David Maister on “Unmanageable” Law Firms (That Would Be All of Them)

The Irish Bishop George Berkeley (1561—1626) famously asked, "
“If a tree falls in the forest and no one hears it, does it make a sound?”  As a metaphysical question having to do with fundamental questions of epistemology, it remains debatable today.  I cite it for another reason.

David Maister, who is without peer in this generation among observers of the law firm scene, and a consummately insightful analyst, commenter, consultant, and author, has published a piece in the April 2006 American Lawyer (which, faithful to its Paleolithic approach to the Web, doesn’t deign to offer it online), "Are Law Firms Manageable," which Must Be Read.   (David just released it on his website, which enables me to link to it.)

David was gracious enough to favor me with an advance copy of his piece before TAL was even published, so I’ve had the luxury of being able to reflect on it.  Suffice to say I needed time to collect my thoughts.

I propose to summarize and mildly elaborate upon David’s critique, and then to advance my own response.

I will tell you, gentle reader, that I have rarely embarked upon an essay on "Adam Smith, Esq." with such a strong feeling of obligation to and trepidation about the managerial endeavor we’re all engaged in, to what David’s cri de coeur means, and to whether I can point a way out of the cave.

David starts with a bang, and doesn’t let up:

"After spending 25 years saying that all professions are similar and can learn from each other, I’m now ready to make a concession: Law firms are different.

"The ways of thinking and behaving that help lawyers excel in their profession may be the very things that limit what they can achieve as firms. Management challenges occur not in spite of lawyers’ intelligence and training, but because of them."

I read this piece as a bedrock challenge by David to David—in
other words, a questioning of the essential premise of the endeavor he
and I are each engaged in, devoting ourselves to the ever-increasing
professionalization of the management of law firms.  His answer
to the question posed in his title is, "No—law firms (as currently
constituted) are not manageable."

I think an enormous oak may have just fallen in the forest.  Who’s
listening?

The problems are four-fold.  Lawyers have:

• problems with trust;
• difficulties with ideology, values, and principles;
• surpassing levels of professional detachment; and
• "unusual approaches" to making decisions.

Trust

Partners "vigorously defend their rights to autonomy and individualism, well beyond what is common in other professions," and are "professional skeptics" to boot.  They bring these attitudes towards their own relationships with their partners, not just to client matters analytically dissected at arm’s length.  The consequences of operating in a chronic environment of "low trust" are various, none pretty.

One of David’s most telling quotes comes from a former managing partner who seems utterly sympathetic to the problems "low trust" engenders:

“It’s not that I don’t trust my partners. They’re good people, mostly. It’s that I don’t want to have to trust them. Why give up any degree of control over your own affairs if you don’t have to?”

Reading this, we not only understand it, we even feel sympathetic and
our instinctive reaction may well be to agree:  Why, indeed, "give
up any degree of control?"

But there’s control and then there’s control.  The sonata form "controls."  The 26.2-mile length of the marathon "controls."  The Constitution "controls."  For that matter, the institution of marriage "controls."  I don’t know about you, but I embrace all four of these controlling environments.

But seeing any form of control as an incursion on almighty autonomy means:

• joint teamwork initiatives will be implemented poorly if at all;
• in an internal firm environment of competition rather than collaboration, no one will make the smallest sacrifice for the good of the firm;
• ceding any degree of authority to firm leadership is resisted so virulently as to incapacitate decision-making;
• committee-proliferation goes on steroids, which not only traduces the true meaning of "democracy," but invites everyone to take their eyes off the ball of truly productive work;
• and, as David writes, "Most important, absence of trust may be a significant contributing factor to the extremely short-term orientations of many law firms"—because partners are highly skeptical the firm will value any investment they make in its future success.

The upshot?  This "selfish and self-serving, even narcissistic" focus squanders the firm’s resources, disserves clients, and diminishes profitability.

It gets worse.

Skepticism about firm-wide values and principles

Take a look at these articulated principles from a well-known professional service firm:

“Our clients’ interests always come first; if we serve our clients well, our own success will follow” and “We have no room for those who put their personal interests ahead of the interests of the firm and its clients.”

Could your firm embrace those?  Does it?  In particular, look at the second one:  "We have no room…"  Does that apply to your $2- to $20-million/year rainmakers?  Yes or no? 

Quiz-time over:  These principles are from Goldman-Sachs. 

Still hard to stand up to your gorilla rainmaker?  (Yes, is the answer today.  What’s the answer tomorrow?)

David puts it thus:

"Law firms appear unable to achieve this level of ideological consistency. They will buy into principles—firms can have very high ideals as long as they remain ideals—but they have difficulty with the concept of enforcement."

I’ve said before that I have a profound belief in the hyper-sensitivity
of human beings’ detectors to pick up on hypocrisy—I’ve written,
not entirely in jest, that their default setting is "stun"—and
here we have an example of the fallout from hypocrisy in spades. Firms
that articulate noble ideals (or even good-housekeeping managerial ideals),
and immediately fail to enforce them as against the most powerful people
in the firm, will shortly find those ideals treated with caustic contempt.

Could or would the rainmaker be disciplined, meet "the enforcer," as
it were, on issues of associate training and development, collaboration,
quality of client service?  To ask the question is, in almost all
firms, to know the answer. 

But try this trivial thought experiment:  What if the rainmaker’s entire book of business were abruptly merged or bankrupted out of existence, and he/she were reduced to pleading for service-partner work they were no good at because they’d never done it?  Would the firm suddenly be at a loss for "enforcement" mechanisms vis-a-vis performance?

Without enforcement, there are of course no standards.  David believes firms take the process-centric, bureaucratic way out:

"Law firms have a proliferating plethora of rules, not functioning principles, because they don’t or won’t trust that their partners will adhere to the values, standards, and principles that they agreed upon. So firms end up with a mishmash of bureaucratic red tape in the hope that mandatory processes will achieve compliance when adherence to common values does not."

Which sounds a lot like FASB’s GAAP rules, or the Internal Revenue Code; and we all know you can drive 18-wheelers through those, as they become Biblical in length.

But try evading the import of these 21 words:   “We
have no room for those who put their personal interests ahead of the interests of
the firm and its clients.”

Professional detachment

We are trained to be dispassionate, to park our personalities at the
door (even, to use the arresting metaphor of one partner, hanging one’s
personality on the back of the office door for the day along with the
jacket, to be donned again only when it’s time to go home).   The
hyper-objectivity this attitude brings with it is the antithesis of teamwork,
mutual support and reinforcement, coaching, trust, and mutual growth.

Yet as the world of business and of law moves faster and faster, firms need to emulate basketball teams or jazz ensembles more than they need to emulate a deployment of salesmen on commission assigned to a new territory, where only the most "productive," in-your-face individuals will make the cut. 

More to the point:  Ours is an industry of elevator assets, and
partner and associate mobility has never been higher.  (As a disciple
of Adam Smith, I celebrate this—but I also know it is not without
consequence.)  If all that holds your firm together is a series
of metrics and rewards, have you the remotest degree of confidence that
someone down the block or across the country won’t come up with a more
attractive set of equations?  Or that a critical group of partners
of like mind won’t start a new firm in their own image?  Where are
you then?

And if you think it never happens at gilt-edge firms, I have two words
for you:  Boies-Schiller.

Approaches to decision making

As I’ve written elsewhere, lawyers tend to approach new initiatives not with the open-mindedness and even wonderment of businesspeople, but with profound skepticism and pessimism.  David puts it this way:

"In other businesses, innovative thinking and action are considered a primary requirement for success. Companies eagerly search for strategic ideas and initiatives that their competitors have not discovered.

"Lawyers are usually different. Presented with a new business idea, the first thing they ask is, “Which other law firms are doing this?” "

Just today I received an email from a senior partner at an AmLaw 100
firm who was curious about the time commitment involved in being Managing
Partner.  Rather than ask, "what would you recommend?," or "what
factors go into estimating what the commitment would be?," or "my
estimate is X; am I being realistic?," he asked, "Do
you know where I might discover what the typical
practice is in firms
[of our size]?" (emphasis supplied)

Worse, lawyers’ risk-aversion conditions them to find fault, to focus on the remote contingencies, to display their intellect by propounding counter-examples and hypothetical, vastly improbable what-if’s.  What could be further from the approach of an entrepreneur founding a new business, or businesspeople exploring a joint venture? 

We lawyers assume that even a proposed solution to a problem could
cause dangerous instability (and the problem can’t be so bad as long
as everyone else is suffering from it), while the businesspeople approach
with delight novel solutions to problems that, with the most brilliant
product and service innovations, people
don’t even know they have.  (Who needs:  A $4.25 cappuccino
served with mood lighting and couches?  A five-bladed razor?  Overnight
delivery?)

Permit David to summarize:  "As long as we are no worse than anyone
else, we don’t need to change! It’s hardly a recipe for a
strategic advantage."

What’s to be done?

I would be the last to gainsay that despite this audacious and insightful
litany of dysfunction, law firms are doing rather splendidly.  From
the perspective of any partner at a healthy AmLaw 100 firm, "if it ain’t
broke,…."  Indeed, David cheekily acknowledges that lawyers’
greatest ally in the face of this dysfunction is themselves:  "The
greatest advantage lawyers have is that they compete only with other
lawyers."

Nor am I remotely tempted to deny that the vast majority of firms have
hit upon a business model that produces jaw-dropping gross profit margins:  Simply
work everyone to near-exhaustion, pinch pennies, and turn a cold eye
to whether people enjoy their work lives.   As David puts it,
"“Let’s succeed by working more hours with ever-decreasing
amounts of support” is not the most sophisticated piece of business
thinking"—nor, I would add, an indefinitely sustainable one.

This is not the world we imagine ourselves in, of accomplished and urbane
professionals in high-rent midtown aeries in the world’s crossroads of
global finance, but "bands of warlords, each with his or her followers,
ruling over a group of cowed citizens and acting in temporary alliance—until
a better opportunity comes along."

But I do have a thought, foreshadowed earlier.

Stop verifying, start trusting

The missing ingredient in this Dante-esque vision of law firm life is
one simple, invaluable, and alas highly perishable virtue:  Trust.

The problem with developing trust, of course, is that it takes time.  There
are no shortcuts.  A steady, reliable, sustained set of repeated
interactions between people who not only know they have a present together
but fully anticipate they’ll have a future together is what it takes
to establish trust.

In The
Wisdom of Crowds, Jim Surowiecki points out that the earliest
bands of merchants succeeded precisely by exploiting this bedrock principle
of human nature.   Quakers, anathema to both the Catholic Church
and the Church of England, were forced by necessity to trade, bargain,
and conduct business among themselves.  Knowing that essentially
anyone you did business with today stood a good chance of doing business
with you again tomorrow gave you every incentive for honesty, fair dealing,
and even minor pieces of altruistic conduct ("keep the change;" "no charge
for shipping").

The fascinating bit of history is what happened next:  Once Quakers
had a reputation among themselves for being fair-minded and
trustworthy merchants, other groups were willing to deal with
them on equally upright and high principles.

Could a similar evolution take place in law-firm-land?

I believe it could.  What we need are one, or a handful, of exemplar
firms, which will doubtless be led by exceptional individuals of uncompromised
vision ("people make the times; the times don’t make the people") such
as Jay
Zimmerman of Bingham McCutchen today or Clint
Stevenson of Latham
20 years ago (who a commenter called "Latham’s Paul Cravath").

Am I not assuming that a gifted clairvoyant would need a firm-size critical
mass of like-minded…lawyers?!  Indeed so. 

But I have profound hope, and it comes from what I know of myself and
some kindred souls I’ve met in my career.   My "response" to
David, then, comes from the heart far more than from the head:  My
bedrock belief is that there are more than enough lawyers out there who
are, as I am:

• deeply inquisitive
• risk-taking, open-minded, and eager to experiment
• trusting (by default—until crossed)
• instinctively dissatisfied with a static status quo, and
• unwilling to settle for unimaginative, brute-force business models.

My answer to David’s question, then, is:  "Most law firms are,
on the present model, not manageable; but it doesn’t have to be (and,
stronger claim, should not be) that way." 

Back at you, David.