Last week I was able to attend a panel discussion sponsored by ALM Events on "Developing the Next Generation of Law Firm Leaders." Moderated by Aric Press, the panelists were nothing if not qualified to speak. They were:
- A.B. Culvahouse, Jr., Chair of O’Melveny & Myers
- Peter Kalis, Chairman and Global Managing Partner of K&L/Gates
- Barton Winokur, Chairman and CEO of Dechert, and
- Alfred Youngwood, Chair of the firm and of the Management Committee of Paul Weiss.
Their remarks about the state of our profession and our industry were as informed, articulate, and divergent as any I’ve heard in the space of a single hour within recent memory. Herewith your scribe’s attempt at recounting the highlights (along with some editorial comment appended). In the order in which they spoke:
Winokur
"There are certain characteristics of lawyers which do not lend themselves to leadership."
A few years ago Dechert hired a consulting firm (unidentified) to interview 45—50 partners on a variety of topics surrounding leadership, including their failures and successes in that area in order to determine perceived commonalities among high- and low-performing "leaders." Bart observed that there are some characteristics which cannot be changed, or learned, such as integrity, but that there are others which can be learned, such as being comfortable with and having strong instincts about personal interrelationships.
The second part of the consultants’ engagement consisted of three 3-day weekend workshops offering a cohort of tests and some "360" reviews. In the end, 16 people evaluated each of the leadership candidates on 72 separate characteristics, such as "ability to listen." It should come as no surprise that essentially everyone (they’re lawyers, after all) ranked in the bottom 5% of the population in terms of sociability. If you have to deal with people as a leader, this can pose a problem.
Nevertheless, Bart reports, one of the more marginal performers, upon discovering these results, immediately realized why they had felt "outside their comfort zone 95% of the time" and was able to adapt and even to capitalize upon that understanding, becoming one of the firm’s star performers subsequently.
Kalis
"Law is a very mature profession and a very immature industry." [Editor’s Note: I fully intend to steal that phrase, albeit with due attribution, many times to come.]
"We are engulfed in the indicia of that immaturity." For example:
- We are running several-hundred million dollar a year enterprises capitalized by passing a hat among our friends.
- Consultants to the industry are immature and rely more on anecdote than empiricism.
- [With a nod towards Aric Press, editor-in-chief of The American Lawyer], the most publicized financial metric dominating our industry is divorced from an understanding of how firms operate, is divorced from generally accepted accounting principles, is not reported consistently or with accuracy, and reveals little or nothing about the ongoing financial and economic well-being of firms.
- We look for our leadership of these firms to the "last man standing" principle, rather than looking for the best possible leader within (or outside!) the industry. The leader of a firm must be, for starters:
- an equity not an income partner
- of a certain age—not too young and not too old
- the leader or a key player within only some specific practice groups
- etc.
- We do not do what other firms outside law do when they need a new CEO or Chairman, which is to look well outside the firm—including going up to Fairfield, Connecticut, to steal a Vice President from GE.
- Leaders in our industry identify themselves because the opportunities to lead are ubiquitous and dispersed, from hiring, evaluations, talent development, leading offices or practice areas, etc.—and many of these roles are open, at least in cabined form, to associates as well.
- Law firms should think of themselves as laboratories for leadership development.
- The hegemony of business school thinking "is one of the most pernicious intellectual straitjackets of the 20th and now of the 21st Centuries. It is simply beyond false that business schools teach collaboration and law schools do not. Law school is the definitive collaborative and teamwork training ground. Imagine the experience of getting out a volunteer-staffed Law Review, in the context of huge-ego professors and unrelenting deadlines."
- The best way to identify leaders is to put them in a position to fail, and preferably to fail spectacularly, with blood on the floor (ideally their own). And then to see whether they can recover and win back trust of their colleagues.
Culvahouse
More leaders can be made than are born.
When he became Chair of O’Melveny in 2001 he hired McKinsey to undertake a strategic review of the firm, and they recommended (and O’Melveny followed) that the firm be reorganized away from having the most powerful or, conversely, the most disposable, partners in charge.
Starting next year he will implement the "No 2 Jobs Rule," which means that no partner can have two jobs: If you’re office manager or on a key committee, etc., you can play one and only one role. This is intended to end the Casablanca police inspector’s famous fall-back of "round up the usual suspects." In other words, spread opportunities for leadership more widely.
Practice Group Leaders are "the point of the spear," and not office managers. If office managers are on top, they put the wrong teams out there. If PGL’s are on top, they put collaborative (read: the right) teams out there.
O’Melveny has now contracted with the Kellogg School of Management at Northwestern to create the O’Melveny & Myers Executive Leadership forum, consisting of (among other things) week-long programs for PGL’s. Another component will encourage risk-taking and "a bias for action."
Succession planning?
Start late. There is of course planned and unplanned successions, but don’t start planned succession planning too early. Yes, "lawyers like the known," and therefore there’s always anxiety over succession. But don’t succumb to it.
Youngwood
Al will retire at the end of 2008 and started more than three years ago to pick a group from which his successor would be chosen. It’s now down to two or three people.
At Paul Weiss, there’s a tradition of contested elections for almost everything. And in accord with that tradition, there is no nominating committee.
If some of the other firms are "immature," in a business sense, "then Paul Weiss is a very immature firm." [Laughter.]
In terms of compensation, there is no "billing" partner, no "origination" partner, and essentially a tightly fixed lockstep for the first eight years of partnership; after that, the lockstep remains all but fixed with just very tiny differences thereafter based on legal skill and contributions to the partnership.
85% of the partners at the firm are home-grown and 85% of the partners are resident in New York.
There are no plans to open additional offices, although Shanghai remains a possibility.
The firm has had one weekend retreat in eight years, which was at a resort, and partners complained that they couldn’t go home for the evening. Added Alfred drily: "It will probably be another 8 years before we have a retreat."
Question for the Panel: Should Managing Partners Also Have an Active Practice?
Al: If you have a global firm (a category into which he notably does not place Paul Weiss), it’s probably difficult to have any practice. But he reports having spent 600 to 800 hours last year practicing, and thinks there is a "large value to that" because it connects you to your partners’ everyday concerns.
Bart: I like to keep my hand in, but it can be difficult. He’d like to practice more if he could "because it’s fun."
A.B.: I think it’s important for maintaining the respect of one’s partners to keep an active practice going, even if it’s far far less than full-time. "Besides, your clients are far more appreciative of what you do for them than your partners ever are."
Pete: Aside from himself, K&L Gates also has a Global Development Partner and a Global Integration Partner; all three are full-time. He doesn’t realistically see how it could be otherwise, and he also notes that he does not believe that the respect one has earned as an impeccable practitioner "is a wasting or perishable asset; it’s an enduring asset."
Question for the Panel: What Will Be the Key Challenge of the Next 5, 10, or 15 Years?
A.B.: We need to "live in the external world," putting our best talent in front of the client community and not focusing on internal debates.
Pete: The tremendously powerful centrifugal forces at loose in the profession must be resisted by even more powerful efforts to create a centripetal equilibrium. There are also two romantic notions of "professionalism" abroad, one of which is arrant nonsense and the other of which is to embraced as an inspiration:
- The hokum romantic notion was most recently expressed by Stanford Law School’s Dean Larry Kramer (as picked up on the WSJ Law Blog) who lamented: "Twenty years ago, most lawyers would have scoffed at the idea that profitability, much less profits-per-partner, should be the measure of success and prestige. Yet that is where we are. Law firms are run like businesses by managing partners and committees whose time is almost wholly occupied with, well, managing."
He could not be more wrong; this is pathetic whining posing as analysis. - But the admirable side of the profession is embodied, for example, in former Republican Attorney Generals of the US testifying recently before Congress that the President cannot claim executive powers that exceed constitutional bounds, and who insist that "the rule of law" has meaning and teeth. This stiff-spined and consequences-be-damned integrity is the antithesis, by the way, of what some "captive" practitioners do to stay in a client’s good graces by nodding vigorously that a planned transaction has their oracular legal blessing even if it runs right up to ethical boundaries and, if it does not actually cross those boundaries, would be the type of arrangement one could never live down were it to appear on the proverbial front page of The New York Times.
Bart: "Alignment" will be the challenge. By that he means getting people on board with the firm’s vision for its future. Separately, he notes perhaps an even bigger threat, which is the "clear progressive breakdown of trust that used to exist between lawyers, firms, and clients. There are some examples of where that trust is intact, but there are many many more examples of where that trust has broken down."
Alfred: "I have a less cosmic vision. For me, the challenge for the firm will be how, in a more inter-connected world, we can remain the true, classic, law firm partnership we have always been. I noted, for example, that our partner compensation system was in place when I became a partner 37 years ago, and it will remain in place when I leave."
Now, how do you view these observations?
I’ll give you the "Adam Smith, Esq." view, at the risk of misinterpreting or traducing what each of our four intimate observers really intended:
- A.B.: Firms can be managed, but only up to a point. Leadership is ineffable, but the right conditions (such as "no 2 jobs") can be put in place to cultivate its emergence.
- Bart: Leaders can be made. Systems can be effective. People and firms can change.
- Alfred: This I hold true above all else: It ain’t broke.
- Pete: It’s past time to begin emulating the grown-ups.
