Be a Class Act

When this article caught my attention this morning, Mass Layoffs at Heller Ehrman, I couldn’t help but wonder, “Could it get any worse for our Heller friends?” Unfortunately, the answer turned out to be “Yes”:

At least 100 Heller Ehrman employees were laid off on Friday, without receiving the 60 days’ wages required by federal law or accrued vacation due under California law, leaving even those remaining expressing confusion and concern.

Heller staffers and attorneys arriving at work Friday received one of two e-mails, either notifying them that they had been laid off, effective immediately, or that the firm would be retaining their services for the time being. Many said they were surprised by the e-mails and frustrated that there wasn’t more warning. The e-mails did not address whether employees would be paid for accrued vacation or other wages owed to them under federal law.

Law firms are not immune to the ups and downs of business cycles or bad management. Companies go under. Companies merge and there are redundant employees. Folks get laid off. Yet, there is always a right way and a wrong way of doing things.

  • Being honest with employees – RIGHT!
  • Promising not to leave before all staff members are placed with new jobs – RIGHT!
  • Having a CMO candidate show up at the partner retreat where the current CMO is making a presentation – WRONG!
  • Walking out the door with cash while the staff are left with no vacation days paid – WRONG! WRONG! WRONG! WRONG! WRONG!!

With that, I’d also like to give a shout out to our friends over at Heller Highwater. On Friday, the cruise director received a lovely pink notice via e-mail along with 100 other colleagues.

Heller Drone, my hat is off to you and your kind. You are one class act!

Will the Wall Street backlash spill onto their lawyers?

There was a national backlash against AIG and “Wall Street” this week when the news of AIG’s spa retreat broke.

The country was asking “how could they be so greedy” to spend $400,000 for a sales reward meeting when they just took countless billions in a bailout from the feds?

Intellectually, I get it, but talk about a PR disaster.

Then this headline caught my attention this morning: Weil Received $5 Million from Lehman During Crisis

Weil, Gotshal & Manges received a $5 million advance in September from Lehman Brothers Holdings Inc. for work leading up to the bank’s bankruptcy filing, according to court documents made public Wednesday.

Lehman reportedly retained Weil Gotshal on September 10. Five days later, Lehman filed for bankruptcy. Lehman paid Weil a $5 million advance to cover legal fees and expenses arising from Lehman’s negotiations and efforts to remain in business and to prepare for the possibility of the Chapter 11 filing if negotiations failed.

Further down, the article lays out the hourly rates for both Weil Gotshal and Curtis Mallet:
Both applications lay out billing rates the two firms expect to charge Lehman. Weil says its partners charge $650 to $950 an hour. Curtis, Mallet says its partners charge $675 to $785 an hour. Rates for counsel, associates, and paralegals also are detailed.

Is this another PR disaster waiting to happen? When the “average” American, who is happy to make $650 to $950 a week ($33,800 to $49,400), learns of these hourly rates, will there be a backlash against the Wall Street attorneys that rivals the backlash against Wall Street?

The first comment should give pause to us all:

What about the stock holders? What about the Lehman pensions? What about the retirement plans & 401Ks.

Rise of the Mid-Sized Firm

Just like most Americans, the legal industry has been obsessed over the past decade with super-sizing. The AmLaw 100 has super-sized head count, PPEP (profits per equity partner), RPP (revenue per partner), revenue generated, etc.

We’ve already seen the first casualty of the economic downturn with Heller Ehrman’s inability to make it to the altar with any of its suitors. I’ve been speaking with my colleagues across the country and there is a lot of belt tightening, layoffs and fewer hires going around – some of it due to necessity. For most of us, it is out of prudence. We don’t know what’s coming around there corner.

Coupled with our personal portfolios tanking, it can all be a bit depressing

Then I read this article, Mid-sized law firms see silver lining in cloud over Wall St. It’s not just my Pollyanish thinking, there is a bright spot in today’s economic climate, and it is shining on the small and mid-sized firms.

Many smaller shops are hopeful that the slowing economy will actually be good for their business, as clients looking to cut their legal budgets may consider shifting work from larger, pricier firms in New York and other major cities.

Economic uncertainty and downsizing at major firms could also translate into lower associate attrition and more recruiting options, say attorneys at several midsize firms.

With fewer ties to the financial sector’s heavy hitters, smaller firms say they are experiencing less fallout from the recent economic turmoil than their big-firm counterparts — atleast for the time being.

So while all the news out there isn’t good, the outlook can be for many of us.

Belt Tightening

So, how’s the situation with your belt? Getting tighter?

Six months ago I attributed tightening my belt to my fat and happy diet. Today as I was cooking a pot of chicken ¼’s for a batch of soup I was pleasantly pleased with the idea that tightening my belt means I might have to buy a smaller belt. No dining out on a Thursday night for me. I’m tightening my belt. No rich dinners of lamb chops and French fries on a weeknight. I’m tightening my belt. Was that thing we called prosperity really a belt?

Not only am I cooking at home to tighten my belt, I’m cooking chicken I bought for $.59 a pound! Add a few carrots, celery, onions, garlic and spices and a salad and I have dinner for under $5.00 (and fewer than 2000 calories) with left-overs for lunch tomorrow. At this rate, I’m not so sure that belt tightening is a bad thing. In fact, if I eat out less and cook at home more I may reinvent myself after I loose those 10 pounds of prosperity (or the $33,000.00 which I’ve invested in America)!

As law firms increasingly find themselves having to tighten their belts they may have to reinvent themselves. Not necessarily a bad thing. An article by Avi Dan on AdAge.com this week addressed the reinvention of “the agency” and suggested they might take a page from the investment bank response following the dot com crash. Law firms may also find some wisdom in this approach.

“The investment banks responded to the threats largely by changing their business model and taking more risks with their own money than they had before. Sure, they still did top-notch advisory work and acted as market makers. But their revenue and income growth has come mostly from betting with their capital.

Agencies like to believe they “partner” with clients, but unless they have skin in the game, that assertion is questionable. And the product, whether a creative idea or a media plan, needs to be sold to marketers at a negotiated market value, not simply an aggregated number of billable hours. If agencies really want to control their own destinies, they must de-commoditize their products and invest their own funds in whatever they think they can create a market for, whether it be content, media, product development or merchandizing. The old-fashioned approach — acting as agents on behalf of clients alone — is a slippery slope.”

Mr. Avi goes on to say that as the consumer continues to struggle with information overload, insight will become the organizing principle for agencies – why not law firms too I say. He used this example of how it might look.

Instead of dealing in price-competitive, commoditized creative and media products, a significant premium could be charged for data collection and analysis. Data and analytics need to be put at the center of the agency model and monetized aggressively. In the same way Wall Street analysts gave the marketing machine credibility, agency scientists will make sure creative ideas and media plans are relevant and engaging, and they will deliver a desired return on investment.

A little known factoid is that in the early days of America, lawyers would charge for their services “by the word.” This of course explains why many lawyers instinctively still use 5 words when 1 might do. It’s embedded in the profession’s genetics. Sadly for those lawyers, it is an old paradigm that doesn’t sell well today. Come to think of it, will any of the current pricing modes that have replaced “by the word” pricing sell well in these belt tightening days?

There was a lot of chatter about client service, knowing our client’s business and creating opportunities for our clients beyond filing briefs in the past 5 years of growth. Law firms may now need to examine their true motives behind these statements and their business model. Although change brings risk, it also brings opportunity. Harkening back to my make-peace-not-war days in the LATE 60’s when I was 3 years old (tee hee)….what if a law firm talked with the customers of their clients? Perhaps together they could find out what really matters. Perhaps the answer lies in law firms, their clients, and their client’s customers coming together to address in a global, collaborative manner where the delivery of legal services could deliver real value to the greater good for each party and reinvent themselves?

Oh, my. A remarkable thing just happened. While I was writing this post a rainbow appeared in the evening sky. A good sign, for sure. Maybe a pot of gold.

Law Firm Mergers in the New Economy

The numbers are out. Jobs in the legal sector are down, and law firm mergers are up for the year. According to a new report issued by Altman Weil:

Third quarter deals are down from 26 last quarter, but, year to date, 2008 law firm combinations are outpacing 2007 by 58 to 44.

“The volatile economy may have a short-term negative impact on deal-making, causing some law firms to hunker down,” said Altman Weil principal Ward Bower. “But cash-strong, well-capitalized firms will use the economic challenges faced by others as an opportunity to grow market share through acquisition.”

“Times like these are great opportunities for amalgamators in any industry,” he added.

Before jumping on the law firm merger, acquisition or cherry picking band wagon, law firms need to review their firm culture and honestly ask themselves: will this marriage work?
Having worked in-house for more than 10 years, I assure you that mergers are seldom effective long-term. It is rare for a firm to fully integrate the new partner, practice or firm into their culture. Five, 10 or 20 years later, you will still hear attorneys referring to themselves as the “ACME” firm, the “Northern Virginia” office, or “Bill’s group.”
Years after a merger you will still find different offices using different billing and accounting systems. Old allegiances are hard to break. New relationships are hard to build. Resentments build as reality sets in, polarizing factions of the merger against one another. Check the headcount three, five or ten years later. Most of the “merged” attorneys are gone.
How often in recent press have we seen this reference in recent weeks? VLG Core Makes Move to Cooley. Read past the headline and take a look at the problem:
[The move to Cooley] also marks the end of the Venture Law Group, an independent law firm that clung to its culture, name and acorn logo even after being acquired by Heller in 2003. At Cooley, said firm CEO Joe Conroy, VLG won’t continue as a distinct brand.

“Our firm culture would not be consistent with a firm within a firm,” he said.

Mark Medearis, who co-founded VLG in 1993, said his team was ready to let go of that identity. “Obviously we have a lot of affection for all those things,” he said, “but we’ve learned a lot about the practice of law, and we’re really excited to be joining Cooley.”

VLG held onto its old culture and never integrated with Heller. How many other VLGs are out there? Do you have a VLG within your firm?

Before taking a bite out of the merger apple to form a new, better, or bigger firm, I’d make certain that you have fully integrated the partners, practices and offices you currently have.

A for Effort

I really enjoyed Seth Godin’s post today on Is effort a myth?

Delete the outliers–the people who are hit by a bus or win the lottery, the people who luck out in a big way, and we’re left with everyone else. And for everyone else, effort is directly related to success. Not all the time, but as much as you would expect. Smarter, harder working, better informed and better liked people do better than other people, most of the time.

Effort takes many forms. Showing up, certainly. Knowing stuff (being smart might be luck of the draw, but knowing stuff is the result of effort). Being kind when it’s more fun not to. Paying forward when there’s no hope of tangible reward. Doing the right thing. You’ve heard these things a hundred times before, of course, but I guess it’s easier to bet on luck.

Of course, this got me thinking about (drum roll, please) business development.

Having worked with attorneys for more than 10 years on their marketing and business development, I can say, that in my experience, most lawyers are successful despite themselves. In Seth Godin speak, they are the lucky ones. They fell into or inherited a client relationship, they fell into a practice that became extremely successful due to the marketplace (tech boom, anyone???).

Yes, there are rainmakers out there with a plan and a knack for business development, but most lawyers will agree that they fell into their success.

In today’s economy we (marketers, lawyers, IT folks, HR professionals, consultants, etc) cannot bet on luck. We need to get out there and make our own, put some elbow grease into it, and get to work.

Now, more than ever, it is time to be a thought leader in your particular area of expertise. We need to get out ahead of the trends and lead others to success. We need to be vocal, and forceful if necessary. If in our roles as Pied Piper we cannot attract followers, then we must get behind them and push.

We live in uncertain times and we need to get over it. Success, now more than ever, will take effort, and that we have full control over.

Why the Heller Shock?

I read Paul Lippe’s blog post yesterday about the shock in the industry of the demise of Heller.

A law firm friend of mine told me many of his peers were “shocked” at the demise of Heller and its failure to find a merger partner. That put me in mind of the iconic scene in Casablanca, where Vichy police captain Louis Renault declares himself “shocked, shocked to find gambling going on [in Rick's Casino]” while pocketing his winnings.

I too have industry friends who were shocked, I wasn’t. I was reading between the headlines about the layoffs, failed mergers, practice defections and partner movement at Heller.

Paul is predicting that Heller is the first in a trend of law firm dissolutions and lays out his reasons why. I could not agree more.

As firms decide how to deal with the current economy, the employment numbers are out and it ain’t looking pretty.

The law sector saw jobs shrink by 2,000 in September — the fifth consecutive month of losses. According to the U.S. Bureau of Labor Statistics, the legal workforce of 1,165,100 is down by 1.15% from one year ago, when the industry employed 1,178,600 people. The drop-off is even steeper since May 2007, when legal employment peaked at 1,180,700.

On a world-wide basis, 28 companies went public during the month, down 67% from September 2007 and down slightly from the 29 in August this year, according to data from Dealogic. Just $181 million was raised, a fraction of the $9.4 billion in the year-ago period, and down from the $1.3 billion in August.

In every corner of the world, the amount of money raised by IPOs could have represented just one small deal during flusher times. In Europe, the eight deals that were completed raised a total of $21 million, down from 19 that raised $784 million in September 2007. In North Asia, seven deals, including three from China, raised $30 million, compared with 20 that raised $3.7 billion a year ago.

There were no IPOs in the U.S. during September; last year, there were four that raised $990 million. It has been five years since the U.S. has seen a month without any companies going public; the last time that happened was in April 2003.

But rather than panic at the bad news, lawyers and law firms need to realign quickly and take advantage of the new opportunities. Those who do will avoid the path of Heller and will reap the benefits at the end of the day.
With the stock markets falling and credit markets tightening, law firms across the United States are dealing with panicky clients and scrambling to form new practice groups focused on the economic crisis.

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