One of the most-watched TED talks is by Simon Sinek. Called “Start with Why,” Sinek compellingly argues that why an organization exists is more important to its success that what it does or how. Sinek offers Apple as an example, demonstrating its ability to enter and remake markets including music, MP3 players, cell phones and tablets, as well as desktops and laptops, is a function of the “us against the status quo” culture and brand that Apple thrived on since its inception. To follow Sinek’s “Golden Circle,” after you figure out why, you can focus on how and what.
(©Simon Sinek) While this concept may not be familiar to many lawyers, many businesses embrace this concept. So do we.
My colleagues and I have spent a lot of time over the years talking through some of the layers of our why, but we recently delved to the core of the issue. It was the criminal trial of the leaders of the former Dewey LeBoeuf law firm and the commentary around it that finally helped us crystallize our collective thinking.
The criminal trial of the leaders of the failed Dewey firm has pulled back the curtain to reveal a profound level of corruption in one large law firm. The corruption may not be criminal, but the evidence is crystal clear that the firm was run to benefit a chosen few. While the trial is about a single firm, it is naïve to believe this level of self-centered-ness occurred in but one law firm. The commentary from informed observers and other former BigLaw leaders makes a compelling case that some degree of similar behavior pervades most large law firms in varying degrees. Some cases may not be as starkly selfish as Dewey, but large law firms have become big businesses in their own right, and like other big businesses, the success of the business is the paramount objective of those who run it. On limited occasions, the powerful may share benefits with others, though their motives for doing so are frequently selfish, not due to altruism or institutional devotion. But, by and large, firms are run by an elite club of insiders for their own benefit. Other partners are carried along for the ride, unable to alter the firm’s course or behavior.
To be fair, there are exceptions to this characterization, but, sadly, they appear to be rare exceptions. One lesson learned from this state of affairs is that, lip service aside, client well-being is irrelevant in most law firms. Clients are relevant insofar as they pay their bills on time and the firm may be able to extract more fees, but as between the firm’s business and the client’s business, the powerful managers in large firms have proven again and again their own business is the priority. The priorities are not in doubt.
Law firms’ institutional rejection of any semblance of client service is so embedded in the DNA of the legal establishment that no one even questions it. Clients don’t question it. They often are like passive victims, caught in a teller line during a bank hold-up. They may know exactly what is happening and they certainly don’t like it, but they feel like there isn’t anything they can do about it. They certainly don’t exercise the power of their wallet, except, perhaps, in the most egregious of cases.
Firms do not question their institutional abandonment of client service. It would be bad business to publicly admit this truth. So they don’t. They talk about “client focus” and “client service,” tossing around buzz words like loose change. The rhetoric was been so colored that firms do not see the problem even when trying to be candid. But when one focuses on behavior instead of rhetoric, the firms’ claims are revealed as mere hyperbole.
Countless examples prove that firms placing their own interests above clients’ interests has become part of the firms’ DNA: they just can’t change it without killing themselves. In no particular order, here are just a few:
1. Hourly billing
2. Bonuses based on hours
3. Compensation guarantees.
4. Compensation based on revenue rather than profit.
5. Compensation that ignores client satisfaction.
6. Large partner offices and high downtown rents.
7. Expensive artwork.
8. Mergers. And then justifying them by saying it helps clients.
9. Annual fee increases that have become self-righteous expectations.
10. High turnover of associates and income partners.
11. Putting all risk of failure on the client side.
12. A business model as unfriendly to clients as one can imagine.
13. Pressure to collect at year end for the firm’s benefit with no regard to how that practice helps or hurts the client.
14. Massive infrastructure and expansive numbers of offices that provide no value to most clients, but are paid for by all clients.
It is impossible to escape the conclusion that those who run large law firms have become “the Man,” doing things for themselves and the other powerful elite in their firms. In most firms, any semblance of equal treatment of partners has faded along with bygone eras. Even in the “good old days,” clients were merely a means to comfort and success.
My partners and I all practiced at firms run by one version or another of “the Man.” The challenge for each of us was what to do about it. Separately and without knowing it, we all had the same epiphany. We could not work for the Man any longer. Indeed, we had to challenge The Man and everything he stood for.
Although we did not rely on it for guidance, the Declaration of Independence provides this time-honored explanation that fits:
But when a long train of abuses and usurptations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.
“It is their duty.” Powerful words. Those who are victims of the King had a duty to “throw off such Government.” While it would be silly to in any way equate the founding of the country with what goes on in law firms, the same general sentiment applies to those who wish to challenge “the Man.”
A Declaration of Law Firm Independence can lead to a civil war within firms, or it can yield the creation of new firms. Some new creations are smaller, kinder, gentler versions of the partners’ former firm. Others seek to make a new mark, to blaze a new trail. My partners and I believed the civil war could not be won, that the entrenched power in large law firm was so self-perpetuating that real change was not possible. So we opted to declare our independence, throw off such “Government,” and blaze a different trail and create something totally new, something totally focused on our clients.
The sole guiding principle for our creation was whether the design feature would work to our clients’ benefit. Only those features that passed this test became part of the Valorem foundation. We began with the 800 lb gorilla in every law firm: compensation. The “what’s in it for me?” question does more injury to clients than most can fathom. Highly skilled partners won’t work together to benefit the client because of the fight for credit. To avoid this, we agreed everyone would earn the same amount. There is nothing magical about this formula, but it entirely eliminates the “what’s in it for me” concern and replaces it with a how do we do more for our client so we can earn more for all of us. We call it the “rising tide (raises all boats)” compensation system. We’ve used this formula for seven years and it has cemented the culture of collaboration, of realizing that what’s best for us is what’s best for our clients. If we ever adopt a new system, it will have to sustain these underlying values.
Inexperienced lawyers do not add value for clients. We eliminated the concept of a large base of new associates. We hire a new associate every several years. We also did away with the notion of “up or out” so we can retain incredibly valuable colleagues who do great work for clients.
We focus on experience. Experienced lawyers are far more likely to get better results and do so efficiently, both of which are important to clients.
We stopped measuring hours.
We stopped using hours as a surrogate means of calculating an alternative fee.
We give our clients the right to change the amount due on a bill, in their total discretion, if they don’t think we delivered value. Not hours, value.
There is no “billing” or “origination” credit. We don’t debate about who gets credit for what. In an elite corps of lawyers, every job is critical
We have a portion of our fee held back on most matters to share risk in the outcome with our clients.
We provide exceptional service.
Clients must come first. Every aspect of a firm must be designed with this a guiding principle. If you compromise in any area, you will, sooner or later, become the Man. Clients deserve better.
So if you want to know our “why,” it is this:
We reject “the Man” and everything about the model he represents. We stand together to serve our clients and help them avoid any problem that can be prevented, successfully handle any problem that cannot, and learn from every encounter so we inspire continuous improvement.
It is that simple.
There is nothing about what we have done that any other group of lawyers could not do. But, so far, we’re not aware of others who have organized their business to institutionalize value for the firm’s clients. There is a reason that is so: it is not easy to believe that focusing on value for clients first and only will pay off as a business model.