June 2005 Archives

I promised a more substantive gloss on the AmLaw 100 results, and, while I have not run this by any Ph.D.'s in statistics, I think it tells a fascinating and possibly powerful story—which, more importantly, might even accord with some of the hypotheses and intuitions floated hereabouts on the trend of consolidation among the AmLaw 200.

First, eyeball this:

What, you may rightly ask, is going on here?

Let's back up.  One of my hypotheses, articulated when I first posted this year's results, is that "the rich are getting richer."  By this I meant to suggest that the leaders of the AmLaw 100 pack are pulling away from the laggards at an accelerating rate.  So far, most of my basis for surmising this has been based on anecdote, isolated "data points," and caffeinated or lubricated conversations with friends and colleagues about Big Trends for the Next Ten Years.

Then it occurred to me that if there is something to this hypothesis—if the AmLaw 50, say, are gaining ground on the AmLaw 51-100—then the year over year revenue growth might reveal something.  So on this graph I calculated the year-on-year revenue growth for the AmLaw 100 for the past three years (yielding two one-year-over-one-year series and a two-year series).

So what do we see?  I would argue:  Striking visual evidence that the hypothesis is correct.   For each of the three series, the rate of increase in revenue is higher for larger firms than for smaller.  

I performed one other test.  Using Excel's "forecast" function, which extrapolates a series out to a future data point, I asked what revenue growth would look like for AmLaw firm #200, and these are the almost shocking results:

• Based on an extrapolation of the 2004 vs. 2003 series, firm #200 would have revenue "growth" of -7.18%.  (Yes, that's a minus sign.)
• Equally damning, based on an extrapolation of the two-year series (2004 vs. 2002), that same firm would scarcely enjoy any net revenue growth at all for the two years:  Specifically, a charitable-to-call-it-anemic 0.12%.

I anticipate copious emails from the incredulous, the triumphant, and the Ph.D. statisticians.

---

Methodology Update: Posted by Bruce at 8:45 am 30 June 2005:

You may be wondering whether I tracked the revenue-growth performance of each individual firm in the AmLaw 100 during this period or whether I analyzed the overall composition of the group.  Answer B. 

In other words, my interest was in "what it takes" to stay in the AmLaw 100 at a macro level, not whether the strategies of individual firms were, relatively speaking, successes or failures.  So, for example, firm #10 in 2004 was Sullivan & Cromwell; in 2003 it was Kirkland & Ellis; and in 2002 it was McDermott, Will & Emery.  My data point for "firm #10" on these time series, therefore, actually represents the performance of three entirely different firms. 

But since my goal, as noted, was to analyze what it takes to be (in this case) "Firm #10," this methodology seemed the correct one.

Other questions?

At a meeting at Milbank yesterday, a senior partner had occasion to recount the tale of the pencil-sharpener, which was an actual employee at the firm decades ago.

The pencil-sharpener's role was to circulate throughout the office collecting used pencils and replacing them with sharp ones. So far, so good, and so far, so invisible.

But one day the senior partner had reason to visit a paralegal's cubicle and noticed that all the pencils, while sharp, were very short; and all of his pencils were very long.

You can intuit the rest. The pencil-sharpener provided partners with long pencils, associates with medium-length ones, and paralegals with short ones. Legend has it that a partner presented with a short pencil threw it back at the pencil-sharpener, and a lesson was learned.

A quaint tale of a bygone time where associates and paralegals were duly put in their place, silently and (almost) invisibly, but with utter certitude and devastating effects were they to be reflected upon for a moment.

Isn't it great we all know better now?

As promised, here's the AmLaw 100 for 2005. I'll have some substantive commentary later today, but for now I'll primarily limit my gloss to that provided by my friends at American Lawyer Media: 

"Five Am Law 200 firms posted gross revenue in excess of $1 billion in 2004, the largest number ever. Sidley Austin Brown & Wood broke the billion-dollar barrier for the first time in 2004, while the others did so previously -- Skadden, Arps, Slate, Meagher & Flom in 1999; Baker & McKenzie in 2001; and Latham & Watkins and Jones Day in 2003."

My very quick and dirty calculation of the change in revenue over last year's AmLaw 100 is that at the top (Skadden, what a shock) the increase was 8.27% ($1.440-billion vs. $1.330-billion), while at the bottom (Ballard Spahr this year, Preston Gates last year) the increase was only 5.82% ($200-million vs. $189-million). Are the rich getting richer? Very preliminarily, it certainly looks that way.

The Billion-Dollar Club Expands

2004 Rank	2003 Rank	Firm	2004 Gross Revenue	Lawyers
1	1	Skadden	$1,440,000,000	1,554
2	2	Baker & McKenzie	$1,228,000,000	2,992
3	4	Latham & Watkins	$1,206,000,000	1,502
4	3	Jones Day	$1,190,000,000	2,076
5	5	Sidley Austin	$1,029,500,000	1,405
6	7	White & Case	$953,000,000	1,685
7	6	Mayer, Brown	$911,000,000	1,258
8	8	Weil, Gotshal	$905,000,000	1,080
9	10	Kirkland & Ellis	$835,000,000	897
10	11	Sullivan & Cromwell	$833,000,000	589
11	9	Shearman & Sterling	$775,000,000	963
12	58	Wilmer Cutler	$750,500,000	960
13	12	McDermott Will	$745,000,000	975
14	15	Morgan, Lewis	$723,500,000	1,112
15	20	Greenberg Traurig	$712,000,000	1,149
16	13	O'Melveny & Myers	$697,000,000	910
17	18	Cleary Gottlieb	$695,000,000	844
18	14	Gibson, Dunn	$693,000,000	745
19	19	Simpson Thacher	$691,000,000	632
20	21	Hogan & Hartson	$630,000,000	898
21	17	Akin Gump	$612,000,000	822
22	23	Paul, Hastings	$609,000,000	835
23	16	Davis Polk	$604,500,000	538
24	22	Morrison & Foerster	$593,000,000	882
25	27	Piper Rudnick	$580,500,000	905
26	26	Bingham McCutchen	$565,500,000	790
27	24	Holland & Knight	$551,000,000	1,155
28	25	Foley & Lardner	$542,500,000	869
29	28	Winston & Strawn	$516,500,000	793
30	32	Paul, Weiss	$504,000,000	480
31	33	Reed Smith	$503,500,000	881
32	30	Fulbright & Jaworski	$491,500,000	831
33	29	Orrick	$484,000,000	666
34	40	Debevoise & Plimpton	$478,500,000	536
35	36	Heller Ehrman	$472,000,000	628
36	37	King & Spalding	$470,000,000	707
37	37	Cravath	$455,000,000	389
37	34	Vinson & Elkins	$455,000,000	661
39	31	Arnold & Porter	$454,000,000	639
40	41	Dechert	$441,500,000	678
41	35	Hunton & Williams	$440,000,000	781
42	39	Pillsbury Winthrop	$432,500,000	643
43	42	Milbank, Tweed	$431,500,000	480
44	64	Wachtell	$431,000,000	197
45	43	Baker Botts	$420,000,000	643
46	51	Cadwalader	$416,000,000	486
46	52	Willkie Farr	$416,000,000	507
48	53	Sonnenschein	$411,000,000	660
49	55	Ropes & Gray	$404,500,000	501
50	50	Alston & Bird	$402,000,000	664
51	49	Proskauer Rose	$395,000,000	584
52	47	Squire, Sanders	$393,500,000	675
53	48	Dewey Ballantine	$380,500,000	524
54	46	Wilson Sonsini	$377,500,000	540
55	45	Bryan Cave	$372,500,000	726
55	62	Kirkpatrick & Lockhart	$372,500,000	697
57	57	Katten Muchin	$368,000,000	581
58	56	Kaye Scholer	$362,000,000	458
59	61	Fried, Frank	$359,000,000	438
60	54	LeBoeuf, Lamb	$356,500,000	601
61	44	Howrey	$352,000,000	525
62	67	Nixon Peabody	$348,000,000	593
63	65	McGuireWoods	$344,000,000	686
64	63	Covington & Burling	$337,500,000	463
65	59	Dorsey & Whitney	$330,000,000	619
66	73	Seyfarth Shaw	$313,000,000	603
67	69	Goodwin Procter	$302,500,000	433
68	72	Perkins Coie	$297,000,000	603
69	76	Schulte Roth	$292,000,000	354
70	68	Cooley Godward	$289,000,000	418
71	70	Baker & Hostetler	$284,000,000	605
72	80	Duane Morris	$264,000,000	480
73	71	Jenkens & Gilchrist	$258,000,000	435
74	79	Jenner & Block	$253,500,000	381
75	74	Shook, Hardy	$252,500,000	490
76	81	Blank Rome	$247,500,000	459
77	77	Chadbourne & Parke	$241,000,000	382
78	78	Thelen Reid	$240,000,000	413
79	83	Stroock & Stroock	$238,000,000	331
80	84	Kilpatrick Stockton	$236,000,000	442
81	90	Womble Carlyle	$233,000,000	475
82	93	Steptoe & Johnson	$232,500,000	335
83	75	Coudert Brothers	$230,000,000	552
83	92	Sheppard, Mullin	$230,000,000	366
85	82	Cahill Gordon	$227,000,000	242
86	86	Finnegan, Henderson	$225,000,000	292
87	95	Fish & Richardson	$224,500,000	304
88	91	Wilson, Elser	$222,000,000	675
89	86	Venable	$221,500,000	394
90	93	Andrews Kurth	$217,000,000	394
91	89	Mintz Levin	$216,500,000	373
92	88	Drinker Biddle	$213,500,000	426
93	85	Gray Cary	$213,000,000	350
93	96	Patton Boggs	$213,000,000	396
95	98	Haynes and Boone	$210,500,000	419
96	107	Pepper Hamilton	$209,500,000	382
97	97	Troutman Sanders	$206,500,000	468
98	101	Cozen O'Connor	$205,500,000	463
99	105	Faegre & Benson	$204,500,000	456
100	102	Ballard Spahr	$200,000,000	412
1 Due to the merger of Wilmer Cutler Pickering and Hale and Dorr in June 2004, there is no year-over-year comparison for the merged firm.
(The American Lawyer, July 2005)

My friends at American Lawyer Media will release an early "preview" copy of the 2005 AmLaw 100 to Adam Smith, Esq. readers this coming evening, Tuesday, June 28.

Sign up for an email update, subscribe by RSS, or just come back here Tuesday evening. I for one will be all eyes.

Perhaps the most valuable achievement of a highly-functioning Knowledge Management system is the ability to identify a colleague within your firm who has pretty much the exact expertise you're looking for, when you need it.  I call this the "Ask Sally" moment, as in "Ask Sally; she'll know." 

Traditionally, firms that have tried to create this capability have approached matters with a fairly blunt instrument:  Surveying everybody, or at least every professional, to ask them point-blank where they consider themselves an expert.  Of course there are any number of problems with this, from the practical (it takes time; it needs constant updating) to the epistemological (do you mean what I mean by "expertise?").  Stories of companies investing millions to create such systems, and then watching them lie dormant and neglected, are legion.

But what if it turns out that your firm might already know most of what it needs to about your professionals?  If you cobbled together—this means you, IT!—information from many of the internal databases you already have, might you not end up with a reasonable facsimile of such a system? 

For example, HR has information on everything from what office and department you're in to where you went to law school, what CLE topics you've studied, and who you've worked with (performance reviews).   Finance and accounting know which clients and industry groups you've worked for and how much and for how long (time and billing records).   Marketing knows if you have any articles, whitepapers, or even patents to your name.  &c.   Pull all these together with baling wire code, set an internal version of Google or Verity loose on it, and you might be surprised how far you get.  This could be a case of knowing more than you think you do. 

Better yet, you don't have to survey anybody, and the information is continually refreshed through the ordinary course of doing business.  Before you give me too much credit for this, read McKinsey's take on it.

CIO Insight has the shortest, sweetest guide to wikis behind the firewall that I've yet seen:

• Wikis are a social innovation, not a technological one.
• Wikis turn the notion of "permissions" built into traditional knowledge management DMS's and CMS's upside down; suddenly everyone has permission (and ability) to edit everything.
• If you're worried about people on your payroll vandalizing an internal wiki, you have a bigger and different problem; are people vandalizing the Coke machine?
• Last and of breathtakingly paramount importance:  "You can't know a priori what people need to know and share, but big knowledge management systems make a lot of a priori assumptions. Wikis don't."

I rest my case.

Pepper-Hamilton, HQ'd in Philadelphia, which I've always been irrationally fond of, becomes the latest firm I'm aware of to appoint a Chief Strategy Officer—a litigation partner whose bio highlights his fascination with issues at the intersection of law and economics, an ardor I fell victim to long long ago.   He sounds as if he might potentially be qualified, at least if raw intellectual horsepower counts (and yes, it does):  a magna cum laude grad of Harvard Law School and editor of the law review. 

At least as interesting as the creation of the "CSO" job was this announcement that Pepper-Hamilton is moving towards a corporate managerial structure:

"Pepper recently restructured leadership responsibilities to reflect a more practical approach to firm management. It created a five-member core management team, the Operating Committee, that is responsible for day-to-day management of the firm and for initiating strategic planning and growth opportunities. The Operating Committee will work under the direction of the Executive Committee, which functions in a capacity similar to a corporate board of directors."

So what is this all about?  A recognition that if the firm wants to expand in size and geographic footprint (which it unabashedly says it does), you need at least one senior leader devoted to that strategy.  Give them great credit.  The proof will now be, as always, in the pudding.

Congratulations are in order to Jim Calloway for winning the "Favorite Practice Management" blog award over at TechnoLawyer (complete list of winners and finalists).  

I'm also pleased to report that "Adam Smith, Esq." and Dennis Kennedy were chosen as finalists. 

There's always next year....

I previously wrote on the notion of knowledge-focused enterprises (make that:  law firms) using internal, behind-the-firewall blogs as tools for "doing" Knowledge Management.  For example, if your firm has one or two individuals expert in §1031 tax-free exchanges, why shouldn't they collaborate on a blog reflecting their experiences with real transactions and their dissection of the various issues that arise?  After six months or a year, your firm would have a valuable—and proprietary to you—knowledgebase in, to my mind, a near-perfect format:  By default, sorted chronologically so that whenever "timeliness" is deemed important, it's automatically presented in that format; archived by category so that subtopics can be immediately zeroed in on; and open to comment threads so that the author's first draft is not necessarily the last word, and ideas can be refined through interchange.  Even better, no one has to be trained to create and maintain a blog; as a Sun Microsystems analyst observed, "they're like pencils and paper; people know what to do with them."

So what's wrong with this picture?  Sidestepping the question of whether antediluvian attitudes might torpedo such an initiative before it could start, the biggest question to date has been one not susceptible to answering readily:  To wit, is anyone actually doing it?  And what has been their experience?

Now we have at least one case study.  Analyzing the experience of an unidentified European pharmaceutical company with 4,000 employees, operating in 20 countries, it tells the story of that firm's adoption and roll-out of six internal group blogs (150 bloggers total, no individual blogs) based on the Traction Software platform.  Traction was selected because it permits very fine-grained "permissions," as in who can post to, comment upon, edit, and view which blogs.  (For example, although this is a bit unclear, it appears that Traction can make posts to certain category "invisible" to certain users who otherwise have permission to read the entire blog.)

Bottom line:  A rousing success.  "Compared with setting up a similar project on a more traditional CMS or KM platform, the project has been simpler, faster, more effective, and less expensive to implement" (emphasis supplied).

Word to the wise:  The roll-out of this project was exceedingly thoughtful, including limiting it to a small group of self-selected evangelists at first, generating positive word-of-mouth, and providing user-friendly "daily digests" via email (than which nothing is more familiar, for better or worse) to ease people gently into the blog construct.  

Do you hear the same intimations of the exhaustion of top-down, muscle-bound, user-hostile Big IT that I do?

My college friend Malcolm Ryder has been working in quasi-stealth mode for awhile now on a blog at the intersection of business strategy, IT consulting, and design, called Archestra, for the "architecture of enterprise strategy."  

Just recently he's put up a few provocative posts on one of my favorite topics, Knowledge Management, and readers who share my interest in KM should take a look.  [Aside:  What's so fascinating about KM?  To me, the appeal is that it is (a) so hard to get right (b) because it is at the intersection of technology and a firm's culture (c) but for a large and sophisticated law firm it needs to be a "core competence."  KM is, in a nutshell, an indispensable Everest to climb.]

Malcolm has put his thoughts together on:

• "Managing the Productivity of Knowledge Work"
  
• "Harvesting Tacit Knowledge" 
  
• "The Architecture of KM" and
  
• "What is 'What You Know' Worth?"

I'm highly confident Malcolm would welcome any thoughts you might have on his reflections.

Are we entering the 'Net's first golden age?

Wait a minute, you're protesting, the first golden age in Internet Years was the dot-com bubble, no?   I actually think not.

The dot-com bubble (in which I had a role on-stage in the chorus, although my name never made the Playbill), was in retrospect largely about companies trying to do things online that people had always been doing off-line:   Buying books and pet food, booking airline tickets, investing, and so on.  It was fundamentally a one-to-many model, even in the case of an arguable paradigm-changer like eBay, which deserves credit at least for creating a national marketplace that literally could not exist in the off-line world.

One of my theories about a new medium, the 'Net included, is that it starts out resembling the old medium to which it's most closely analogous.  So radio began by broadcasting vaudeville acts, TV by broadcasting acted-out radio soap operas, and the 'Net by emulating broadcast TV's top-down, take-it-or-leave-it, content.

The next generation of each medium arrives when it finds its "true voice," which is by definition not an imitation of something that has gone before.  Thus with radio it's music, news, and talk.  With TV it's sports, movies, and breaking news.  And with the 'Net, it's.....?   This.   (Courtesy of the Wharton School, headlined "Wikis, Weblogs and RSS: What Does the New Internet Mean for Business?")

The shift is from host-provided content to user-provided content: 

• From one-to-many to many-to-many.
• From large, intricate, zealously tended and feature-rich Big App's spanning acres of servers to small, lightweight, low-tech ways of publishing and communicating.  And perhaps in the most revolutionary sense
• From a command-and-control, gating, editing, and triple-checking process to wide-open communities of permissive social interaction driven by spontaneous and unedited expression.

In other words, we can now do with the 'Net  things we could never do off-line:  This is, indeed, "The New Internet."

There are several ways to think of this, but one that sums it up nicely is to characterize the past decade as having built up the physical infrastructure and anticipating that the next decade will build up the social infrastructure.  Now, a "social infrastructure" comes with no guarantees, and as with the LA Times' famous lightning-speed retreat from wiki-editorials reveals, a few vandals can wreck the neighborhood.  The tradeoff for accepting this risk—which within small virtual neighborhoods is de minimis—can, however, be enormous.

Moreover, what's going on is nothing other than the 'Net returning to its roots:

"If you go back to the thinking of the earliest visionaries with respect to the Internet, that was exactly the picture they were painting. [...] The original vision of the Internet being a medium that is genuinely peer-to-peer, is loosely coupled and [which] sparks different kinds of interactions."

Then, the "social infrastructure" was set by the hacker/geek code, with its arcane but effective rules of courtesy and mutual respect enforced, of course, by white-hot flaming when called for.  There is every reason to believe that our most social of all species will be able to evolve an online culture that is both collaborative extraordinarily potent:  Certainly when you think of the intricacies of the supply chain required to deliver, say, your new Dell Inspiron laptop to your front door, a supply chain that touches down in Taiwan, the Phillipines, Hong Kong, mainland China, and Memphis, Tennessee (FedEx), with not even a moment's "command and control" issuing from Round Rock, Texas, you realize what human beings, guided by Adam Smith's invisible hand, are capable of.

Is this all starting to sound a little airy-fairy?  Then consider how business has evolved.  No longer is the goal to achieve Six Sigma perfection in churning out X thousand or million perfectly identical widgets; the goal is to innovate, to steal a march, to cause disruption.

"This changes the way you think about productivity in organizations where innovation, adaptability and dealing with complexity are the key challenges. So much of reengineering, which is what major corporations have been about for the last 10 or 15 years, has been about linear efficiency -- lining everything up in as tight a way as possible along a path. That's wonderful if you know exactly what it is you want to do, and the aim of that task will never change. Increasingly, that's not the relevant challenge. The challenge is adaptability, complexity, uncertainty and your capacity to mine the elements of your business, people and knowledge into different and new combinations."

This brings us back to law firms.  When has it ever been more important to deal adroitly and nimbly with uncertainty, to "mine your people and knowledge?" 

Envision new ways of working; with the New Internet, they just may be possible.

Speaking of leadership, O Defenders of Justice, O Officers of the Court, restrain yourselves from doing this. 

"I won't take yes for an answer" has been variously attributed to everyone from Groucho Marx to Samuel Goldwyn, but now Harvard Business School Professor Michael Roberto says there's management wisdom in it.  True leaders, that is to say, cultivate constructive conflict, from which arise sounder decisions.

While this may strike all us enlightened, post-command-and-control types as obvious, in the real world it is still honored mostly in the breach.   Consider the recent sacking of Phil Purcell of Morgan Stanley.  Here's The New York Times on his management style:

"He was ruthless, autocratic and remote. He had no tolerance for dissent or even argument. He pushed away strong executives and surrounded himself with yes men and women. He demanded loyalty to himself over the organization. He played power games. He had little contact with rank and file. Is it a surprise that he was loathed by many executives?"

Or this, from the veteran of decades of Wall Street wars, Jim Cramer:

"Now it is well known on Wall Street that Purcell never managed down, just up, catering to the board in a way that made many people—including yours truly—think that he would have to commit a homicide to lose the support of these mostly handpicked backers. I personally loathed the guy, having done about $30 million in business with his firm without ever so much as a thank-you, let alone an acknowledgment of me or my firm’s existence as a client. I was small-fry for Purcell. We were all small-fry, I later learned."

Why do organizations continue to go astray in this way?  Consider the culture of yes, the culture of no, and the culture of maybe.

The culture of yes:  The most obvious and perhaps prevalent species of this managerial dysfunction is when all smile and nod at proposals or during meetings and then retreat to their offices to voice their objections, undercut the phony "consensus," and ensure that nothing moves forward.  This is indeed the "yes" that means "negotiations have commenced."

The culture of no:  Famously, at IBM before Lou Gerstner arrived, anyone involved in a decision could "fail to concur," and the initiative would be scrapped.  Archaic as that sounds—and it was barely 15 years ago—a stylishly mod version, comfortably enthroned in a position of honor in the large tent of P.C.'ness, is today's "precautionary principle," which holds that virtually any uncertainty about consequences of an innovation should preclude its embrace unless and until its proponents can prove against all objections that it will do no harm.   Cost/benefit?  Mature judgment?  Responsibility?  Out the window.

The culture of maybe:  My personal favorite, because it finds fertile ground in the mindset of lawyers.  This has also been nicknamed "paralysis by analysis," and is the attitude that all the facts must be on the table before one can decide.  "A good plan now beats a great plan tomorrow?"  Sure, pal.

This leaves us with the practical challenge of encouraging candid, frank exchanges.  A good place to start is with the leader staying mum on what he or she thinks, and instituting and reinforcing a fair (think "due") process where all viewpoints can be heard.  Of course, the leader must ultimately take responsibility for decision and action:

"Leading a fair process does not mean trying to satisfy everyone in terms of the ultimate decision that is made. Instead, it means creating a process in which leaders have demonstrated authentic consideration of others' views."

Crucial to maintaining open debate at a high level is disciplining those who break the rules: Those who mount ad hominem attacks, undercut arguments in private or "offline," or who refuse to participate. In other words, a key leadership trait is enforcing the debating rules.

Before you next need to arrive at a consultative decision, take a look at the whole article.

The UK press, not known for a dainty approach, is covering the developing (or should that be "unravelling") story of Coudert with no minced words:

• "Coudert in Crisis..." and
• "Living in the Past."

Watching this happen is immensely sad, as it need never have happened. 

Perhaps after the dust settles there will be something positive to take away by way of "lessons learned," or perhaps I'm just grasping at a straw of hope in following a dismal story.

When the Financial Times speaks, people listen, so try this on for size:

"The old model of partnership between lawyers alone has its drawbacks for large law firms, which are complex businesses - the biggest are multinationals in their own right. Yet management is often weak. Compared with the best companies, they are often bad at marketing, customer relations, innovation, use of information technology and process management.

"Law firms need to compete for the best managers, finance directors, marketing experts, technology officers and human resources professionals. Such people may be unwilling to join firms where they are second-class citizens."

And this would be apropos of what, precisely?  The UK's famous Clementi Commission, of course.

Now that firms in the UK can, at least in principle, be publicly owned (and traded) entities, what are the implications?  How about a firm with a market cap of £5-billion?  Not unreasonable, given comparables. The chorus of "not so fast"'s has already arisen:

• "Law is a special case."  Yes, and investment banking was a special case before Morgan Stanley, Goldman, et al., went public.
• "Being public would put too much focus on profits."  Vs. precisely what eleemosynary attitude today?
• "Being public would force us to put profit ahead of ethics."  Sure, and the heads of Arthur Andersen, Enron, and WorldCom are available for interviews confirming the sagacity of that counsel. 
• Lastly, and perhaps briefed at the greatest length and with at least superficial plausibility:

  "In the US, a conflict of interest arises if an attorney's duties to a third person could materially harm the interests of that attorney's client. Furthermore, under the so-called "rule of imputation", this conflict is imputed to the entire firm, not just the affected lawyer.
  
  "Under corporate law, however, corporate officers and directors have a fiduciary relationship with the corporation's shareholders. As a result, a managing attorney or an attorney who is serving as an inside director in a hypothetical publicly traded law firm would owe duties to both the firm's shareholders and the firm's clients. Furthermore, the fiduciary relationship owed to the firm's shareholders could potentially conflict with the professional duties that the firm's attorneys owe to their clients, and vice-versa."

There are (at least) three come-backs to this reservation.  First, if ownership of the public law firm is widely dispersed, as is all but universally the case with listed companies (the exceptions are usually family-controlled dynasties that have emasculated minority public ownership), no single shareholder would have a "material" interest in the firm which could remotely approach the interest of a client; in other words, the conflict would remain purely hypothetical.  Second, the precise contours of the "conflict" are difficult to discern.  I hypothesized earlier that if Goldman-Sachs bought a large stake in (the future-ly public) Shearman & Sterling, Morgan Stanley might object since S&S is their "go-to" firm.  Short of such outright buy-off's, I would assume, and economic theory would confirm, that all a shareholder really "wants" out of an investment is superior performance—and under the classic corporate separation-of-ownership-from-control model, the shareholder should leave management alone.

Third is the possible case where the conflict is real and unavoidable.  In that case all one needs do is address it with the familiar toolset for dealing with conflicts:  Resign the representation, obtain knowing and informed waivers, etc.  In other words, we can deal with this, children, if we really see advantage in being public.

 Finally, the always cheeky and entertaining Gerry Riskin ("Amazing Firms, Amazing Practices") plays out a dynamic analysis scenario that has firms going public, senior partners cashing out for points offshore, the remaining loyalists finding their take-home profits diminished by the new demands of an investor class for actual results, and the public firm imploding as rainmakers desert for private competitors.  Read the whole deeply amusing thing.

But would this really happen?  Would it really happen more than once?  I suspect wannabe-public firms would learn a lesson promptly and put restrictions on capital extraction, as well as set the expectations of investors for fast-cash-out suitably underwater.

At last we come to the final question:  What on earth do law firms need all this capital for anyway? 

One word:  Innovation.  With capital available, what sums might firms not invest in everything from expert systems to ever-more transparent client communications, to proprietary knowledge bases?  After all, we all know that one of the most robust objections to investing in technology today is that it would deprive the partners of this year's new Mercedes.  Maybe, in future, it won't have to.

Coudert merger update:  Baker & McKenzie, and DLA Piper are both reported to be "circling" Coudert.  

Neither B&M nor DLA denies it. 

The universal, chronic, and incurable complaint of CIO's?  That they can't get management "buy-in" for their IT initiatives.  The syndrome is as follows:   The CIO/CTO has a great idea for a new way to support a business function, they do diligent research and determine best-of-breed vendor, put the thumbscrews to pricing, create a compelling case for the business value of the new app, and it dies upon contact with the COO/CFO/CEO.  Next quarter, repeat.  And repeat.

The often contrarian Michael Schrage combines diagnosis and prescription in analyzing this long-running mutual consternation society:  "Dude, stop selling 'buy-in!'  Salesmanship is not your friend."

But without buy-in, where are we?  Aren't we still staring at a landscape of still-born tech initiatives?  Actually, there is an alternative.   CIO's (and their departments) need to stop thinking of themselves as "leaders" [stay with me on this one, folks] and become "enablers:"

"In other words, IT shouldn't be a change or transformation leader; it should be a change or transformation enabler. What's the essential difference? For the purpose of this column, leaders are those individuals most responsible and accountable for setting the right objectives and ensuring the right results. Enablers, by contrast, are those individuals most responsible and accountable for providing leaders with the tools, techniques and technologies for achieving those objectives and results. Enablers make effective leadership practical and probable."

The gem of wisdom at the core of this is simple:  It requires executive management to take control of, and responsibility for, digital initiatives—it requires them to be imaginative and creative about the uses of IT.  In other words, they sell themselves.

Cue the applause, please:  Albeit somewhat cryptic, this strongly suggests Clifford Chance is making a concerted effort to return to something much closer to its traditional lockstep partner compensation model.  

Called "actively managed" lockstep, the new model will apparently tighten both the criteria for admission to partnership and subsequent performance appraisals.  In a striking nod to recognizing the wide disparities in profitability that can arise across jurisdictions—through neither fault nor virtue of the partners affected—Clifford Chance will also expand the range from highest-compensated to least-compensated from its current 2.5:1 to 6.5:1.

One unidentified CC partner reportedly said, "We still want to be a lockstep firm and this is all about preserving that lockstep."  Five years after the Rogers & Wells detour, it's about time.

While I've never been to a psychic or a tarot reader, or consulted my horoscope except when presented with the most utterly content-free tabloid, I'm about to make a prediction:  Coudert Brothers is grooming itself for a merger by shedding its less desirable offices.  Today it was the German office, and yesterday it was San Francisco.

What they will not shed are the jewels of their Asian network, or the indispensable New York base.  Short of that, there may be more to follow. 

A first on "Adam Smith, Esq.," then, a prediction of a future fact (as opposed to a description of a future trend or general state of affairs)—and if I'm wrong, the last such prediction, at least for awhile.

"It's not what you know, it's who you know?" 

Agree or disagree, but there's no doubt a key capability of a law firm's KM initiative—assuming you actually want your attorneys to use it—is some capability for finding the apposite expert who can help.  I've called this the "Ask Sally" moment, as in, "Ask Sally; she'll know."

Within a law firm, a simple exercise in "Social Network Analysis" (SNA) can map who really is talking with who, and the results often surprise a firm, for better and worse.  A very common experience, for example, is to find a few very highly connected individuals appearing as hubs of knowledge exchange:  The problem is that many of those networkers extraordinaire are actually bottlenecks, suffering overload, as the sheer volume of incoming (and they're usually incoming) requests for assistance impairs their ability to get their own work done with a modicum of productivity.   Unless you try SNA, you may never know.

I've discussed SNA before, but now CIO magazine has nice story including a sidebar about how Orrick is playing with it.   Can you say, "timely?:"

"[T]he corporate world has been waking up to the uses for this once arcane social science. Some of the interest stems from disappointment with efforts to build knowledge management databases that were largely ignored by employees. "We're seeing that companies want to have a picture of who the key knowledge brokers are in their organization," says [Prof. Rob Cross, of UVA's McIntire business school]. "The rise of blogs, online support sites and social networking sites—such as Friendster and LinkedIn—have also helped raise SNA's profile."

I've been reading Prof. Cross's 2004 book, The Hidden Power of Social Networks, as he seems to be the go-to guy for SNA.  Look for a review in the near future.

The first post-Clementi shoe is about to drop in the UK, and it's a fascinating one indeed.  [For those of you who haven't been paying attention, the "Clementi Commission" proposed fundamental reforms of the way UK law firms are governed, essentially all of which have been adopted and are or soon will be effective.  Among the eye-openers in the lot were permitting non-lawyers to be equity owners of firms, which is the peg for today's post.]

Check this out:

Likelihood of different practice managers being admitted to the partnership

	Likely	Not likely	Already a partner	Do not have one
Finance	100	0	0	0
Marketing/business development	82	12	3	3
HR	82	18	0	0
IT	67	33	0	0

Source: Wheeler Associates/McCallum Layton

Such are the results of a survey of 51 managing partners from the top 100 UK and Welsh firms (Scottish firms are exempt from Clementi).   Will this finally begin to break down the caste-iron (sorry, couldn't resist) barrier between lawyers and "mere" business managers?  One can hope.

Of course, I am a lawyer so this should make no difference to my personal estate:   Were I not, however, I'd be researching the London housing market.

Just why is that "doing" Knowledge Management at law firms seems so hard?  Is KM itself simply an ineffable concept, meaning that virtually no two people agree on what it means?  (And that, when they then try to go about it, the results are what you'd expect, as if every building subcontractor on a construction site were looking at a different set of plans.)

Is it just that lawyers don't "share nicely" together (with the implication that they never will)?  Or is it merely a matter of getting the incentive structure right, implying that heretofore we've relied on weak and indirect incentives such as exhortation from above?

McKinsey, as befits them, has written a piece more or less asserting that if we only wrap a classic marketplace structure around knowledge management, our problems will be solved:

"[The most talented employees] will be unlikely to exchange their knowledge without a fair return for the time and energy they expend in putting it into a form in which it can be exchanged. [...]

"In short, effectively exchanging knowledge on a company-wide basis is much less a technological problem than an organizational one: encouraging people who do not know each other to work together for their mutual self-interest.  There is, of course, a well-known, well-tested solution to making it possible to exchange items of value among parties who don't know each other.  We call it a market."

This may come as a surprise to you, but I am of the increasingly firm view that this is wrong:  Paying colleagues within a firm (explicitly, in dollars and cents) for their know-how will prove not only ineffectual but divisive.

To be sure, McKinsey gets much of their discussion of KM right, starting right off the bat with their recognition that both "Build it--they will use it" and "Take it from the top" approaches will end in grief and disappointment.  They write that the approach of letting "a thousand Web sites bloom" is the best alternative so far, but still not good enough across a "global" organization because disparate "standards and protocols" will make information generated by specialists in one sub-practice group inaccessible elsewhere.   I can only scratch my head:    One wonders if the author never heard of blogs—inexcusable, if so, as the piece was written in the third quarter of last year.

Instead of neoclassical market models of motivation, I'd like to introduce you to the concept of "peer production," a shorthand coined by Yochai Benkler, a professor at Yale Law.  In an interview running as a sidebar to the cover story in this week's Business Week, Benkler explains the notion in a nutshell: 

"[Benkler,] who studies the economics of networks, thinks such online cooperation is spurring a new mode of production beyond the two classic pillars of economics, the firm and the market.

"Peer production," as he calls work such as open-source software, file-sharing, and Amazon.com Inc.'s millions of customer product reviews, creates value with neither conventional corporate oversight nor market incentives such as payment. "The economic role of social behavior is increasing," he says. "Things that would normally just dissipate in the air as social gestures become economic products." Indeed, peer production represents a sea change in the economy -- at least when it comes to the information products, services, and content that increasingly drive economic growth."

This is a large claim indeed, so let's unpack it a bit.

The most thorough introduction to the notion of "peer production" comes, surprise, in a paper by Benkler himself, "Coase's Penguin, or Linux and the Nature of the Firm," blessedly available online.  The guts of the Abstract (emphasis supplied) read:

"I suggest that [what] we are seeing is the broad and deep emergence of a new, third mode of production in the digitally networked environment. I call this mode "commons-based peer-production," to distinguish it from the property- and contract-based models of firms and markets. Its central characteristic is that groups of individuals successfully collaborate on large-scale projects following a diverse cluster of motivational drives and social signals, rather than either market prices or managerial commands.

"The paper also explains why this mode has systematic advantages over markets and managerial hierarchies when the object of production is information or culture, and where the capital investment necessary for production-computers and communications capabilities is widely distributed instead of concentrated. In particular, this mode of production is better than firms and markets for two reasons. First, it is better at identifying and assigning human capital to information and cultural production processes. In this regard, peer-production has an advantage in what I call "information opportunity cost." That is, it loses less information about who the best person for a given job might be than do either of the other two organizational modes."

(The title is something of an in-joke premised on my candidate for the single most influential economic paper of all time, written by Nobel laureate Ronald Coase, his 1937 essay "The Nature of the Firm," clocking in at all of 14 pages written in pellucid English—need I add I commend it to you?.) 

Back to KM in a law firm. 

The incentive for lawyers to put their expertise on display?  Not "market prices or managerial commands," but "a diverse cluster of motivational drives and social signals."  Precisely. 

And the single biggest "instant win" a KM system can provide?  Identifying "who the best person for a given job might be." 

How do we, then, actually get it done?  The foundational building-blocks of such "peer production" today are the emerging generation of Net technologies including file-sharing, blogs, wikis, and social networking sites such as Tribe or Meetup Inc.    Tim O'Reilly, the famous tech book publisher, characterizes the common theme of these tools with a felicitous phrase:  They share "an architecture of participation."

So:  Motivated professionals responding to social signals adopt tools designed to facilitate participation, and "peer production" takes over from there.  Will there actually come a day when the economist's arsenal of explanatory models puts that concept on a peer with the centuries-old pillars of The Firm and The Market?   Read Benkler.  I'm finding myself persuaded.

I wrote a few days ago about "the cautionary tale of Coudert," but with more background emerging from Legal Week's excellent coverage, some additional insight into the firm's truly alarming predicament is possible.

Let me preface all I'm about to say by repeating that I have good friends at the firm (albeit no inside information), and that it thus pains me to dwell on what by any lights is now a firm in distress.  But I'm a big believer in the value of "lessons learned," and hope that some beneficial ones might be extracted even now, before the next chapter on Coudert is written.

Tim Newbold, the Legal Week reporter, sets the proper overall tone when he concludes:  "Coudert’s current predicament is particularly poignant given the fact that it did so much to blaze the [international] trail."  That predicament dates to Coudert's expansion efforts on continental Europe in the 1990's. 

What went wrong?  Fundamentally—and we have seen this happen before—both the profit capability, and the expectations, of its US and European practices began to diverge, now with potentially lethal results.  While the US chafed at Europe's lower profits dragging down the mean, Europe's view was that the US had reneged on promises of investment, which would have brought them up to par.  It matters not who was right; what does matter is it went unresolved.

Now, as a strategic matter, the firm faces a difficult cross-roads.  It's safe to say most analysts view a merger as ultimately the best, or only, salvation for Coudert, but at the moment they're in a defensive, underperforming crouch:   Not the stance from which to execute a merger-from-strength.   If a merger is to be more than a distress sale, Coudert needs to take the time to restore its attractiveness—by, I would recommend, focusing on its strong Asian network and the indispensable New York office.  But time is a luxury they may not have a lot of. 

In short, they need to merge because they're weakened, but because they're weakened merger prospects are unattractive.  My choice?  Go for broke (perhaps literally) and try to rebuild on your own.

As I said, there is no schadenfreude for me in this sad tale.  But there is at least one key lesson:  When it comes to reconciling different profit expectations, you cannot survive half-pregnant.  Make a choice; bite the bullet; become, perhaps, a different firm.  But a healthy one.

"Managing Partner Magazine?"  Calling all readers who may be familiar with this publication, which I have seen occasionally but perhaps not often enough, or not enough of—primarily because their website appears to hide all the good stuff. 

But past the spam filter arrived this afternoon a promotion to subscribe (reproduced verbatim in the extended portion of this post).  Any advice from any of you who know the publication?  Worth it?  Too pricey?  On a scale of 1 to 10, it's a [_____]?  As always, bruce at adamsmithesq dot com is happy to hear from you.

Now that pretty much everyone has tossed in their 2 cents on Thomas Friedman's new book, "The Earth is Flat," to the point where a few people are saying enough is enough, I'd like to try to introduce a measured dose of calm and clarity about outsourcing, and I'll take as an eminently worthy point of departure an op-ed from yesterday's WSJ.  The author, C. K. Prahalad, is a professor of "corporate strategy" at the University of Michigan's Ross School of Business, and the sanity of his observations can be summed up as: 

• Outsourcing has been going on for a long time, and companies including IBM, Accenture, and EDS built their businesses on it (i.e., taking over IT operations for F500 companies).
• Cowering in isolation (this applies to CEO's and managing partners as much as to Senators and members of Congress) is neither viable nor smart; getting out in front of changes in order to direct them is.   And most importantly:
• The only truly new variant in the long history of outsourcing is the ability to "fragment complex processes into their components...it is the granularity of the effort that can be outsourced."

In other words, while in the '80's and '90's the question whether to outsource (IT operations, say) was a board-level, all-or-nothing decision, today firms can experiment at separating, say, sales-transaction processing from the sales team in the field, or patent research from patent applications, or even preparation of PowerPoint slides from writing the presentation.

So what?, you may now be thinking—as I've joked before, unless you really want your children to grow up and be order clerks or secretaries for life, where's the threat?   The threat in an economic sense, of course, is to firms that don't take advantage of the opportunities presented by outsourcing, which surely begin with cost but, it's essential to understand, scarcely end there.   Too much of what is assumed to be an actual debate about outsourcing overlooks what firms must do, on the ground as it were, to make outsourcing work.  And it turns out those are all very hygienic, managerially speaking.

For example, because doing work remotely requires clear documentation, both the client and the vendor must be very clear about workflow processes, and in doing so they almost invariably find opportunities for improvement; legacy ways of working that don't make sense are suddenly exposed as such.

Another point intrinsic to thinking intelligently about outsourcing has gone missing, as well:  Countries do not compete; firms compete. 

Seeing matters this way changes the question.  "Should we ship US jobs overseas?" is the wrong question.  The right question is:  Given that talent markets in China and India are now as open to us as the talent markets in New York and LA, "How can my firm compete more effectively?" 

Actually, that's the first question:  How can you do what you're doing today faster, smarter, and cheaper?  The really interesting question is the next one:  "What else can we do that we've never been able to do at all?"

Isn't it a great time to be alive?

The percentage of AmLaw 200 firms with an office in New York is?  65%, with, according to The American Lawyer, more wannabe immigrants to New York in the wings.  

New York has always been known for two superficially contradictory, but I devoutly believe fundamentally compatible, characteristics:  A wide welcome mat for immigrants (fully 40% of the residents of the five boroughs foreign-born as of the 2000 Census, the highest since 1910), as well as the "you should live so long" challenge immortalized in "if you can make it there, you can make it anywhere."  (A few readers responded to my recent survey by taking me to task for writing too much about New York City, which I readily cop to having a life-long love affair with, but trust me, this time it matters to your firm.)

Now we have The American Lawyer devoting an issue to a special report on firms, domestic and foreign, wanting to set up shop in New York, why they aspire to do so, the obstacles they encounter and successes they enjoy, and the enormous variety of strategies they engage.  For example, you can:

• buy a mid-size firm in whole—but at this point in the market's evolution there aren't many, or many worth having, left;
• cherry-pick lateral partners—an increasingly expensive and fraught strategy (Aric Press, editor-in-chief of "TAL," jokes that "We may have finally found the one market where there aren't enough lawyers to go around");
• try to move in with one marquee name-brand partner—as Bracewell & Patterson did when it morphed into Bracewell & Giuliani; or
• arrive as countless fresh-faced college grads and aspiring actors and writers do, off the bus as it were, looking for your 7,500 square feet on Park Avenue and trusting in the luck of the draw.

Why do firms do this? 

"Any firm with global ambitions must have a presence in New York. "Without one," says O'Melveny & Myers chair A.B. Culvahouse, Jr., articulating a widely held sentiment, "it just doesn't work.""  and this:

"If you don't come here, you cap out," says Kenneth Bezozo, the tax partner who uprooted his entire life in Dallas to open Haynes and Boone's Manhattan office in 2004.

How to crack the market, then?  According to TAL:

1. Pick your practice expertise and decide on the scope of your "playing field."
2. Come with clients, or be prepared to buy some.
3. Get lucky, or make your own luck.
4. Have a long-term vision.

Having read and re-read the article—and as a strong admirer of TAL for lo these many years—something's missing; I'm not confident this is the whole story.  Or rather, it is a series of individual stories with diverse endings  but no common theme.  In retrospect, some firms made it big (Latham & Watkins) and others haven't; Bingham McCutchen chairman Jay Zimmerman concedes it's been difficult to establish a beach-head in Manhattan because of the intense competition for desirable laterals:  "You get your fair share, but it can be frustrating."

Latham clearly came with a vision of taking market share away from firms such as the four horsemen of Cravath, Davis-Polk, Shearman & Sterling, and S&C.   Quite remarkably, they've succeeded, in part through serendipitous ties to Michael Milken and Drexel at the height of the junk bond boom, and to the diaspora of Drexel alum's following that firm's implosion.  To duplicate this strategy, you merely need to identify and hitch yourself to the next departing rocket.  Other firms (Greenberg Traurig, Sonnenschein) pointedly do not compete in the bulge bracket, an eminently manageable and sensible strategy.  Finally, others still come on a wing and a prayer.

The allure is unquestionable, but the odds of hitting it very big have never been longer.  Even Latham has taken 20 years to get to where it is.  Then again, markets can change profoundly over 20-year periods.  Who's to say that even the four horsemen themselves will survive with their current marquee status?  The line forms to the left.

Pop quiz:  Q:   How many companies on the Forbes 100 list 25 years ago (1978) are still there today?  (Forbes ranks firms by market cap; Fortune ranks them by revenue.)

A:   32, or an attrition rate of 68%.  (35 were taken over, 30 dropped out of the top 100, and 3 went broke.)  The common theme tying together the ranks of the fallen is a failure to adapt.

If you think that means you cannot relax, you are more than approximately right.   Why precisely do firms fail to adapt?  According to this Boston Consulting Group piece, "Leadership in a Time of Creative Destruction," some simply misperceive the threat:  Motorola owned analog cellphones but never saw digital coming, and Sony was the gold standard of tube TV's but missed flat panels.

Another set of firms sees the threat and wants to respond but is intrinsically incapable of adapting:  Kmart in retailing, virtually the entire US steel industry.

Lastly, we have the interesting cases:  Those who see the threat and have the resources (financial and intellectual) to respond, but who cannot bring themselves to change--they just lack the stomach for it.  Now, it's a truism that lawyers are not exactly known for embracing change, but like most truisms it's decidedly unhelpful (meaning it provides no guide to action).

So if your firm is facing the need for change—be it as "small" as rejiggering your practice group lineup or as large as finally at long last embracing the collaborative mindset needed to undergird a KM effort—what's to be done?  Start by realizing the good news about lawyers' notorious resistance to command and control environments:  People who care more about "meritocracy, autonomy, self-expression, self-improvement, and mobility" actually find it easier to adapt than previous generations (warning:  stereotype ahead) of grey-flannel suited conformists determined to keep their heads down.  But, as Peter Drucker has said, it's like "managing volunteers."

Put into practice, this means you as firm chair or leader need to be prepared to listen to the smart iconoclasts—not all of them are right (but neither, necessarily, is the conventional wisdom) but a few of them are not wrong.  Hard to separate the wheat from the chaff?  Tough; that's your job.  You need to strike that fine balance between drowning in distractions and being intellectually open to the notion that business as usual may not make for prosperous year-end's indefinitely.  And once you've separated the signal from the noise, your #1 job is to communicate, communicate, communicate.  Explain the problem, harp on its urgency, inspire with your vision of an alternative future that dodges this bullet, and do it again, and again.  So:

• Listen to everyone, not just those who tell you what you want to hear.
• Decide what's a genuine risk and what's merely cyclical or distracting.
• Formulate a vision.
• Communicate.

Most of all, stand firm.  As BCG puts it, "most organizations will do everything humanly possible to avoid stress, [and] they have developed an extended repertoire of avoidance behaviors."  Your job is to achieve, and insist on, clarity.

Apropos the results of the readership survey, which found a high number of respondents worried about the seemingly relentless consolidation of the legal industry—apparently from both those participating in the consolidation and those wanting to be left out—is this cautionary Legal Week editorial about the "hard place" Coudert Brothers finds itself in, highlighted (but scarcely caused by) Orrick's snatching its entire London office away last week.

As Legal Week analyzes it, and as I have no reason to doubt, Coudert's current, and grave, travails took root a decade or more ago when it expanded its Paris-based European network without quite coming to terms with the question of how the relatively low profits per partner of the newly acquired European offices would be squared with its (then) stronger US practice.   Irreconcilable differences over money—in a partnership as much as in a marriage—can have fatal consequences, as some fear we are witnessing with Coudert.

I have good friends at the firm so I will not offer an opinion of the diagnosis or prognosis, but I commend the story to all of you worried about consolidation, whichever side of the fence you are on.

"Inimitable" is grossly over-used, but I'm at a loss for words after reading Aric Press's latest column introducing the current issue of The American Lawyer and recognizing again what an iconoclastic thinker he is.  (Disclosure:  Aric, editor-in-chief of TAL, is also a friend.)

The topic is what must be going through the mind of the managing partner of a UK firm attempting to break into the US—and more specifically, New York—market, an exercise which has been "notable for its struggles," as Aric puts it.  Aric considers and discards two tried and true (albeit feckless) strategies:   Ramp up your laterals in the corporate/deal lawyer world, or else do the same in the litigation/dispute world.

Aric has a better idea, and anticipates that it will be received as "drivel:"  Look to Texas.

The long-awaited results (speaking for myself, at least) of the famous first-ever "Adam Smith, Esq." Reader Survey are now in, and I hasten to share them with you, dear reader, as audience participation was extremely strong, and gratifying.   My version of Excel had steam coming out of its ears over the long weekend, but the results have now been thoroughly sliced, diced, and charted, if not yet pivot-tabled.  

Are the results reliable or accurate?  My crack panel of market research experts (that would be Janet) advises that, if the question is whether the responses are likely to constitute a representative cross-section of the actual readership of "Adam Smith, Esq.," the answer in all likelihood is yes—it should be accurate. 

Why?  First, the absolute number of responses was gratifyingly high.  My stats server reports that lately the site has been enjoying about 50,000 visitors per month (this means hundreds and hundreds of thousands of "hits," a different measure),  and while the survey scarcely got that many "visitors" (for one thing, you can visit here more than once a day but the survey locks you out, other than to make changes, once you've responded), it got a more-than-decent response.   Second, it was up for a month and thus exposed to a random cross-section of visitors.  Finally, and most importantly from a "research design" perspective, there is no plausible reason to think those willing to respond have a different profile than those who didn't.

So, without further ado:

Question #1:  Who You Are

I'm pleased at the high proportion of people living and working in law firms, as it is to the enhancement and enlightenment of their world that this site is, when all is said and done, devoted.   And among "other," what roles were specified?

• precisely 25% of all "other" are legal industry consultants;
• we have a more than respectable smattering of CIO's, heads of knowledge management, headhunters, judges, and law professors (not so many law students, evidently—perhaps the issues we cover seem remote to them?);
• along with the self-deprecating sprinkling of "interested reader--not a lawyer," "just interested," and "just a private (so-called) citizen," and finally my very favorite;
• "ESQ Wife."  (Please do not be desperate, ma'am.)

Question #2:  Where You Are

So about 77% are here in the USA and, according to my site-stats server, if you can believe IP addresses you're concentrated in the Northeast and California.  With respect to those in "Asia" who were asked to specify where they are, the top answers were:

• India
• Korea
• Phillipines, and again my very very favorite (maybe even better than "ESQ Wife"):
• Kyrgyzstan (!)

Question #3:  If You're in a Law Firm, It Is

Again, I'm gratified to see that what I view a my day to day core target audience—the AmLaw 200 and firms of similar size abroad—is well represented.  And lest those of you in regional or single-office firms, or even solo's, feel left out, please be assured that I try to cover issues such as leadership, strategy, and cultural considerations that cut across all sizes and shapes of firm.  What about "Not in the US?":

• About 20% of this segment is each in the UK [top 20 UK firms well represented], Canada, Australia/New Zealand, and India.
• The remainder are simply far-flung including Chile and the broadband-friendly Finland and Norway.

Question #4:  How Do You Read "Adam Smith, Esq."?

So I credit you for candor--"purely by chance," while trailing all other choices, makes a non-trivial showing.  I don't know why, but my intuition going in would have guessed RSS feed penetration would be higher.  The good news here is you seem by and large to be loyal.   Thank you!  Sincerely.

Question #5:  What You Wish I Would Write More About

No pie charts on this open-ended question, which 31.7% of you actually took the time to respond to.  Some of the highlights/themes that emerged from this "visitor request" opportunity, in no particular order other than that all were mentioned more than a few times:

• technology, especially as it impacts the economics of the practice of law; and [the lack of] technology training
• the differences between US and UK/European firms
• leadership and cultural issues, including lateral recruitment and entry-level associate hiring, development, and retention
• flaws of the billable hour system and alternative billing in general
• knowledge management--"what else!"
• along with a truly gratifying number along the lines of "n/a, doing good," "keep it varied," carry on--you're doing fine," "is just right," and the blushworthy "anything you want - you have great insights."

But I would be remiss not to leave you with our champion in this category, which wins going away:

• "tax law and how to smuggle money out of the country."

Question #6:  What You Wish I Would Write Less About

30.4% of you responded here, and of those responses 40% were to the effect of "nothing," including a generous reader who volunteered "I cannot think of a thing you shouldn't write about ;-)"

Of the 60% who had a recommendation, many duplicated issues that (I hope!) others had cited under #5, including technology, KM, alternative billing, and leadership issues.  Much as I try to be responsive, dear readers, this presents a difficulty; I think I shall probably continue to try to keep the content varied, although I will take your collective counsel reflected under #5 to heart.

Do we have a winner in this category?  Indeed we do—a reader who, having seen "Adam Smith, Esq." branded in the banner as "...an inquiry into the economics of law firms," requests that I spend less time on:

• "law firm economics."

Question #7:  The Most Pressing/Frustrating Legal Business Issue Facing You/Your Firm

44.6% of you responded to this, indicating perhaps a distressing degree of pain.  Interestingly, the single most oft-cited problem issue can be reduced to one word:  Management.   Although it was expressed in different ways from various perspectives, some of the representative comments here included:  "work overload [because of] lack of efficient management;" "total hands-off management style that causes chaos for associates and paralegals;" "lawyers who are managers thinking they can direct people;" lawyer managers finding/using time to actually do the management part of their job;" "poor quality of life for associates/poor management by partners;" "indecisiveness/inaction;" and finally, one that constitutes perhaps the cardinal sin, entitling the offender to immediate admission to Dante's innermost circle of Hell:  "lack of vision from the top."

A strong theme also emerged centered on the difficulty of achieving cultural change.  "Figuring out how to shepard [sic] change in the legal profession" expressed it most clearly, but it also arose in what might be called the obverse, such as:  "The complete inability of old school lawyers (who constitute 95% of all decision makers) to grasp technology-related issues as it relates to litigation.  It is debilitating!"

A group of ever-present issues also made a strong showing here, including:

• marketing and business development;
• work/life balance, the relentless pressure to amass billable hours, and the haziness of padding and client expectations; and
• profitability in general, usually expressed as a desire for more revenue or, as one pithily put it, less "COST."

Interestingly, certainly to me, was that knowledge management came up repeatedly.   It sounds as though firms know they need it.

But the most intriguing by far speaks to tectonic changes that may be taking place in the structure of the industry at large:  A surprising number of respondents worried about the consolidation trend among law firms, expressed variously as:

• "Uncertainty as to the future for mid-size (AmLaw 200 but not 100) firms, especially outside NY;"
• "[being] national, specialized and staying profitable and independent;"
• "staying competitive without having to bulk up in size like everyone else;"
• "growth (industry consolidation);"
• "how to respond to globalization;" and lastly, a comment evidently from the UK about client-generated pressures in the brave new world of "panels" and "preferred providers:"
• "variable growth as a result of increasing tenders; you are either on the panel with lots of work (and needing to quickly hire staff), or suddenly off the panel with corresponding overstaffing."

All in all, a basket full of serious, thorny, deeply challenging issues.  I humbly give you all enormous credit.

The final question, asking for the "unvarnished truth" in terms of other editorial comments/suggestions/critiques, I will save for a separate post.  Stay tuned.

DLA Piper [Rudnick Gray Cary?—I'm quite confident they shortened the name, but their website doesn't reflect it] is partnering with Harvard Business School to launch what is to my knowledge the second-of-its-kind lawyer "executive education" program.  

The original, and first-of-its-kind, as faithful readers recall, is "Reed Smith University," in conjunction with the Wharton School.   Reed Smith's still sounds to be the more ambitious, comprising five "schools" (law, leadership, business development, technology, and professional support) and a mandate to support and enhance the professional development of lawyers, business-side people, and support staff as well.  DLA Piper's venture is more "focused" (yes, I'm being kind), and is geared to "issues relevant to the firm's partners;" they plan to enroll about 50 partners a year in the one-week course. 

Not to be hard on DLA Piper—this still qualifies as a surpassing fit of forward-thinking here in law-firm land—but my fond hope is that I'll soon be in a position to report that they have extended this savvy and beneficent effort down the ladder.

Which firm will be #3?  The betting window is open.

My article at Law Technology News on Milbank's outsourcing their wordprocessing to Chennai, India, is now up.   How, you might well ask, could control-freak lawyers possibly cope with the news that their documents would not be processed under their noses but halfway around the globe, out of sight?  Read about the brilliant double-blind trial period.  And many thanks to Jim Lantonio, their Executive Director, for responding to my questions and follow-up even though he was abroad.

While Milbank's is a success story, Deloitte has just released a report "calling a change" in the outsourcing market.  Basically, Deloitte questions the benefits of outsourcing once one considers their "fully loaded" costs, including the burden on management, security/privacy risks, and the potential loss of expertise, reservations that have always seemed to me to be underplayed.   A more speculative prediction Deloitte makes, which is entirely plausible on its face although I have no independent means of verifying it, is that the vendor market is about to undergo a consolidation phase, decreasing the bargaining power of would-be US outsourcers.  Bottom line (and I quote):

• Seventy percent of participants have had significant negative experiences with outsourcing projects and are now exercising greater caution in approaching outsourcing.  
• One in four participants have brought functions back in-house after realizing they could be addressed more successfully and/or at a lower cost internally.  
• Forty-four percent of participants did not see cost savings materialize as a result of outsourcing

En garde.