This is a sequel, in a yin-yang fashion, to an earlier guest post, ‘Three leading indicators of failure‘. What might the equivalent indicators be for success, or outperformance?
I’m not going to rehearse characteristics of successful firms that I consider elementary learning from Manaqement 101, or good organisational hygiene, any more than I would expect my doctor to congratulate me on my good health if I reported that I was not obese and didn’t smoke. But for the sake of thoroughness, some of the elements I consider baseline prerequisites to success and outperformance include:
Healthy, sustainable, and honestly reported financials, with no or the bare minimum of debt;
Strong leadership;
A crisp, market-driven strategy; and
Consistent and disciplined execution upon that strategy.
Think of Maslow’s Hierarchy of Needs: these are the equivalent of safety and security, nutrition, shelter, and baseline good health.
Here are my three nominees for leading indicators of out-performance.
I. A shared and compelling vision
This is not the same as a carefully articulated and compelling strategy, and Lord forbid that you think it’s the same as the omnipresent and gelatinous free-roaming jellyfish concept of ‘culture’, which is a pox on our ability to think clearly about what our firms are really and truly designed to achieve.
The ‘shared and compelling vision’ is widespread, ideally near-universal, agreement within the firm on what it and all who work for it stand for: An aspirational view of what we are jointly trying to build together, which is something (a) praiseworthy and laudable; (b) stronger, more resilient (‘anti-fragile’) and more capable than it is today; and (c) which is plausibly within our joint reach.
This, not another 10-15% per year in compensation, is what motivates people from the executive committee to the administrative assistants to want to get up in the morning and go to work, to be cheerful, hard-working, optimistic, creative, and cooperative, and to put in the extra effort it takes to distinguish an acceptable level of performance from noteworthy and surprising levels of achievement.
Here’s an example of a vision from outside LawLand. Princeton University’s April 2000 updating of its timeless informal motto, ‘Princeton in the Nation’s Service and in the Service of All Nations’:
‘Princeton University strives to be both one of the leading research universities and the most outstanding undergraduate college in the world.’
It’s elaborated upon at some length from there (these are academics speaking to academics; you must forgive them), but there’s the thrust. A child could understand it, and some of the most accomplished people in the world could also devote their careers to fulfilling it.
Your vision for the firm is the answer to the question, ‘What does this place stand for, and what do we aspire to make it?’ It is the mutual response to the challenge of how you intend to leave the enterprise better than you found it. (You do intend to achieve that, don’t you?)
II. Being a tangible, distinctive ‘destination’ for clients
Can clients explain in 25 words or less (ideally, five to ten words) why they consider your firm the ‘go-to’ place for one or a few particular, readily identifiable, things? Does your firm stand for the LawLand equivalent of ‘the ultimate driving machine?’ Please, no quibbling here, folks: BMW may or may not be to your taste, that’s not the point. The point is that they claim to know who they are and you know it too.
What makes you different?
What do you excel at?
What can clients find at your firm that they can’t find anywhere else?
Think this is impossible? Here are, in my personal opinion, a few examples. Other firms do these things as well, of course, but here are the names that probably are on the tip of your tongue if you think of each of these practice areas:
Labour and employment: Jackson Lewis, Little, Ogletree Deakins
Private equity: Schulte Roth, Simpson Thacher
Debt and equity issuance (capital markets): Cleary, Davis Polk, Sullivan & Cromwell
Litigation where the stakes are deadly serious: Paul Weiss, Quinn Emanuel
High tech IPOs: Cooley, Fenwick, Wilson Sonsini
Hostile takeover fights, proxy contests, M&A: Skadden, Wachtell
Energy: Baker Botts, Vinson & Elkins
Banking in the City of London: Any of the Magic Circle
You get the point. It may be hard but it can be done. And the rewards are tremendous.
Consumer product safety warning about attempting to gain a standout name for yourself in one area: count on having to say no to a lot of other areas. If you’re not willing to do that, you’re not serious about this. Just so you know.
A second dimension to becoming a distinctive destination approaches it not from the perspective of building a practice area powerhouse but from the dimension of standing for indisputable quality or value (you cannot do both).
In today’s post-Great Reset environment, clients (and the very same clients) are migrating in two directions at once: a flight to quality, and a flight to value. Are they finding value in the middle? Not so much. Regular readers know that I like to abstract from LawLand to use examples from other industries, so I invite you to think of the last time you were in the market for, say, a shirt or a bottle of wine. I’ll bet, without knowing you, that you wanted a either a lovely dress shirt out of fine fabric or a polo for the weekend, and that you wanted either a name-brand vintage cabernet or a jug of the house white for the refrigerator. You see where this is going: The middle, not so much.
Note what I have not said: I have not said staking out a clear identity as providing quality or providing value is easy. The high bluffs of quality are quite well-occupied, thank you very much, and a reputation for prestige of the very first rank can take decades to establish. Not for the faint of heart.
Conversely, focusing on delivering value instinctively rubs many lawyers the wrong way, and if they had the MBA-speak for it they would probably say something like, ‘I didn’t go to law school to optimise business processes’. (What they might actually say would be, ‘I didn’t go to law school to be cheaper than the other guy’.) Every lawyer wants to think their firm is BMW and they’re a German engineer. They’re not and they shouldn’t be. Camrys, Accords, and Sonatas provide tremendous value and fulfil a critical role in the market.
A third dimension which will make you a destination is at least as challenging to create, but digs its own moat of protection around your castle and ramparts if you can build it: providing a global platform. Rome, famously, wasn’t built in a day, nor was the British Empire, nor is a global law firm. As with the firms known for impeccable quality/reputation/pedigree, assaulting these cliffs is a long, tough, expensive, drawn-out slog, with no assurance of success and plenty of obstacles in your path, not least the dissension of partners in your own ranks who don’t think they’ll be around to enjoy the fruits (if indeed you can ever pull it off) but who meanwhile are bearing the costs.
But again, I didn’t say a criterion for being a ‘destination’ was that it’s easy; to the contrary, any destination worth pursuing has to create sustainable competitive advantage, and Industrial Structure 101 tells you that any advantage that can be readily copied will be – and is – unsustainable by hypothesis.
Now, what do all three of these ‘destination-driven’ approaches have in common?
All are designed, developed, and implemented from the point of view of responding to what the client wants, not from the inward point of view of the law firm creating some Platonic ideal of what a law firm ought to look like.
III. Building a top-drawer, sophisticated ‘C-suite’ of non-lawyer executives—and giving them real power and autonomy
Of all three ‘leading indicators’ I’ve discussed in this column, this may be the one which bodes well to create the most energetic pitched battle pitting lawyers’ perception of their role in their firms against the way sophisticated enterprises everywhere else in the economy operate.
I’m recommending here that you recruit individuals at the top of their respective games for every one of your important executive functions, including at least your chief officers of:
operations
finance
strategy
marketing
technology;
and, if you’re serious about building offensive competitive advantage and not merely playing defence, also powerful heads of:
talent recruitment and professional development;
pricing; and
business process optimisation.
If you’re patting yourself on the back because your firm finally hired a ‘real’ CFO with a CPA degree and a background in professional services to replace the comptroller who had risen through the ranks from the accounts receivable desk, then I would applaud your taking a step in the right direction, but you’re still on your own 20-yard line. Prepare for a long drive on the ground and through the air. You can get there, but some people on your team may endure hard hits on the way.
I’m talking about a C-suite commitment of a different order of magnitude. I’m really talking about stealing a page from the corporate world, and purposefully going on a mission to recruit, and pay – as in top of market – the most experienced, sophisticated, and capable CXO’s you can find. Take them from where you find them; if you limit your search to LawLand, you might as well limit your search to left-handed candidates with birthdays in June. You just cleaved away 98% of the talent pool.
Second (again), be prepared to, and do, pay them what they’re worth. You may in fact have to pay them a bit more in ordinary income than strict ‘comparables’ would indicate, since you can’t offer stock options.
Finally – and this is where you need to be prepared for a sustained autoimmune rejection response from your own organisation in the form of your partners – give them real power and autonomy. Do not under any circumstances let them be second-guessed. Leave them alone to do what they do best. ‘Manage’ them, yes, and have high expectations for their performance—I’m not suggesting otherwise – but don’t permit anyone at the firm (most particularly including the ‘gorillas’ – see instalment #1 of this) to micromanage, undercut, double-deal, subvert, sabotage, or second-guess them.
Why is this important?
Would you permit your C-suite stars to second-guess the way your partners handle their litigation and transactional matters? If you answer that in the way I expect (NFW, or words to that effect), then you know why reciprocal respect and autonomy is important. Let lawyers lawyer, let business people run the business.
A larger issue is afoot here.
Partners think they can do anyone else’s job, but no one could possibly do their job. Because they’re lawyers, they know better than anyone – better than all of them. They think they not only should have a voice but a vote on anything that comes to their attention, be it through formal firm constitutional provisions or at their own whim. They are wrong on all counts.
Countless are the times I’ve heard partners complain, sometimes pre-emptively before it’s even a real and present danger on their hyper-sensitive radar, about being ‘managed’, or a ‘top-down approach’ at the firm, or ‘centralised decision-making.’
I have a simple question: What did you think the deal was, in joining BigLaw?
More strongly: Get over your self-important, me-centric view of the world. It’s unbecoming.
Americans, Europeans, Asians, everyone across the world, understands that joining a large organisation has pluses and minuses. So does joining a start-up, a small company, a non-profit, a governmental agency. As the weak joke goes, ‘that’s why they call it work’. By signing up with BigLaw, you subscribed to an implicit social compact: this firm is bigger than me, it has strengths and advantages I could never have created or enjoyed without its size and scale, and yes, there are mutual expectations, limitations, and responsibilities.
Every couple of weeks I receive an email from a partner at one AmLaw firm or another (for the record, there seems to be no pattern) to the effect of ‘this isn’t the firm I joined’. And 90% of the time I have to tell them they’re right. So they have a choice.
I’ve also seen talented, desirable, and highly marketable groups of partners leave – not just for another BigLaw home – but to form a tasty boutique of their own. If you follow the trajectory of these firms, and I try to do so with the more interesting ones, you find that within a couple of years the all-hands wine and cheese parties in the library Friday afternoon are tailing off, the spontaneous pizza-for-everyone evening orders are more memory than reality, and the firm-wide distribution of full disclosure, open kimono financial statements have slowed to a trickle. In other words, the firm is changing. It’s becoming more ‘managed’ and more ‘top down’. What a shock.
I know of no pithier, more succinct, or less politically correct declaration of the bones of the social compact that comes with membership in BigLaw than that of Peter Kalis, chairman of K&L Gates, in an all-hands memo republished on Above the Law a couple of years ago dated 30 December 2010, the day before the firm’s calendar-year fiscal year books closed:
‘Let me be clear about a couple of things. First, partners and administrators at this law firm are expected to run through the tape at midnight on December 31. Many of you came from different cultures. I don’t care about your prior acculturation. We didn’t conscript you into service at this law firm. You came voluntarily. What we are you are as well.
‘And that brings me to my second point. We are a US-based global law firm. US law firms operate on a cash basis of accounting. Our fees must be collected by midnight within the fiscal year in which they are due. You don’t get to opt out of this feature because it doesn’t appeal to you. Again, I couldn’t care less whether it appeals to you. It is who we are and therefore it is who you are. Get us paid by tomorrow.’
Like it or not, this has the inarguable ear-shattering crash of truth to it. David Lat said as much in the very next lines of the post:
‘You know, in substance, you kind of have to agree with Kalis. It’s not like the partners were surprised by K&L Gates’s collection policy. Get your money by the end of the fiscal year or it won’t be reflected in your 2010 realisation.’
Pretending you didn’t know what you signed up for is either hypocritical or naive. Billion-dollar-a-year enterprises spanning a multitude of time zones demand adult supervision. ‘Whether it appeals to you’ is not germane.
Some closing perspective.
Each of the three ‘indicators’ I’m advocating here should be resoundingly welcomed by lawyers in these firms; you should be lobbying management to provide all of these, in spades. Need I remind you that the market landscape for BigLaw has never been more competitive? That far from the rising tide of the 80s, 90s, and (most of) the 00s, lifting all boats, we are locked in a battle for market share? That disaggregation has arrived? That substitutes are cropping up? That the vast majority of law schools, source of our future talent, are burning platforms?
This is not the salubrious environment in which to lay down your arms. Demand your firm pursue all those indicators if they’re not, and redouble their commitment if they are. It’s no exaggeration to point out that your wellbeing depends on it.
Bruce MacEwen is president of legal management consultants Adam Smith, Esq. You can read the blog here