June 2007

Just got back from a couple of days at Camp Shin Go Beek, a Cub Scout camp in northern Wisconsin.  That’s my son, Steven, on the left.  The lake was low this year, and with 10 Scouts and 10 adults on the dock, there was too much risk in casting, so the fishing was pretty lame.  But Steven caught a tiny blue gill.  He couldn’t have been happier.  "It didn’t matter that the fish was small," he told me on the ride home.  "It just mattered that I caught a fish."

After a while, I started thinking about what he said in terms of client service.  And I remembered some of the comments I’ve heard in client satisfaction interviews or that I have heard directly from my own clients.  Sometimes the little things made them smile big.  Its a lesson I’ll remember as a Dad and as a lawyer.

Line from Bob Dylan:

"Don’t be afraid not to follow the herd – because where the herd’s gone, the food is already eaten."

Thanks to the folks at the Brand Builder  for their great post, Bob Dylan On Fresh Ideas & Innovation.

When you think about, it is important to be thankful for the herd.  Without the herd, there would only be individuals.  And when you sell yourself as someone special, you need the herd.

You need to decide who you are and what your firm is. 

If you’re part of the herd, you don’t need to worry about your navigational skills.

If you wonder about whether you have what it takes to leave the herd, take heed to this from the Brand Builder post:

"If you aren’t already finding your own lush pastures, maybe it’s time you stopped settling for someone else’s scraps. Do something different. Take chances every once in a while. Innovate. Put original ideas into action. Try something new. Do something.

Get there first – or at least be among the first.

Life is too short – and green pastures are in far too short supply – for anyone, you included, to waste your time following the herd. It might seem like the safe thing to do, but trust me: It’s a hard living, fighting over someone else’s scraps, and in the long term, there’s absolutely no future in it.

None.

Unless you like going hungry."

"At a famous presentation at Black and Decker, a consultant held up one of these, a drill, and asked the Black and Decker executives if this is what they sold. They all recognized the product and answered “yes”. He then suggested to them, that from the customer’s point of view, what they are selling is this, a hole in a board."

From Mark Chandler’s speech, referenced in the preceding entry.

Why the beach ball?  Because perspective is everything.  From one angle, you can tell there are 3 white and 3 blue sections.  From another angle, the majority of what you see is white and, from another angle, the majority of the ball is blue. 

Everyone should have reminder to help them focus on the other person’s perspective.  My reminder is the beach ball.  What’s yours?

"Put most bluntly, the most fundamental misalignment of interests is between clients who are driven to manage expenses, and law firms which are compensated by the hour."

So says Cisco General Counsel Mark Chandler in a recent speech, which is posted here

From the same speech:

My answer to this question is therefore simple: first, winners will be those who are able to standardize services to meet clients’ cost management and predictability needs where very good is good enough. Second, those who can differentiate themselves by providing the top notch of customized services, where that is needed, will also win. In some cases, one firm may be able to do both. But my bet is that despite the consolidation trend we’re seeing today, top quality boutiques will thrive while the cost structures of larger centralized firms will put them at risk.

This is a must read.  I’d love to have 20 minutes of Mark Chandler’s time to discuss it.

I have been spending considerable time trying to identify the character traits firms must have to succeed.  Here’s my top ten list.  Feel free to add to it.

Discipline
Execution
Passion
An ability to be dispassionate
Commitment
Creativity
Excellence
Customer-focus
Comfort with Change and willingness to experiment
Maniacal effort to improve

I know that being both passionate and dispassionate appears paradoxical.  But I think not.  A firm must be passionate about something–that is what will distinguish it from its peers.  But in evaluating performance and making business decisions, it cannot drink its own Kool-Aid.  In areas where self-critical analysis is required, a firm must be dispassionate.

In any event, I hope to hear from you on the traits you agree are essential and those you don’t, as well as traits not on the list you feel should be.

Like most other firms of its size in Chicago, Butler Rubin is approached regularly by much larger firms looking to merge (read, swallow).  Because my partners are a polite group, we smile, say thank you and then politely decline.  You see, most of us are big firm refugees and we would rather not relive those experiences.  The conversations we have with our suitors range from brief to short, but there are, occasionally, discussions that while not destined to lead anywhere are nevertheless interesting.  I want to relay one such discussion.  Of course, I won’t identify the highly respected firm or its most distinguished and thoughtful leader.  But because the conversation fits so nicely with my prior post, Demand Destruction, I thought it worth a second post on the topic.  If you haven’t read Demand Destruction, you might want to do so before finishing this post.

During our conversation, the subject of the recent increases in starting associate salaries to $160,000 in major cities came up.  The distinguished leader had some very insightful observations.  He said that firms like Simpson Thatcher, which started the latest frenzy, derive almost all of their revenue from mega deal, bet-the-company matters where hourly rates or the amount of fees are irrelevant, a footnote if you will.  Whether for the stated reason of trying to attract top talent or the more cynical view of trying to increase pressure on wanna-be competitors, a Simpson Thatcher strata firm will increase salaries.  Firms in that elite echelon can do so with absolute impunity.  The next tier of firms, which derive maybe 15% of their revenue from such mega-bet-the-company matters but hope to increase that number, matches the increase in order to maintain the appearance of playing in the same sandbox with the Simpson Thatchers of the world.  Then the next tier of firms, still further down the line, the ones which get 0% of their revenues from mega-bet-the-company matters, but which hope to break into that line of work (can we say "wishful thinking") then suck it up and match the increase, and so on.  Of course, for every tier but the Simpson Thatcher elite level (all 6 or 8 of those firms), the increase doesn’t much change the percentage of revenue derived from mega-bet-the-company work, but it builds pressure on relationships with the clients whose revenue falls into the other 85% segment.  And those are the clients that are going to start shopping the work.  The demand is destroyed.  (All those who think this is the end game of the Simpson Thatcher move, raise your hands here.)

I asked this very insightful leader what the end-game was.  He sighed, and then  said he had spent more time thinking about that issue than any other.  And then he said, "I don’t know where this all ends.  We are damned if we do, and damned if we don’t."  He then sighed again, and while he didn’t say so, I could almost see him thinking, "I  hope we’re not just damned."

Some of the brightest people in the profession do not see an out.  Or if they do, I think they fear moving first, the same way countries fear unilateral disarmament.  But doesn’t it seem that more than ever, we need some bold leaders?  Oh wait, what am I saying.  Firms like Butler Rubin, which don’t obsess about the need to have multi-million dollar profits per equity partner, and which see value in being flexible in the fee arrangements we reach with clients and then are flexible enough to strike the bargain, stand to gain the most.

That’s the moral of a recent "flash survey" of top General Counsel by Altman Weil on the latest round of salary increases for starting associates.  And that’s demand as a noun, not a verb.  Here are the key findings and insightful comments submitted by GC s:

  • 58% of the GCs believe the newest increases are "outrageous".  Only 20% were indifferent to the increases.
  • 100% reported that no panel firms had contacted them to discuss associate salary increases and what they mean for that GC and his or her company.  At the same time, 84% believe that they should have been contacted.
  • Among the comments:
    • Law firms are presently riding high on high utilization rates. It will not always be this way. In economic terms, law firms are causing "demand destruction." Over time, clients will learn how to demand less legal services from the major firms, and they will be left with squadrons of overpriced, under-utilized associates who they will have to surplus. Markets have a way of correcting themselves.
    • May cause us to use second tier firms more aggressively on certain matters.
    • This is just one more factor that goes into the selection of law firms. The big pricey firms are only going to get tapped by us when we absolutely need that kind of lawyering, and we are going to insist on budgets and ridge herd on the process. The tension level just keeps increasing between the outside firms and the inside departments.
    • It’s making us seriously evaluate our outside counsel selection more urgently than we have done in the past.

That’s why I view every announcement of increased starting salaries for new associates as good news:  the firms who march to that beat are putting their client relationships at risk.  And for those of us who view our relationships with clients differently.

The Altman Weil survey is available here.

While its much more entertaining to write about Raquel Riskin (for those interested, vote here), I return to an issue at the core of this blog–hourly billing.

Here I am reading the June 2007 issue of American Lawyer.  Nice little story about the San Diego City Attorney recommending that the City take legal action against Wilkie Farr for overworking and overbilling a matter.  From the story, I can tell that no less than 5 partners worked on the matter and that for these 5 partners, 2006 billing rates ranged from a high of $865 per hour (okay, he’s the firm’s chair so that number must be out of whack) to … here it comes … $830 an hour at the low end.  Three other partners on the matter billed at $850 per hour.

The point of the American Lawyer story is not the hourly rates.  But they sure struck me.  I wonder what their 2007 rates are….

Not Gerry.  Raquel.

Let me explain.

Gerry was in Chicago yesterday, so we planned dinner as is our habit when he is visiting.  He called to tell me his daughter Raquel was in town.  "Would I mind if she joined us."  "Of course not.  Gerry and I got to the restaurant first and were having a beverage.  When Raquel walked in, every eye in the joint was on her.  I am sure you can understand why.

 Raquel is an actress and a model, but clearly her father’s daughter in terms of her intellect, intellectual curiosity and creativity.  I learned during our dinner that she also is a "Hometown Hottie," having advanced to the semi-finals in Maxim magazine’s contest.

So here’s the challenge for the legal blogging community:  We need to rally votes for Raquel!.  You can see how deserving she is, but when you add the sass and the personality, you’ve got a young woman who deserves to get to the finals!  Here’s where to go to cast your vote–visit the sight often and vote as often as you like (it’s a Chicagoan’s dream election!)

Vote for Raquel here.

Raquel has been in a number of TV shows and has some movie credits too.  She was the star of "Killer Bash", playing the role of Becky Jeckyl.  One reviewer wrote ‘ For an independent film without much hype, Killer Bash was greatly entertaining and Raquel Riskin is a great new actress.

Gerry is very proud of all of his children.   And like any proud parent, he would love to see his daughter succeed in this contest.  I’d love to see her succeed too.  I also think it would be interesting to test the real power of the legal blogosphere.  So here’s my proposal.  Post about this yourself–let’s get the "VOTE RAQUEL" movement publicized as far and wide as the legal blogosphere can reach.  Let’s make the movement viral.