April Fools’ Day is a terrible day to be in this business. Every tip that comes in requires an extra layer of scrutiny because even longstanding, trusted sources are trying to troll. It’s really not all that funny to make up false but entirely believable stories and pass them off as real. That’s why the Daily Currant isn’t funny.
Which is why when Citi Private Bank issued its First Quarter report on the confidence of managing partners across the legal landscape and declared that managing partners have a rosy outlook, it earned a double take on this end. After all, wasn’t it just a few months ago that managing partners were telling the American Lawyer that it was all gloom and doom on the horizon?
So is this result real? It is, but the headline isn’t the end of the story….
As discussed last week, I agreed to answer some questions from Professor Bill Henderson of Indiana University’s Maurer School of law in exchange for his kind agreement to be interviewed (parts 1 and 2 of that interview available here and here) for this column. This week, I conclude our exchange by answering his final three questions. In so doing, another year of writing for ATL will come to a close, and I wanted to take the opportunity to thank everyone who interacts with this column, whether as reader, commenter, interview subject, or editor. May 2014 be a year of success, health, and growth for us all.
BH: You have chided your fellow lawyers to give back to the next generation of lawyers. I certainly agree. However, between moral exhortation to do the right thing, or changing incentives within law firms, where should we focus our efforts?
At a roulette wheel in Vegas, you know the odds. The folks with all their money on red have a less than 50 percent chance of winning (47.37 percent, to get technical). There will be highs and there will be lows, but over the long haul, those poor saps swizzling their comped drinks will come out on the losing end.
On the other hand, you put all your money on black because the guy on your flight told you to. Intellectually, you recognize you have the same odds of pulling out a victory as the overmatched retirees from Kansas City betting on red, but you’re absolutely positive you’re going to win.
Welcome to the positive expectation bias. Rational thought flies out the window as you ignore facts you know (or at least strongly believe) to be true, instead placing blind faith in the proposition that everything’s going to turn out well for you.
Law firm managing partners are expected to be a little more risk-averse compared to other chief executives, but it turns out law firm managing partners are not immune to a little irrational gambling from time to time….
The year-end Biglaw management machine is starting to grind into motion. The compensation committee is starting to look at the numbers for individual partners — to decide who will be rewarded and who will be de-equitized. And the firm’s A/R collections crew is starting to pressure the partnership to get bills out the door and talk to clients about what will be paid by year’s end. The associate bonus committee? If one still exists, is must be having a hard time reserving conference room space to meet.
The end of the year is a serious time for law firms. For many individual lawyers in Biglaw, it is the time of year when their die may be cast, in terms of compensation, lateral movement options, or even their continued employment. As anyone who follows Biglaw knows, we are living in interesting times, with many firms navigating choppy seas in terms of client demand, financial performance, and expense management. And at many firms, there has never been a wider gulf between the rank-and-file partner and firm management when it comes to the ability to make or influence decisions about the firm. Partners at many firms are often clueless about what the firm is doing and why, to the extent that partners are asked to vote on lateral candidates or even mergers based solely on the “reassurances” and “enthusiastic outlook” of management.
The net effect of this divide between management and the partnership? An increasing sense among partners that they are simply assets of legal “brands” rather than owners or even stewards of a professional enterprise. For many, it is a bit of a hopeless feeling, especially when they consider the Biglaw options down the street, which usually present the same level of management opacity to the putative “owners” as their current firm. But just because management likes to tell the partnership to “leave the managing to us, you just focus on building your practice” does not mean partners aren’t entitled to information — even if it’s just the personal views of the managing partner on certain issues.
Here are five questions for your managing partner. The topics are varied, but the answers given should give partners a good sense of both their relative standing within their firms and the values that drive the business decisions of their leadership….
Former managing partner Edwin Reeser is one of my favorite analysts of the legal profession (or industry, as the case may be). He recently wrote an interesting and thoughtful piece for the ABA Journal with a great title: “Law firms in the Great Recession: looking for change in all the wrong places.”
I’m a sucker for a good double entendre. Here, “looking for change” has at least two meanings. First, there’s “change” in the sense of reform. Second, there’s “change” in the sense of “spare change,” reflected in the sad way that law firm are rifling through the couch cushions — de-equitizing partners, laying off associates and staff, and cutting other costs here and there. These marginal steps have helped keep profits per partner up in the wake of the Great Recession, but they’re no recipe for winning the future.
So what should Biglaw be doing to promote long-term success?
One firm just started pocketing 20 percent of partner pay.
Many lessons can be drawn from the collapse of Dewey & LeBoeuf. We’ve learned, for example, that it’s dangerous to have a law firm name that’s highly susceptible to puns. (Dewey know why that is? Howrey going to find out? Heller if I know.)
Another lesson: avoid excessive dependence upon bank financing. When a firm starts to spiral downwards, that spiraling can be accelerated by a bank calling a loan, not renewing a credit facility, or otherwise taking steps to protect itself that, while reasonable for the bank, can be damaging to the firm.
Ed. note: This is the latest installment of The ATL Interrogatories. This recurring feature will give notable law firm partners an opportunity to share insights and experiences about the legal profession and careers in law, as well as about their firms and themselves.
Jim Maiwurm, chair and global CEO of Squire Sanders, has more than 30 years of experience as a business and transactional lawyer. His work involves the representation of a diverse range of businesses — from technology startups to Fortune 50 manufacturers — in private equity infusions, public offerings and sophisticated domestic and international acquisitions, dispositions, financings and joint ventures.
The first quarter of 2013 was not particularly kind to large law firms. There’s no crisis at hand, but things aren’t exactly great either, with demand registering as slightly sluggish.
Citi Private Bank’s Law Firm Group, which possesses great insight into the legal industry because of Citi’s role as a leading law firm lender, just released its quarterly survey of managing partners’ confidence. The results are consistent with the general sense of “meh” that we’ve been anecdotally picking up from partners we hear from….
Ed. note: The Asia Chronicles column is authored by Kinney Recruiting. Kinney has made more placements of U.S. associates, counsels and partners in Asia than any other recruiting firm in each of the past six years. You can reach them by email: [email protected].
Since late last year, things have been booming in Hong Kong / China in cap markets, especially Hong Kong IPOs. M&A deal flow has recently been getting a bit stronger as well. Although one can’t predict such things with any certainty, all signs are pointing to a banner entire 2014 for the top end US corporate and cap markets practices in Hong Kong / China. This is not really new news, as its been the feeling most in the market have had for a few months now and things continue to look good.
The head of our Asia practice, Evan Jowers, has been in Hong Kong for about 10 days a month (with trips every other month to both Shanghai and Bejing) for the past 7 months (Robert Kinney and Evan Jowers will be in Hong Kong again March 15 to 23), and spending most of his time there meeting with senior US hiring partners at just about all the major US and UK firms there, as well as prospective candidates at all associate levels and partner levels, and when in the US, Evan works Asia hours and is regularly on the phone with such persons, as our the other members of our Asia team. Our Yuliya Vinokurova is in Hong Kong every other month and Robert is there about 5 times a year as well. While we have a solid Asia team of recruiters, Evan Jowers will spend at least some time with all of our candidates for Asia position. We have had long standing relationships, and good friendships in some cases, with hiring partners and other senior US partners in Asia for 8 years now.
Are you challenged by the costs and logistics of maintaining your office, distracting you from the practice of law?
Many small firms are successfully moving part—or even all—of their practice to a virtual setting. This even includes multi-jurisdictional practice spanning several states and practice areas, although solo and small partnerships are still the largest adopters of virtual law.
Can you do the same? The new article Mobile in Practice, Virtual by Design from author Jared Correia, Esq., explores how mobile technology bring real-life benefits to a small law firm. Read this new article—the next in Thomson Reuters’ Independent Thinking series for small firms—to explore how a mobile practice:
Everyone is talking about the importance of Social Media in Corporate America. But it is relatively safe to say that most law firms and lawyers are slightly behind the social curve. Most lawyers, at minimum, use LinkedIn, for networking. Some even use Twitter for pushing out short, pithy content, while many have Blogs, where they write their little hearts out. The adage “it is better to give than to receive” is not always true though in the world of Social. In the Social World – it is best to listen, give back and engage.
Social Media is a communications tool that can deeply educate you about the needs and wants of your clients and prospects when used in conjunction social media monitoring and sharing tools.
Take this quick quiz and see if you know how to use Social to help you engage more with your clients or to better service the ones you have.