This is a continuation of the past three articles I published in ATL over the past month or so. My first article argued that Profits Per Partner is a great servant for a law firm but a bad master. In my second article, I set forth our Profits Per Partner Emancipation Plan as an alternative. In my third article, I set forth what I believe is the highest level in law firm profitability analysis, which is to “embrace” the volatility inherent in the practice of law. In this final article, I will give some thoughts on how a law firm could indeed Embrace Volatility.
Before getting to that, I will mention as an aside that I wrote a few weeks ago in this column an article entitled “Are Lawyers Only Happy When They’re Miserable?” That article largely dealt with how an individual might in fact Embrace Volatility. This article is directed not at individuals but at law firms.
If you have been reading my past articles, you may be open to at least considering how Embracing Volatility might be a good thing for a law firm. But is this whole concept just a fantasy, like it would be nice to not be afraid of snakes but you can’t help it and just reciting “I am not afraid of snakes” isn’t going to work? I don’t think so. I think the following simple steps would do it quite nicely:
This is a continuation of the past two articles that I published in ATL over the past month. My first article gave my view that the profitability metric of Profits Per Partner is a good servant but a bad master and, as a master, it is a root cause of serious problems for Biglaw. In my second article, I put forth a Profits Per Partner Emancipation Plan as a different way of doing business that I hope will eventually be adopted. Now, here I am giving my theory on what I think is a higher level of law firm profitability analysis, which is to “Embrace Volatility.”
Let me start by asking you: what is it that we all crave in our hearts? I mean, we all want money and power and fame and to be cool and good-looking and talented at sports or music or acting — but in addition to that — I think it is one of the basest human emotions to crave:
This is a continuation of the article I published in ATL two weeks ago. My previous article gave my view that the profitability metric of “Profits Per Partner” becomes in effect a master (rather than a servant) and is destructive and a root cause of some serious problems for Biglaw. In this article, I put forth a different way of doing business.
A long time ago, we at Duval & Stachenfeld decided that we would not make partnership decisions in our law firm based on a “numbers game.” Instead, we would look at the quality of the associates, and if they were qualified, we would make them partners irrespective of the effect that had on our firm economics. We have stuck to that view rigorously.
This is the first of a four-article series focusing on the following matters:
First Article – Profits Per Partner: A Good Servant But A Bad Master
Second Article – A Profits-Per-Partner Emancipation Plan
Third Article – Beyond Profits Per Partner – Embracing Volatility
Fourth Article – How to Embrace Volatility as a Law Firm
Those of us running law firms have two sets of clients:
Clients – parties that hire us for legal work.
Lawyers – parties that do the legal work for the clients.
One without the other is pointless, obviously – they are yin and yang. However, despite this almost symbiotic relationship, most law firms are set up to attract great clients a lot more than they are set up to attract great lawyers. That is how law firms define “marketing.” The other function is called “recruiting.”
Indeed, let me ask you — in your firm, which is cooler: to be on the marketing committee, or to be on the recruiting committee? Which one is more likely to result in success at your firm, including money, power, fame, a big office, etc.?
There – I always wanted to write an article that had such a strange title that people would look at it and wonder what I was talking about. So here goes….
Everyone just loves to beat up on the big law firms. I keep reading articles everywhere that say:
They are overpriced.
They are inefficient.
Their partnerships destroy innovation.
They are terrible places to work – sweatshops – associates are worked to death until they quit.
Their business model is broken.
There was even a book that came out a year or so ago with a great title, The Lawyer Bubble: A Profession in Crisis (affiliate link). To me the book described the law business as part of a dying profession that is enmeshed in a conspiracy to ruin the lives of all in it — except the fat-cat senior partners at the top of the pyramid. I admit I read it a while ago and it is a bit hazy in my mind, but the author, a former Kirkland & Ellis partner, clearly is not a fan of the current state of Biglaw….
I am famous for a saying. Actually I am not really famous, but I have a saying that I have been, well, saying for years, as follows:
“Lawyers are only happy when they’re miserable.”
What I mean is this: You are working round-the-clock so much you haven’t even been home for a full day and hardly at all for a month on a doozie of a deal. You are completely sick of it. All you can think of is when the deal will be “over.” You are clearly “miserable.” If only you could have your personal life back! Then, finally, the deal closes — at last. Your client is wiring out the funds. As the transfer of funds is happening, a (terrible) thought races through your mind. You hate yourself for the thought — you try not to have the thought — but you simply can’t help it… and the thought is that you are kind of worried because you have nothing to do now and that is disquieting… gee, what if work has really slowed… at some point this will be a real problem. You’ve had your personal life back for maybe a second — you haven’t even taken a shower — and you are worrying where your next deal will come from.
Or the other way around. Work has been slow — very slow — for a couple of months. You have enjoyed some rounds of golf and gone out to a bunch of dinners and lunches, but you really would like a nice tricky and challenging deal to sink your teeth into. And of course you are mindful of the fact that like it or not lawyers just have to bill hours. That is how we make a living, and you just aren’t billing hours. Not a good thing. You are edgy — if only you could have a big deal to work on….
“Low overhead is great!” That is one of our sayings. We recite it all the time — yes, even out loud at meetings — as it is a powerful competitive advantage for a law firm. It seems pretty obvious, but if so, why doesn’t everyone get with this concept?
There is a term informally used to describe how overhead impacts a law firm called “Implied Overhead.” The “Implied Overhead” of a law firm is the cost of everything except the lawyers divided by the number of lawyers. So if you have 50 lawyers and the cost of “everything” except the lawyers is $10,000,000, then you have implied overhead of $200,000 per lawyer.
Our Implied Overhead for last year was about $165,000. Anecdotally I believe that Implied Overhead for major law firms averages about $300,000. (I admit I don’t really have this data for sure; it is just what I have heard.) If your firm has 100 lawyers and implied overhead of $200,000 and the average for major law firms is $300,000, then you have a $100,000 per lawyer competitive advantage over your major law firm competition. Multiply that by 100 lawyers and you just made $10,000,000! And this flows right to the bottom line! If there are, say, 30 partners at this firm, then each partner just got a check for $333,333!
Yikes — did I do that math right? Was that $333,333 per partner merely by reducing the implied overhead? I just double checked and $10,000,000 divided by 30 partners does indeed equal $333,333. That’s a sizable number, so maybe you should read the rest of my article….
Of all the regrets I have in life, one of my greatest is that I never had the chance to meet Peter Drucker before he died.
Drucker is one of my intellectual heroes. He was able to look at the same world that everyone else was looking at but see things that others couldn’t see. He literally invented a science. And like all science, it is around you from the start but you just can’t see it till someone shows you the way.
The science he invented was the science of “management.” Before Drucker, people just ran things and sometimes good things happened and sometimes bad things — no one really delved too deeply into the “why” of it all. But then along came Drucker, who made order out of chaos and realized that there were principles that, if followed, would increase the likelihood a business would be successful.
All those leadership books you sometimes read, all those “how to” books you sometimes read, all of that thinking evolved from his groundbreaking analysis into the science of “management.” Drucker’s books are utter masterpieces. Indeed, there was an epiphany for me on every single page of his amazing book Management (affiliate link). I think I learned more about how to run my law firm successfully from Drucker than from any other source.
Here are two thoughts from Drucker that hit me like a bolt of lightning when I read them. Honestly, my business — and even my whole life — was never the same again.
I give credit for the inspiration of this article to a writer named Seth Godin who wrote a book called The Purple Cow (affiliate link). My law firm benefited hugely from this book.
The theory of the Purple Cow in a nutshell is that you should try to STAND OUT like a purple cow would stand out from the other mere brown cows. If you don’t STAND OUT, then you just blend in, and you are nothing at all.
Okay, so that is a good point – as if you didn’t know that already. But it is not that simple. And here is why. Our instincts and everything we learn every day – our emotions, our colleagues, and our loved ones – all lead us in the safe (and wrong) direction.
In my article of two weeks ago, I threw out the proposition that if you are running a law firm — or a department or practice group in a law firm — the critical mission is to “attract, train, retain and inspire talent.” If you can do this, you are probably going to accomplish great things — and the converse. So the question now is, how do you do it?
Below is the best I have been able to come up with. It is (mostly) from a speech I gave at an IMN conference in 2011. (You can read the original speech here.)
First — and foremost — Talent wants to be with other talented people. They crave it in their souls. They will put up with major “not nice people” and even poor working conditions, if they are convinced that other very talented people are doing it with them in the trenches. Consider Apple and Steve Jobs. He wasn’t thought of as a nice guy; indeed, quite the opposite. But when people looked around the room, they were awed at the skill sets of those in the room with them, and boy did they want to stay in that room, in the worst way. So they put up with Jobs’s not–niceness. (Of course, I do not advocate being this way as a boss — far from it.)
Average law school debt for graduates of private universities hovered around $122,000 last year. With only 57% of new attorneys actually obtaining real lawyer jobs, recent graduates have a lot to consider when it comes to managing their student loan payments. Thanks to our friends at SoFi, today’s infographic takes a look at student loan debt, including the possible benefits of refinancing for JDs…
Kinney Recruiting’sEvan Jowers is currently in Hong Kong for client meetings and still has a few slots available through October 22. Evan will also be in Hong Kong November 14 to December 15. Further, Robert Kinney has been in Frankfurt and Munich this week and is available for meetings with our Germany based readers.
One of our key law firm clients has referred us to one of their important clients in the US, Europe and China – a leading global technology supplier for the auto industry – in order to handle their search for a new Asia General Counsel and Asia Chief Compliance Officer.
Kinney is exclusively handling this in-house search.
This position will have a lot of responsibility and include supervision of eight attorneys underneath them in the Asia in-house team. The new hire will report directly to the global general counsel and global chief compliance officer, who is based in the US. The new hire’s ability to make judgement calls is going to be as important as their technical skill set background.
The position is based in Shanghai and will deal with the company’s operations all over Asia and also in India, including frequent acquisitions in the region.
It is expected that the new hire will come from a top US firm’s Shanghai, Beijing or Hong Kong offices, currently in a top flight corporate practice at the senior associate, counsel or partner level. Of course, the candidate can be currently in a relevant in-house role.
The JOBS Act created new tools for companies to publicly advertise securities deals online. As a result, thousands of new deals have hit the market and hundreds of millions in capital has been raised, spurring a wealth of new business development opportunities for attorneys.
Fund deals, startup capital raises, PIPE deals and loan syndicates are just a handful of the transactions benefiting from the JOBS Act. InvestorID FirmTM is a platform designed to help attorneys equip their clients with the workflow, marketing and compliance tools to publicly solicit a securities offering online. By providing clients with the tools to painlessly navigate the regulatory landscape of general solicitation, InvestorID FirmTM helps attorneys add value above just legal services.
The Jumpstart Our Business Startups Act (JOBS Act) went into effect in 2013 and permits Regulation D offerings of securities to be advertised publicly. This means that funds and companies can now use social media, emails and web sites to market transactions to new “accredited” investors.
However, with these new powers come new pain points. InvestorID FirmTM provides a secure, fully hosted, cloud-based platform with a breadth of tools for your clients, including: