March 2008 Archives

In less than three weeks, on Thursday and Friday April 17 and 18, the Georgetown Law School Center for the Study of the Legal Profession will host the symposium, "The Future of the Global Law Firm." The Symposium will be at the Law School (a few blocks from the Capitol in Washington, DC) and a wide and distinguished array of managing partners, other practitioners, and academics will be in attendance, from the US, the UK, Canada, and Australia.

It's not too late to register, and I urge those of you with an interest in this subject to do so. Attendance is free.

Partly that's because I ended up instigating this conference with what I thought was an innocent email about a year ago, but mostly it's of course because of the depth of the content and the quality and credentials of those who will be on panels at the symposium and in attendance.

The registration form is here, and the final schedule is here. 

Among the other topics which will be discussed are:

• The emerging dynamics of global competition.
  
• Ownership and capital structure, including the possibility and the desirability of outside (that is, non-lawyer) investment in law firms.
• Ethics and professional values.
• Perspectives from corporate law and finance.
• Organizational and cultural dynamics, and
• Lessons from other professional service firms.

The symposium will conclude at lunch on Friday with a panel on the globalization of routine legal work, a/k/a outsourcing.

The impetus for the Symposium is this:

The Center has published an article in The Georgetown Journal of Legal Ethics (21 Geo. J. Legal Ethics 61 [2008]) which discusses whether ethics rules in the United States should be changed to permit law firms to raise money from outside equity investors. The aim of the paper is to stimulate discussion of the potential effects of pending legislation in the United Kingdom that would permit law firms to become publicly-traded enterprises.

The UK legislation is expected to go into effect next year. "This reform could have profound effects on global law practice, and raise fundamental questions about the basic identity of the legal profession," said Center Co-Director Mitt Regan, a Professor at Georgetown who teaches courses on ethics, law firms and the legal profession. "Surprisingly, there has been little public discussion on this side of the Atlantic of the potentially significant impact of this development. We're trying to get that discussion started." At a minimum, he noted, law firms with offices in London will need to consider how to structure their practices so that the UK legislation does not cause the firm to be in violation of ethics rules in this country.

The paper consists of correspondence among Professor Regan; Bruce MacEwen, an expert on law firm economics and editor of the online publication Adam Smith, Esq.; and Professor Larry Ribstein of the University of Illinois Law School, an expert on partnership law. Current ethics rules in every state forbid any non-lawyers from having an ownership interest in a law firm. Beginning with an inquiry by Mr. MacEwen, the participants in the exchange first discuss whether these rules would permit firms to sell financial instruments such as derivatives whose value is based on the firms' profitability. The discussants then move on to the broader subject of the arguments for and against allowing firms to raise money in the stock market.

Mr. MacEwen and Professor Ribstein generally support permitting firms to attract equity investors. Professor Regan is more ambivalent, but says that participating in the exchange made him appreciate that the question is far closer than most people realize.

Again, I invite you to look at the agenda for the Symposium, which promises to be fascinating.

Most important, I hope to see you there! Please shoot me an email if you plan to attend.

The current issue of The Lawyer features the cover story, "US top 50's £23.4bn haul makes 2007 the best year ever."  (That's $46.8-billion to us.)  Top-line:

• Year over year revenue for the 50 largest US-headquartered firms was up more than 16%, from $40.27-billion in 2006
• The average PPP rose 11% from $1.55-million in 2006 to $1.72-million in 2007
• The leaders in revenue growth were:
  • DLA Piper, +110% largely by virtue of consolidating its EMEA operations with its US operations
  • K&L/Gates, +51.3%, and Reed Smith, +38.2%, helped by mergers
  • Debevoise and Latham, each up 23.5%, on sheer performance
• The laggards in revenue growth were:
  • WilmerHale, 4.8%
  • Akin Gump, 3.4%
  • Pillsbury, 1.9%
  • Jones Day, flat
  • Holland & Knight, -0.2%
• Highest PPP:
  • Wachtell, $4.48-million
  • Cravath, $3.30
  • Sullivan & Cromwell, $3.13
  • Simpson Thacher, $2.87
  • Cadwalader, $2.72—notable for also being 49th out of 50th in "growth in PPP," at -6.2% [see below]
• Lowest PPP:
  • Hunton & Williams:  $850-thousand
  • K&L/Gates: $800
  • Fulbright & Jaworski:  $777
  • Jones Day:  $770
  • Holland & Knight:  $699

As always, take all PPP figures with a tablespoon of salt.  "Your mileage may vary."  That's why it may be more informative to look at strongest and weakest PPP growth—at least we can assume (can't we?) we're comparing last year's apples with this year's apples.  So:

• Strongest PPP growth:
  • Baker Botts, +30.0%
  • Debevoise, 27.2%
  • Latham, 22.7%
  • Baker & McKenzie, 21.8%
  • Paul Hastings, 20.0%
• Weakest PPP growth:
  • Fulbright & Jaworski, +0.9%
  • Jones Day, flat
  • Holland & Knight, -0.1%
  • Cadwalader, -6.2%
  • Akin Gump, -7.0%

Here's the cover page, the second page of the article, and the key 50-firm table.  With all this information out now, why wait for the AmLaw 100?

I'm also happy to report that I was able to contribute a few thoughts, including the warning:

"that while the record results were partly down [sic: due] to increased levels of work across most practices last year, a large portion of the increase in revenues was driven by rate hikes.

"On the extremely plausible assumption that activity cools this year, additional rate hikes are essentially the only tool firms have left if they expect to generate year-on-year revenue growth," said MacEwen. "One has to question whether corporate clients will have the stomach for additional rate increases in this economic environment."

What’s striking about these results is how fast firms have to run just to stay in place.  Solid double-digit increases in revenue and profitability would be the envy of many a corporate CEO.  (And we have enjoyed this for several years in a row, now.) 

But this year the challenge for these firms will be avoiding the temptation to stand pat in a worrisome environment.  Challenging times tend not to re-cement the status quo but rather to make for the emergence of new leaders.

Today Altman Weil announced its release of The Legal Transformation Study:   Your 2020 Vision of the Future, published by Decision Strategies International:

“The comprehensive industry assessment identified 11 key global trends and uncertainties shaping the future of the legal industry, then developed four possible planning scenarios that the legal industry may face in the next decade,” said Paul Schoemaker, Ph.D., research director of the Mack Center for Technological Innovation at Wharton Business School, and the founder and executive chairman of Decision Strategies International.  “These four scenarios can be used as a framework for challenging current service models within the industry, answering key strategic questions, and helping stakeholders, including corporate law departments, law firms and legal service suppliers, identify proactive strategies to ensure future success.”

"According to Dr. Schoemaker, four possible scenarios for the delivery of legal services between now and 2020 are summarized as follows:

- Blue-Chip Mega-Mania: A model that emphasizes the global consolidation of legal service providers and the dominance of giant law firms with vast global presence and offerings spanning all legal areas.

- Expertopia: A scenario that envisions the increasing complexity of the law and challenges of corporations operating in multiple environments worldwide, thereby placing a premium on specialization and expert-driven cultures at legal services organizations.

- E-Marketplace: A model built on the premise that technology will be a catalyst, but not the core, for an industry transformation in which an array of Web-based technologies will make information more available and expert judgment more valuable.

- Techno-Law: A scenario that contemplates rising corporate investment in automation capabilities throughout the legal services industry, leaving only the high-end services to be delivered by legal professionals and potentially requiring a complete reconstruction of the traditional business models in the legal services industry.

“In the past, law firms and corporate law departments have frequently been taken by surprise by unexpected forces that directly influenced the practice of law,” said Jim Seidl, president of Legal Research Center and co-developer of the Study.  “The findings of this Study will empower legal service providers to proactively compete more successfully in the global legal marketplace, reduce the risk of unexpected business surprises and threats, and identify new opportunities for business growth in the next decade.”

“As a provider of services within the dynamic electronic discovery services arena, we closely monitor current trends and anticipate the future of our profession to help our clients make well-informed decisions and achieve favorable results,” said Greg Mazares, president and CEO of Encore Legal Solutions.  “The Legal Transformation Study is an important tool we can all use to prepare for any number of potential business scenarios.  We are pleased to have been a primary developer of the Study and look forward to sharing the results with our clients and other legal professionals across the nation.”

“This Study is a tool to test the resiliency of law firm strategic plans across a range of possible futures, or to develop new plans more likely to assure their success,” said Ward Bower, strategy consultant at Altman Weil.  “This is critical stuff for law firms.  If they get their basic direction wrong, they’re toast.”
 
“There can be no doubt that we are poised for significant change between now and 2020, with a wide range of business, technological and regulatory forces sure to have a major impact on the way that legal services are delivered to corporations worldwide,” said Mark Chandler, general counsel of Cisco Systems, and a Study contributor.  “This groundbreaking Study identifies the likely components of these industry changes and prescribes important guidelines for how corporate law departments, law firms and other legal service providers can start planning now to seize these emerging opportunities while protecting against competitive threats.”

Sponsors include of course Altman Weil, and Jomati, but also Encore Legal Solutions, Bridgeway Software, Inc., Deloitte Financial Advisory Services LLP, DuPont Legal, Eversheds, Intellevate, Meritas and Solomon Page Group LLC. 

You can order a copy here. 

The attentive among you may recall that I was in London last November where, among other things, I was pleased and flattered to have been asked by Guy Beringer of Allen & Overy to participate in a panel hosted at A&O's Bishopsgate headquarters on "Measuring Law Firm Success."  That discussion, and that topic, have now been handed over to The Law Society of England & Wales, where they recently launched coverage of the event that I was able to participate in as well as ongoing efforts.   They describe it thus:

"The Law Society is taking forward an initiative to explore ways of measuring the success of law firms. The initiative will look beyond the blunt instrument of profit per equity partner to the longer-term sustainability of firms, including business strategy, client care, employee engagement, innovation, social capital and efficiency.

"Our initiative is prompted by a significant and innovative project launched by Allen & Overy during 2007, and follows their request that the Society takes the project profession-wide. We are grateful for the opportunity to do so. "

Now available online are a summary of the seminar held at A&O, and the presentation I gave. 

I would be interested in any thoughts or opinions this prompts.

No question is posed to me more frequently these days than, "What does this economic environment mean for law firms?"

To which the only sensible answer is, "It's way too soon to predict anything for sure, but each firm's own situation is sure to differ."    Indeed, it's true that we've seen layoffs at Cadwalader, Clifford Chance, Thacher Profitt, and as of yesterday Thelen Reid, as noted on the WSJ Law Blog.  Yet I've also had conversations with managing partners who tell me that the first quarter of 2008 is shaping up to be as strong as any last year.  So what's going on?

I've written about this environment before, and recently, as in:

• "Prospects for 2008"
• "Think Different.  Who, Me?"
• "Don't (Only) Sweat the Small Stuff"
• "Glass Not Half Full"
• "A Contrarian Bounce?", and
• "The Upcoming Banana?"

If I had to summarize where I stand, I'll reiterate that at this stage in the cycle I remain a "worried optimist."

But since loudly and confidently declaring one's economic predictions is essentially a mug's game (as the joke has it, "you could lay all the economists in the world end to end and they wouldn't reach a conclusion"), the real question is, What should you do?

I have a thought:  Let's re-examine associate lockstep.

Again, this is not the first time I've written about this; in "Fealty to Anachronisms," I reported last June on Howrey's ditching associate lockstep.  But it's time to revisit the issue.

To begin, it helps to step back and take a deep breath before we ask probing questions about a custom we take so very much for granted—one which has been ingrained as a core element of the "Cravath System" dating back to the turn of the prior century.

But if you look at our industry's practice of compensating associates from the perspective of corporate America—or even from the perspective of the putative "man in the street"—I'm put in mind of nothing so much as the New York Times music critic reviewing an early Verdi opera with an especially preposterous plot:  "If I tried to explain to you why Ernani kills himself, we'd be here all week and at the end you wouldn't believe me anyway."

Isn't that about right?  How on earth is it that we've brainwashed ourselves to believe  associate lockstep makes sense?

I submit that in no other business does compensation turn almost solely on year of graduation or year of admission to the profession.  Are we right and the rest of the for-profit economy wrong?  If you're with me at least to this point, now is the opportunity of an economic cycle to re-examine this hoary tradition.

The moment's propitious because, regardless of one's views of the health of our revenue streams going forward, savvy attention to cost is always a virtue, and given the recent spike in associate salary "going rates," real money is at stake.  (I might add that clients appear irrationally anything but exuberant about the associate salary spike.  This may make zero sense economically but it seems to clients to make great sense psychologically.  Ignore it at your peril.)

How then might you wean your firm away from associate lockstep?  Start by taking a page from the playbook of firms, such as Howrey and notably Latham, that have done it already.  Some ideas:

• Create "bands" rather than "years," and group associates past the first or second year into perhaps three such bands of seniority.
• Within each band, which would have a minimum, median, and maximum salary range, determine the place of individual associates based on 360° assessments.
• Permit, indeed encourage, deviations from seniority; that is, after all, what this is all about.  Why not have a third-year who's a superstar earn more than a fifth-year who's hanging on by their fingernails? 
• Deviations from seniority achieve a number of salubrious objectives:
  • They tell the truth to associates about how the firm views their performance;
  • The associate's costs begin to more roughly approximate their value to clients;
  • The firm can more wisely target its scarce salary and bonus dollars to those it wants to keep, now divorced from the artificial constraints of lockstep year-by-year compensation;
  • Billing partners are liberated from the awkward conversations with clients about associates' increased rates; if a client notes that a particular associate's rate has gone up, it's not because another year has ticked over on the calendar, but rather it's because the firm has decided that associate's performance—and value to the client—has increased.

Perilous times are often the most conducive to change.  As a managing partner said to me, "Change is easiest when the house is on fire."  Don't wait for the house to be on fire. 

But explore creative alternatives to business as usual.  Your partners, and your associates, will thank you for it.

Update (24 March):

A 3L at a heavy-duty law school writes (reproduced by permission, but anonymously):

"Hi, I am currently a 3L at [...]. I very much agree that firms should move away from lockstep pay, but I do wonder whether an economic downturn would be a feasible time to do it. I will be starting at a firm in the fall, one of the "bulge bracket" NY firms that you refer to, and it occurs to me that now would not be the time to implement this there. Two of the largest and most profitable practice groups are litigation and M&A (unsurprisingly). I have been told that M&A is fairly cyclical and litigation is mildly counter-cyclical, that the partners are aware of this and that they fully expect hours to fluctuate accordingly. However, the M&A people have been working their tails off for the past few years under lockstep pay. If this program is implemented now, the M&A people will probably resent the fact that it is starting while they have to sit on their hands, rather than in the last few years where they put in superlative hours. Furthermore, lockstep pay helps to avoid causing people to fret about their reduced hours during downturns in business, whereas lockstep pay might cause competition for work that might damage the firm's atmosphere. More generally, how should firms thinking about switching to merit pay deal with fairness between different practice groups that operate according to different business cycles?"

He raises an interesting point, one I did not address in this  piece initially, which is why I wanted to append his question and my thoughts.

Which are two:  First, to the extent variable compensation under my hypothetical scheme would include a material component reflecting hours billed, our faithful correspondent is correct that timing issues and practice group cyclicality will all but ensure that someone's ox is gored during the transition from lockstep.   There are ways to solve or at least ameliorate that, of course, and were someone to actually ask me to advise on such a transition, I'm quite certain I would recommend a "glide path" during the transition that would even out any capricious inequity.  After all, everyone knows what's hot and what's not:  You just have to address it as adults.

But second, implicit in his question is the assumption that a large portion of the variability in compensation would reflect the absolute level of billable hours.  I don't know if I implied that in the original piece, but now that the predicate is laid bare, I will plead to only the most tepid endorsement of that assumption.  More precisely, I will endorse the notion that "more hours means more  $$" within the scheme I outlined only with the following understandings:

• There's an important distinction between the workload of a practice area overall and the hours billed by any individual associate.
  • It's unfair to penalize associates for a low overall level of activity in their group—if that's anyone's fault, it's the partners' (or the economy's).
  • Conversely, I believe it's not only fair but the soul of meritocratic capitalism to reward individuals for hours at the right of the bell curve within their group and to ding individuals at the left.
• But the heart of my proposal as I envision it has almost nothing to do with hours and everything to do with professional development and progress along the curve of being a high-performing practitioner.  What I care about are:
  • Pure legal excellence:   Analytic ability, attention to detail while not losing sight of the big picture, an instinct for getting to the core of a matter.
  • Writing and speaking clearly, effectively, and precisely.
  • Being able to team with colleagues within the firm, up, down, and sideways.
  • Client relationship skills—beyond dutifully reporting what clearly has to be reported—extending into the realm of potentially excellent client service overall.

A thought-provoking followup.  Thank you (and you know who you are).

With great pleasure, I can today announce that Adam Smith, Esq. has entered into a strategic alliance with Altman Weil, Inc., and with London-based Jomati Consultants LLP to consult with clients on matters related to law firm strategy and economics.

I have known Ward Bower of Altman Weil and Tony Williams of Jomati for some time and, while we have worked together informally in the past, the goal of this alliance is to improve what we can offer our clients in terms of depth and breadth at a time when the international legal marketplace is undergoing a period of major change. 

The resources and history of Altman Weil—going back to 1970—are well recognized and respected within our profession, and, together with my presence in New York and Tony's in London, I would like to believe we can provide our clients coverage from the two key capitals of the Anglo legal world.  

In announcing the alliance, Ward said:

"We are very pleased to be working with Bruce.  He is a true thought-leader on issues of strategic importance to the legal profession and increases the scope and depth of resources we can offer our major law firm clients."

And Tony added:

"I am delighted to be working with Bruce.  He is widely respected for his thought provoking views on law firm strategy and economics and he brings extra depth to our offering to major law firms."

Finally, on a personal note, I must tell you this is most exciting for me and a milestone in the development of "Adam Smith, Esq."

Update (19 March):  The Lawyer has published coverage, as has Legal Week.   

Just back from an abbreviated week in London (essentially Tuesday through Thursday).  Herewith a report.

I met with the managing partners of a good half-dozen firms, fairly representative of the marketplace, and unsurprisingly the top question on most minds is what the economic downturn portends.

Unlike most of life, where a bell curve distribution is the best first approximation of almost any sampling, views on this topic are bimodal:  Either people tend to believe things could get quite bad indeed, or else their  firms are having bang-up first quarters here in 2008.  To be sure, those on both ends of this spectrum are hesitant to predict that their gloomy or sunny outlook will endure:  Uncertainty, in spades, is the watchword of the day.  And so I resolved to try to delve into deeper and more enduring questions.

Primary among them are whether London will overtake New York as a global financial capital, and what the prospects are for a major (as in "headline news") US/UK  law firm merger.

In a bit of contrast to last time I was in the City last November, there's a more cautious and less triumphalist air about London attaining supremacy over New York.  (I will resist the temptation to link this, as rich as it is, to the overwhelmingly delightful, gratifying, and juicy self-immolation of Eliot Spitzer, which occurred during my trip.)  Now, the view  seems to coalesce around a consensus that New York and London will always be transatlantic cousins, each with respective styles and strengths and weaknesses, but neither regnant over the other in capital markets.

Interestingly, one lunch I attended featured a speaker (an American by birth but one who has lived in London for 20+ years) who discussed the cultural  differences between doing business in the US  and the UK.  If you will indulge me in a bit of editorial license, these were the highlights of her talk:

She also told the anecdote of a set of deal documents being jointly worked on by a US and a UK firm.  As drafts were updated, the routine became that the US firm would turn on "track changes," insert its revisions, and email it across.  The UK firm, by contrast, would leave the document untouched but return it with a cover memo suggesting editorial revisions.

After a few rounds of this, the US firm piped up with some exasperation that the UK lawyers were requiring double-work:  First, to read the memo and determine the validity of its points, and second to actually make  the changes.   Why not just  make the bloody changes?  And here, of course, we have a cultural misunderstanding:  The UK  lawyers were merely being politely deferential in not assuming they could trespass all over the so-far-agreed-upon document.  The US lawyers were assuming that  efficiency and expediency were the goals. 

Also anecdotally, in the departure  lounge of my return flight, a woman asked me from behind my back, "How are your dachshunds?"  Having succeeded in getting my attention, she turned out to be a former neighbor on the Upper West Side, in a building catty-corner to ours, who had moved a few years  ago to London with her investment banking husband for a tour of duty.  I told her that I hoped she felt as at home in London as in New York—on occasion I'm tempted to envision it as almost the sixth borough of New York—and then I took the opportunity to ask her how she would  compare the two cities, as someone with a ringside seat to each.  She replied that London is like Brooklyn Heights—unmistakably an urban locale with its own indelible identity, but less frenetic and less dense than Manhattan, lower-rise.

As noted, the other enormous question of interest (well, at least to me) was the prospect for a headline merger.   Previously, I must say, this speculation has  tended to be dismissed with suspicious abruptness on both sides of the pond.

This trip  was a bit different.  People were far less dismissive, and many indeed even owned up to the potential strategic and business logic of a hypothetical US/UK (read:  New York/London) merger.  Culture, of course, will always be the obstacle, but the financial misfit that was presumed to exist heretofore may be eroding as practices converge and globalization truly kicks in. 

One point of view I heard in different contexts and expressed in different ways, but pregnant with potential meaning about the market's readiness for a merger, was this:  Some US firms are relatively strong in Asia and some UK firms are relatively strong on the European Continent.  Wouldn't that make for a potentially interesting combination, delivering the three first-world continents, North America (including New York), Europe (including London), and Asia?

But repeatedly, the reservation was voiced that it is so intrinsically difficult to sustain long-run investments in new geographies and practice areas where partners' expectations are to "strip-mine" the firm of cash at the end of every year and even the most visionary managing partners with the greatest commitment to the long term find it almost impossible to orchestrate continuing, loss-producing, investments.

Pop quiz: Q:  What's the one line item that appears on every corporation's balance sheet that I suspect you have never seen on a law firm's?

A:  [tick-tock-tick-tock.....]  Retained earnings.

This still begs the economic question which applies to mergers and long-term investments in new geographies alike:  Why, if the initiative would benefit us all in the long run—better work from happier and more valuable clients, higher profitability, stronger weapons for recruitment and retention—can we not stomach the short-term sacrifice?

I have no answer to this question.

Which makes me optimistic that, during my career, we shall see a transformative merger.

But, you protest, conflicts will become insuperable the larger firms get?   You know as well as anyone that rules are made to evolve and adapt, and with Chris Perrin, the general counsel of Clifford Chance, calling for relief from conflicts just last week, can reform be far behind?  (He would permit sophisticated clients to waive conflicts in any and all circumstances.)

In any event, I predict that I'll be going to London pretty regularly.  Not the worst duty.

A major article appears in this month's American Lawyer, penned by Ben Heineman, most famously ex-GC of GE, and David Wilkins, Harvard Law professor. Both are now deeply involved in HLS's Program on the Legal Profession, whose stated mission is "to build bridges between the academy and the profession."

The article, "The Lost Generation?", subtitled "demoralized and dispirited, big-firm associates are defecting in droves. Here's what firms, and their clients, can do about it," is one of which it might be said, "Attention must be paid." Between them, Heineman and Wilkins contribute more diverse experience of the world and more IQ points per paragraph than has graced any other article yet published this year.

First, permit me to summarize their arguments, and then I'll offer my own humble coda.

The problem, in a nutshell, is attrition. Despite increased salaries and bonuses, more (professed) attention to work/life balance and associate development, more indisputable investments in stress management, concierge services, and day-care, by years three to four anywhere from 30 to 50% and more of associates are out the door.

The reasons are well-known:

• Having paid off law school debts, they're done.
• Private equity and investment banking pay better and are sexier.
• They figure they won't make partner--and aren't sure they'd like to, based on what they see of partners' lifestyles.
• Other obvious reasons like following a spouse to a different city or deciding to become the "at home" spouse.

But then David and Ben delve deeper into the associate/partner disconnect within large firms and unearth more subtle, cultural, professional, and personal reasons for the appalling rates of attrition:

• A depressingly high ratio of drudge-work to interesting work. (As one commenter to the WSJ Law Blog piece on the article put it, "One word: e-discovery!")
• Large matters staffed by large teams where junior associates feel peripheral and marginalized.
• Partners' inability to communicate (junior partners are especially singled out for this critique).
• Utter opacity about:
  • firms' finances
  • associates' chances for partnership
  • the criteria for partnership
• Corporate clients who, as the authors put it, "are unwilling to take risks on young associates and unwilling to pay their rates, so associates may not have interesting opportunities such as doing important work, meeting with businesspeople, or traveling to depositions, hearings, or arguments." [We'll come back to this.]

And they claim that this has all changed markedly for the worse in the past 20 to 30 years. This one sentence may summarize the article:

"Big-firm associates, then, may be a lost generation: a cohort of junior lawyers whose initial professional experience is extremely unsatisfying, who are turned off by the traditional rite of passage in a large firm, and who are not developing as legal professionals in the broadest sense of that phrase."

Here they may have put their fingers on what I think could be one of the defining challenges to the profession in the near future: Climbing the mountain of finding the next generation of committed professionals. Ben and David proceed to enumerate some suggested reforms attempting to ameliorate the barriers that young associates seem to feel stand in their way. Most are conventional extrapolations of things a few firms are already doing, and perhaps the question is whether the cumulative impact of all of them would really change the proportion of associates who feel inspired.

Their core recommendation is surely sound: Expose associates early on to real work even if they're bystanders and not participants. Only if junior associates have a sense of the drama of high-stakes litigation or deal-making will there be a prayer of their staying enough years to begin doing it themselves.

Ben and David's prescription thus includes these elements:

• Having junior associates attend key meetings, albeit "off the meter;"
• "Seconding" third or fourth-year associates to corporate clients to get a more textured sense of what companies actually do with legal advice and how lawyers fit into the overall corporate hierarchy;
• Somewhat obviously, expanding pro bono commitments;
• And equally obviously, expanding opportunities to "lend" associates to governmental agencies; but most important of all
• Really and truly demanding that partners devote time and emotional commitment to professional development, including competency benchmarks and internal career counseling.

Do we, then, have a credible response to the dilemma of ever-higher compensation and ever-higher attrition?

Almost. The authors are far too generous to corporate clients and put essentially the entire burden of associate development on law firms. Yes, I understand the financial pressures on GC's to cut costs just as their other C-suite comrades are doing, but I'll bet you that the CFO is not second-guessing junior trainees being on the outside auditor's team and the CMO is not telling the ad agency to leave the assistant account executives back at the office.

It's actually worse than that, because the same GC who (for example) instructs outside counsel not even to bother putting first-year's on the bill because their time will only be zero'ed out is going to go right back to those same firms to poach mid-level's when the inhouse department needs to staff up. Economists call this free-riding, but it doesn't take an economics background to label it for what it is: Patently hypocritical, exploitative, and plain old unfair.

Corporate America, which presumably benefits first and foremost from the services of BigLaw, needs to behave more as a business partner and less as a distant third-party willing to exploit the reality that right now there's a lot of sand in the gears when the interests of law firms and the interests of young associates try to mesh.

Nevertheless, many components of what Ben and David have laid out are, as I said, inarguable.

But even if we could get corporate America to help the situation rather than throw fuel on the fire, one other thing is missing, and that is passion for the profession: Inspiring it, cultivating it, sustaining it. These are the among the missions of law firms (and yes, clients), because it's passion and only passion for the intellectual challenges and the creative possibilities of the profession that can sustain a lifetime of engagement and performance at the highest levels. Understandably, we're more comfortable talking about processes and procedures and techniques; but let's not lose sight of what we're trying to achieve. Lifetime commitment to the practice.

Over at "Drug and Device Law," they kicked up a little storm last Friday by asking why the marketing value of practicing lawyers' writing a blog seemed to be undervalued.  I first learned of it when my friend Mark Herrmann of Jones Day sent me a heads-up asking if I could respond.    Unfortunately, before I had a chance to do so, the WSJ Law Blog also picked up the story this afternoon. 

Here's the issue:  "Drug and Device Law" is apparently the most widely read site on drug and device product liability, with 25,000 page-views/month.  But the law firms the authors belong to (Jones Day, of course, for Mark, and Dechert, for his co-author James Beck) seem remarkably indifferent to and only passively supportive of the blog.  Why might that be?  Mark and Jim propose four theories (as aptly summarized by the WSJ Law Blog):

“Most widely read product liability blog” = “World’s tallest midget”: 25,000 pageviews is a drop in the bucket, and there’s essentially no institutional benefit to blogging. If the two of us — Beck and Herrmann, the blogging morons — want to waste our Saturday mornings feeding this beast, we should go ahead and entertain ourselves.

Power of blogosphere eludes firm management: Management is basically folks over 50 who start their days sipping a cup of coffee and reading the Journal. Only people under 40 start their days sipping a cup of coffee and checking [legal blogs].

Blogs attract the wrong eyeballs: The target market for big firms such as ours is the general counsel and C-level management of Fortune 500 companies. With all due respect to our visitors — and we love you guys; really! — you folks are younger and less important.

Where’s the money in this? It takes many hours of effort each week for the two of us to provide regular, fresh content to this site, and the amount of business generated doesn’t justify the effort. If the two of us get some personal satisfaction from blogging, no one will interfere, but firms do cost-benefit analyses of marketing initiatives, and this one flunks the test.

Both the original piece and the WSJ followup have received numerous comments, which while they have few common threads do coalesce around the proposition that most blogs are a waste of time or worse, and that sorting the gems from the rest is time-consuming.  Interestingly, almost everyone who advances this view also adds the caveat that finding the  good stuff is highly rewarding—and a robust counterpoint to the mainstream media.

So what do I think here at "Adam Smith, Esq.?"  Not being in a large firm any more, I fortunately don't have anyone whatsoever looking over my shoulder when I write and hit the "publish" button.  But I think each of Mark & Jim's hypotheses has some merit, most particularly #4, "show me the money." 

There seems to be less and less time for labors of love, for things we do not because they contribute to the bottom line but because they advance our learned profession, serve the cause of justice or the disenfranchised, or boost the flagging morale of a colleague.  And it's very hard to infer any 1:1 correspondence between what I write here on "Adam Smith, Esq.," and my speaking and consulting engagements with firms, just as it is—so I suspect—very hard for Mark and Jim to identify clients who have come to them through "D&D Law."

That's not why I created "Adam Smith, Esq.," and I suspect it's not why they created D&D Law.

I part company with them, however, on ##2 and 3, "management doesn't get it" and "the wrong eyeballs."  At least judging from my experience, some of the most loyal, dedicated, and enthusiastic readers of "Adam Smith, Esq.," are managing partners and firm chairs at BigLaw firms.  I also believe firmly that there's no such thing as "the wrong eyeballs."  In the famous six degrees of separation syndrome, some of the most rewarding encounters I've had in the real world with people new to me have come through a friend of a friend of a referral of a reader who pointed them to "Adam Smith, Esq."

Since time immemorial—or at least since Gutenberg (1440)—lawyers have indirectly promoted their visibility and enhanced (with luck!) their credibility by publishing on legal issues and gaining a reputation for being thoughtful observers. Now that we can do it in the online medium, nothing fundamentally has changed.  The basic equation remains the same:  "Assertion persuades not; but demonstration convinces." 

It does me no good to ask you to believe that I'm a thoughtful fellow who cares deeply about the management of law firms and I would not insult your intelligence or waste your time by saying that.   But it has apparently done no small bit of good to have founded and be publishing "Adam Smith, Esq."

So my words of advice to Mark & Jim?  Hey, just keep it up.  As long as it is its own reward.  Because your site, in and of itself, will never be more (and should never be less; if it becomes so, it's time to pull the virtual plug).

Or, as my wife has observed, be realistic about this salient fact:  "'Adam Smith, Esq.' is, itself, nonprofit."

Kevin O'Keefe and Rob La Gatta of LexBlog posed a few questions to me a week or two ago, for their "LexBlog Q&A Series," and I thought you, Dear Reader, deserved to see my answers.

1.  When did you start Adam Smith, Esq? What was your purpose in doing so?

December 2003.

I had looked around the so-called legal "blawgosphere" pretty thoroughly—it was actually possible to know everyone then, there were only a few dozen of us—and I saw nothing about the economics of law firms.  Since I thought it was an exceptionally rich topic, with no apparent "incumbent," and since of course it's a topic I'm passionate about, I decided to launch "Adam Smith, Esq." as an experiment in online publishing.

I don't call it a "blog," by the way; I still think that has negative and pejorative connotations.  "Adam Smith, Esq." is a publication, albeit one which happens to be online.  As an aside, I can't imagine launching any publication today that would not be heavily or exclusively online.  And from an instrumental and practical perspective, the "Movable Type" publishing software that powers "Adam Smith, Esq." has a number of features and characteristics that you would surely want in any well-organized and architecturally sound publication:

• The default organizational scheme is reverse chronological.  This makes intuitive sense.  After all, which copy of The Wall Street Journal am I most likely to be interested in?  Right—today's!
• Each column, or piece, has its own unique identifying URL which will never change, called its "permalink."  This makes it exceptionally easy to refer friends and colleagues to pieces.
• Archives are spontaneously and automatically created both by month and by topic category.
• It has a nice built-in search feature (at the top left-hand column of "Adam Smith, Esq.").
• And it automatically generates an RSS feed.

All that said, when I launched "Adam Smith, Esq.," I did so in stealth mode, telling no one initially (besides my wife).  Why?  A number of reasons:

• I might find the time commitment too onerous.
• I might find others covering similar territory better, faster, or more articulately than I.
• I might have nothing to say.
• And, in any event, I didn't want to launch into the world with a bare naked site along the lines of, "Hello, world, this is my first piece."

Of course, after a couple of months it became clear to me that I should go public with what I was creating.

2.  You write fairly lengthy and detailed posts. How long does it take to do them? Do you have a particular setting in which you feel you do your best writing?

Actually composing my columns takes less time than you might think.  I'd like to believe I have a characteristic and identifiable writing style and tone of voice, and at this point I find that second-guessing myself too much on style harms rather than helps the columns. 

I strongly prefer—almost to the point of its being a hard and fast rule—writing at the beginning and the end of the day, say, before 9 am or after 8 pm, when there are no incoming distractions of phone or e-mail.

But the most time-consuming piece of any column is deciding which topics are worthy and then, worse, figuring out what I want to say.  That's the hard part.

3.  Walter Olson said you cover your niche better than the conventional legal press (not surprising, given the timeliness of blogs compared to print). Do you find that readers are coming to your site before they hit the traditional legal publications?

That's a good question.  My hunch—informed by precisely zero data— is that people come to "Adam Smith, Esq." for more considered background and reflection on issues.  I explicitly do not cover breaking news and when there is a big story (such as the associate salary spike last year), I often consciously wait a week or two before writing a piece, which then tries to explain the true salience of the event and what I think it really means.

I would still like to believe that people find content here that they do not find in the conventional legal press, and that we're complementary to each other. 

4.  When looking at your 2007 site traffic stats, you can see some fluctuation: it seemed to peak around June, then drop until October before rebounding again. Do you use site traffic as a way to gauge how you blog (ie how frequently to post, what to write on, etc)?

Much as I love data ( the economist in me can't help myself), this is something I stay a million miles away from.

For starters, when asked how frequently I think I should publish a new column, or how often I do in fact, the answer is I have absolutely no guidelines or goals in mind.  For me, it's all about quality, not quantity.  It might be germane to mention, in this connection, that the "acid test" in my mind of whether a piece is ready, before I hit the "publish" button, is this:   If a reader had never been to "Adam Smith, Esq." before and this was the first piece they were ever reading, would they want to come back?  If the piece passes that test, it goes live.  (If you're keeping numeric score, as Movable Type faithfully is under the hood, this is column #855 on "Adam Smith, Esq.," which, over its 4+ years of existence, works out to between 17 and 18 columns a month.) 

But second, I dare not, cannot, and do not, as publisher, live or die by site traffic.   Let me hasten to add that the very strong site traffic—about a third of a million page-views per month—is unspeakably gratifying.  But in terms of micro-analyzing it or trying to micro-manage it, I would prefer to keep a firm grip on my sanity.

Third and perhaps most important, I never have and never will conceive, target, or tilt pieces to what I might imagine would curry favor or interest among hypothetical readers.  The only enduring asset I have here at "Adam Smith, Esq." is editorial and intellectual integrity, and I guard it furiously, fully aware of the crown jewel that it is.

5.   What is the biggest challenge you've experienced with blogging, and how did you overcome it? What about the biggest reward?

I assume you meant to say the biggest challenge with "publishing" ;-). 

An utterly surprising one:  Before I started "Adam Smith, Esq.," I now realize that I was not as critical a thinker as I could be.  The discipline of reading widely for content for the site, and thinking deeply about what stories might mean, has honed that skill in a way nothing I've ever done before, professionally, ever has.

As I say, utterly surprising:  Had you asked me five years ago whether I thought I was a "critical thinker," I surely would have responded in the affirmative.  I've graduated from schools people have heard of, have spent my entire career in one of the most competitive and high-energy cities in the world, and essentially have pursued a profession where thinking is the coin of the realm.

But it was not until "Adam Smith, Esq." that I really began to read for unspoken assumptions, for "what-if's" and the implications of logical extrapolations of the author's argument, for internal inconsistencies, for logical leaps of faith, for gracious or compelling rhetoric standing in for analysis and careful discussion, and so forth.  It has been an intellectual journey of the first order.

Aaah, and the biggest reward?  Exceedingly simple:  Meeting people in the real world, everywhere from New York to California to Europe to China, that I would never in a million years have met without "Adam Smith, Esq."   Absolutely nothing beats making those real world connections, and forging them into personal and professional alliances.