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NALP 2011: Law Firm Transparency – From Black Boxes to Glass Houses

Is your law firm this transparent?

Greetings from lovely Palm Springs, California, home to the 2011 annual education conference of the Association for Legal Career Professionals (better known to many of you as NALP). The setting is beautiful, the weather is fabulous, and the conference panels have been stimulating thus far. Who needs SXSW?

Yesterday I attended a very interesting session, covering a topic near and dear to the hearts of many Above the Law readers. The apt title of the panel: “From Black Boxes to Glass Houses: Evolving Expectations of Law Firm Transparency.”

The lively discussion covered a wide range of topics — and also offered some advice for law firms for dealing with the increased transparency of the digital age….

The panel description:

With the ubiquity of social media and evolving expectations for transparency, firms face unprecedented challenges in defining the proper balance between appropriate disclosure and protecting the interests of a firm and its clients. Through the lens of unique, proprietary survey data and expert panelists, we will examine the interplay between law firms’ internal and external communications strategies and associate perceptions of their firms’ business outlooks. Vault survey data will also be employed to explore the impact of these factors on recruitment and retention, as well the correlations among associate perceptions of their firms’ prospects, overall satisfaction, and other criteria.

And the panelists:

  • Brian Dalton, Managing Editor, Inc., Moderator
  • T.J. Duane, Principal, Lateral Link Group LLC
  • Susan Robinson, Associate Dean for Career Services, Stanford Law School
  • Charlotte Wager, Partner, Chief Talent Officer, and Chair of Associate Development & Evaluation Committee, Jenner & Block LLP

Dalton opened by discussing the spread of transparency throughout the world, as reflected in everything from WikiLeaks to President Obama’s declaration that he’d run the most transparent administration in history. Transparency has a tremendous amount of rhetorical appeal, but it can also present practical challenges and difficulties.

Transparency has been growing within the legal world too, noted Dalton. For law schools, the Law School Transparency organization is pushing for law schools to become more forthcoming about their graduates’ employment outcomes. On the law firm front, Steve Brill’s American Lawyer magazine started publishing internal law firm data, including profits per partner, back in the early 1980s. At the time it was scandalous; now it’s industry standard.

The law firm world is covered not just by the American Lawyer, but also by outlets such as Vault and Above the Law, which delve into such factors as office culture, the associate experience, and diversity. Each year Vault conducts in-depth surveys of law firm associates, which it uses to generate its influential rankings. In Vault’s latest survey – which had approximately 16,000 respondents from 350 firms, Vault’s largest survey ever – Vault added a new question regarding transparency, asking associates to rate how transparent their firm leadership is with respect to decisionmaking.

Law firms did not excel on this metric. Consider these average aggregate ratings, from the results of the latest Vault survey (the new rankings come out in June):

  • overall associate satisfaction: 7.29
  • treatment by individual partners: 8.39
  • business outlook of the firm: 8.42
  • transparency: 6.04

Ouch. If translated to a letter-grade score, that 6.04 for transparency would be a D minus.

Vault investigated the correlation between transparency and associate satisfaction and found strong positive correlation. In short, transparent firms have more satisfied associates.

(As Dalton noted, there is an issue of causation versus correlation here. Does transparency contribute to associate satisfaction? Or are firms with happy associates more willing to be transparent because they have less to hide? I suspect it’s a bit of both.)

Dalton listed the top 5 transparency related subjects, according to associates (in descending order of importance):

1. Compensation
2. Layoffs
3. Evaluation process
4. Partnership track
5. Strategic decisions

And here are some of his favorite metaphors prompted by the transparency question:

1. “My firm is as transparent as a solid oak.”
2. “My firm is as secretive as Mao’s government.”
3. “My firm’s decisionmaking is as obscure as the Politburo’s.”
4. “My firm’s decisionmaking is less transparent than OPEC price-fixing.”
5. “Associates get information about the firm through a bad game of telephone.”

He outlined some major transparency-related themes in the survey findings (note that some of these themes point in different directions, due to differing perspectives from respondents at different firms):

1. Associates compartmentalize: Individual partners are approachable and willing to discuss the firm with associates, but there is very little transparency about how high-level decisions are made. Also, transparency will vary from subject to subject.

2. Firms are trying to improve: For example, some firms are starting to send out memos about key decisions. As one might expect, some information is useful and some isn’t.

3. Transparency has diminished: Some associates feel that transparency has declined (perhaps due to the difficult economy; see also the discussion below about the fear of internal communications being made public).

4. Transparency is a phony issue: “Complaints would stop if bonuses were doubled,” said one respondent. Another said opacity might be the best way to run a firm, since it frees up everyone to focus on the practice of law.

5. Other media outpace firms’ communication efforts: “I get as much information from the internet as I do from firm management.”

Dalton then turned to the panelists for their thoughts on the meaning of transparency. T.J. Duane of Lateral Link, speaking from the perspective of an external recruiter, noted how lateral candidates seek transparency with respect to matters of compensation. Many associates look at firms as somewhat interchangeable; they want to know where they’ll be happiest with their salary.

Irena McGrath of Hogan Lovells observed that organizations generally share more information now than they’ve ever done before. The information needs to be fair and balanced, of course, and candidates need to do their homework to piece together the whole story.

(Amen. We try to do some of this homework and piecing together here at ATL, but given our limited resources, we often can’t do as much as we would like. You should definitely supplement what you read in these pages with news from other sources.)

“Transparency is a loaded word,” noted Charlotte Wager of Jenner & Block. Information must be placed in context. What kind of transparency are you talking about, with respect to what subjects? In some areas, information flow needs to be more controlled. In addition, a distinction should be drawn between internal and external transparency – although maintaining a divide between internal and external communication is harder than ever, in the age of Above the Law and Twitter.

Offering the law school perspective, Susan Robinson of Stanford Law observed that transparency is very important to students as an abstract idea. Law students get bothered when they see comments on the web about a firm not being transparent. (This seems right to me; millennials appear to prize openness.)

Discussion then turned to the tricky issue of internal versus external communications. McGrath noted one advantage of firm-wide emails: they make sure that everyone gets the information at the same time. The problem, however, is that these emails are very easily distributed outside the firm — which might not be what the firm wants. Many firms might want to let their employees know about a given development without sharing the news with the entire world.

Some firms have responded to this erosion of the wall between internal and external communication by simply communicating less to their own people, Wager observed. But there’s a better approach to dealing with this difficulty: after you communicate the top-line news to everyone, perhaps via email, you can use more informal channels to offer additional information or reassurance, or address questions. The initial firm-wide communication can be supplemented in helpful ways.

(Agreed. Some firms complain to us that Above the Law, by taking internal communications and making them external, has forced them to communicate less to their own people. But this complaint may reflect a certain amount of laziness on the part of the firms — they want to be able to send around a firm-wide email, to hundreds or even thousands of employees, and not have it go outside the firm. That’s not a realistic expectation in the digital age. The proper response to greater transparency is not to communicate less, but to communicate better, using all of the different channels available to you.)

On the subject of the internal / external communication challenge, and how greater transparency has perhaps reduced internal communication, Susan Robinson made this excellent point: How much information would firms share if leaks never happened? Think about the law firm world before the American Lawyer started reporting about partner profits: there was practically zero information about this subject. To some extent, information that makes its way outside the firm helps to promote greater transparency.

(This raises what I’d call the “Google question”: Is more information always better? For example, was Biglaw better in the pre-Am Law age, when partners at Firm X had no idea how much they could earn if the lateraled over to Firm Y? It’s an interesting issue to think about – although perhaps beside the point, since it’s so contrary to the way we live now.)

Dalton posed some questions to Wager: How does transparency tie into evolving partnership structures? For example, what about the divide between equity and non-equity partners? How much transparency should there be on that subject? And should associates care about the distinction?

Wager raised an interesting point: a firm might, by responding to some of the various demographic surveys, inadvertently reveal whether a particular partner is equity or non-equity. For example, if a firm discloses through surveys that it has one female non-equity partner of color in a given office, it would be very easy to figure out who that partner is, just by searching the firm website.

As for whether associates should care, it depends on how you define “success,” Wager noted. Is the only form of success making equity partner? Sometimes these surveys of equity versus non-equity partner status reinforce the perception that the only form of success at a firm is making equity partner, which isn’t accurate. A firm needs experts in many different substantive areas, and it needs lawyers at different billing rates and levels of seniority. Not everyone can become an equity partner — and perhaps that’s not a bad thing.

The floor was then opened for audience Q-and-A. I posed a question about how much reputation matters. When the market for lawyer talent shifts from a seller’ market to a buyers’ market, as it did during the Great Recession, can firms afford to worry less about how they are perceived?

Charlotte Wager rejected that notion: “Reputation is reputation is reputation, in good times and in bad, and especially in times of crisis.”

Irena McGrath concurred, noting that firms are always competing for the best talent and need to preserve their reputations as desirable places to work. “It doesn’t matter whether it’s a buyer’s market or a seller’s market; all that can change in a heartbeat. Reputation is all you have.”

UPDATE: There’s additional discussion of the panel over at Vault.

(hidden for your protection)

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