. Not so elsewhere in the world. Here is a link to a well respected South African financial commentator, Alex Hogg, CEO of Moneyweb, for whom this is the fifth summit that he has attended. An extract:

"Last night, US President George W Bush's right hand, Condoleezza Rice, tried hard to lift the gloom. Her official opening address of Davos 2008 was friendly and upbeat. Exactly the opposite of what we've been hearing from the Republicans here for the past few years. But such is the half empty perspective of delegates that due praise was subsumed by the complaint that the US Secretary of State should have been making these noises eight years ago when her boss took office, not now when he's about to depart from it.

The too-late and "asleep at the switch" refrain about the Federal Reserve kept reverberating in official sessions and private conversations. The few optimists hope this week's rate cut which arrested sliding stock markets will be more than a placebo. Most of those I've been exposed to worry that it's yet another symptom-addressing quick fix which only serves to make the eventually cold turkey even more severe.

That equity markets have become uppermost in minds is reflected in bookings for the various sessions. Rarely have economists been more popular in Davos. Any discussion dealing with the dismal science has a house full sign posted within minutes of bookings opening on the electronic system. Just about anything else on the programme is an easy walk-in."

I'd add to this a comment in the economics blog The Bayesian Heresy, about "what Greenspan would say." It quotes Alan Greenspan in 2001:

Am I trying to be a deliberately pessimistic doomsayer? No, not in the least! I am simply deeply, deeply aware of something that I read in a book on survival in the jungle many years ago. That is: in  a "survival situation," the people that are most likely to survive are those that have the ability to "hope for the best but, at the same time, prepare for the worst."

If you haven't sat down and considered, seriously, what a significant drop in headline earnings this year would mean for your firm, then do so now. And then put an action plan together, to mitigate the risks (and seize the opportunities.) And then execute it.

According to their web site, Quinn Emanuel Urquhart Oliver & Hedges, LLP is a 375+ lawyer business litigation firm - the largest in the United States devoted solely to business litigation.  Their lawyers have tried over 1175 cases and won 1078, or 92%.  When representing defendants, their trial experience gets them better settlements or defense verdicts.  When representing plaintiffs, their lawyers have won over $6.2 billion in judgments and settlements.  They are the only firm in the United States that has won three nine-figure verdicts in the last five years. In that same period they have also won three nine-figure settlements.

Not at all a bad role model for other litigation focused firms.

If you want an insight into how the firm works, I'd recommend that you read the posting :

Wherein We Hear From john quinn of Quinn Emanuel

• The Firm's approach to billable hour targets and  bonuses ($0 for associates that billed <1900 hrs ; Cravath + $5k for those 2100 hrs and above)

• Partner appointments (they eschew non-equity partners)

• Governance (Quote: "if you make the right decisions about who you practice law with, lawyers do not need to be governed; you just need to see that they have adequate help and stay out of their way. at our firm we have very little governance")

•  and even party budgets (they are "not adverse to spending money" on these!)

"it has been suggested that i do not use capital letters in my typing in an effort to be "cool." i am not cool; wish i was, but after 56 years i don't think it is going to happen. the fact is i am not coordinated enough to hit the shift button with one hand and a letter with the other."

Hat's off to a great leader (Euromoney calls him "one of the world's leading litigation lawyers"  and Chambers calls him "known litigation genius") of an amazing firm (what other epithet for a firm that wins 1078 out of 1175 trials) for putting pen to paper (or rather fingers to keyboard) in this way.

A significant part of the Edge International Managing Partners Strategy Summit in Washington DC last week was devoted to Dan DiPietro of Citi Private Bank's Law Firm Group's sombre view of the economic outlook for the US economy in general and US law firms in particular in 2008/9, and what firms might do to "recession-proof" their strategies.

Since then, in just the past few days, the Dow Jones has broken below the 11,000 mark and global stock markets have plunged on fears about the impact of weaknesses in the US Economy. See a CNN commentary Market panic as world stocks slump. See also Bloodbath in Indian Stock Market, where Monday saw the greatest crash in Indian history.

When the United States catches a cold, many other parts of the world catch pneumonia.  By only the 14th trading day of 2008, shares in Europe's main markets are now down between 12 to 15 percent on the year, reacting to the rout in Asia and other emerging markets.

During the market gyrations of 2007, sharp falls were often followed by sharp rises. There is no evidence of that yet in 2008. Will a 0.75% drop in interest rates in the USA and $145 billion in tax cuts be enough to reverse the trend? One hopes that this will not be seen by the markets, after the inevitable short term positive adjustment, as being tantamount to jabbing a sick horse with a cattle prod. As I pen this post, world leaders are gathering in Davos in Switzerland for the 37th annual meeting of the World Economic Forum. High on the agenda must be: how to insulate the rest of the world from the US's economic woes.

How does this translate into action for professional service firm strategists?

Ships do not install lifeboats because they expect to hit rocks; they install them in case they do. Even if you are optimistic that the worst is past, if you have not taken a close look at your firm's strategy and your business plan for 2008/9 in order to work through the "what if..." scenarios that could play out during a major economic recession, then you should waste no more time before doing so.

A key part of this is entering into a proactive, meaningful discussion with your most important clients about how a recession would impact them and how their needs will evolve. Clients become more mobile in recessions, so you want to do this before your competitors do. This possibility has moved from being a mere contingency, to now being a real and present danger.

Edge International's January 2008 edition of our Strategy Newsletter will go out in a day or two and is firmly focused on this issue. I'll post it on this blog as soon as it is released, too.

Gary Wingens of Lowenstein Sandler and Frank Burch of DLA Piper listen to Dan DiPietro of Citibank forecasting a tough 2008, at The Army and Navy Club in Washington DC during The Edge International Managing Partners Strategy Summit

Last week, my Edge International partner and friend Gerry Riskin and I hosted a very private, personal invitation only, Strategy Summit for the leaders of 10 law firms to explore:

•    key strategic issues facing law firms today

•    what law firms are doing to address these issues

•    what constitutes "best practice" in law firm strategy process

The managing partners represented firms ranging from the largest in the world (DLA Piper) to a tiny, brand new firm with a highly innovative business model (Valorem Law Group.) It was a truly fascinating two days of strategic debate and solution building.

On the facilitation / faculty side, we were joined by guests Dan DiPietro of Citi Private Bank’s Law Group and Michael Rynowecer, President of BTI Consulting Group in Boston. The venue was one of the most prestigious and historic venues in Washington DC: The Army and Navy Club, barely a block from the White House.

A publication is currently being prepared to communicate learnings from the summit for publication in February. Not everything will be covered. The summit included many candid exchanges between the managing partners, sometimes on quite sensitive issues. Arguably, this was by far the most valuable part of the summit. We have agreed that the managing partners themselves will be the final arbiters on what gets published and what does not.

Thank you very much to the managing partners that participated. In alphabetical order, they were:

Charles P. (Chuck) Adams, Jr., Managing Partner, Adams & Reese
Francis (Frank) Burch Jr., Joint Global Chief Executive Officer, DLA Piper
Nicolás Herrera, Managing Partner Guyer & Regules (Montevideo, Uruguay)
R. Steven Kestner, Executive Partner, Baker & Hostetler
Patrick Lamb, Chairman, Valorem Law Group
Don G. Lents, Chairman, Bryan Cave LLP
Christopher Marston, Chief Executive Office, Exemplar Law Partners
Keith Vaughan, Managing Partner, Womble Carlyle Sandridge & Rice, PLLC
Mark D. Wasserman, Managing Partner, Sutherland Asbill & Brennan (substituted for by Executive Partner Tom Gick on Day 2)
Gary M. Wingens Managing Partner Nominee, Lowenstein Sandler

Each invitation was extended based on personal peer recommendation.  The event was not publicized beforehand.  Many of those invited could not attend, though, because of conflicts with their internal firm events, specially related to compensation given the time of year.

Given the very positive feedback from the participating managing partners, we will certainly host similar events in the future.  If you are interested in being invited and are willing to recommend other firm leaders with whom you would like to explore timely issues, please let me (email me) or my Edge partner Gerry Riskin know.

Service Goals:

• Help Law and other professional service firms craft strategy that is more meaningful, profitable and sustainable
• Make the task of those that craft such strategy easier, better informed and more inspired
• Help ensure that the strategy that is crafted actually gets not only executed but executed well

Services:

1. Helping firms rethink their strategy process so that they can make the transition from strategy as a periodic "strategic planning" event to strategy as an ongoing process of re-inventive planning as the market evolves, and creating and sustaining a state of dynamic resilience to a range of possible futures, instead of just the one that was anticipated when the strategy was crafted.

2. Assisting firms with a review of their strategic systems and structures, to benchmark these against emerging "best practice." This sometimes takes the form of a longer term, more cost-effective retainer to effect incremental improvement over time, rather than a once-off engagement where impetus may be lost soon after.

3. Facilitation of retreats and workshops on a wide range of topics. Each retreat is obviously tailored to the specific requirements of each firm

4. Analysis and measurement of a firm's culture, assessment of its compatibility with strategy, and assistance in proactively evolving it in a desired direction. I have a particular interest in firms with multi-faceted or otherwise complex cultures, e.g. multi-national or multi-lingual firms.

5.Merger counsel, especially post-merger integration and joint strategy crafting

6.Coaching of strategists and other leaders

Areas of Practice:

• Professional Service Firm Management
• Change Management

• Strategy committee of the American Bar Association's Law Practice Management Section 
• Managing Partner's Forum

• MBA Henley Management College in England
• Currently enrolled in a PhD program at Walden University in the USA, in Applied Business Management
• Undergone further professional development training at various business schools, including Harvard

Here's a great little tale courtesy of Shawn Callahan "down under" at Anecdote, in Australia, about some R E A L L Y long range planning:

New College, Oxford, is of rather late foundation, hence the name. It was founded around the late 14th century. It has, like other colleges, a great dining hall with big oak beams across the top. These might be two feet square and forty-five feet long.

A century ago, so I am told, some busy entomologist went up into the roof of the dining hall with a penknife and poked at the beams and found that they were full of beetles. This was reported to the College Council, who met in some dismay, because they had no idea where they would get beams of that calibre nowadays.

One of the Junior Fellows stuck his neck out and suggested that there might be some oak on College lands. These colleges are endowed with pieces of land scattered across the country. So they called in the College Forester, who of course had not been near the college itself for some years, and asked about oaks. And he pulled his forelock and said, "Well sirs, we was wonderin' when you'd be askin'."

Upon further inquiry it was discovered that when the College was founded, a grove of oaks has been planted to replace the beams in the dining hall when they became beetly, because oak beams always become beetly in the end. This plan had been passed down from one Forester to the next for five hundred years. "You don't cut them oaks. Them's for the College Hall."

In this age of quarterly earnings, annually distributed profits and deliberately engineered redundancy, reading about foresight such as that is truly a breath of fresh air!

Anybody with the slightest training or even interest in business strategy is probably familiar with Michael's Porter's famous 5 Forces Model. It would be no exaggeration to say that this model fundamentally re-defined the field when it was first published back in 1979. Here's a link to a short interview with him (12:57 minutes) on the relevance of the 5 Forces in today's world. Well worth watching. The page also has a link to an article by Michael Porter in the January 2008 Harvard Business Review, updating his model.

Click here for the video

Guy Kawasaki is punting a book on his blog with a nicely provocative title: The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By. If you think that you already know enough about entrepreneurship, take the test. I just did and equalled Guy's score of .... 40%. (Ouch!)

Says the author, Scott Shane:

“People start businesses based on the myths we tell ourselves about entrepreneurship and then are hurt when confronted by reality. Investors believe these myths and invest money and they’re disappointed when they don’t hold true. Policy makers make policy based on these myths and then wonder why the economy isn’t growing with all these entrepreneurs now in it.”

This resonates strongly with why so much strategy ends up flawed too, because we believe the myths that we tell ourselves about:

1.  what our clients think.
2.  which services / clients / fee-earners are profitable, and which are not.
3.  how good we really are, at what's really important.

Looks like Amazon is about to make another sale off me!