August 2009 Archives

Pop quiz: Which of these would be worse:

• Learning that, based on economic performance, lawyers in your practice group (including yourself) would be getting year-end raises smaller than average across the firm; or
• Feeling that you, individually, are being systematically shunned by the head of your practice group.

If you answered (b), welcome to the Mammal population.

I'm not being facetious. Neuroscientific research described in Managing with the Brain in Mind, (Booz & Co., Strategy + Business, Issue 56, Autumn 2009, p. 59--not yet published online, but keep an eye on their site) demonstrates that mammals perceive the feeling of emotional exclusion (based on activity in the "suffering" region of the brain) as the neurological equivalent of the distress associated with physical pain.

According to Naomi Eisenberger, the UCLA researcher who designed the study reaching this conclusion (involving fMRI's and a rigged computer game, since you asked), "Most proesses operating in the background when your brain is at rest are involved in thinking about other people and yourself."

What does this mean to you as a manager? Plenty.

As social animals, and as mammals animals extraordinarily dependent on the support of members of our community, work is not a financial transaction, not a quid pro quo of compensation in exchange for behavior. It's social interaction, where being given an assignment we feel unworthy of, being reprimanded (fairly or unfairly), or feeling excluded are far more devastatingly negative experiences than the differenceof a few dollars, or thousands of dollars, at the end of the month.

So what?

Don't think you can treat people--especially highly talented professionals--like a hydraulic system or internal combustion engine, where you adjust the richness of the incoming fuel/air ratio (compensation) and get corresponding horsepower out of the system.

Now, this is not news to anyone who's legitimately earned a role in management (and who has any memory whatsoever of the schoolyard playground), but what's shocking to me is how often this core human insight is honored in the breach in large and medium size firms.

Before, we might have thought that leaders who were empathetic enough to engage employees' strongest talents, support and encourage collaborative teams, and generally create an environment fostering productivity and creativity were "nice to have's."  But the reason I bring this new research to your attention is it argues strongly that such leadership is a lot more than that:  It's indispensable to high-performing organizations.

In an important sense this new research challenges Abraham Maslow's famous "hierarchy of needs," which posits that higher needs can only be met once lower-level needs are satisfied and which ranks the "hierarchy," from bottom to top, as follows:

• physiological survival, such as breathing, sleep, food, and clothing;
• safety, such as personal and financial security, and health;
• social, such as friendship, intimacy, and family
• esteem, both from others and self-esteem; and finally
• self-actualization.

But if being hungry, being physically threatened (by a snake, let's say, a vicious-looking dog, or a reckless driver), and being socially ostracized all trigger the same response in the brain--which this research confirms--then "merely social" needs start to appear more fundamental.

Coincidentally, we got unintentional but powerful confirmation of where "social" needs fit, in what otherwise would have seemed a small bit of news this weekend: The story was that three fishermen were rescued after spending 9 days 200 miles off the Gulf Coast on top of a capsized boat---one day after the Coast Guard called off the rescue efforts as in vain, and by sheer accident as a sharp-eyed guy on a passing boat spotted what he first thought was an innertube and went to investigate.

The story continued that the three had survived on a few gallons of fresh water serendipitously saved from the boat, a box of crackers, "and some bubble gum."  (The nutritional value of bubble gum being a topic that had hitherto not crossed our minds.)  But what's germane about the story?  When asked by the inevitable reporter looking for a "human reaction," "What was the hardest part of the 9 days?," the spokesman for the three replied:  "Right around the fifth day we just really all wanted somebody else to talk to."

Bingo.  You're hanging on for dear life to a useless boat in the middle of the Gulf with dwindling and palpably inadequate resources of food and water, hope for rescue diminishing by the day, and you report that "the hardest part" of the ordeal was being deprived of human companionship?  I did not make this story up.

Making this more important is what happens when the threat response is triggered, as hunger, danger, and ostracism all do:  Analytic thinking and creative insight go right out the window, and in a professional, performance-driven setting, just what people need most deserts them. 

Lest you think that this is all about avoiding dysfunctional human behavior, the good news from the new wave of neuroscientific research is "that the brain is highly plastic. Even the most entrenched behaviors can be modified." Neural connections are not static from adolescence (or thereabouts) onward, as once was thought:

Neural connections can be reformed, new behaviors can be learned, and even the most entrenched behaviors can be modified at any age. The brain will make these shifts only when it is engaged in mindful attention. This is the state of thought associated with observing one's own mental processes (or, in an organization, stepping back to observe the flow of a conversation as it is happening). Mindfulness requires both serenity and concentration; in a threatened state, people are much more likely to be "mindless." Their attention is diverted by the threat, and they cannot easily move to self-discovery.

What conditions, then, might conduce to "mindful attention," or at least to a disposition to collaborate instead of to clam up, to suggest imaginative or creative approaches instead of reproducing the last matter's approach by rote, or to truly engaged conversations instead of what we often get instead, punctuated monologues?

Again, the new research provides evidence that the predisposing conditions include:

• status
• certainty
• autonomy
• relatedness
• fairness.

Status is something we are constantly evaluating: Higher, lower, the same? In whose eyes? And high status is very important: It correlates with higher longevity and health (even adjusting for income, education, etc.). In a firm, the key point is that which indicators of status people value depend on the perceived values of the organization. If the firm is all about rewarding rainmakers, then the only "status" signal that matters is compensation. If the firm is committed to training and professional development, then recognition for increasing levels of professional competence and excellence will be at least as valuable in terms of morale-boosting and teamwork as serious raises.

Certainty is valued simply because its opposite, uncertainty, requires so much energy and attention, a/k/a distraction. Take this with a grain of salt: Moderate uncertainty (will we win the client? will we win the oral argument? will she go to bed with me the client approve our strategy?) can increase tension in very positive, creative, and energizing ways.

But too much uncertainty is simply exhausting. We have to pay so much attention to what seems like a series of unknown but potential threats (each one of which has to be assessed, discussed, and worried about) that we can't focus on what we're actually here to do. Particularly when change is on the agenda--especially if it's internally at the firm--all-hands efforts to reduce uncertainty are called for. Explain the rationale for change and then explain it again. Be reassuring not by assertion that everything will be fine but by explaining what is entailed and--one can hope--letting the logic of the change speak for itself.

Autonomy is an uber-value for lawyers. But it's important across the board, because the more autonomy one feels one has, the more capable one is of dealing with "the same" level of stress. The classic example is people who can control the hours they work vs. those who can't. A 40-, 50-, 60-, or even 70-hour week is relatively manageable if one feels in control of when one will be working and when not. But if quixotic and unpredictable forces from above dictate when you'll be working and when not, far fewer total hours can be worked productively before total burn-out sets in.

With lawyers in particular, be exquisitely sensitive to their perceived need for autonomy. Present options, not mandates; alternatives, not requirements; and offer independence wherever possible.

Relatedness goes right back to the old "friend or foe" distinction we all come hard-wired with. New people perceived as different may not be embraced in a spontaneous one-for-all hug. But if you lay the groundwork for new people to meet through social events (partner retreats, anyone?), the path will be smoothed towards accepting them as colleagues down the road.

Fairness may be the most critical ingredient of all. How many of you can sympathize with an executive who, when asked why he'd been at the same firm for 22 years, responded, "Because they always did the right thing."

Conversely, leaders perceived as having an "inner circle," whiffs of clubbiness, croniness, or old boys' networks, will destroy the perception of fairness in a heartbeat.

Particularly in times like these when cutbacks and pain are on the agenda, they must be perceived as fairly distributed, equitably arrived at, objectively parceled out, and explainable in common sense sentences containing words of few syllables.

What might all this mean for you as a leader?

Apply it to yourself, is the short answer.

Give people latitude to make their own mistakes (at least where it's not mission-critical). Buttress economic incentives with social reinforcement. If you're inclined to micromanage, try to wean yourself from the habit (it doesn't help your targets, and in the long run it doesn't help you).

The beauty of learning how to read your own reactions better, as a leader, is that once you're more comfortable in the zone of uncertainty, others will pick up on that cue and be able to relax into doing their real work rather than obsessively second-guessing your decisions. Don't be afraid to be spontaneous; it shows you're real and increases confidence.

The acid test may be this: Do you trust your colleagues in the firm to rise to the highest professional standards because that's what they believe in, because they feel confident their status entitles them to make autonomous decisions, and because they know they'll be treated fairly if they exercise their best judgment, regardless of the outcome?

As I said at the outset, you may think all this is obvious. I commend you if you know it all already. But the new research shows how profoundly grounded in our human and animal natures is the need for reinforcement of the social, not just the economic, context of our daily work.

Oh, and where do we fit in the Linnaean table?

Domain: Eukarya
Kingdom: Animalia
Phylum: Chordata
Subphylum: Vertebrata
Infraphylum: Gnathostomata
Superclass: Tetrapoda
(unranked) Amniota
Class: Mammalia
Linnaeus, 1758

When on the same day both the WSJ and Corporate Counsel publish feature articles heralding that the time has come for alternatives to the billable hour, it's time to step back and ask if they might actually be right this time around.  (It doesn't hurt that the Journal's article was written by its two best legal-beat reporters and that the Corporate Counsel piece was co--authored by the rather more prominent Ben Heineman and Bill Lee.)

They may well be right—and I'll discuss what I perceive as the intrinsic defects of the billable hour in a moment—but first I want to suggest another thought:  The debate about the billable hour is not, actually, about the billable hour.  It's about something far more fundamental to the lawyer/client relationship.  (You can either jump ahead at this point or have confidence that I'll get to it.)

Well, of course it's about the billable hour at some level, but I don't think the question of whether any of us will live long enough to see the triumph of fixed or alternatives fees and the elimination of this rather remarkably durable and dysfunctional institution (the billable hour) actually depends on their relative merits or the rational parameters of the debate.

What's wrong with the billable hour?

From my fundamental economic perspective, all you need to know is that it starts and ends the pricing determination based on "cost of production" rather than "value to client."  In my book, that's per se irrational. 

It can be difficult for those of us who've spent our careers in this industry to get perspective on this, so let's step outside for a moment.  What if cars were priced in linear proportion to cost of production?  We can imagine a few things would occur, but what would not occur is a car marketplace looking anything remotely like the one we have which, for all its self-inflicted troubles of late, is clearly providing incredibly valuable services to a fast-growing worldwide customer base.  But in the car "cost of production" world, we would see these irrational conditions:

• There would be almost no such thing as premium luxury brands.  Perhaps Ferrari, Rolls Royce, and few other "bespoke," one-by-one handcrafted brands would truly have costs of production so astronomical as to justify astronomical prices, but any cost accountant worth their salt would tell you the difference in cost basis between a top-of-the-line Lexus and a Toyota Yaris is not on the order of 10 or more to 1.
• Conversely, manufacturers might lose any incentives towards efficiency.  Who cares whether it takes 22 or 44 or 88 hours of labor to assemble a car if the customer picks up the passed-through costs?  Factory managers might even be measured and favorably rewarded based on how many hours of labor they require to get a finished car out the door.  (Sounding familiar?)  "Cost plus" pricing tends to create such results.
• At the very least, one could imagine manufacturers losing all interest whatsoever in producing rock-bottom, purely utilitarian, econo-boxes—regardless of whether a small cohort of customers would actually prefer them.

I don't need to pursue this for you to get my drift.  It's just plain a weird way to price products or services, because it fundamentally disconnects price from perceived value in the eyes of clients.

The Journal and Corporate Counsel pieces add a few other specific facts, observations, and counts to this indictment, of their own, including:

• Alternative billing is reported to have accounted for $13.1 billion this year vs. $8.6 billion in the same period last year, which if true would represent a 52% increase.  Unfortunately, it's not clear what the "denominator" of that figure is, as it's simply said to be the results of a survey of 370 lawyers at Fortune 1000 companies.
• Pfizer GC Amy Schulman reports that their alliance of 16 law firms "bills entirely" on a non-billable hour basis.  Firms are rated on such performance criteria as collaboration and diversity of teams, and "there are rewards and punishments."
• Heineman and Lee write that the move away from the billable hour, among other things:
  • reduces billing hassles
  • yields more predictable costs for the client and more predictable collections for the firm;
  • avoids clients "flyspecking" bills and demanding after-the-fact writeoffs or discounts; and
  • economizes on the "deadweight cost" of overhead devoted to the billing process.
• Flat fees have a long history of being used for "repetitive, predictable work" and while the somewhat pregnant implication is that that territory will expand, Barry Ostrager, head of the litigation department at Simpson Thacher retorts fairly convincingly that "a client can't expect to have the absolute best team of [trial] lawyers from a firm, and have the lawyers give up all the other work they could be doing on a regular-fee basis, to work 18 hours a day for months of time on a flat-fee engagement."  Somewhere in between routine patent implications and Ostrager's bread and butter (such as successfully  representing Swiss Re in its highly publicized insurance coverage dispute over the World Trade Center), we presumably have a gray, fuzzy, and moving line differentiating matters suitable for flat fees and those not.
• Heineman and Lee talk more specifically about where that line might be drawn, using these examples:
  • A single project involving expertise and judgment, but not much risk, such as writing a handbook ...
  • A repeating, routine book of business, which involves expertise and judgment, but not much risk, such as filing a certain type of patent or trademark application ...
  • A repeating, but more complex book of business that involves judgment, expertise, and risk, such as annual securities reporting ...
  • A one-off, highly complex, high-risk matter [such as] the company wide bribery scandal being pursued by enforcers in multiple jurisdictions ...
• And they write, I think persuasively, that even in the most complex types of matters, "the fixed fee can be split into segments."  This is nothing more than unit pricing, which is a time-tested model.  Don't tell me you have no historical data on how much it costs to take a deposition:  And where the 10th %-ile, median, and 90th %-ile of that distribution fall.  That's about all you need to price realistically.
• Some of the consequences of fixed fees are unquestionably salutary:
  • A Sidley Austin partner working on a fixed-fee matter for Pfizer cites her freedom to assign a senior associate to perform legal research much more quickly and efficiently than was the case under the prior rule that no lawyer with an hourly rate higher than a second-year could bill the company for research;
  • And the managing partner of Saul Ewing says they made a comfortable profit on a six-week flat-fee corporate due diligence engagement "because we were incentivized to get done in 10 hours [could have taken] 12."
• Both Heineman and Lee, and Larry Ribstein (albeit from a slightly different angle, since he sees this trend as another arrow to the heart of BigLaw), trace part of the rise of alternative billing to the increasing sophistication of in-house lawyers:  "the 20-year rise in the talent, experience, and expertise of in-house lawyers has led to co-equal partnering on matters."

And yet.

All three pieces have rather caustic observations to make about law firms' profitability:

• "One of the most important issues in setting fixed fees is distinguishing between a law firm's actual costs (which firms see), and the actual costs, plus profit margins for the partners (which is what clients see in a firm's bills)." [Heineman/Lee]  You know where this is leading:  Directly to challenging the "profit margins for the partners."
•  "'I have told firms you cannot make your historical profit margins' on Pfizer work, said the pharmaceutical giant's general counsel, Amy Schulman." [WSJ] Can't say it much more bluntly than that.
• "The implications for Big Law are substantial. Fixed fee and other alternative billing make legal work more like a commodity and less like a specialized one-on-one service.
  "Even more importantly, hourly billing has been Big Law's profit engine for decades." [Ribstein]

Now, you might think people would be more guarded about directly attacking the profitability levels of law firms.  After all, what business is it of theirs?  Why—I'm wearing the rational economist's hat now—should a client care how profitable a law firm is or indeed whether it's profitable at all (assuming only that they don't positively yearn to see the place go out of business)? 

Back to cars:  If I'm trying to choose between a BMW and a Lexus, or for that matter between a Kia and a Hyundai, should I care how profitable each company is?  What earthly relevance does that have to my decision?  Or consider, on a somewhat parallel note, clients' noisy objections to the salaries paid young associates:  Does the car buyer in the showroom ask what assembly line workers make?  If he did, would handsome wages be a demerit for the auto manufacturer or to its credit?   (Does anyone this side of Michael Moore ask what the CEO or senior executives make?)  How does that bear on the ultimate "money for value" calculus?

But clearly, when it comes to law firms, no such restraint applies.  Clients just plain do not like how much money law firms have made.

And this is getting us closer to the heart of the matter, isn't it?

Here are some less than randomly selected comments I've heard in various precincts over the past month or so on our topic du jour:

• "If I hire a plumber to renovate my bathroom, I want to know what his time and materials are!"  [GC, major corporation]  "Don't you really just want a nice bathroom?"  "But I don't want to be taken for a ride."
• "If I got a bill 'for professional services rendered' for a six-month period of time, how on earth would I know what the law firm had even done?" [GC, a different major corporation]  "Well, you were GC during those six months, right?"  "That's not the point."
• "How do I know I'm saving money with a fixed fee?  Isn't the law firm just going to take the opportunity to pad their bill even more?"  [GC, major corporation #3] 
• "Lawyers are risk-averse; we know that.  So if they have to quote a flat fee, they'll estimate how many hours it will take and add a safety margin.  I'll end up paying even more!"  [GC #4]
• "I'm afraid that if I submitted a bill 'for services rendered,' the client would assume I was overcharging them."  [BigLaw senior partner]
• "When I send an itemized hourly bill with disbursements, the client knows we actually did the work."  [BigLaw senior partner #2]

So this is what I believe it has come down to:  Trust.

Sadly, for too many of us, clients don't trust us with their money and we don't trust them to reward us fairly.

If you hark back to those old-fashioned typewritten bills "for professional services rendered," didn't they positively reek of a close, trusting relationship? The lawyer would no more exploit the client than the client would expect (hope?) the lawyer would price representation at bargain-basement levels.  This seems to me to be the enormous unspoken issue in today's debate over the billable hour.

If you don't trust someone, you want something quantifiable.  And you want the "most favored nation" rate and 10% discount on top of that.  If you don't trust someone, it's all perfectly understandable.  And uneconomic.  Is this what we've come to?

So perhaps more than anything else, I find the seemingly perpetual debate about the billable hour sad.  Because I can't think about it without thinking about forfeited trust.

Trying times call for a dose of perspective, and in "Leadership Lessons for Hard Times" McKinsey tries to provide just that. 

As they say in the preface, their goal is not to excavate the mistakes that led us to this crisis--quite enough ink has been spilled on that elsewhere--but to interview 14 CEOs on what they felt they had learned from this, and as importantly, previous, crises or turnaround situations.  They're in very different industries--ranging from Tyco, 3M, and Ingersoll Rand, all industrial conglomerates, to Travelers Insurance, Pepsi, P&G, Macy's, and AutoNation--but through the interviews common strategic themes emerge.

First and foremost is one of the simplest in theory but most difficult in practice:  Confront reality.

Do not sugarcoat bad news or assume that a few minor blips here or there are safe to ignore.  Early warnings are just that--early--and therefore not loud, conspicuous, and unmistakable.  By the time they're those three, it's far too late for you to be ahead of the curve. 

Think of the stories of Native Americans' seemingly supernatural abilities to "read" the vestiges of a trail left by potential prey or a potential enemy, and to construct their own mental landscape, which had its counterpart in reality, of who or what had passed through here when, where it was going, and what its intentions might be.  The business analogy may be to Herbert Henkel, chairman and CEO of Ingersoll Rand, who noted over a year ago that orders for the company's transport refrigeration business in Europe had dropped off.  So what, you're asking?  How many individual lines of business is a CEO supposed to stay on top of?

But Henkel read it differently:

He was alarmed: a fall in the delivery of perishable foods surely indicated trouble in the supply chain. "I couldn't help thinking, what if that figure really is indicative of what's out ahead? What are we going to do about it?"

Henkel, squaring up to what he detected, forecast zero growth in Europe during the third quarter, though analysts thought he was "nuts." His forecast was wrong: growth fell by 15 percent. Yet Ingersoll Rand got ahead of the curve by quickly putting contingency plans in place, restructuring, and running down inventory. 

This takes courage, especially if the rest of the firm seems to be thriving.  Particularly if you need to make decisions in a hurry, it can be hard to persuade others to go along without decisive data.  But again, waiting until the data makes the decision for you is no substitute for leadership:  Don't let perfect information be the enemy of a strong decision based on some data, plus educated intuition.

A tremendous aid to this is an atmosphere where dissent and disagreement are openly aired, welcomed, and greeted with sincere interest and probing interactions.  Why are contrary points of view so welcome, nay essential?

The difference between good news and bad news--from the perspective of a leader or manager--is that good news will take care of itself.  In fact, it doesn't really matter when you, as a leader, hear the good news.  It's fine if you hear it early, if you hear it late, or if you never hear it, in fact.  But bad news doesn't age well.  Bad news you need to know, and you need to know it at once:  At least then you have a fighting chance of being able to do something about it.  If you've cultivated an environment where dissent is discouraged, count on bad news staying under wraps until the stench is unmistakable.

The next precept emerging from the interviews follows hard on the heels of openness to diverse perspectives:  At leadership meetings, put strategy first. 

Consider how the nature of "meetings" themselves has changed:  They're conducted on a rolling, continuous basis, through email, intranet updates, conference calls, and informal spur-of-the-moment "subcommittee" discussions.  And consider how much better off you are when decisions need to be made quickly if everyone is up to speed to begin with.  It's not that all are prepared for the rubber stamp--it's that all are prepared to participate in a genuine conversation about pros and cons, risks and benefits, whether to move faster or slower.

And what about the rank and file?

The only way to address uncertainty is to communicate and communicate. And when you think you've just about got to everybody, then communicate some more.--Terry Lundgren, chairman, president, and CEO of Macy's.

And:

Our policy is: "If in doubt, communicate." We always want to conduct our business with integrity and forthrightness.--Ron Sugar, chairman and CEO of Northrop Grumman.

That says it all, doesn't it? 

The challenge, of course, is not to mouth it or endorse it with your head, but do it.  Here, I suspect the challenge lies more between your own ears than in the external environment or with your management team.  You presumably can have all the "air time" you want to communicate with the firm, and your team members are not going to second-guess your efforts to talk to the firm about topics they've already, presumably, given their blessing to.  No:  The obstacle is that you know what you want to say, you feel you've said it, perhaps ad nauseum, and you've (admit it) lost interest in saying it again.

Not good enough.

Especially in times like these, openness at the top cannot be over-valued.  People are famished for information, and if you don't provide it, rumors will rush in to fill the vacuum.  But there's more to it than that.  Which of the following values are in your firm's values statement, or would be if you drafted one today?:

• Honesty
• Integrity
• Trust
• Respect

All, I submit, are honored by candid and relentless communication from management and all are undermined by passivity, silence, or, perhaps worst, the episodic and surely insincere firm-wide blasts about pet projects, causes, and favorite sons. 

Think people don't see through this?

In a prior life, I worked for a major Wall Street brokerage and investment bank where, consistently, the highest annual tonnage of information from senior management devoted to a single topic concerned?:  Your United Way contributions,and progress of the campaign.  (This was, for better or worse, some years before the United Way was exposed as having its own, shall we say, "values" challenges.)  A friend of mine who worked elsewhere on the Street once asked me what I thought the firm's strategy centered around, and I replied that if you were a Martian and were to judge by the content of communications from senior management, the only rational conclusion would be that the firm's over-riding mission was to dun people for United Way contributions. 

Yes, people see through it.  In a heartbeat.

Which brings us to the next point.

If those back-of-the-envelope values summarily enumerated above are to mean anything, they mean that you believe in, care about, and strongly support your firm's "culture." 

Culture is not a loose and baggy value, but one premised on clarity, and making short-run-stupid, long-run-smart decisions to reinforce the culture and send a clear and convincing message that it means something.  Culture, in other words, doesn't come cheap.

[Michael] Jackson [Chairman of 20,000-employee AutoNation] says that the most critical battle he waged when he arrived at AutoNation was destroying the "growth at any cost" culture. "We wanted entrepreneurialism, but we also wanted the highest standards of integrity." Over the next three years, he worked hard to nurture and recruit the right people for the company's top 350 positions and to purge the "high-performing money makers whose risk profile would keep you awake at night." 

At Travelers, [Jay] Fishman [Chairman and CEO] is proud of the culture he has nurtured, which rewards returns on capital rather than revenue and has offered some protection during the financial crisis. "We never criticize anyone for a transaction not done, not ever--not ever," he says.

Where does this leave us?

Faithful readers know that I'm an unrelenting optimist. 

So I can't help but be delighted that McKinsey ends on essentially this same note, by stressing "keep faith with the future."  In other words, as A.G. Lafley of P&G puts it, despite the pressures for short-term performance, don't short-change the future for benefit of the present. 

All easier said than done, you're probably thinking right around this point.

No argument.

I'm having an ongoing conversation with a friend about what qualities are most important in a firm's Executive Director, and while we can readily agree on the "compulsory events" that one has to master, which include financial sophistication, operational savviness, a high degree of organization, the ability to delegate, strong skills at prioritizing, [add components from job description here], I've decided there's one attribute not commonly mentioned, but which may be the most important of all, which is:

• Courage

Executive Directors surely need the courage to call suboptimal practices suboptimal, even if someone's high-profile ox may be gored,, but more importantly they need the courage to meet senior firm management on an equal footing,

Do you find this surprising?  So did I.

But courage may be the highest leadership value of all.  Now or never.

We have a dust-up between Fordham Law School, instigated or certainly escalated by its Dean, William Michael Treanor, and Reed Smith, which, a few days ago, canceled on-campus interviews scheduled for this week and next at Fordham. Unfortunately, students who had already signed up for those interviews are reported "to have lost a potentially valuable interview slot."  (Being unable to reschedule something worthwhile for those slots strikes me as the triumph of bureaucracy over common sense, but we'll let that pass for the moment.)

Dean Treanor didn't take this lying down, as first reported by Above the Law, and released a memo to the "Fordham Law School community" banning Reed Smith from participating in on-campus interviewing for the next five years.  The Dean explained:

Ethics and professionalism are at the heart of the legal profession. At Fordham Law, we strive to impart to our students the importance of these principles through our curriculum, clinics, and activities--and during the job search process. The importance of law schools instilling the tenets of professionalism in students is a theme we continually hear from legal employers.

[...]

While disappointing, Reed Smith's action is more disheartening because of the lack of professionalism it conveys. The firm could have made its decision earlier; in fact, it received its interview schedule prior to canceling its participation. In my seven years as Dean, no other firm has canceled its interviews after the schedule was released. [...]

At Fordham Law, we require our students to conduct themselves with the utmost professionalism, and we expect employers to demonstrate the same high standards.

Best,

Bill

Reed Smith's response today, also covered on ATL, reads in part:

Like every major law firm, Reed Smith is faced with a very difficult set of circumstances brought on by the global recession which has dramatically reduced the demand for legal services. This has resulted in layoffs, deferrals, fewer offers and now consideration about whether to have a 2010 Summer Program, and if so, at what size. Firms have taken a variety of approaches to handling the many issues raised by this environment. In all instances, Reed Smith has tried to make carefully considered business decisions and has communicated with the people affected by those decisions.

We have decided to maintain a 2010 Summer Program, although it will be a smaller program than in prior years [and therefore] we decided to reduce the number of schools we will visit for on-campus interviews. We immediately and directly discussed our decision with all the law schools affected, including Fordham. [W]hile we won't be coming on campus, we will still be considering students from their schools by reviewing resumes and conducting in-office interviews.

Fordham is an outstanding law school and we regret that our decision has caused problems for them. Reed Smith has many Fordham graduates in our lawyer ranks; all of them valued members of our team.

Michael Pollack, Reed Smith's Global Head of Strategy (and--disclosure--a friend, but I haven't spoken to him on this topic) also had this to say yesterday:

[T]his certainly isn't a situation the firm was looking for and he suspects the ban isn't a good situation for the firm or the students. He said he hopes Treanor would reconsider.

"We're trying to run a business just like he's trying to run a law school and I appreciate the pressures that he is under and I would hope he would appreciate the pressures we're under.  [...]  It's unfortunate that it didn't fit within Fordham's schedule and calendar, but we're trying to manage this thing as best we can.

"Does interviewing in August make sense when you're trying to project [what your needs will be] two years from now?" Pollack asked. "I suspect not."

Oh, and for the record, James Leipold, executive director of NALP, was contacted by the diligent Legal Intelligencer reporter and had this to say:

Leipold wouldn't comment on the specifics of the situation between Reed Smith and Fordham. Both are members of the NALP. But he did say there is nothing in NALP guidelines that would govern a situation like this. While the association has specifics on timing for when offers must be given or accepted, for example, it doesn't have anything regarding when firms can pull out of OCI.

"This particular fact pattern I've never seen before," he said. "It's new" like many things in this market.

Credit Leipold for candor:  Many things in this market are indeed, as he puts it with intentional or unintentional drollery, "new."

May we now review the bidding?

• We are in the midst of the most pounding and serious recession of the post-WWII era;
• 125 major law firms have announced or had confirmed layoffs (as of July) totaling 10,723 people, 4,015 attorneys and 6,708 staff;
• AmLaw Firm #16 (Reed Smith) decides that it probably can't, after all, realistically project its associate hiring needs two years hence;
• And faced with a decision (presumably) to go through with sham interviews or to honestly announce its intentions, it chooses B;
• Whereupon the Dean of US News law school #30, donning the robes of "ethics and professionalism," decides to deprive his students of on-campus interviewing opportunities with that firm for the next five years.

I readily admit that there are many dimensions of law firm management which baffle me, but I can usually understand the motivations and endorse the goodwill of those behind the decision-making.

But I confess, Dear Readers, I find myself utterly over-matched by how they make decisions in Academe.  It is a bridge too far for my brain.

Further affiant sayeth not.

Among the phrases, and phenomena, that now seem so hopelessly "last August" is that of the fabled Work-Life Balance.  ("So last August" has been a phrase around town for several months now, referring especially to examples of wretched indulgent excess, but by extension to almost anything dependent on an economy in overdrive.)  More on work-life balance (WLB) in a moment, but first consider what happened during a mere 19 days last September.  It wasn't just the fall of Lehman:

• 7th September 2008:  Fannie Mae & Freddie Mac nationalized
• 14th:  Bank of America buys Merrill Lynch
• 15th:  Lehman Brothers bankruptcy, one of the largest in American history
• 16th:  Reserve Primary money market fund "breaks the buck"
• 16th:  Fed gives AIG $85-billion in exchange for a 79.9% equity warrant
• 22nd:  Investment banks go extinct:  Goldman Sachs and Morgan Stanley become bank holding companies
• 25th:  Washington Mutual seized by FDIC--biggest bank failure in US history

Any single one of these headlines would have been eye-popping, but the concatenation of all of them in such a compressed period of time clearly signaled the world was changing.

And among the things that have changed is all of the talk about WLB.  First, let's simply try to understand what the loaded phrase "WLB" entails.  I think it's pretty simple:  It's merely the sense that the demands of the profession have gotten out of whack with the rewards.  You can solve for this inequality either by finding greater rewards in your professional pursuits--but there's no handy or obvious volume knob that adjusts your reward level, and it's usually a long and extended process of introspection and, more than anything, trial and error, to attain that blissful state--or you can decrease the demands so as to align them with the rewards.  WLB was, for better or worse, always assumed to mean the latter.  And in fairness we know how to achieve the latter:  Basically, work fewer hours and/or less intensely while you do.

There's just one problem with that, and it's an enormous one.  If you believe the thesis of books such as Talent is Overrated, you can never achieve professional excellence (and the satisfaction that flows from it) without something on the order of investing 10,000 hours in "deliberate practice," which is the demanding exercise of pushing the limits of what you're comfortable with in order to improve.

Two other aspects of WLB I will studiously not discuss here include whether it's primarily a women's issue, and whether it's a Gen Y/Millennial issue.  Why not?  The first craven and meanspirited assumption ghettoizes half the human race, and the second amounts to the feckless and self-indulgent attempt to "stand astride history, yelling 'stop!'."  The point is that neither engages WLB on the merits; both are nasty and somewhat immature ad hominem reflexes.

My theory about WLB is rather simpler:  It waxes and wanes in synch with demand and supply in the lawyer talent market:

• When the economy, deal-making, and firms are all booming, and when the greatest constraint on capacity is available talent, firms will worship at the shrine of WLB in order to try to make themselves attractive to a wider cohort of the (fixed number) of law school graduates.
  
  
• When, as now, voluntary attrition is nonexistent and law students are entering recruiting season with expectations ranging from "extremely confident law-reviewers to those expecting to receive zero offers" (as a top 10 school student reported to me in an email), or when students are offering to work for name-brand firms for free (also a true story), then the balance of negotiating power has shifted.

I offer as anecdote this January 2008 story from the NYT, "Who's Cuddly Now?  Law Firms," celebrating that:

"There are things happening everywhere, enough to call it a movement," said Deborah Epstein Henry, who founded Flex-Time Lawyers, a consulting firm that creates initiatives encouraging work-life balance for law firms, with an emphasis on the retention and promotion of women. "The firms don't think of it as a movement, because it is happening in isolation, one firm at a time. But if you step back and see the whole puzzle, there is definitely real change."

The article also noted the efforts of the suddenly-invisible "Law Students Building a Better Legal Profession" and their efforts to rank firms based on how well they treat associates.

Both seem certain signs of a "market top" in WLB.

But I believe there's something else even more important here.

As Jack Welch put it last month with his trademark directness, "There's no such thing as work-life balance.  There are work-life choices, and you make them, and they have consequences."  He added that you shouldn't be surprised if you're passed over for promotions if "you're not there in the clutch."

I would only refine what he has to say slightly, to adapt it to the context of law land:   There are elite, high-performance firms, playing at the top of the global game, and they are not "lifestyle" firms.  They never will be.  Don't kid yourself.  Or, as the New York vernacular puts it, "Fugghedaboutit!"

These firms, I hasten to add, are not for everyone.  Neither are "lifestyle" firms for everyone.

My point is simpler:  One and the same firm cannot be both. 

If you doubt me, the people (or at least readers of LegalWeek) have voted:

But the fun is that you get to vote as well.  We'll keep track of the results and have a followup piece in the near future.

Have you ever asked yourself why management education exists? 

Presumably, we know why law school exists (even the most curmudgeonly among us would admit the first year, and perhaps a fair portion of the second year, are an experience unlike any other, which, if one is willing to submit, changes the way one thinks).  But why MBA school?

I've actually asked myself this question, and I'd like to think I have a little bit of personal history to inform it.

One of the primary reasons I chose to major in economics as an undergraduate, aside from its being a superb department at Princeton, was that I realized if I didn't embark on a formal course of study in economics I wouldn't "pick it up along the way."    The same, probably more emphatically, could be said about the relationship between law school and "thinking like a lawyer."

Once launched out into the Real World, of course, I learned that the MBA credential had market value, if not, as a cynical friend of mine once opined, intrinsic value.  But I chose to embark on the MBA degree program at NYU's Stern School of Business (the evening sessions, which I could accommodate within the exigencies of my day job as a securities lawyer at Morgan Stanley/Dean Witter), and, with the exception of a final group project that fell victim to a preposterously dysfunctional group, I completed the coursework for the degree.

So what do I think?

With apologies in advance to all the MBA's in the crowd, I'm tempted to repeat the opening question.

Immediate caveats:

• If you haven't otherwise been exposed to finance or accounting, or if you find them alien languages, any respectable MBA program will remedy that, and they do provide, of course, the shared language of business.
• A few other core courses do instruct you in things you probably wouldn't "pick up as you go along," such as statistics and operations theory (there's a reason banks have one line for all tellers and not one line for each teller).
• But in terms of the vast run of courses in such topics as strategy, leadership, personnel management, human resources, and marketing, my experience was that they added up to repeated and almost incessant statements of the obvious.  You doubt me?  How about this for a gem, from my marketing professor:  "Make it easy for customers to do business with you."  I'm not making this up.  I couldn't.

These thoughts are occasioned by the release of The Management Myth:  Why the "Experts" Keep Getting It Wrong, which was reviewed in the WSJ yesterday.  The author, Matthew Stewart, has expanded upon an article he published three years ago in The Atlantic also called "The Management Myth," which opens with how he spent his time after seven years in the consulting business, which he entered (improbably) without an MBA but with a Ph.D in philosophy--19th Century German philosophy (Heidegger, Hegel, Nietzsche):

After I left the consulting business, in a reversal of the usual order of things, I decided to check out the management literature. Partly, I wanted to "process" my own experience and find out what I had missed in skipping business school. Partly, I had a lot of time on my hands. As I plowed through tomes on competitive strategy, business process re-engineering, and the like, not once did I catch myself thinking, Damn! If only I had known this sooner! Instead, I found myself thinking things I never thought I'd think, like, I'd rather be reading Heidegger!  It was a disturbing experience. It thickened the mystery around the question that had nagged me from the start of my business career: Why does management education exist?

We needn't follow all of Stewart's perambulations to take his point:  Much of what's taught in MBA-school is faddish at best.  Who can remember what intellectual content, if any, went into these catchphrases (just a few of those Stewart lists)?:

• Information-based organizations
• Intellectual holding companies
• Learning organizations
• Perpetually creative organizations
• R-I-P.  Rip, shred, tear, mutilate, destroy that hierarchy
• Intrapreneuring
• Integrative organizations
• Re-engineering
• Total quality management

You get the idea.

But--I hasten to add--this is damning the B-school academy for some sins of which they may not be entirely guilty, as many of these concepts have been promiscuously appropriated by best-selling authors and monetized by way of the lecture circuit.

No, I actually think there's something more interesting going on.

What I have in mind was encapsulated in a recent Harvard Business Review colloquy called "Are You Ready to Manage in an Irrational World?" 

The original article posited, among other things, that:

Have you noticed that we are being bombarded by a flood of work by neuroscientists and behavioral economists, aided by such things as clever research design, the use of improved technologies for measuring brain activity, and the admission by Alan Greenspan that markets acted in ways he had not anticipated? The work shares several common counter-intuitive conclusions that: (1) human behavior is much less rational than has been assumed, (2) this renders much of conventional teaching in fields such as economics and management obsolete, and (3) it makes suspect much of what we do as managers.

[...] because each of us harbors our own perceptions of reality, "It turns out that most of what we thought we knew about management is probably wrong." Reactions to our efforts as managers reflect what each individual receives in relation to what he or she perceives and expects. Because this is highly subjective, the argument goes, generalizations (many of them currently taught in conventional courses) about how to manage are practically useless. 

[...] Things become much more complex in the world of irrationality. Much of traditional economics becomes outmoded when complex relationships based on often counter-intuitive behaviors are taken into account. Instead of a management philosophy centered around the manager as the play-caller, assigning tasks and motivating people to carry them out, we are told by the neuroscientists that the new management job is one of facilitating more of a customized, do-it-yourself process centered around each newly-energized employee, one centered on questions (often leading) rather than direction.

Among the 97 reader comments this provoked (before they were closed) were:

 "Managers must be rational when it comes to planning, financing, operating and measuring business performance.... Irrational thinking is needed when you think about the question, 'What's next?' "

 "We've seen people and companies reject new technology [and new ideas].... Is (it) irrational ... (to) place a higher value on their current solution than they do on a future uncertain benefit(?)"

 "It (irrational behavior) makes suspect much of what we do as managers.[...] Workers will become increasingly self-managed and the manager's role will require the ability to facilitate dialogue, clarify roles and responsibilities, gain alignment, drive to consensus, and enable peer coaching and feedback." 

We have now experienced a near surfeit of books elaborating on these intellectual models which are (worthy, and highly overdue) successors to the uber-rational Homo Economicus, that utility-maximizing human calculator that was always a fiction driven by the requirements of Ph.D students in economics to provide elegant solutions to their equation-laden constructs.  Among those books are The Tipping Point, Freakonomics, Nudge, and the 4-Hour Week, and among the usual suspects in terms of authors are Malcolm Gladwell, Nassim Nicholas Taleb, Richard Thaler, Cass Sunstein, and many others.

But I would prefer to leave the last word not to those who laud business school or those who denounce it, much less to those aspiring to land at the top of best-selling business book lists, but to the famous Roman Stoic philosopher, Seneca (4 BC -- 65 AD), who, in "On the Shortness of Life," had a few things to say about how we manage our lives (ellipsis omitted).

It is a general complaint among mankind that Nature is niggardly:  our allotted span is brief, and the term granted to us flies by with such dizzy speed that all but a few exhaust it just when they are beginning to live  

It is not that we have so little time but that we lose so much.  Life is long enough and our allotted portion generous enough for our most ambitious projects if we invest it all carefully.  But when it is squandered through luxury and indifference, and spent for no good end, we realize it has gone before we were aware it was going. 

So it is:  the life we receive is not short but we make it so; we are not ill provided but use what we have wastefully.  Kingly riches are dissipated in an instant if they fall into the hands of a bad master, but even moderate wealth increases with use in the hands of a careful steward; just so does our life provide ample scope if it is well managed.

Some follow no plan consistently but are precipitated into one new scheme after another by a fickleness which is rambling and unstable and dissatisfied with itself; some have no objective at all at which to aim but are overtaken by fate as they gape and yawn.

Do you suppose I am referring to wretches whose failings are acknowledged?  Look at the men whose felicity is the cynosure of all eyes; they are smothered by their prosperity.  How many have found riches a bane!  How many have paid with blood for their eloquence and their daily straining to display their talent!   How many are deprived of liberty by a besieging mob of clients!  Run through the whole list from top to bottom:  This man wants a friend at court, that man serves his turn; this man is the defendent; that man his lawyer; and the other the judge; but no one presses his claim to himself, everyone is used up for the sake of someone else.

Perhaps to put this in more modern terms, are you as a manager--of your career, your department, your firm--living fully right-brain and left-brain? 

Have you gotten past the biz-speak lingo and are you honestly, sincerely, truthfully, engaged with what you do?  Are you, as well, thinking as but not only thinking as a lawyer?

If Seneca were to come to dinner tonight, what would you say to him?