The Handbook of Law Firm Mismanagement for the 21st Century
By Arnold B. Kanter, Paul Hoffman
Catbird Press Copyright © 2003 Arnold B. Kanter
All rights reserved.
Survival of the Unfittest
Why study law firm mismanagement? Well, if you ask that question (as somebody just did), you are probably unfamiliar with the old saw that "he who does not study history is doomed to repeat it." In this day of heightened competition among law firms, in what has aptly been called a muskrat-eat-muskrat world, it is crucial for the law firm that would survive (and which law firm would not like to do that, eh?) to avoid the trap of old mismanagement techniques by developing and utilizing the newest and best mismanagement techniques.
As Darwin predicted in one of his very long tomes that very few people have the patience to read, only the fittest survive. Competing species — and surely law firms are species — will tend to deviate in order to find their survival niche. Thus, if one observes closely the beaks of finches in certain islands of the Galapagos archipelago through seasons of drought and heavy rain, one will note that the shape and length of those beaks will change according to the availability of certain types of food and the accessibility of that food to various types of beaks. Guppies will do something like that, too, in other circumstances. And though most law firms neither have beaks nor swim, that hardly makes them immune from the forces of evolution.
To summarize, fit law firms — firms that are well managed — will survive in their niche. Unfit firms will scramble to maintain their existence by seeking a different sort of niche, the most mismanaged. Since most law firms, as a species, are not well managed, the competition among mismanaged firms is ferocious. So if you want to get a toe up in the struggle to survive through effective mismanagement, you'd best read this book real carefully.
Law As a Business
Form and Function
Fairweather, Winters & Sommers' consultant, Andrew Tellem of Tellem, Whathey, Noh, addressed the Executive Committee recently on the subject of "Restructuring, Reordering, Redoing, and Otherwise Revamping the Firm's Organization, Structure, Governance and the Like." His remarks are set forth below.
Gentlemen and Gentlewomen:
As you know, we have been undergoing an extensive review of your firm's organizational structure over the past three and a half years. This kind of review inevitably raises emotional issues, since change is never easy and basic changes such as the ones we are talking about are bound to elicit strong reactions. It would serve no useful purpose to revisit all of those reactions here. Such a review would serve only to open old wounds, which are better left to fester. I am sure that both you and we regret some of the verbal abuse, and physical objects, that we hurled at one other. From the standpoint of my consulting firm, I would just like to say that we are prepared to let bygones be bygones.
I think it would be useful to put this review into historical context. Not so terribly long ago (seems like only yesterday, I'm sure), you were a firm of forty lawyers, specializing only in corporate law, and located on one floor of a building in downtown Chicago. Today you are a firm of more than 750 lawyers, practicing in virtually every substantive area of the law, with offices in five cities domestically and three abroad. To use a technical phrase, you've obviously come a long way, baby.
This growth has necessitated creating an infrastructure to support your operations. And as you added new practice areas, it became necessary to divide into departments. Your initial division into "Corporate" and "Not Corporate," while perhaps sensible, was hurtful to the Not Corporates, who felt that they deserved more respect. Fortunately, this was easily resolved with a simple name change. Would that all organizational issues you have faced could have been resolved so easily. Alas and lackaday.
In the interviews that I conducted with your partners in connection with this work, I found considerable confusion as to the roles of the Practice Groups and Industry Groups that you have formed at our behest. Often this confusion was expressed simply in questions such as "What's a Practice Group?" or "What do you mean by an Industry Group?" In other cases I found a far richer, more complex confusion as in "Yes, our group practices with great industry in our department."
In deciding to create the Practice Groups and Industry Groups, we asked whether form should follow function, or function form. After wrestling with this question for several months, we decided in the end that the answer to that question was "yes, but not slavishly."
It may be worthwhile for me to reiterate for you some of the reasons we created the Practice Groups and Industry Groups. As you know, with your growth in size the departments became unwieldy for certain purposes; let's be honest, for most purposes. The Practice Groups were a way of providing a more manageable size for running your business and of fostering the type of specialization the market demanded. For associates it was also a way of assuring that they did not get lost in the larger size of the firm. Unfortunately, this effort to prevent associates from getting lost has not been entirely successful. In fact, Nails Nuttree, who as you know is Chair of the litigation department, asked me to inquire if any of you knew the whereabouts of Jamie Stentson, a third-year associate who was last spotted some four months ago in the library. Nails was unable to provide a description of Jamie and, in fact, was not completely sure whether Jamie was male or female, though he said he was "about seventy percent sure that Jamie's a boy."
The formation of the Industry Groups was pretty much a ploy of the marketing department. They thought that being able to go to a client and talk about your telecommunications industry group would convince clients that you were experts in that area. Of course, to make this work you needed to have within the Industry Groups people from different Practice Groups and Departments. This has created a few of what I'll call "turf problems." For example, exactly who has authority over little Jamie Stentson, should he or she be found again, the litigation department into which Jamie was hired, the complex litigation practice group of which he or she is a member, or the pollution industry group of which Jamie is a part? Come to think of it, this confusion may account for Jamie's apparent disappearance.
You may understand this better if we analogize the Departments, Practice Groups, and Industry Groups to the military. In the armed forces, we have battalions, regiments, platoons, companies, squadrons, garrisons, troops, units, brigades, corps, phalanxes, and divisions, each of which has a particular purpose. No, never mind, I guess that analogy doesn't help all that much when you get right down to it.
Of course, overlaid on all of this is your office structure. The office, being a physically distinct entity, is and always has been a natural governing unit. For example, your firm has nice bouquets of flowers on the reception desks of your offices. It makes good sense for the purchase of these flowers to be handled locally. Recently you have come to this conclusion as well and stopped shipping flowers weekly from Chicago to the other offices. I congratulate you on this recognition, and on the formation of local Floral Committees in each of your offices to coordinate both the purchase and the arrangement of the flowers.
Within each office unit, of course, you have members of the various Departments, Practice Groups, and Industry Groups. This is what I refer to as the underlay to the overlay of the office structure. What we have is a kind of matrix management. To understand this, you need to move beyond the typical organizational chart with boxes and lines of authority, and be able to visualize a 3-dimensional sphere or cube in which lines intersect to reflect the complex multi-level managerial structure that you now have in effect.
Perhaps it would be easier to envision the Firm as a watermelon. The outer green skin is the Firm itself. The inner white shell might be the Executive Committee. Of course, you can slice a watermelon, or a firm, in many ways. You can cut it in two, either the long way or across the fat middle. If you did this, the two pieces you have left might be thought of as the Firm's old "Corporate" and "Non-Corporate" departments, or perhaps as the original Chicago office and the second, New York office. But in your organizational structure you have gone way beyond this type of gross cutting in half. Imagine round slices, or perhaps some juicy wedges. Now, let's be honest, with a sharp knife some of the slicing you do is probably going to harm the seeds; let's imagine that the seeds are associates. Some of the seeds may even fall on the floor and get lost, like poor Jamie Stentson. But ultimately, on a nice hot day, you've got yourself a very refreshing dessert, and for not very much money either, especially if you buy the watermelon on sale.
In short, what you have created is a complex organism in which several levels of governance overlap and underlap to form a seamless web of organizational controls that keep your firm, or watermelon, on track, or on the plate. To date, it would not be totally accurate to categorize the Fairweather, Winters & Sommers web as seamless. But that will come in time, much as all good things will, if you have patience.
And speaking of patience, I can see by the old clock on the wall that my time is about expired. In my few remaining moments I would like to paint for you what I see as the future of law firm organization and governance. Over the past twenty years, the organization and governance of large law firms has become increasingly complex. Growth in the size of firms has necessitated adding layer upon layer of management, all of which has redounded greatly to the benefit of consulting firms such as mine.
But there is such a thing as regression to the mean. This is a concept that I don't really understand, but basically it seems to mean that when things have gone too far, somebody's going to stand up and say, "Okay, Charlie, enough of this crap." My prediction is that law firms are going to go back to the good old days when giants roamed the earth. They will do away with all of this structure and select a King (or Queen) to reign and tell his or her subjects what to do. And with that prediction, I would like to yield the floor back to Good King Stanley the First, long may he reign. God save the King.
I Now Pronounce You
Herbert Gander called the meeting of the Firm's newly-named Medium-Range Planning Committee to order.
"I question whether we have a quorum," announced Sheldon Horwitz.
"Sheldon, how can you question a quorum, when everyone on the committee is here, except Sylvia?" asked the Chair.
"I'm prepared to lose, Herb. I'm just exercising my right. If you leave rights unexercised, you're in danger of their atrophying, like an unused leg."
"Sheldon's got a point," agreed Harriet Akers. "I remember when I broke my leg skiing, must have been seven, no, maybe nine years ago. I had my leg in a cast for months and it atrophied something awful. I practically had to learn to walk all over again."
"Well, okay, but I'm ruling that we have a quorum."
"Where is Sylvia, anyway?" asked Rudolph Grossbladt.
"She resigned," reported the Chair. "She felt that medium range was neither here nor there, and she wanted to be a part of a committee that was in one of those two places."
"I actually like medium range," volunteered Sheldon. "It's not so long range as to be irrelevant, nor so short range as to be important."
"I'm glad you like it, Sheldon," said Hiram Miltoast. "Now can we get on to our business? I'm concerned that if we don't find a merger partner soon, there will be nobody left to merge with. "
"You needn't worry about that," said Sheldon. "That can't happen."
"I'm glad you're so sanguine, Sheldon, but I'm not."
"Well, let me prove it to you, so that you can rest more comfortably when you go to bed tonight, Hiram. It's true that law firms are consolidating at a furious pace. But let's suppose the most extreme case. Assume that all of the other law firms in the world merged together into firm X, Y & Z. That would still leave firm X, Y & Z for us to merge with."
"Not necessarily. If we don't get on the merger bandwagon soon, our firm may find itself at so much of a competitive disadvantage, we'd be forced to go out of business."
"Why don't we talk about what we'd be looking for in a merger partner," suggested Helen Laser.
"Good idea. I'd say that we'd like a firm that is strong in many different practice areas, especially areas that are hot and profitable, such as mergers and acquisitions," suggested Jim Freeport.
"We'd want a firm with a consistent record of high and growing earnings," ventured Helen.
"And I'd say that we need a firm with an international string of offices in the key financial centers of the world," said the Chair.
"Definitely, and the offices themselves should be classy, too. And, of course, the firm would need to have an unblemished record for quality legal work and for the highest ethical standards," added Hiram.
"And we'd want a place that has a collegial culture, where lawyers and staff treat one another with mutual respect and pitch in to help one another out," said Jim.
"Oh, yes," said Sheldon, "and we'd like the water fountains to spout soda pop, for the sun always to shine on the firm, for all of the women to be beautiful and all of the men handsome, for the people to be diverse in race and religion, and for...."
"Sheldon, you're sounding a bit sarcastic. Is that possible?" asked Rudolph.
"Well, let's put it this way: listening to the characteristics we've been talking about does leave me with a question."
"Let's hear it, Sheldon," said the Chair.
"Why would any firm that met those criteria want to merge with us?"
"We're just coming up with a list of desirable characteristics, Sheldon. We're not saying that our merger partner would necessarily have all of them. And it would be up to us to present our firm in a way that would make us attractive to the merger partner."
"That would require some creativity," said Sheldon.
"Why don't we move on to the question of how we should go about identifying prospective merger partners," suggested the Chair.
"Well, there are various publications that list firms in order of their revenue, or by the number of large transactions they're involved in. We could look at those," suggested Rudolph.
"We could, but every firm in the country is probably looking at those same lists. And Sheldon does have a point. Firms near the top of those lists might not be all that interested in merging with us, unless we became a lot more profitable."
"In which case we might not be all that interested in merging with them," added Sheldon.
"Well, there is one way of identifying firms that are interested in merging," said Hiram. "Every week we read about firms that are seriously discussing mergers, and most of those mergers wind up not happening. If we talked to those firms who've been unlucky in love, we might be able to pick one of them up on the cheap."
"You mean, catch them on the rebound?" asked Jim.
"You might put it that way," admitted Hiram.
"Usually, there's a reason why those marriages don't get made, so we might be picking up the problems that made another firm decide to pass on them," said Helen.
"True, but sometimes the reasons the mergers don't go through are very specific to the particular firms — conflicts of interest or culture clashes — and might not apply to our firm," argued Hiram.
"Yes, but we might invest a lot of time and effort, only to find that the reason the merger didn't go through does apply to us, as well," countered Helen.
"There may be a way to shortcut that," suggested Hiram.
"How would we do that?" asked the Chair.
"Well, consultants often are involved in these mergers. We could engage one of them and perhaps learn, very quickly, what went wrong."
"But wouldn't that be a conflict of interest on the part of the consultant?" asked Sheldon.
"Sheldon, the consultants who do those merger deals work both sides of every deal and trade on the information they learn in one to try to put another merger together. They make the sleaziest of law firms look prim and proper."
"That raises the question of whether we'd approach potential merger partners ourselves, or go through a consultant or headhunter," said the Chair.
"Well, if we approached them directly, that might make us appear weak or overanxious. And besides, it's a bit unseemly, isn't it," said Hiram.
"And it's more seemly and we would appear stronger if we got somebody else to do our dirty work for us?" asked Sheldon. "Besides, employing these people isn't exactly free. They get a hefty fee if the deal goes through."
"Y'know, I've been thinking," said Jim.
"Oh-oh," replied several committee members in unison. (Continues...)
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