November 2004 Archives

Announcing the launch of the "Adam Smith, Esq." official "Savvy Blawgers Panel," a brain trust I will rely upon to sound off and chime in on (hopefully) interesting ideas I will query them about every so often—not so often as to wear out Adam Smith's welcome, but often enough to keep the Panel, and you, dear reader, engaged.  The notion is to pose a question, collect answers, and publish them here on "Adam Smith, Esq." for the edification of all.

What will these topics be, and who are these people?

The topics will range from the high-end and deeply strategic ("The future of '[.....]'") to the practical and down-to-earth ("The gadget I could not live without is ...").  Readers are also invited to submit mind-bending or just plain irritating questions of their own, understanding that the editor (Bruce) reserves the right to accept, reject, edit for clarity or brevity or good taste, and so forth--and know that all decisions of the judges are final.

The panelists are a highly selective group of outstanding members of the legal blogosphere:  Once all have confirmed their acceptance to this august panel, I will post a list identifying them and their blawgs.  For the moment, I hope to be able to promise a treat in the quality, acuity, variety, and overall sassiness of the group.  We don't need no shrinkin' violets!

Stay tuned; the first Savvy Blawger Query will be posted shortly.

Rees Morrison, a longstanding observer of all matters law and business, opines that vis-a-vis in-house law departments, at least, there is no such thing as management by following "best practices," because they simply do not exist.

To buttress his thesis, he cites no less than philosophy, economics, psychology, and sociology.  Never let it be said that I shy from a deep conversation, so let's plunge in and evaluate Rees' arguments.

Philosophy:  Here he makes essentially an epistemological argument: That no one can define the "best" to begin with ("despite thousands of years of effort,...we cannot reach consensus on what it means to lead a 'good' life"), that determining cause and effect is elusive, and [oddly enough—I would have thought this belonged under "economics"] that lawyer productivity is notoriously difficult to measure. 

Economics:  First, he observes non-controversially that every management practice involves "trade-offs."  Indeed, this is a paraphrase of the textbook definition of economics as the study of the allocation of scarce resources.  Yes, you can use your first-round draft pick on a quarterback or an offensive lineman but not both, and if your department chooses to spend its annual IT allocation on knowledge management rather than document management, you have in some tautological sense "traded off" DM for KM.  Next, he notes that in a competitive marketplace today's innovative best practices will be copied by the competition (thus failing to provide enduring competitive advantage), and also, as something of a non sequitur, that the "law of diminishing returns" means the spread of a "best practice" to every corner of the department will not be as valuable as its initial introduction.  Innovation can indeed be copied, but that scarcely implies one shouldn't try.  Who out there thinks DuPont's decade-long lead in introducing the "DuPont Legal Model" hasn't conferred a lasting advantage?   As far as "diminishing returns" goes, he's simply confused.  Sure, learning curves flatten and [the rate of increase in] returns diminishes, but both the fat part of the learning curve and the fat part of the returns are genuine.

Psychology:  As I understand him here, he's essentially arguing that because human decision-making is flawed (we over-emote and under-reason, hate cognitive dissonance, tend to prefer confirmation of pre-existing attitudes over genuine receptivity to new information), then no decision-making can be trusted.  This is a bridge too nihilistic for me:  If he's really serious on this score, then his column is meaningless because everyone will choose to see in it what they want to see, and he in fact only wrote it at the urging of some ill-understood subconscious drive.  Whoa, boy!

Sociology:  Group think, peer pressure, and dysfunctional group dynamics all infect decision-making, so who's to say that the chosen course is "optimal" and not merely "politically feasible?"  Reasonable questions all, but I've worked in offices with an open, collaborative, "think out loud" dynamic, and in offices where the playbook was "Lord of the Flies."  Guess what?  You can tell the difference, and act accordingly.

What does this add up to?  To a degree, the argument that there is no such thing as [enduring] "best practices" is obvious and non-controversial.   The goalposts are always receding, after all.  IBM Selectrics justifiably had a corner on the market in their day.  But ultimately I must conclude that the essay fails the essential test of common sense.   That we cannot know everything does not mean we know nothing; that we make mistakes does not mean we're incapable of enlightened judgment; that decision-making under uncertainty can get things wrong does not entitle us to wait until all the facts are in.

And that you read it from the pen of a distinguished observer of this landscape, or an analytically minded economist/blogger, does not mean it's gospel.

InfoWorld's cover story is "The Top 20 IT Mistakes," and it's a rogues' gallery indeed.  Amusingly, many are the converse of another:  For example, "botching your outsourcing strategy" vs. "offshoring with blinders on." 

The moral I take away is that many of these are not "IT" mistakes—they're people mistakes.  Ones like "discounting internal security threats" are obvious enough; depending on whether you believe Gartner, 70% of security incidents involving an actual loss are inside jobs.  But others, while less blatant, are still at bottom people issues:

• "promoting the wrong people:"  Well, sure; don't assume your top technologist deserves or wants a management position.
• "mishandling change management:"  Change is a constant, but so is people's resistance to same.  You must anticipate this and bake it in to your project planning.
• "mismanaging software development:"  Which most frequently occurs when frustrated IT managers throw more and more of the "mythical man-month" at a tardy or delayed project.  The solution instead is to find better programmers; "almost nothing else matters, really."
• "letting engineers do their own QA:"  Res ipsa loquitur.

I recommend you read it all—and this goes double for those of you in the audience who are not in IT management.  This is a devil you need to know.

What enterprise software market is growing 15%/year and is expected, if anything, to accelerate in the next few years?  If you answered, "Sarbox compliance app's," guess again:  They grew far more than 15% in the last couple of years but must, by nature, slow down.  "No such software?"  Cute, and yes it has been painful since the bubble, but the real answer is "Business Performance Management" software.

At least since I was in MBA school, when it was called "executive information" or "decision support," what it's supposed to do is display in one place, usually through a dashboard or scorecard interface, a wide array of financial and strategic information, all tied to real-time operational performance, summarized so as to enhance trend-spotting, exception analysis, and strategic decision-making in general.  Sounds great, but as with so many IT initiatives that are predicated on the assumption that one can seamlessly tie together information from different databases on different systems installed at different times for different purposes, well, you get the idea. 

What's new this time?

• The Web in general, and XML standards in particular, provide new tools for integrating data across legacy platforms.
• Sarbanes-Oxley (yes, it is ubiquitous—it's not your imagination) has mandated unitary and uniform financial reporting.
• BPM software is getting cheaper ($50,000—$150,000 for a company today vs. $250,000 and up previously).

Typically (human nature being what it is), corporations undertake a BPM implementation to deal with an exogenous shock.  The California-based chain "Smart & Final" adopted it when a state-wide grocery workers' strike threw their business a happy curve (as a non-union shop, customers reluctant to cross picket lines favored them instead).  Universal Pictures bit the bullet after 9/11 when its theme-park traffic tanked.  Viasys, a healthcare roll-up combining over a dozen companies with the resultant tower of financial Babel, had little alternative if they wanted to stay on the SEC's good side.  PMI Mortgage Insurance discovered the recent tidal wave of refinancings left it with no handle on its portfolio risk.  And so on.

An effective BPM implementation can provide solid numbers on things you need to know about (the cost of associate turnover, for example, or the profitability of a far-flung office), but also can produce informational kryptonite that must be zealously safeguarded until ready to see the light of day.  For example?  Not just the profitability of a particular partner or a particular client relationship, but trends over time, and enough background to enable you to form a view as to whether the positive trends can be sustained and the negative trends reversed.  As one of the CFO's who's been through it says:

"Everyone who goes down this path needs to realize that this is not an IT project."

Knowledge remains, however, power.

Long overdue is the entry of Monica Bay, editor-in-chief of Law Technology News and editorial director of Law Firm, Inc. and Small Firm Business into the blogosphere with her already-engaging blog, The Common Scold.  Two days before Thanksgiving, it is well to remember that the Puritans bequeathed to us many more lasting cultural ingredients than just the traditionally enshrined turkey dinner—and Monica reminds us that one icon (OK, without warm and cozy overtones) is that of the "common scold," a disputatious and vexatious woman who stuck her nose into everything and voiced her negative opinions without inhibition.

This, trust me, Monica is not.

OK, I will stand by the part about expressing opinions without inhibition. 

On subjects from legal technology to the status of professional management of law firms, and gratefully including her (and my) beloved Yankees, Monica's engaging and wide-ranging voice, and her astute ability to point out either the monstrosity that the rest of us have ignored or the baffling absence of something that clearly ought to be there, are profoundly welcome.   Not that she needs encouragement, but "Go, Monica!"

Is CRM [Customer Relationship Management software] a bridge too far for a firm?  This question is probably a tar pit from which one cannot emerge unsullied with a single, unitary correct answer, but as both the power of CRM applications and the competitiveness of the landscape grow, it's none to soon to ask this question about your firm if you haven't already.

The goal of CRM is breathtakingly easy to state:  To make your business more client-centric.  What does that mean in reality?  Among other things:

• that from the inception of a relationship as a prospect through initial engagement and, we may hope, outwards to the horizon, information about the client (both "soft" and "hard") is captured and available to anyone positioned to deal with the client;
• that fee earners see and understand with crystal clarity that their return for getting information into the system is repaid multiple times over once they have a deeper and more intimate view of the client's needs and history with the firm; and
• that information is recorded only once and only in one place.

Undertaking a CRM implementation, particularly in the culturally baroque venue of an "eat what you kill" firm, realistically means a few additional consderations:

• keep it simple ;
• do not try to do everything;
• focus only on what key fee earners and decisionmakers need.

Typically, the key functionalities and pieces of information have to do with the firm's history with the client, who has interacted with whom on what, and some rudimentary "segmentation" facility for assessing at a very seat-of-the-pants level whether a client would be receptive to an overture from another of the firm's practice groups. 

As I said, CRM—perhaps like KM—has a blindingly simple appeal.  So the devil is in the details.  But how irritated have you been to call your credit card company about a billing question, dutifully punch in your 16-digit account number (and maybe your zip code as well), to be delivered to a noxious numbered menu of irrelevant choices, at last to get the ear of a human being, and begin at once by starting all over with your account number?  That system was designed by a bank-centric, not a customer-centric, brain.  Don't do as they do.

It has long seemed to me that the corporate-land debate over whether the CEO and the Chairman should be one person or two mirrors the law-land debate over the relationship between the Executive Director (or equivalent) and the Managing Partner.  On the premise that we might learn something from the corporate experience, here is another top-drawer McKinsey piece on the promises and perils of same. 

The conceptual goal should be to simultaneously separate and fortify the roles of: (a) keeping the trains running on time, and overseeing finance, IT, HR, and facilities (the Executive Director/CEO); and (b) deciding on strategic direction, practice group investment/scale-back, office opening/closing, etc. (the Managing Partner/Chairman, or managing committee/board of directors). Corporate-land has learned over a period of many decades that strategy and management are two different skills. Why should law-land presume to be removed from, or above, this insight?

Guess what the challenge primarily comes down to?  People!  Specifically:

• relying upon a commitment from and leadership by the executive committee;
• defining the proper roles ("sphere of influence") for each;
• getting the timing right;
• appointing a suitable person to each post; and
• making sure they co-operate productively thereafter.

None of this is revelatory stuff, but according to McKinsey it's too often honored in the breach.  The difficulty stems precisely from the radical behavioral changes required.  Consider:

Intel chairman Andy Grove said that dropping the role of CEO was one of the most difficult transitions in his life but that he learned in this way to control a tendency to dig into details and dominate decision making. Another US chairman who previously wore both hats says that when employees turn to him for management guidance, he routinely refers them to the new CEO, even if he himself has the answer.

A solid approach to finessing the radioactive issue of "taking away responsibility" is simply to incorporate the bifurcation as part of succession planning, so everyone's expectations are realistic upfront.

Once the split is in place, the devil is in the details, in making it work.  At the end of the day, a CEO (or Chairman) who doesn't realize in his heart that his only ultimate power is moral suasion is doomed to failure.  The Type A people at the top of an AmLaw 200 partnership are  not shrinking violets and not amenable to a command-and-control approach.  As McKinsey says, it's all about the people.  [Side note:  As President of our Upper West Side co-op for nine years, with a board made up of overachievers, I have internalized this learning in spades.  Not only are my fellow directors whip-smart, they're my neighbors and all of us are unpaid.  Repeat:  Moral suasion.]

Now, the analogy between a sophisticated law firm and a public corporation can be overstated, and in lieu of Delaware corporate law supplemented by by-laws, the constituting document is fundamentally the partnership agreement.  The McKinsey piece is worth a read, though, if not for one-to-one mapping onto law-land, simply for its dead-on insight into the human challenges involved.

With tremendous sadness I report that Janet and I learned yesterday that our 15-1/2 year old short-hair, black & tan, miniature dachshund, Sparky, has cancer.  A "mass," as the vet diplomatically put it, about the size of a lemon on the X-ray, at the rear of her abdomen against her kidneys.  For the past several weeks she had seemed suddenly to have slowed down.  She was 15 going on 4, but 15-1/2 going on 17.  Now we know.

Sparky came into our lives at age nine weeks just four weeks after Janet and I were married, and she has been a deeply good and loving dog.  We will obviously take the most humane care of her possible and will ensure she experiences no suffering.  (For now, she's in zero pain or discomfort.)

All dogs go to heaven.

A trend emerging, I believe, from the competitive landscape is that the AmLaw 100 are "pulling away," competitively, from the AmLaw 101-200.   So when a star among the "second 100," like Boies-Schiller, misses a calendar deadline that goes all the way up to the 9th Circuit, attention must be paid. 

More interesting from the perspective of this blog is the debate articulated by the judges:

"In the modern world of legal practice, the delegation of repetitive legal tasks to paralegals has become a necessary fixture. Such delegation has become an integral part of the struggle to keep down the costs of legal representation," Schroeder wrote. But Judge Alex Kozinski, who was joined by M. Margaret McKeown and Pamela Ann Rymer in dissent, would have none of it. "While delegation may be a necessity in modern law practice, it can't be a lever for ratcheting down the standard for professional competence," Kozinski wrote. "If it's inexcusable for a competent lawyer to misread the rule, it can't become excusable because the lawyer turned the task over to a non-lawyer." "The error here -- whether made by the lawyer, the calendaring clerk or the candlestick maker -- is inexcusable."

There you have it, courtesy of the 9th Circuit: Is, indeed, the tradeoff between the modern and integral necessity of keeping down costs and dumbing down professional standards?  This is a debate the last of which we have not heard.

My answer, in case you asked, is that technology will enable even-higher professional standards (cf. the ability of pharmaceutical software to pick up on dangerous drug interactions without human oversight) while also bringing down costs, certainly for commodity issues like making filing deadlines.

The Holy Grail of assembling the most potent and effective team for a client matter is, simply put, to have the right people in the right place at the right time.  Wal-Mart (and other companies like Toyota) have achieved this with inventory and supplies; what stands in the way of achieving a similar high-productivity, high-delivery-level miracle with people?  After all, in a knowledge organization such as a law firm, talent is your inventory. 

Of course, all talent is by no means equal, so to prepare the groundwork for "human capital management" means identifying and grouping your people by their subject-matter expertise and their level of experience.  In a law firm, much of this work is essentially done:  "senior corporate partner," e.g., says pretty much all you need to know.  But other distinctions are fuzzier, and worth taking the time to delineate.  For example, when is a "senior securities associate" more appropriate for a financing deal than a "junior asset-backed finance partner"?

Again, our friends at McKinsey have done a yeoman job of laying it out. Patterns may emerge that cause you to re-think how you've always done things.  McKinsey offers the example of a $100-million/year "corporate law firm" with undue attrition among senior associates, causing, in turn, an increase in writeoffs.  If it were to turn out that many of the departed, disgruntled associates had been working on a particular class of deals with a particular handfull of partners, that case-assignment pattern could be broken.

So can you run out and buy this software?  Not quite yet; McKinsey estimates another year to 18 months before it shows up in any form remotely resembling off the shelf.  But considering that it addresses the absolutely indispensable core of your competitive distinction—your talented lawyers—you should be thinking about it now.

A theme of this blog is that the "default" approach to issues in law firm management should be that much can be learned from the enormous literature on corporate management.  In other words, barring unusual circumstances unique to the profession (which always includes the sui generis cultural identity of a law firm), the dynamics of law firm management are not utterly distinct from the dynamics of a like-sized corporation in a high-end service business.  So when an outfit like McKinsey writes about knowledge management for companies, it's presumably worth a read to see what light it shines on KM for law firms.

Characteristically—and I believe, correctly—McKinsey approaches the challenge of KM with a market-driven mindset.  That is, treat the exchange of knowledge within a firm as a marketplace, albeit one with idiosyncratic features, and use what we know about the power of markets to drive KM.  Specifically:

• The "supply" of knowledge comes from smart people providing their distinctive expertise.
• Those people, in turn, must be recognized for their contributions above and beyond their passive peers.
• And they must get credit (their intellectual property must be respected); nothing is more demoralizing to a junior person than to see a senior take credit for their ideas.
• Senior management must get conspicuously behind the creation and upkeep of the KM marketplace.

At the KC Forum I blogged here recently, a fascinating side "conversation" was on how UK and US firms approach KM differently: Essentially, UK firms are people-intensive (having dedicated lawyers draft model documents, e.g.) and US firms are technology-intensive (search, taxonomies, and meta-tagging, e.g.).   Which side does McKinsey come down on?  Both.  They call for a small team (two dozen people for a "large investment bank") to fulfill roles such as editor, "knowledge domain owner," and quality assurance, while at the same time confirming the virtue of effective and targeted technology (for example, deeming it a meaningful success to reduce the number of searches required to find a pertinent document from 5 to 1.2).

But isn't there a chicken and egg problem with launching any KM marketplace?  To wit, what user will go to a KM repository that has little content and what supplier will write for a repository that has no users?  Interestingly, if McKinsey knows whereof they speak, it takes as few as 700—1,000 documents to achieve critical mass.  Has your firm got, say, that many briefs lying around?

Yeah, I thought so.

Just four weeks left to nominate the best technology users in the legal profession for Law Technology News's Annual Awards, in these categories:

• IT Director
• Champion of Technology
• Most Innovative use of Technology by a Law Firm
• Most Innovative use of Technology by an In-House Legal Department
• Most Innovative use of Technology During a Trial

The nomination form is here.  This is a high-profile opportunity to obtain deserved recognition for your IT accomplishments.

Who is worthy?  You know who you are....

Back from the truly lovely Midwest oasis of Bloomington, Indiana (approx. 40 miles south of Indianapolis), where I had the pleasure of guest-lecturing to a group of 30 or so smart, inquisitive, and polite-but-challenging 2L's and 3L's.  Bloomington, and the Indiana University campus, are full of architectural gems and monuments both, with brick sidewalks, rolling terrain, and that ineffable "college town" feel.  At a Starbucks right across the street from the law school, the crowd could almost have come from the Upper West Side (well, half the crowd, anyway).

Midwest hospitality may be what it's cracked up to be. Prof. Henderson and Lauren Robel, the Dean of the Law School, were exemplary hosts in their willingness to spend time and make me feel at home, and I can report that the IU Law School library is one of the most beautiful I've seen. Maybe it even encourages students to spend time there. Be that as it may, the Dean and the Professor are people I am proud to know now in person.

And the hospitality runs across the board: When I went to the front desk of the charming B&B I was staying at at 6 am to see if I could get advice on a running route, I got 5-10 minutes of informed, accurate, and inspired advice complemented by a highlighted map.  And a wonderful run it was.

I'll report very very briefly on what the class I taught was about:  The AmLaw 200 and various historical, geographical, financial, and cultural perspectives on same (yes, full of charts and graphs).  The final part of my presentation dwelt on the highly statistically significant (<0.01 chance of random), and highly negative, correlation between profits per partner and associate satisfaction.   Pick the "associate satisfaction" metric you want—"family friendly," "realistic billable hours expectation," "open-ness about financials," etc.—and the negative correlation is striking.  As one student pithily put it:  "Anywhere I'd want to be an associate I would definitely not want to be a partner."

Choose, indeed, your poison.

I look forward with delight to being invited to guest-lecture at Indiana University School of Law/Bloomington in Prof. William Henderson's "The Law Firm as a Business Organization" course.  I fly out there early tomorrow morning. Full report when I return late Wednesday.

"The Industrialization of the Law Firm" is the ambitious, but fair, title of a piece by A. Harrison Barnes, Esq., founder of BCG Search.  His conclusion?: 

"Today's law firm environment is, in a sense, now being controlled by Adam Smith's 'invisible hand'--for better or worse."

He leaves little doubt, I must hasten to add, that he firmly believes it has been for the worse:  The law firm environment "has become a very tormented place," loyalty has "deteriorated dramatically," and the "Greedy Associates" chat boards are emblematic of the parlous state of the profession.

First, Barnes' argument in a nutshell; then, my take.

Barnes starts by introducing an elysian "pre-industrialized" law firm, an "insular" and "predictable" place where associates joined out of law school, made partner almost without exception, and stayed until retirement.  Lateral hiring was unthinkable, lockstep compensation ruled, and bills were for the [perceived] value of services rendered.  The first stage of "industrialization" occurred from the 1950's to the 1970's, as American corporations grew and demanded correspondingly larger scale from their law firms of choice.  Firms in turn expanded by hiring more associates—but then came the realization that not all associates could make partner, lest profits per partner take a nose-dive.  From this pressure emerged the classic "Cravath model," wherein associates are paid handsomely in exchange for the tacit understanding that virtually all will fall short of partnership.  With the increase in leverage provided by more associate bodies came, as well, the billable hour as the default fee-setting mechanism.

The second stage of "industrialization," from the 1980's to today, saw the introduction of two-tier (equity and non-equity) partnerships—according to Barnes, largely instigated by consultants promising increased profits through increased leverage.  [Preliminary results from the Law Firm Research Project belie this promise, but that is a separate topic.--Bruce]  The toxic result of this nefarious "stratification" of the partnership was compounded by the death of lockstep compensation and the introduction of performance-based compensation.  Performance-based compensation, in turn, fueled the growth of lateral mobility, through both a "demand" and a "supply" effect:  The demand being firms' need for high-performance teams, and the supply being such teams who deemed themselves insufficiently appreciated at their current firm.  Firm mergers, as well, took wing.

Now, as noted, Barnes points with alarm and views with despair these developments.  You should not be shocked to learn that I have a different view.  My recap?

I for one know in which world I prefer to live.  That said, Barnes' lamentations about the incivilities of today's world, including most gravely the deterioration of loyalty to and by firms, are real.  But to postulate that the "Greedy Associates" boards constitute the best representation of the state of the profession today is nonsense on stilts.  Indeed, this reminds me of the (deeply uninformed) debate over "outsourcing" jobs—and yes, Barnes does not hesitate to get in a last jab on this very point.  One should not make public policy based on analysis-by-anecdote, and one should not assess the evolution of the profession during the past 50 years based on internet chat boards.

My reaction to the "industrialization" story Barnes recounts is, in fact, entirely different:  What took so long?  I suspect Adam Smith himself would have a similar view.

My good friend and crack wordsmith Michael Clark of EDDix LLC is striving to break new ground in the world of publishing/distribution, by charging a pretty penny (>$2,000) for a conventional copy of his new book covering the landscape of Electronic Data Discovery, but also by distributing it in pieces across a number of blogs, with each piece free.  (See the EDDix site for the full story.)

Adam Smith, Esq. is pleased to be selected by Michael as a participant, and fittingly enough given our economic focus we opted for the section of his book dealing with revenues, margins, and growth strategies.  First, Michael's piece itself is here.

My take?  Beginning at the end, Michael encapsulates growth strategies nicely.  "Go for the low-hanging fruit."  'Nuff said.

The variance between revenue and margins is of far greater interest.  Here's how I would visualize it:

  As Michael implies, contrary to the received wisdom, leveraging IP assets through technology is not the profit driver it's cracked up to be, but personalized, human-touch consulting remains the fattest margin piece of the pie.  Why? 

• Technology is, at least in EDD-land, a commodity.  This is not quite the famous "IT doesn't matter" argument, but it's an argument that there is no competitive advantage to be found on the technology frontier.  No wonder margins are relatively thin.
• People, on the other hand, are a difficult asset to acquire (in the proper combination of quality and quantity, that is) and a difficult asset to replicate.  This is not just true vis-a-vis one's competitors in EDD-land, it's probably even more true vis-a-vis one's customers.  In other words, consulting services are the single most difficult piece of EDD "production" for a client to do for themselves.

Thanks, Michael:  Strong, good stuff.

Not to appear to be piling on, but here is yet another call for the introduction of merely sane and rational, everyday business management processes into law firm land.

In this case, the topic is not recondite in the least:  Plain old cash management and timely collection of accounts receivable.  Big yawn?  Well, consider:

• If a firm's weighted average cost of capital is 7% (scarcely an aggressive estimate);
• And if a $10-million fee has been billed but is being "neglected;"
• The outstanding receivable is costing the firm $13,500 per week.

Any number of reasons are evinced for firms' being less than assiduous in minding their receivables, but they add up to a flat-footed failure to recognize that law firms are not magically exempt from the rules of Management 101:

• No single person oversees all of the outstanding bills to a single client; they're "overseen" (indulge us in applying the term) by each partner for his/her matters.
• A client may be debating or protesting a specific bill on one matter, so the firm feels hobbled in pursuing all other non-disputed bills.
• It's awkward to have a conversation about the $10-million outstanding.

The rebuttals to which, in order, are:

• Appoint a "fixer."
• Are you serious?  Would the client be so indulgent with its customers?
• See #1.

Here again we have law firms in a behavior pattern that would be laughable in corporate-land; it's the equivalent of a major company assigning its customer collection follow-up to the troops on the factory floor, or to its sales force.

Adopting straightforward cash management disciplines is not an act of hostility towards your clients:  Imagine, they might even view it as an indication of professionalism.

So said the famous Eric Raymond about quality control in open-source software.

And thanks to a reader who took pity on me for my screed against IE and suggested a fix, it is now rendering correctly.  Rick (and you know who you are), guest-blogging privileges any time you ask.

Some readers have emailed that Internet Explorer does not seem willing to display some graphics on this site.  (It also offsets the calendar archive, but that's relatively minor.) 

I have two reactions:  First of all, the site renders correctly under Netscape, Firefox, and Opera. Mac-centric friends also reports it works under Safari, so this would make IE the odd Bill Gates man out.  But second, IE has an undeniable hugely predominant market share, so I will bow to reality and attempt to wrestle this highly irritating Gates-ian imposed hiccup to the ground. 

In the meantime, take my advice (and that of Walt Mossberg of the WSJ) and just ditch IE once and for all.  Face facts; IE is buggy, consummately virus-prone and insecure, and loves pop-ups and spyware.  Do you need this on your desktop?  IE is a perfect example of what monopolies wittingly or unwittingly do to the marketplace:  Suck all of the "consumer surplus" out of it and appropriate it to themselves.

Redmond editorial over.

The reflective and nuanced "Adam Smith, Esq." will reappear in the next post (assuming it has nothing to do with Microsoft).

Electronic Data Discovery may, according to this piece, harbor a rich, hidden revenue and profit opportunity for firms—just bring the capability to perform EDD in-house.

Would that it were so simple.  My instincts to reject grafting this foreign body into a law firm rest on more than Management 101's dictum to "stick to your knitting" (or, in consultant-speak, "core competencies").  To begin with, there are evidentiary and potential malpractice issues:  When your firm handles electronic discovery in-house, you will need to be prepared to testify as to the "chain of custody" of the resulting work product.  The invitation to the cross-examiner to probe the swamp of conflicts of interest will be irresistible.   And, should anything slip between the digital stools, suspicion may arise not just of simple error or innocent lapse, but of evidentiary spoliation.

But this is a blog about economics, not about the Rules of Evidence or insurance premiums.

EDD appears to me almost uniquely ill-suited to bringing in-house because of some of the unusual characteristics of it as a market (some of which, in fairness, the author acknowledges):

• The demand for EDD capacity is innately characterized by spikes and troughs; capacity will, more or less continually, be lying idle or be completely overwhelmed, reducing you to outsourcing willy-nilly.  "You cannot build the church for Easter," but Easter happens several unpredictable times a year with EDD.
• EDD, quintessentially a hardware- and software-driven expertise, will be in a constant state of evolution.  An investment in EDD resources today will be obsolete—when?  One year?  Three?  Will they be fully amortized well before that?  And will you know what to buy at that point?  Remember, this industry is still young; it barely existed five years ago.
• Finally, the structure of the EDD industry itself, I would argue, makes building internal EDD capacity a remarkably short-sighted exercise.  I say this because the industry itself is in a profound state of disequilibrium, with anyone who's ever walked past a copying machine, it seems, declaring themselves an EDD vendor.   Profit margins are (in the short run) very high because demand is all but inelastic and clients needing EDD are usually in a frame of mind ranging from nervous to panicky.

These conditions will abate.  EDD is essentially a commodity business, with no meaningful brand differentiation on the current vendor landscape, which adds up to an industry susceptible to large-scale and rapid consolidation.   Once this process starts, margins will shrink and vendor shake-out's will occur.  Best of breed will survive.  But if you've built in-house capacity, the "fallacy of sunk costs" will tempt you to continue using it even if superior alternatives exist outside.

Iin the longer run, I challenge the notion that EDD is an industry:  I believe it's an ancillary expertise of firms who are already in a variety of neighboring industries, such as document management, storage, and forensics.  According to the Economist, in its current special issue on "The State of IT," at the turn of the century large companies had "Chief Electricity Officers" to manage this critical, arcane, and unpredictable resource.  I predict a similar future for "Chief EDD Officers."

Thanks to the good folks at Baker Robbins & Co., I was able to guest-blog the Knowledge Counsel Forum here in New York this past Thursday and Friday, October 28 and 29.  Rather than act as a virtual transcriber of the mountain of information presented, I will instead recap the  highlights, the insights, the unusual perspectives, and some of the wry observations which made these two days both intellectually rewarding and just plain enjoyable.  (I also understand that the full text of all the presentations will soon be on-line at Glasser LegalWorks.)

Michael Mills, Director of Professional Development and KM at Davis-Polk, chaired the conference and kicked off Thursday morning with his characteristic wisdom delivered in his equally self-effacing style:

• Knowledge is the firm.
• But this has always been the case, so why is the case for KM particularly urgent now?

After all, law firms have been doing KM for years: Our collective hundreds of years of common law precedent is one of the largest knowledge bases in the world.  But now:

1.  There is too much for any individual to know.

2. Increasingly, we have arrived at knowledge parity with clients, and they now expect all lawyers from any AmLaw 200 firm to be "excellent."

3.  And, firms have become too large to share knowledge organically, "by walking around."

IT is necessary but not sufficient; "The more valuable the knowledge, the less sophisticated the technology supporting it."  If IT will get you only partway to KM nirvana, and a collaborative culture is also essential, what can KM do about a dysfunctional culture?  "Forget it!" We are not going to change culture. Sharing is an expression of culture; not sharing is not a KM problem. "If you're not collaborating, you're not a firm."