Lawslot

Stefan Stern’s FT column Pssst . . . get smart and wipe out whistleblowing some weeks ago had a telling quote from Dov Seidman, founder and chairman of LRN, a US based business ethics consultancy. After reporting Seidman’s view that ‘ethical clarity cannot be established quickly’, Stern quotes what Seidman told the Journal of Leadership and Organisational Studies,

“Doing the right thing” is not a painless option either. . . I actually think that in many cases doing the right thing is often inconvenient . . . Sometimes that is exactly when you know you are doing the right thing, when it feels so inconvenient.”

I carry around with me a (now dog eared) copy of Practical morality for lawyers by the great Bill Knight, one of the doyens of corporate law in the City. This article is only available by subscription to PLC , which is a great pity as every lawyer should read it. In it he anatomises the dilemma that most of us face at some stage or other in our professional careers, ‘when your client wants to do something which is legal, but in your view highly questionable’, and in the doing of it will be looking to you for help and advice.

As Knight notes

Look hard; this is dangerous territory. One day you’re devising off-balance sheet structures, the next you’re letting the senior executives get rich on them, then you’re shredding documents and, before you know it, you are explaining to your family that you may not be seeing them for some time.

It all seems so easy but sometimes, especially when a valued client asks a favour, and times are hard, it isn’t.

I posted some weeks ago about cultivating a habit of optimism: something which is increasingly difficult as the news gets worse, but stick at it. Keeping the morale of the team up should be one of a law firm leader’s main responsibilities.

Another responsibility, and this has to be linked in to that optimism, is to hold onto the long view. Short term solutions often seem to offer immediate relief to problems, but there is the very real risk of missing the wood completely as you concentrate on the trees.

Business planning in uncertain times is an article by David Hunt in Smith & Williamson’s Summer 2008 Professional Practices News was spot on. In it he identified two principal tasks: to reign in costs, and to seek opportunities.

Although the first of these is, in large part, obvious, Hunt adds a number of key riders

• service delivery (i.e. people) cost, so one way of cutting costs is to get rid of them. This is being done across the profession as law firm after law firm puts in place redundancy programmes. But, as Hunt notes, “change (redundancy programmes) may be and are expensive and can have a long term impact on a firm’s culture”. I would add that you need to know what you want to be as you come out of the downturn is also important.
• cutting discretionary spending offers an immediate opportunity to limit costs, but (again Hunt) “marketing, training, recruitment and capex become ever more critical in a downturn as they aid recovery and future expansion.”

And as for seeking opportunities, take the long view: “thought should be given to future as well as current revenues”. So consider

• lowering prices to win work (although I would add the caveat that there is a risk that teaching your client to buy on price makes only one party, the client, happy, and may have a long term impact on the relationship
• re-evaluate business development activity: build new contacts or markets and strengthen relationships with existing clients (back to Nick Jarret-Kerr’s admonition, which I linked to in my post Spending time wisely, back in early July, to get even closer to clients.

The accelerating downturn, and the UK property market (both residential and commercial) hitting the buffers, has already started to change the legal market. Leaving aside the rumours of cash calls and firms in trouble, the middle market consolidation is starting in earnest (for example the recently announced merger of Withy King and Marshall & Galpin, to say nothing of the gossip circulating about who is talking to whom; or more interesting, who is not being talked to.)

It is an appropriate time to revisit Legal Services Reforms: Catalyst, Cataclysm or Catastrophe by Stephen Mayson, Professor of Strategy at and Director of the Legal Services Policy Institute. In his March 2007 review of the legal services marketplace (inefficient, ripe for reform) Mayson summed up its health as follows,

My diagnosis so far, therefore, is that we have too many qualified lawyers, too many law firms, and too many equity partners.

Later he identifies consolidation as a one of the key themes for the future, highlighting ‘the need to reduce the number of firms . . . in the interests of quality, consistency, efficiency and cost’.

Well, this is already happening and will gather pace. Mayson identified one of the drivers as the ‘natural forces of competition’. I would add to that diminishing fee income, the cost and, at the moment, the availability of borrowing, and the demographic imperative. To say nothing of the Legal Services Act, and the arrival of new entrants into the market.

Train journeys offer an excellent opportunity to catch up on reading, both professional and management. Travelling to London recently, I re-read Rob Millard’s The Strategy Executioner (you will find it in Edge International September 2008 Law Firm Strategy Newsletter).

Millard sets out ten easy steps to ensure your firm’s strategy never sees the light of day; number seven particularly caught my eye,

7.  REWARD PEOPLE ONLY FOR PRODUCTION

The successful strategy executioner pays no heed to ridiculous ‘balanced scorecard’ approaches to performance measurement and reward. They keep the focus squarely on production and only production. Measure and reward billable hours only! That way, people are discouraged from poking their noses into areas where they don’t belong. If anybody asks about strategy, smile and wave and tell them that their own interests would be better served by simply working harder. An added bonus is that this approach tends to maximize short-term profit, which your partners will appreciate when they make their drawings. As to the long term: leave that up to the poor idiot who comes after you!

So now you know.

Somewhat late a comment on the article Meet the rich some weeks ago in The Guardian, which John Malpas posted about in early August, and in particular on the description of the group of lawyers and bankers interviewed,

technically able but less intelligent, less intellectually inquisitive, less knowledgeable and, despite their good schools, less broadly educated than high-flyers in other professions.

Whether or not this is true (and my experience is that this is not the case), what we should be worried about is the perception that people have about the law and lawyers. This is an age old problem, but one we cannot just shrug off.

On a slightly different tack, but worth the read, see Matthew Taylor’s Greed is good, but only in its place, in his eponymous RSA blog.

In a recent post, Not quite such a simple solution I argued that time may be better spent looking at ways to develop your active clients; or re-activating your dormant clients.

Others think the same. See Reactivate past clients in Matthew Homan’s The [non] billable hour, which in turn links to John Jantsch’s Seven Tips to Dig out from a Recession. At the risk of repeating it,

Reactivate past customers – Where did I put that customer anyway, I know they are around here somewhere. Sad but true, sometimes we don’t bother to communicate with current customers unless they call with an order. By the time they have decided someone else appreciates their business more, it’s too late. Reach out to lapsed customers and make them an apology, promise to never ignore them again, and make them a smoking hot deal to come back.

If you haven’t read Rob Millard’s post The Greatest Banking Crisis of our Generation on his blog The Adventure of Strategy, you must.

It is very sobering stuff ~ but absolutely spot on

If you have not yet switched the focus of your strategy to creating contingencies to deal with the very serious possibility of survival under the worst possible economic scenarios, then do so now. Do not delay.

1.  Make sure that you have jettisoned all non-essential costs (but not the essential ones)

2.  Make sure that you are getting accurate and objective information from the market …. keep especially close to your key clients

3.  Make sure that you have a plan based on the “What If?” scenarios that you have identified might emerge

4. Keep your eyes peeled for opportunities as well as threats to be warded off

5. Unless absolutely unavoidable, stay true to your core strategic intent

This time will pass. Right now, a clear mind and strong leadership are absolutely essential.

I suggested to one of my colleagues this morning that he should read The Lex Column, and in particular The law of diminishing returns. The question it put was

But what of the lawyers? As private partnerships, they are shielded from close inspection, but some pain probably lies just around the corner.

The answer?

But there are already signs of forced consolidation, especially among US firms overexposed to a sickly domestic market. Anecdotal evidence from European firms with big overseas networks suggests that several American outfits are desperately seeking mergers. Expensive offices in Hanoi and Bahrain used to be seen as a drain on partners’ takings; now they may be mandatory to survive. Charge-out rates fell, in real terms, during the recession of the early 1990s. Newly qualified lawyers should nail down those six-figure salaries while they can.

The comments were directed at the global players, but they hold good for most law firms. There is little doubt in my mind that consolidation, and pain, is coming. The current economic climate is yet one more accelerator.

It was not all doom and gloom

The good news is that, unlike banking, the industry generally bills on a time-spent basis, so failed deals and falling transaction values won’t annihilate takings. Insolvency and litigation practices, too, should provide a buffer, as businesses fail and claims mount. And there are a few cost levers to pull: routine word-processing and finance functions could be dispatched to cheaper locations worldwide.

Yes and no: time based billing is already under threat (see previous posts) and it is rare that there is not an element of contingency in deal fees.

Legal Week’s poll today is ‘Will a major law firm go the way of Lehman?’ (and see Charon QC’s post Law review; sackings, shortselling and stupidity. . .) And the voting? Currently 68% are saying No – law firms will tough it out and 32% are thinking we are all under threat.

Read Lawyers bringing blogging under control in the FT. I am not convinced (as a lawyer who blogs). Even so, it’s a good article in Digital Business Web 2.0 Strategy section. I didn’t like the closing quote from “Dave” (an anonymous blogger.

“You might think twice about sending a legal letter if you know it will be published [apparently TechCrunch publishes all its legal communications]. Lawyers have no choice but to use legal language, and that always reads so badly.”

We don’t always (and shouldn’t).

I was intrigued reading the Acknowledgements at the start of Kate Atkinson’s One Good Turn, with the following

. . . Thank you also to David Lindgren for trying, and usually failing to explain corporate law to me and, more importantly, for being a lawyer who lunches.

It wasn’t the opening bit, about explaining corporate law: I know only too well that explaining the finer points of our specialisation is all but impossible. After years spent trying to tell my children what I do, they are no wiser. Perhaps it is the way I tell it. Rather, it was the lunch bit! I am known in my partnership as the partner who lunches (and also for complaining once that the dry cleaners had shrunk my suit) and I have always spent most of my business development budget taking clients, referrers, introducers and providers to lunch. Not for nothing does my Outlook Contacts have a Restaurants category.

It was therefore gratifying to read John Studzinski in the FT’s September 2008 How to Spend It last week,

In most of the world today lunch – or any meal, for that matter – is used as a basis for determining whether people trust and like each other. . . The importance of one-on-one conversation over food is still something that I do not believe has reached its pinnacle. It’s where people learn the most about each other and I don’t think we’ve found anything else as effective at this point in time. Some day maybe, but not yet.

although I was not a little disturbed by his assertion that

In the US and the UK, breakfast is the new lunch.

Not in Plymouth it isn’t!