David Maister, management consultant and author of several books, has made an offer on his website to give a free copy of his book, Strategy and the Fat Smoker, to a senior executive or managing partner of your firm.   Maister in 2006 declared that law firms are unmanageable - could his "Give a Copy to Management" campaign be a sign that he has regained some hope?

In larger firms, at least, there are strong indicators of more management - the number one indicator being skyrocketing per partner income.  Law firm consultants know that the service industry model is enviable.  There are no fluctuations in price due to factors beyond their control (such as gas prices).  The main cost to the law firm is also a source of its revenue.

The main obstacles to improvement in management are the firm owners who don't want to follow the key drivers that affect income (usually due to entrenched "firm culture" no one is able to alter).  In any other company this would be the fatal flaw that calls in the Grim Bankruptcy Trustee.  In law firms, the margins are typically good enough to deceptively cover the lack of attention to these drivers until a preventable event occurs that causes a firm to split or fail.

However, many are predicting change in the fortunes of law firms.  Interest rates are above 4%.  Firms who otherwise wouldn't necessarily see a difference in their bottom line by not measuring performance may soon see falling incomes and may not know about it until it becomes a crisis.  The signs are everywhere and many firms are taking note.   It is to these firms that Maister's book is so important a read.  Tom Collins has written about Maister's book in the October 25th, 2007 post The Strategy Problem in Law Firms. 

You can take advantage of this offer by clicking here.  Do it quickly.  The offer is only good for the first 100 eligible senior executives or firm managing partners.

Morepartnerincome.com is sponsored by Juris®.  For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

 877/377-3740, e-mail info@juris.com or go to www.Juris.com.

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Many, including myself, have for several reasons (in my case, personal experience), railed against lockstep compensation as a debilitating agent to per partner income and the ability to keep top attorneys. I have seen the internal griping, the uncomfortable situations, and the inevitable loss of talent because of the appearance of unfair distribution of compensation based on a lockstep system.

James Cotterman, however, in an January 3rd post, argues "[t]he success or failure of any compensation system is not simply inherent within the structure of the program." He defends the lockstep compensation system - with a caveat:

[A] pure lock-step program largely requires the firm to assess a senior associate’s ability to progress as a partner over the remainder of his/her career. Essentially you are making some thirty or more years of future compensation decisions at one time. Such an assessment requires much more careful attention to the qualities of being a partner. And such attention is rare.

Among the benefits of lockstep compensation plans:

1. It supports a single firm philosophy.
2. There is little internal competition.
3. Leadership has more time to lead without the annual compensation ritual.
4. Non-traditional roles and new postings are more easily undertaken.

1. It supports a single firm philosophy.
I agree and disagree. It should support the single firm philosophy in that it treats all partners more or less the same. However, I don't assume a single-firm philosophy requires socialistic tendencies. In fact, such tendencies in a market system don't work well and can lead to a split up of the single firm. Also, the system in many ways requires trust within the firm that everyone will do their part. As David Maister has aptly noted, attorneys aren't big on trusting each other. In declaring that law firms are unmanageable professional entities, Maister wrote:

Recently, I was advising a firm on its compensation system. They didn’t like my recommendations. Finally, one of the partners said, “David, all your recommendations are based on the assumption that we trust each other and trust our executive or compensation committees. We don’t. Give us a system that doesn’t require us to trust each other!”

2. There is little internal competition.
Little internal competition should help foster trust and teamwork. Experience tells me that little internal competition fosters laziness. Distrust is a problem but competition is not. Measurement improves performance. However, if you don't care that you are being measured, then you won't excel. Incentives to reach goals fosters competition and that isn't a bad thing. If you incent properly (ie factor "firm citizenship" into your compensation system), teamwork will be rewarded.

3. Leadership has more time to lead without the annual compensation ritual.
There is no question that compensation discussions are a large source of discontent and delay in implementing strategic plans. If all partners agree to a compensation plan that is not going to change, that would be a great thing. Do I believe that is possible? Perhaps, if, as Cotterman notes, firms give more attention to the qualities of being a partner - ie, they are consensus-builders in the Henry Clay mold and can make "some thirty or more years of future compensation decisions at one time".

4. Non-traditional roles and new postings are more easily undertaken.
If compensation isn't affected, attorneys should be more willing to take on roles that otherwise would affect their ability to maintain their income.

Cotterman discusses two main arguments against lockstep compensation:

1. There is no accountability.
2. Stars are not specifically recognized monetarily (at least not instantly).

I made both of those arguments above in disagreeing in part to the arguments for lockstep compensation. Without measurement, there is no accountability. Without accountability, internal strife erupts and your star attorneys walk. So I don't disagree a bit to either argument.

Cotterman notes that some of the most prestigious and profitable firms in New York and the UK use lockstep compensation. This is proof enough that the system can work. However, I would argue (as he does) that a commitment to the mangement of the firm and a single-firm philosophy is critical to it success. The challenge for small and mid-size law firms is to create an environment that fosters teamwork and manageability. For the lockstep compensation to work, firms need their own Henry Clay who can effectively communicate the philosophy that supports the system and the consensus-building qualities to bring others to agreement.

That said, even Clay couldn't ultimately prevent the Civil War. I'm still against lockstep compensation. However, for those who want a guide on how to make it work (as it certainly can work, I am just not a proponent of it), read his article here.

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Two of the wisest minds on the business of legal services, David Maister and Bruce MacEwen, recently posted items dealing with the ambiguities and paradoxes of capitalism.

Maister posted “Who or What is the Firm For?”, noting that the standard capitalist answer that a business is run for the shareholders doesn’t appear to be that cut-and-dry when one is talking about a law firm. In fact, I think Maister would say the question is unsettled or, as he put it, “confusing and ambiguous."

What sets a law firm apart from big corporations is that ownership and employment are commingled, but that is also true of small, closely held organizations that make up most of the business world. Here is the difference: law firm owners are not stakeholders in the “value” of the business. At the end of the day, partners are expected to walk away leaving the firm to the next generation. As firms take on a life of their own (beyond the productive life of their founder), firm leaders acquire an obligation to preserve the firm for the next generation. Doing so means “business as usual” on a continuing uninterrupted tract for the clients of the law firm. The preservation mission in this “walk away” ownership model pits generations against each other or leads to the kind of situation Maister observed:

“…….an immensely successful firm which has dramatically improved its profitability (among other accomplishments) in the past 5 years. The "moves" made by the firm did indeed impress this reader. But here's the kicker: the article pointed out that, since 2001, 37 percent of the partners (i.e. shareholders) had left the firm. Now how is one supposed to process that?”

MacEwen’s post on Adam Smith Esq., “The Paradox of Capitalism”, should make all law firm leaders sit up and take notice. You are at risk from the Darwinian creative destruction driven by entrepreneurship. We are talking about the competitive threat that goes beyond other law firms nibbling around your edges. It is the threat that entrepreneurs tapping new “means” will reinvent legal services or the segment of legal services in which you are engaged. Or to turn that threat around, it is the opportunity out of entrepreneurial drive, or desperation, that capitalism affords you. The paradox referenced by MacEwen is one described by the economist Joseph Schumpeter, who warned that societies benefiting from wealth accumulations through capitalism might begin to erect barriers to protect the entrenched from the next generation of capitalist destroyers.

As for the business or profession of legal services, the smell of change is all around us. The pressures of reforms abroad cannot be ignored. Law firms cannot forever ignore traditional concepts of ownership investment and value. New “means” of solving the wants and needs of legal service customers cannot go untapped. The Societies and Bars afford only limited and temporary protection. Some time, some day, some entrepreneur will accumulate massive wealth by eliminating the wealth and livelihood of entrenched players. The threat only grows for law firms as a whole as elements of change are ignored or resisted and more and more “new means” go untapped.

Law firm leaders must accept that change is constant. Resist at your peril. You either change up or the natural forces push you down. Like other businesses, you must look outside of your natural competitors for the risk that will replace you. You have to look outside of your natural competitors for the innovations through which you can reinvent your enterprise.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income contact Juris National Sales Center: 877/377-3740, e-mail info@juris.com or go to www.Juris.com.
 

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The issue of which is more important, doing the right things or doing things right, has been ringing in my ears since I saw a leading business consultant to law firms shout, “Execution is everything!” from the blog world.

Then as I read Bruce MacEwen’s recent post “ Do The Management Gurus Have Clothes?”, I was reminded of my reaction to that earlier post. MacEwen was writing about Phil Rosenzweig’s new book The Halo Effect, in which the author takes to task many of the popular “management books."  Most emphasize execution quality and would make great “managers” of us all by following their methods.   

If execution in great management is everything, then great managers could make any bad idea or pursuit a success.  It isn’t and they can’t.

Bad execution can rob one of their successes.  It can lower results from what is possible.  But being in the right place at the right time pursuing the right idea rules the day.  Getting the right people on the bus may be the way to go from “Good to Great”, but having the right bus is pretty important to start with.

This is the point where David Maister would probably want to educate us as to the difference between leadership and management.  There is a difference.  Many leaders are not good managers—if, by management, we mean masters of execution. Leadership has more to do with being in the right place at the right time with the right idea and then, of course, getting people to believe the leader’s vision.

The “Halo Effect” is the tendency of management experts to attribute the qualities of “doing things right” to organizations that achieve great success.  Most, I might add, achieved that success by having done the “right things”.  Unfortunately, time catches up with us.  Once others begin to imitate such success, execution becomes the important differentiating factor.  One time “right thing” leaders like IBM, Federal Express, and eventually even Microsoft can fall pray to the imitator with superior execution.  

What does all of this mean for the law firm? It is simple: first do the right things! Then work on doing them better. Picking the right areas of law for your place at this time may be the most important decision you make. The primary importance of doing the right things is why planning is so important.  Otherwise, you may be working hard to improve your ability to arrive at the wrong place. 

When one takes a structured approach to planning, execution is the last thing you plan. First you have to decide where you are going.

Morepartnerincome.com is sponsored by Juris, Inc.  For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

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Both Larry Bodine and David Maister have written about the firm of Levenfeld Perlstein PC and its creative chairman Bryan Schwartz.  I haven’t met Mr. Schwartz, but if you are looking for someone who has modified their compensation approach away from an emphasis on individual production to one designed to promote team work, I would give Bryan Schwartz a call.

While morepartnerincome stresses the importance of balanced financial management, we have also emphasized the importance of law firm culture. I define that as a common set of beliefs. It comes from the partners getting together and agreeing on the things they believe in. Then they must communicate those beliefs to the entire team and they must do it repeatedly and often.  It goes without saying that the partners have to walk the walk as well as talk the talk.

Let me use Bryan Schwartz’s own words. “…and most importantly, firm leaders must create a culture that energizes the lawyers and gives them a reason to stay with the firm. It makes a big difference in profitability. An inspired group of people can make a lot more money than people who are trying to bill a lot of hours." ….. "Our lawyers are the most competitive people, but it’s a culture where everybody helps the other person, they don't compete against each other."

Back to the compensation issue:  David Maister reported on a communication he had from Schwartz describing some of the discussions at the firm’s recent retreat.  Maister had apparently spoken earlier at the same event.  Schwartz wrote, “We talked about compensation and our subjective plan. You set that up beautifully. We spent 10 minutes on that - a miracle for a law firm. I believe people are realizing that in the absence of subjectivity, which we currently employ, we become a mercenary firm, which we do not desire to emulate.”

I could not say it better and it is worth repeating:” …in the absence of subjectivity…. we become a mercenary firm”.

I encourage you to read or reread my earlier post How to Fix Your Compensation Plan.

Morepartnerincome.com is sponsored by Juris, Inc.  For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

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In responding to a question, David Maister wrote the following:

“Ultimately, clients care about quality, efficiency and service - continuity is just a short-hand rule-of-thumb to try to get to these things. If you can be more thoughtful about how you achieve these things, they will give you more leeway in pursuing your other goals and won't insist on always seeing the same faces. And, with more thoughtful staffing, you'll be able to improve leverage, profits, learning and morale.”

The work one gets determines the future of the individual attorney.  Give them limited exposure, the same old stuff or the same clients year after year, and you will neglect the full opportunity to enhance the value and potential of the attorney. You are likely to lose them to someone who they think is more concerned about their professional development.  It is over the professional development issue that most associates switch firms.

The problem appears to be a general lack of centralized schedule management in midrange law firms.  Someone other than each individual partner needs to manage firm-wide scheduling. An alternative is needed to the frequently seen model where work is doled out by partners to “their associates” or “their favorite associates.” There has to be a counterweight to the easy and expedient “continuity” method that leaves associates stuck working with the same partner, same client, and/or on the same style matter.

For an enterprise whose factory floor is composed of talented people rather than machines, it is surprising that more technology is not available and used for managing the maintenance (professional development) and scheduling of the firm’s production resources (its professional talent).  This is one of the areas of future product development that the Juris team has been considering. Technology is one thing; having a culture that makes scheduling a strategic issue must come first.  How do you have the best people and the best future leaders without making their development a priority?  How can you do that if scheduling is not a key tactic in that pursuit? 

Morepartnerincome.com is sponsored by Juris, Inc.  For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

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I was reading a paper reporting on David Maister’s ideas for improving a law firm’s client services.  The opening salvo read “The first step is to care about your clients”. 

You can follow checklist after checklist, but if you do not have a culture of caring about your clients, you can never touch the benefits that fall to those law firms that achieve excellence in the eyes of their clients. 

Tom Peters made it clear in A Passion for Excellence.  You don’t determine what excellence is or when or if you achieve it.  Excellence must be earned through the eyes of those who judge you, and the most important judge of all is the customer—the law firm’s clients.  Peters and his co-author Nancy Austin gave us the model for excellence in that 1985 book.

Achieving excellence in the eyes of your clients takes people who care about their clients, and once you achieve it, you can only hold onto it through constant innovation.  All of that takes leadership.  It takes an organization with a common set of beliefs—a culture in pursuit of excellence. 

Your customers judge you based on more than your legal skills.  They judge you by how they are treated by every single member of the law firm who touches them directly or indirectly. You are judged by the quality of every act and every output of every member of your law firm that reaches your clients.

I was always struck by Peter Drucker’s explanation that the only sound strategy is the pursuit of excellence; anything else is merely competent, and that leads to marginal.

PS: David Maister's web site and his separate blog are important information sources for managing partners.

Morepartnerincome.com is sponsored by Juris, Inc.  For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

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David Maister was asked how one sustains a personal service organization (that is what most law firms are) after the founder and key people are gone.  He found a way to drive home the key in just 20 words.

“……the founders can either extract the maximum sales price or leave behind a vibrant institution, but they can’t do both.”

Partners are business owners and deserve to receive the value of their ownership shares upon leaving the firm.  Some extract payment through continuing origination credit or some other form of compensation.  Another approach is to follow the morepartnerincome suggested alternative for valuing partnership shares, an approach similar to that followed by closely held businesses in the commercial world.  Regardless of method, the departing generation must, as David Maister says, “leave money on the table to hand the business off to the next generation.” 

Backbreaking unfunded obligations usually do not stand.  The remaining partners dissolve the partnership, go their different ways, or move across the hall.

Maister makes three other important observations in his post, Passing It On:

1.       The brand must be solid

2.       Successors must be groomed

3.       Power must be shared

Morepartnerincome.com is sponsored by Juris, Inc.  For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

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Dennis Kennedy in making his 2006 Blawggies Awards selected morepartnerincome.com as the Best Overall Law Practice Management Blog with David Maister's Passion, People and Principles and Bruce MacEwen's Adam Smith, Esq as runner-ups.   To be selected as the best blows me away; just being in the company of Maister and MacEwen is an honor in and of itself!

While the name morepartnerincome attracts the attention of most managing partners, there are some who are put off by the name. What they miss is its core message. More partner income is the result of “doing the right things and doing them right”.

You do not have to make a choice between higher income and better client services.  Higher income is the result of better client services.  It is not a choice between placing the interest of clients first or driving income higher. Higher income is the reward for serving the client’s interest.  It is not a choice between higher margins and the proper concern for treatment of the firm’s talent.  Higher income comes from the quality of the team and their environment. 

To think of those alternative choices is to have fallen victim to what Jim Collins refers to as the “Tyranny of the OR”.  Excellent organizations practice “And Thinking” rather than “Or Thinking”.   For example, how do we provide exceptional services to our clients and exceptional compensation to our legal professionals and employees?  These are not incompatible choices.  To the contrary, the very process of “And Thinking” leads to breakthrough innovations.  The genius of “And Thinking” is that greater success results from the effort to achieve both rather than limiting an organization’s efforts based on the belief that we could only have one or the other.

Morepartnerincome.com is sponsored by Juris, Inc.  For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

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