February 2005 Archives

Now that we all have religion about organizing firms by practice groups (well, most of us, anyway), the next logical question is, to paraphrase Ed Koch, "How are we doin'?"  In other words, which practice groups are the strong economic engines driving profitability of the firm as a whole, and which are the laggards which are calling out for a strategic re-think, a tactical readjustment, or both?

Getting the numbers on profitability by practice group has become almost trivial given today's financial management software suites:  The question is what to do with it, and a devilish question it is. 

To be sure, one may debate methodology ad infinitum.  Should all revenue from a given matter be credited to the practice group where the billing or originating partner resides?  Should it be allocated among groups in proportion to the hours actually worked on the matter by members of various practice groups?  Meanwhile, on the expense side, it's easy enough to simply allocate overhead "per capita," but some practice areas do in fact demand greater infrastructure resources than others.  Should that be reflected accordingly?  Whatever choices are made, the mantra should be, "Transparency!"  Articulate your assumptions, describe why they were chosen over alternatives, and—hey, go crazy!—even think about doing the profitability calculation more than one way.

Meanwhile, what's happening in the real world?  The consultancy Edge International conducted an online survey last month of 341 COO's and Executive Directors of "large U.S. law firms" (no further specificity provided), and garnered a response rate of 46% which I will stipulate for purposes of discussion amounts to a representative sample.  (Without access to the underlying questionnaire I'm not in a position to judge whether it was well-designed to defend against self-selection among respondents.)

According to them, the truly fascinating aspect is not the green-eyeshade debate over debits and credits, but what use firms actually make of the results—if any:

• 21% use it as a factor in partner compensation;
• 15% in setting rates;
• 12% in allocating marketing expenditures;
• 1% in setting recruiting priorities (One percent!  Think about that, unless it makes your head hurt, as it does mine); and
• an overwhelming 78% consider it simply "general information."

Ironically, the one significant trend Edge espies is that some firms are moving from analyzing practice-group profitability to analyzing the profitabililty of specific lawyer/client relationships.  Aside from playing with kryptonite, does this risk regressing from the sine qua non of collaborative practice groups to the bad old days of super-star silos?

This leaves me almost at a loss for words about the backward status of practice group profitability analysis.   Can you imagine a single Fortune 1000 that considered the profitability of its various brands or services merely "generally informative?"  No, not a single one.  But we evidently have 78 of the AmLaw 100 (by extrapolation) taking that head-in-the-sand position.  Perhaps it's best if I conclude by simply citing the title of the most recent book by the Edge consultant who authored the survey summary:  "The First Great Myth of Legal Management is that it Exists."

I put an on-line "photo album" up about "The Gates" installation in Central Park.  Check it out.

You still have today, Saturday, and Sunday to experience them in person:

• preposterous, insane, magical, joyous—brings out the child in every visitor (even the cops)
• human-scale and monumental-scale at the same time
• would not work with fewer Gates, would not work in a different color—whatever else one thinks about Christo & Jeanne Claude, they got this precisely right
• evanescent:  Hard to believe they actually appeared, and harder to believe they'll be gone shortly.

"Once upon a time, 'The Gates' were in Central Park...."

If you asked us to name one seminal development that "changed everything" in terms of law firm economics between the stasis model of the 1950's and the dynamic model of the 1990's, we'd say it was the creation of a market for lateral partner mobility.  I've talked about this before, but now the redoubtable Leigh Jones of The National Law Journal has a piece reflecting upon the "tectonic shift due to law firm megamergers," which concludes, among other things, that:

• lawyers surveying the new landscape who may doubt there firm will exist in its current form three to five years down the road are more open to overtures by other firms;
• there may be a certain Fortune magazine "best places to work for" envy at work as particular firms seem to systematically acquire powerful laterals and practice groups; and
• firms that have grown more sizable and powerful are increasingly willing to "buy" rather than "build" expertise in practice areas they desire.

When you think about it, acquiring a lateral partner or a lateral practice group is essentially a mini-merger, and all the considerations that befall the (poor) success rate of mergers therefore obtain.  Pertinent is this observation:

For William O'Connell, Buchanan Ingersoll's managing shareholder, bringing in a boutique firm is preferable to cherry-picking groups of attorneys from larger firms because the acquirer has full access to the boutique's financials and can get a clear picture of how those attorneys are performing. He said that having access to financial records avoids having to rely on attorneys looking for a new firm to provide that information. "The first wife knows something that second wife hasn't figured out yet," he said.

Indeed.

On top of the possible murkiness of past performance record is the risk of overpaying upfront for the acquired group.  Even if information is perfect, a possible market outcome is that the acquired group would fully capture in the "takeover premium" paid to them the capitalized value of their future supra-normal earnings stream.  So if they depart a few years later, or even if they don't, the acquiring firm is no richer on the bottom line.

But success or failure in acquiring laterals is also an exercise in Management 101:  Support them, integrate them, blend them in, introduce them to and inculcate them with the culture. 

Under no circumstances do this:
"The firms that do the poorest job of integration basically give them a desk and say, 'Here's a copier. Tell us where you are at the end of the year,' " [said a recruiter]. 

Even Carly Fiorina did more with the late lamented HP/Compaq merger.  Acquiring laterals is, again, a "mini-merger."  Treat it with all the care, attention, seriousness of purpose, and innate skepticism, it deserves.

Coming soon:  The results of the "Savvy Blawgers Query #2!"

You will recall the results of "Savvy Blawgers Query #1," which had to do with changes in law firm management over the next five to ten years.  [That link also has a handy-dandy recap of the rules of the road for the estimable and accomplished Savvy Blawgers panel.]

Next up with #2, to appear within a few weeks, will be the SBs' cumulative wisdom on the billable hour, its future, its pernicious and beneficent effects, whether it's a better deal for clients or for lawyers, and what alternatives might be realistic and desirable.

Stay tuned.  And a heartfelt thanks and round of applause for the SBs.

So this has nothing to do with the economics of law firms, but it has a lot to do with professional behavior under incentive regimes.  Two economists at the University of Chicago have published a paper analyzing whether realtors (representing the seller of a home) work as hard on their client's behalf and extract as much value for a home as they do when they're working for themselves, selling their own home.

Have you already guessed or shall I tell you?  As competently summarized by The New York Times, in a study of nearly 100,000 home sales over ten years (1992—2002) outside Chicago, realtors selling their own homes typically kept it on the market 9.5 days longer and secured a median price 3.7% higher than a comparable home for sale by you or me.  Unprofessional?  A breach of duty to the client? 

Not so fast:  Because of the commission structure, there is truly little in it for the realtor to hold out very long for a better offer that may, of course, never come.  Although the standard 6% commission is, in my opinion, scandalously high and prima facie evidence that the National Association of Realtors constitutes a cartel, the seller's individual realtor only gets one-quarter of that 6%, or 1.5% (their half of the half that goes to their firm). 

So for a $500,000 home, the agent would get $7,500—say, for 10 days' work.  Now suppose they could add 3.7% to the price by working for another 10 (OK, 9.5) days.  The house would now sell for $518,500, and their net gain in income for doubling their efforts would be $277.50.  $7,500 or 10 days work or $7,777.50 for 20 days?  But when selling their own home they of course get to keep at least 95.5% of the incremental price (assuming 1.5% still goes to their own firm and 3.0% to the buyer's realty firm).

Now comes the important part:  Recall that this particular 10-year period spans from pre- to post-internet.  Pre-internet (1992—1995), the difference in favor of the realtor's own home was 14 more days on the market and a 4.9% higher price.  Post-internet (2000—2002), the numbers shrank to a 2.9% higher price and 2.5 more days on the market.  Thank you, realtor.com!

Something similar (see below) is happening to the mainstream media courtesy of the blogosphere:  The cartel's power is under siege from newly-widely distributed data. 

Don't you hate it when your information advantage starts to be eroded?

A fellow new to me, one Bruce Marcus (a self-described former Upper West Sider, I hasten to add, as well as someone with an enviable first name), alerted me to a post of his about the impact of legal blogs:

"Aside from political blogs, few areas have produced more interesting, valuable and sophisticated material than the legal profession. You have only to look at the growing number of blogs for and by lawyers to realize that the massive power of law bloggers can ultimately influence the law itself, and certainly its practice.  Law firm blogs report on techniques of practice management, practice news, practice gossip and practice techniques. Led by a long list of pioneers, such as Monica Bay (The Common Scold), The Volokh Conspiracy, Andy Havens, Dennis Kennedy, Bruce MacEwen, Larry Bodine, Jerry Lawson, Sabrina I. Pacifici, Robert Ambrogi, and many others, the network of law bloggers has blossomed."

Excuse me while I finish blushing.

To my mind, and I'm confident Marcus would agree, the impact of blogs—particularly in knowledge-intensive domains such as the law itself, management of law firms, and practice group management—stems from their spontaneous creation of a distributed network of wisdom and knowledge. 

And, unlike in the world of "MSM" (mainstream media), a Darwinian competition enforces a discipline upon content, meaning that cant, obfuscation, and insincerity will be rejected and ignored, and that thoughtfulness, a felicitous tone of voice, and critical insight will rise to the top. Put more simply, if The New York Times has a bad day, I'll still read it tomorrow; but if a blog disappoints, there are plenty more where it came from.

Proof that this "distributed intelligence" is a genuine phenomenon was "Rathergate," where a powerful array of arcane specialties (the fontography of 1970's-era IBM Selectrics, for example) spontaneously assembled to deal a blow to the august CBS News division.  I wonder when or if there may be such a seminal event in law-land.

How common is this scenario?:  The CIO needs to improve the quality and credibility of the firm's IT implementations, but since he lacks the money and resources he believes would be needed, he's looking for a less expensive way to boost IT's performance.

If he asked you, what would you recommend?  Beats me as well, but Michael Schrage, co-director of MIT's Media Lab and a monthly columnist for CIO magazine, has a snappy comeback:  Fire the right person. 

And don't kid yourself that you don't know who that is:  It's the person who's the consistent obstacle to bringing projects in on time, who's the prima donna, who may be a brilliant coder but who views his peers as jerks. 

Are there reasons to keep that person?  There always are.  Firing someone is, we hasten to add, a drastic measure not to be undertaken without contemplating the potential fallout to morale, not to mention the pain inflicted on the fire-ee. 

But a "strategic" firing can deliver a powerful message, and for sheer thriftiness among competing tactics it can't be beat.  Give it some thought.

Am I the only one being driven to the conclusion that the ethics and jurisprudence surrounding "conflicts" are insane?  After reading about the tortured machinations firms go through as part of their pre- and post-merger due diligence, it's clear to me that this system has become detached from economic reality.   Don't get me wrong:  If two firms' clients are on actual or potential opposite sides in litigation, we have a hard-core conflict and Firm A or Firm B has to recuse themselves. 

But particularly if niche practices are involved, the world quickly becomes a very small place (patents and trademarks, e.g.), with less than six degrees of separation between almost any two companies  you can name. 

Let's go back to fundamental principles for a moment:  An economically cognizable "conflict" exists where a firm has (legitimately) obtained confidential information from Client A in the course of representing them, and then proposes to represent Client B who could be materially advantaged or prejudiced if the confidential information were disclosed.  To resolve this problem we have no need to resort to "conflicts" analysis at all:  The case is squarely covered by the duty to keep privileged client disclosures confidential.

Or, consider two clients who compete with each other in the XYZ marketplace.  Why should a law firm be disabled from representing both?  Across the rest of the span of their vendor relationships, the two clients surely have substantial overlaps:  From the certainty that both buy PC's running Windows with Intel chips to the likelihood that they recruit skilled professionals from each other.  So long as client confidentiality is rigorously maintained, I fail to see the ethical impediment to dual representation. 

I propose putting the discretion entirely back in the hands of clients (excepting only cases that would call for mandatory recusal).  Why put the onus on the clients?  I start from the presumption that any client should be permitted to hire any law firm of their choice.  And, if Coke knows that Pepsi uses (hypothetically) Davis-Polk, why should Pepsi be in a position to thwart Coke if it wants Davis-Polk's counsel as well? 

At the extreme, the existing conflicts rules invite the moral hazard of a large company signing retainer agreements with all the top law firms serving its industry, relegating its competitors to hiring second-tier firms.  (Think this is implausible?  How many New York firms do almost all the work for the bulge bracket investment banks?  Only a handful.  Could Goldman-Sachs afford to sign $100,000/year retainer agreements with all those firms?  I rest my case.)

Realistically, conflicts are always in the eye of the client, after all.  The most preposterous example of this occurred years ago before federal law banned smoking on airplanes.  Northwest Airlines, in a bid to stand out, announced it was prohibiting smoking on all its flights.  Northwest and Philip Morris, as it happens, both used the same ad agency.  Philip Morris pulled its account from the poor, side-swiped agency; and nothing can prevent this kind of irrational eruption.

Would this proposed change accelerate the merger wave?  Perhaps; but either way, that is surely an unintended consequence. 

I've reviewed the merits of the Pillsbury-Winthrop/Shaw Pittman merger before, but now I want to ask a different question:  What if anything does this portend for the merger/consolidation trend in general?

If you believe Hildebrandt's annual merger-activity data, at least the total number of deals has been on a continuous upswing for the past few years.  But as a question of market structure, does that imply there is less and less room for mid-sized firms?  Are we headed for a bipolar world of global one-stop shops and local or practice-specific boutiques, with few solid firms of the 100—400 lawyer scale?

At the very least, it's become clear that to be a national player in the US, you need strength in New York City, California, and D.C.  Pillsbury needed Shaw-Pittman's D.C. throw-weight and, unless Shaw-Pittman resigned itself to being a perpetual regional player, it needed Pillsbury's NYC and Bay Area presence.  You can read a piece speculating on the fate of the remaining "mid-sized" D.C. firms courtesy of Legal Times, where Mary Cranston, current and future chair of Pillsbury, has this to say:

Still, Cranston sees little choice but to aggressively expand: Either a firm grows, or it's unable to provide a broad array of services to top clients, she says. By merging, Pillsbury Winthrop is looking to Shaw Pittman's regulatory practices -- nuclear energy, the Federal Trade Commission and banking -- to boost its business with its corporate clients. And it hopes that Shaw Pittman's outsourcing practice will complement its West Coast corporate needs.

When you're thinking of providing absolutely full-client service, you almost always need a regulatory piece ... and D.C. is where most of the regulatory expertise resides," Cranston says. "So it's one of the few markets that brings a different mix of services to the firm."

I read her to mean that it's time to stipulate that NYC, California, and D.C. are "special cases," where a firm with national ambitions simply must be.

If so, have we left any room for medium-sized firms based elsewhere in the country to be stand-outs?

Increasingly, the evidence argues that there is no such room.  Consider this (arguably self-serving) essay by a marketing consultant in Legal Week.  Starting from the premise, with which I agree, that the legal marketplace is becoming ever more competitive, with firms' primary growth strategy having to be one of contending for a larger share of a slow-growing pie, he argues that a distinctive brand image is prerequisite to success.  Indeed, he argues that development and nurturing of that image is more important than anything else the firm is doing: 

"The starting point to greater marketing effectiveness is to ensure that the firm’s marketing programmes reflect the firm’s overall market segment-resource strategy in terms of the defined positioning and performance objectives, the specific market segment priorities, and which of the firm’s practice-industry-geographic strengths are to be most powerfully leveraged for enhanced position and profitability."

More pertinent for our purposes, he argues that there will be no room for "second best" in key market segments: "the richest market segments will always attract the most determined competitors."

Even granting his occasionally hyperbolic rhetoric, he draws a Marketing 101 roadmap:

• know your firm's core distinction;
• understand how that draws particular clients to you;
• be consistent in your message;
• articulate your "brand" in a way that is: (a) credible; (b) ownable; and (c) distinct.

This means there will be very few winners left standing.  So, is there no room for the 100—400 lawyer firm? 

In our brave new world, without a compelling regional or practice-specific expertise, I'm increasingly skeptical there is such room.  Choose critical mass or local excellence. 

But under no circumstances don't choose.

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PS: I should note that this type of industry structure (with firms either big and global or boutique and niche) is a fairly common phenomenon across the economy. It more or less describes industries as diverse as:

• Agriculture
• Retail Banking
• Apparel retailing
• Advertising
• Cable TV channels
• Investment Banking
• etc.

The big event in New York today is the unveiling (actually, "unfurling" is more like it) of Christo's project, "The Gates," in Central Park.  Janet and I were in the Park with the dog by 7:00 am to watch the process begin. 

All I can say is that if any of you are in a position to get to New York before February 27th (when they come down), do it.  Magical.  The cumulative impact is hard to exaggerate.

From the wires, and I quote:

"Altman Weil is pleased to announce a strategic alliance with London-based Jomati Limited. Like Altman Weil, Jomati is an independently owned global management consultancy advising law firms and corporate law departments. It is led by Tony Williams, formerly the worldwide managing partner of UK-based international law firm Clifford Chance and worldwide managing partner of Andersen Legal.

"Both Altman Weil and Jomati focus on high-level work involving strategy, merger, financial performance and organizational structure, and share a goal of providing clients with sophisticated, innovative solutions to management issues. By allying, Altman Weil and Jomati broaden their capabilities to serve legal organizations throughout the world. Both organizations were involved in the two transatlantic mergers of US and UK law firms announced in 2004. Altman Weil advised DLA in the recent DLA Piper Rudnick mega-merger. Jomati acted for Kirkpatrick & Lockhart in their combination with Nicholson Graham & Jones.

"Because an increasing number of US and UK firms are considering the possibility of a transatlantic merger, there is a growing need for advisors with breadth and depth on both sides of the Atlantic. This alliance will allow us to provide in-depth, on-the-ground, consulting services to clients in the UK, Europe and Asia, multiplying the value either firm could deliver independently to law firms with an international agenda."

So what?  Actually, so a couple of things:

• The study of market structure tells you that the geographical footprint of service-providers (Altman-Weil, Jomati) to an industry (the AmLaw 100 and UK 100) should align.  Simply put, you want to be where your clients are.  Seen this way, a better question than "why?" is "why not before?"
• Globalization is proceeding apace; it is increasingly limiting to have critical mass only in London or only in New York.  And the divide between the US-based and the UK-based firms is starting to look flimsy.

Combined with last month's news about Thomson acquiring Hildebrandt, the legal-consulting industry also appears to be consolidating in mimicry of its target clientele.  The interesting question now becomes whether these deals will have any impact on the relative success and failure quotients of US firms targeting London and UK firms targeting New York.  Up until now, it's fair to say the former efforts have fared far better than the latter.

Why is this so?  I'll resist the glib temptation to attribute it to some nebulous and self-congratulatory "entrepreneurial" blood in American veins which is hypothetically lacking in English veins; that "explains" precisely nothing. 

Rather, I have a more straightforward theory (Occam's Razor, anyone?):  The UK partner lockstep-compensation system operates potently to inhibit them from paying gunslinging New York rainmakers—who they need to build a presence here—what they're worth on the open market.  The daytime drama that has been Clifford-Chance's embrace of Rogers & Wells is only the most conspicuous example.  (I have faith they're sorting it out, but the point still obtains.)

Succession planning is part of the Management 101 toolkit that law firms ignore at their peril.  Too many firm leaders are reluctant to attend to it, either intentionally ("it will all work out") or simply through preferring not to take up a potentially contentious, personality-intensive issue so long as there seems no urgency to it.  Of course, once it's urgent it's too late.

These observations are not academic.  I had the happy experience of being an associate at the late, great firm of Shea & Gould here in New York when it was in its heyday, but after both Bill Shea and Milton Gould retired in their 70's, the firm ultimately dissolved for want of strong and uniting management—a death that could have been avoided.*  Thinking about succession planning is also timely:  We've recently learned that Testa-Hurwitz is no more, two years after the sudden death of marquee founder Dick Testa, and my recent piece about Jay Zimmerman's leadership at Bingham-McCutchen shows the flip-side:  That good, not just bad, things can happen when a new leader steps in. 

So bravo to Larry Sonsini of Wilson-Sonsini for handing the CEO keys to John Roos.  Roos, who's been at Wilson-Sonsini as a corporate attorney for 20 years, is currently the managing director of professional services and, in the small world department, a friend of mine from Stanford Law School days.  (Yes, I have already congratulated him, and he has graciously and self-effacingly replied.)   Aside from my own delight at John's well-deserved elevation, why do I hold this out as a model of succession planning?  Consider:

• Sonsini didn't have to do this now; he's only 64 and clearly in a position to remain on the throne for as long as he chooses.
• Wilson-Sonsini may be at something of a strategic inflection point.  While it is pre-eminent in technology and venture capital circles, and sizable by any standard (600 lawyers, #46 on the AmLaw 100), it's heavily Bay Area-centric:  Palo Alto and SF aside, none of its offices has more than 30 attorneys.  If they aspire to be a Latham & Watkins or an Orrick, a different approach is called for.
• Sonsini has not attempted to clone himself and appoint a mirror-image successor:  Instead, he has self-consciously moved to "institutionalize" (his word) management.  While Roos becomes CEO, Jeffrey Saper, now managing director of business development, will become vice chairman and focus on client development.

John sums up the change with pith:  "We are a major company that needs full-time management." 

GE has been written about in the management literature as a virtual finishing school for CEO's.  AmLaw 100 firms could do worse than taking a page from that playbook.

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*Trivia fact: Bill Shea is the "Shea" in Shea Stadium. Huuuh? you ask. After the Dodgers decamped from Brooklyn to LA, New York was for some time without a National League baseball team. Eventually Major League Baseball got around to talking about giving an "expansion" National League team to another city--but not to New York! Bill Shea, who was unbelievably well-connected politically, started a movement to create a third, new baseball league, the Continental League, and planned, of course, to award this new league's first franchise to New York. The National League blinked, New York got the Mets, and Bill got his stadium.

Even the reader acquainted only at the most cursory level with my perspective on the increasingly professionalized management of law firms would know I endorse that trend wholeheartedly.  The question du jour is whether I endorse it without reservation.

Prompting this soul-searching is Sidley-Austin's highly publicized run-in with the EEOC over demoting 32 partners in 1999—all over 40—in order, as the management committee put it, to provide "greater opportunity for younger lawyers down the road."  The EEOC's position is that Sidley's "hyper-centralised" management under which partners almost never voted on anything means the demotees were mere "employees" and thus subject to anti-discrimination law.  Sidley-Austin retorts that they were, obviously, "partners" sharing in profit and loss and contributing capital, and thus outside the scope of anti-age (anti-sex, anti-race, anti-religion, etc.) discrimination law.

As Professor Bob Hillman of UC/Davis Law School, an expert on partnership law, puts it to the FT, "This is a big one."  Not only law firms, but accounting firms as well may be deemed partnerships in name only if the EEOC prevails.  As a securities lawyer and not a partnership or agency lawyer, I have no opinion on whether Sidley or the EEOC has the better of it, but it does present me with a dilemma.

Simply put, as a champion of professional management, I strongly favor decisive, centralized, strategically focused executive bodies.  Not for me the New England town hall model of interminable discussion in search of consensus.  (If you doubt me, just look down one post.)  But the more "hyper-centralised" management is, the more disenfranchised the rank and file partners are, which has a whiff of inhumanity to it and which—worse from the economic perspective—may leave their incentives mis-aligned with the firm's long-term best interests. 

On the other hand, we as a civilized society have developed certain protections against the ruder depradations which an omnipotent management can visit upon its underlings, anti-discrimination law primary among them.  Would I deprive these neutered partners of even that protection? 

In other words, in for a dime, in for a dollar.  If I have the courage of my (pro-professional management) convictions, do I also think Sidley should lose this case?

Yes.  I think they "should."  But, as my first-year Property professor unforgettably screamed at a naive compatriot of mine, "FAIR?!?!  What's 'FAIR' have to do with it?"

Roughly speaking, there are two theories of history:  That people shape events, or that events shape people.

As a confirmed subscriber to the former theory, this American Lawyer profile of Bingham-McCutchen's chair, Jay Zimmerman, tells the tale to me of what a decisive leader can accomplish.  Indeed, I don't even read it as a profile of the firm; I read it as a profile of Zimmerman.  (Clarification time-out:  Always remember that this is a blog about the economics of law firms, not about law practice per se—so my focus on Zimmerman reflects my perspective going in, and that perspective has nothing to do with the accomplished, astute, perspicacious, and innovative lawyers practicing at Bingham—not, anyway, unless they have a senior role in management.)

Zimmerman became chair in 1994, winning a contested election when the previous managing partner abruptly took early retirement with no succession plans in place.  "Bingham, Dana & Gould," as it was then, was nearly on the rocks.  Fully one-third of its business came from a single client (Bank of Boston, now long gone and a part of the Bank of America empire), and morale was sliding.  A few years later, with the firm on more solid footing thanks to savvy lateral hiring at its weak Washington, DC, and Hartford offices, it began a measured regional expansion—without grandiose plans, or even an articulated strategy—taking advantage of opportunities as they arose. 

The real change came of course in 2001 with its merger with McCutchen-Doyle of San Francisco (of which more anon), but here are the numbers.  From 1999 to 2003, Bingham:

• more than tripled its revenue;
• rose from #81 to #26 on the AmLaw 100, faster than any other firm;
• and today has revenue of $565-million, 850 lawyers, and 11 offices.

Zimmerman's goal from here?  "To become the best national firm in five to seven years."  And he just might pull it off, given his track record of decisiveness.  For example, when he was negotiating to acquire LA's Riordan & McKinzie in 2003, an unfunded retirement plan liability had required endless negotiation and number-crunching by other firms who had held talks with Riordan.  For Zimmerman?  Within 10 minutes, he agreed that Bingham would simply assume the liability.  And this is not a pose:  At a firm-wide retreat at the Bellagio in Las Vegas in early 2003, a Bingham partner made a crude and offensive presentation involving superimposing the heads of female partners on Dobermans (from the firm's ad campaign at the time).  Zimmerman immediately took the stage and denounced the presentation, and got a written apology from the partner distributed to all hands the next day.

Bingham under Zimmerman is run on as close to a corporate model as any firm remotely its size.  Not an accident, and Zimmerman is not a man shaped by events.  He's a man shaping events.

One of the most promising and optimistic pieces I've read in awhile comes courtesy of John Smock, co-founder of Smock Sterling Strategic Management Consultants outside Chicago.  Essentially a look-back at his twenty years of experience being a strategic consultant to law firms, he reports that the landscape has changed—for the better—drastically:

• Law firms used to be in denial that they are businesses; no longer so.
• Work of impeccably high quality was thought to be all that was needed to win clients; firms now recognize that's merely the price of admission.
• "Marketing" was a dirty word; although to some extent this remains the case, enlightened firms are realizing its true value if it is premised on a keen understanding of client needs.
• "Finally, law firm management was just not very good—primarily because it did not have to be," but now management is far more professional and non-lawyers play pivotal roles.

What drove, or forced, these changes?

Competition.

Simply put, law firms are better managed today because they have to be.  While per-partner compensation has risen dramatically in real terms in the past two decades, that only means that laggard firms can fall victim to a self-reinforcing downward spiral as talented partners move to greener pastures, high-quality (and high-fee) work moves with them, the firm is no longer attractive to recruits, etc.  Law firms—yes, even law firms!—recognize that in this environment a reluctance to adapt is a slow-release toxin. 

What adaptations, specifically, has competition driven us to?  First of all, simply adopting Management 101 principles:  Set objectives, measure results, provide suitable incentives, define accountability, review, fine-tune, repeat.  Second, recognizing that over the long run strategic decisionmaking can determine a firm's future:  Exploit what you're good at, improve or kill off what you're weak at, choose your geographic footprint wisely.  Third, practice group management is being implemented at most firms, and while getting it right can include a period of trial and error, once you are doing it effectively and consistently "the results have been quite dramatic."  Lastly, in what is a fascinating observation which Smock almost uses as a throwaway line (the article is very high-quality, as I said), he notes that law firm CEO's are paid more or less on a par with their partners, unlike in corporate-land, and are thus not susceptible to the "Greedy CEO Syndrome."

What, then, remains to be done?  Well, plenty, but for starters:

• Create advisory boards to give firms fresh perspective on their strategic and tactical options.
• Make sure partner compensation is aligned with the long run interests of the firm and not just last semester's report card.
• Institute 360-degree reviews for partners, recognizing that a 30-something just-minted partner is and will be a work-in-progress for, one hopes, another 30 years.

If I lived in Chicago, I'd buy Smock lunch on the strength of this piece alone.