Early Warning Signs of Law Firm Failure

law firm failure, out of businessAccording to Hildebrandt's The Anatomy of Law Firm Failures, failed law firms, like Thelen and Heller Erhman, have three things in common: 

  • Below average financial performance – often including excessive financial leverage, significant deferred obligations, low productivity, and poor realization;
  • Internal dynamics – primarily involving leadership issues, partners with incompatible goals, differences over compensation philosophy, and lack of succession planning; and
  • External dynamics – primarily involving competitive pressures related to the firm’s historical client base, access to new clients and desirable work, and inability to recruit key talent. 

I would add a fourth:

  • Lack of a business development strategy -- which leads to firms taking whatever comes in the door, as opposed to taking clients that fit a growth strategy; a lack of business development activities by the partners, who instead rely on a tiny minority of lawyers to bring in new files; and the promotion of lawyers without clients to partnership, which is preceded by hiring associates with no business development acumen.

The analysis comes from a new Hildebrandt white paper called The Anatomy of Law Firm Failures."  "Typically, the underlying problems created by the fundamental flaws in the firms we studied were brought to a head by a triggering event that set in motion a rapid downward slide," the report states.

Four types of triggering events were the most common:

  1. Overexpansion that weakened the firm over an extended period of time
  2. The unexpected rapid or gradual defection of significant partners to one or more other firms
  3. A breakdown in merger efforts for a firm that was already in serious financial distress and barely surviving, or
  4. The impending expiration/renewal of the firm’s primary office lease.

I would add more triggering events: the retirement of key rainmakers, loss of one or more "crown jewel" clients, clinging to unprofitable practices because they "generate cash flow" or are used to train associates, failure of partners to specialize, and hitching the firm to a dying industry and failing to adapt to the current downturn.


OBABL: Life as a Minority Lawyer

Yolanda YoungYolanda Young has launched the blog www.onbeingablacklawyer.com. You might remember her as the former Covington & Burling staff attorney who chronicled her experience as a minority attorney there in The Huffington Post piece, “Law Firm Segregation Reminiscent of Jim Crow.” http://www.huffingtonpost.com/yolanda-young/law-firm-segregation-remi_b_91881.html


Young recalls, “I was surprised and disheartened by the intensely negative comments that followed on blogs like Above The Law. Even after Covington issued a statement that was basically conciliatory and in no way a denial of my accusations, those commenting refused to focus on some of the easily verifiable facts in the piece. They chose instead to make personal attacks on me and reduce the discussion to one that centered on anti-Affirmative Action rhetoric.”


There was, however, a silver lining.Young discovered a large number of attorneys who were sympathetic to her position but didn’t want to post their comments on websites that were generally hostile to minorities.  This group instead sent Young personal emails.


Says Young, “I realized there was a real need for a place where African American attorneys and law students could gather to network, disseminate information and poke fun.


Visit OBABL:www.onbeingablacklawyer.com


November Issue of Originate Focuses on How Economy Affects Law firms

Originate business development newsletterIt's crunch time in both the legal business and the economy at large. In the newest issue of Originate! - the business development newsletter - we offer many basic, but powerful, ways to make a difference in your business development so you can stay ahead of the turmoil – from advice by general counsels to simple plans of action to knowing how to connect with a prospect. Sometimes it's the little things that count.

Lead Article: What General Counsels Like and Don’t Like About Their Lawyers…and Why You Should be Asking How You're Doing

Recent research, according to Martha Cusick Eddy, shows that only 25 percent of general counsel rated their relationships with their lawyers as an “A.”  In eight key areas, as reported by Janet Ellen Raasch, Cusick Eddy explains what clients like and don’t like about their lawyers. Ultimately, though, it’s the disconnect between a client’s expectations and your delivery of service that causes the most trouble. That’s where a program of client interviews and surveys can help.

Quick Start Your Personal Business Development Plan

Even in difficult economic times, there are opportunities galore, according to Larry Bodine, Esq. But what’s your best plan of action? Here’s a quick start plan that can fill up several hundred hours of business development time over the next year. And it’s one grounded in client relationships, your existing networks, and face-to-face meetings.

The PR Multiplier: Five Ways to Keep a Good Flow through your Sales Pipeline            

Second Stage of the 12 Step Pipeline: In his ongoing series about managing your sales pipeline, Andy Havens turns to the power of Public Relations to build awareness. Here are five good ways you can multiply the value you gain, mainly through knowing how the media work and improving relationships with them.

Why Thelen Failed – And How You Can Avoid the Same

Are you doomed to fail in the current economic climate? Barry Schneider looks at some underlying causes of the Thelen Reid collapse in the words of one insider, observing why these can be so damaging, and proposes what you can do individually and within your firm to avoid the worst.

To see the entire issue online visit http://www.pbdi.org/originate/.



Survey of Women Lawyers Reveals Shocking Results

law firm marketing, business developmentThe 2008 National Association of Women Lawyers (NAWL) Survey produced some shocking data, including that, on average, a female equity partner earns $87,000 a year less than a male equity partner.

  • The best way for a woman lawyer to reach the position of equity partner may be to make a lateral move: two-thirds of the new women equity partners in the sample were laterals, and 31% of all new equity partners were recent laterals.
  • Women continue to be markedly under-represented in the upper levels of law firms. 
  • The majority of women who start as associates in firms do not reach the position of equity partners.  Fewer than 16% of women lawyers are equity partners.
  • Law firm leaders, including governing committees and managing partners, are overwhelmingly male. 
  • Even in the best of circumstances, women are promoted to equity partner at only about half the rate as men. 

Nearly 97% of large firms have implemented women’s initiatives, which provide a combination of programs on professional development, networking, mentoring and/or business development. Given that women’s initiatives and formal programs for business development skills are relatively new activities in firms, it is too early to say whether these various programs will enhance the level of business development among women lawyers.

For the full NAWL survey please visit: http://www.nawl.org/Assets/Documents/2008+Survey.pdf.  It is the only national study of the nation’s 200 largest law firms which annually tracks the progress of women lawyers at all levels of private practice, including the most senior positions, and collects data on firms as a whole rather than from a subset of individual lawyers.

NAWL is a national organization devoted to the interests of women lawyers and women’s rights. Founded in1899, NAWL is the only national women’s bar association with individual and organizational member nationwide, including law firms, law firm attorneys, corporations, in-house counsel, government attorneys, law schools, and law school professors.

"Elevator Pitch" Post Deleted

I sincerely apologize for the crude and offensive "Elevator Pitch" post I put online last week.  In the clear light of morning, it is clear that it was anti-Semitic and repellent.  I want to thank all the people who commented and called me about it; I listened and took what you said to heart.

I have deleted the post.  It was a mistake to repeat a crude joke that I heard in rural Illinois, and I should have known better. It was a worse mistake to say it was the "best" of its kind, when actually it was hideous.

The post offended people I admire and hold near. I certainly don't espouse the kind of thinking behind the obnoxious "elevator pitch" and don't want anyone to think I do. A friend called me, recounting how he heard a Holocaust survivor describe being evaluated by Dr. Mengele in a concentration camp, but was fortunate to be passed over.  I was horrified and immediately deleted the blog post.  A member of my own family was captured in the Second World War and imprisoned in a Russian concentration camp until the 1950s, and there was nothing funny about it.

I regret I didn't delete it sooner, and should have had the good sense not to put it online in the first place.

Marketing the Marketing Department

Chadbourne Parke law firm marketingNothing is more frustrating when a an MBA or JD who has toiled in the firm's marketing vineyards, striven mightily to generate new business for the firm, and vainly proposed great ideas like CRM, client surveys and competitive intelligence only to have them ignored -- than it is to have a lawyer at the firm ask:

"What exactly do you do in marketing?"

The ever-successful Iris Jones of Chadbourne & Parke in New York has come up with a remedy: print a one-page directory of the Business Development and Marketing Department, naming the marketing professionals, describing concisely what they do and listing their phone number.


Iris Jones - Chief Business Development & Marketing Officer, 212-408-1143

  • Oversees the functions of the department
  • Manages department strategic plan, budget
  • Principal leader of client development efforts
  • Lead strategist on presentations and proposals: business development trainer
  • Builds and facilitates client teams

Andrew Blum - Media Relations Manager, 212-728-4519 

  • Liaises with the media, handling proactive and reactive PR with reporters, editors and producers
  • Places bylined articles and op-ed pieces
  • Distributes press releases and internal announcements

Chadbourne Park Business development marketing departmentThe one-sheet, distributed firmwide, also describes 19 additional professionals in New York, London, Moscow and Warsaw: 

Director of Marketing Leslie Stenull, Staff writer & Editor Van Wallach, Design & Creative Services Manager Andrew Watts, Business Development Manager Angelica Crisi, Business Development Coordinator Arlene Dominguez, Conference & Events Manager Michelle Shirian, Marketing Technology Manger Thomas Vitale, Marketing Coordinator Kwasi Mendoza, Marketing Coordinator Alaina Maggio, Corporate Business Development Specialist Stephen Ruben, Litigation Business Development Specialist Michael Coston, Marketing Coordinator Kieran Morgan, Marketing Consultant Lesley Wright, Editor/Marketing Coordinator Amanda Dahler, Marketing Coordinator Jurgen Dersch, Marketing Manager Monika Grzybowska and Administrative Assistant Alessandra Composto.


LTN AWARDS Deadline Extended to Dec. 3 - Nominate your firm/law dept.

By popular demand, Law Technology News has extended the deadline to enter its 2008 LTN Awards to WEDNESDAY DEC 3.

Especially in tough economic times, here's an opportunity to showcase your organization's technology stars -- and projects. Toda y, as Doug Caddell (a former winner of IT Director of the Year) says, you can't just sell your legal skills -- who also have to "sell" your technology. What better way to demonstrate your success than winning one of beautiful lucite stars signifying that your organization is the best of 2008?

The process is simple and painless... Just download the application at www.lawtechnologynews.com (click on LTN Awards on top nav bar) -- or visit www.tinyurl.com/LTNawards

Categories include:
• IT Director of the Year  (your IT director or a IT key staff member)
• IT Champion of the Year (a non-IT person at your organization who has helped advance  technology adoptation)

• Most innovative use of technology in:
-- A trial
-- A law firm
-- A law dept.
-- A pro bono project

The eligibility period for projects is July 31, 07- July 31, 08.

As Nike sez, "Just Do IT!"  and as the NY Lottery sez, "You can't win if you don't enter!"

Questions? Contact Kevin Iredell kevin.iredell@incisivemedia.com


White & Case Lays Off 70 Associates, 100 staff

Hugh VerrierFrom the AmLaw Daily Blog:

White & Case said it will lay off about 3 percent of its global legal and staff head count as part of a review of firm operations in light of the economic downturn.

The layoffs, first reported on the blog Above the Law, will affect about 70 associates and 100 staffers, spokesman Nicholas Clarke says.

"We are living in a time of unique economic challenges, and well-managed, successful businesses, including White & Case, must assess their operations in light of current market realities," chairman Hugh Verrier said in a statement. "We believe this is a necessary step to adjust to the global economic downturn and to ensure a strong, long-term future for the firm."

Related articles:

The cuts affect all of White & Case's U.S. offices and its London outpost, Clarke says. The firm has offices in Los Angeles, New York, Palo Alto, Miami, and Washington, D.C. Following the layoffs, the firm will employ roughly 4,900 lawyers and nonlegal staff.

Despite the layoffs, White & Case insisted in its statement that it "anticipates a strong 2008, with significant revenue growth across our globally diverse network." Clarke says net income is also up year-to-date. White & Case posted $1.373 billion in gross revenue in 2007, with profits per partner of $1.67 million.

Nevertheless, the firm said it was "exercising prudent business judgment" in anticipation of a weakened global economy in 2009.

The layoffs follow the closure last month of White & Case's Dresden and Milan outposts. Those closures affected 20 lawyers. The firm has also retained consulting firm McKinsey & Company to conduct a review of its global business. Clarke says neither the office closures nor the hiring of McKinsey are related to the layoffs.

White & Case says the layoffs are in part driven by a decline in attrition rates. It also says those being asked to leave will receive a "competitive" severance package. Clarke declined to provide more details on the package.

New Technology Affects Public Relations

I just picked this up from a public relations agency:

New technologies have made an impact on how newsrooms operate. Journalists are simultaneously facing added on-line duties and large staffroom cuts and are increasingly dependent on the internet and press releases. Yet most PR professionals continue to use traditional press release distribution methods. You need to stand out from newsroom clutter by delivering a highly branded and media rich press release directly into the hands of journalists and bloggers.

Indeed, 85% of journalists prefer to receive press releases via the internet (as compared to 6% via fax, 5% via mail and 3% via terminal). Moreover, the more information you can put into the hands of journalists—images, backgrounders, translations, video, etc.—the easier it is for them to tell your story.


The Silent Treatment from the Boss Means You Could be Laid Off

If your boss suddenly stops talking to you, it may be a warning sign that you will soon be laid off, according to Debra Cassens Weiss.

The Wall Street Journal talked to job coaches and management consultants to put together a list of warning signs. They include:

  1. Your boss stops making small talk with you, even though he or she continues to shoot the breeze with other co-workers.
  2. Your boss takes longer to respond to your e-mails.
  3. Your boss excludes you from meetings you once were invited to attend, or makes you feel as if you are no longer part of the “inner circle.”
  4. You are passed over for plum projects and given production-oriented tasks instead.
  5. Your work gets reassigned.

If you see the warning signs, it’s best to talk to your boss so you can correct any problems before it’s too late, experts told the newspaper. They also advise those worried about their jobs to update their resumes and start networking to prepare for a job search.


Lawyers Among WSJ "50 Women to Watch"

Several lawyers lawyer made the list in today's "50 women to Watch" section of the Wall Street Journal, and the only practicing lawyer is Marcia Goldstein of Weil, Gotshal & Manges. "

"Marcia Goldstein sits atop what is arguably the hottest legal practice of the moment," the newspaper says.  "The New York lawyer is head of bankruptcy and restructuring at Weil, Gotshal & Manges LLP, which has long advised many of the nation's biggest debtors," including American International Group in an out-of-court restructuring. In court, she is lead bankruptcy counsel to Washington Mutual Inc. and LandSource Inc., a Louisiana-based land-development company. And her team is also handling many other massive matters, including the bankruptcy of Lehman Brothers Holdings Inc.

"I foresee a continuation of companies in distress in a variety of sectors for the next 24 months," Ms. Goldstein says. Ms. Goldstein, age 56, who attended Cornell University for college and law school, has practiced with Weil for more than 30 years. Some of her past greatest hits include serving as bankruptcy counsel for WorldCom Inc. (which was later subsumed into Verizon Communications Inc.) and Parmalat Finanziaria SpA.

Other lawyers included in the "50 to Watch" list are:

  • Christine Lagarde, Finance Minister of France. Before becoming trade minister in 2005, she spent five years in Chicago as chairwoman of international law firm Baker & McKenzie.
  • Pamela Daley, Senior Vice President, Corporate Business Development at General Electric. The Princeton University graduate honed teaching skills as an adjunct professor at University of Pennsylvania Law School, where she graduated top of her class and edited the law review. A tax lawyer by training, she was a partner at the Philadelphia office of Morgan, Lewis & Bockius in 1989 when GE attorneys recruited her. A year later, she was GE's top mergers-and-acquisitions lawyer.

Women with legal duties include:

  • Barbara Desoer, President, Mortgage, Home Equity & Insurance Services, Bank of America.  She's not a lawyer, but she negotiated a settlement with 14 state attorneys general targeting Countrywide's lending practices. The $8.4 billion legal agreement seeks to modify loans by reducing principal owed or lowering interest rates for 400,000 subprime and adjustable-rate borrowers.
  • Nicole Seligman, Executive Vice President and General Counsel, Sony. Not a lawyer, but she oversees legal, compliance and internal-audit issues across the Japanese company's broad range of businesses.


Defense Bar Launches Blog

The Defense Research Institute, the organization that is to the civil-defense bar what the American Association for Justice is to the plaintiffs' bar, recently launched a blog, For the Defense, as an adjunct to the organization's magazine of the same name.

"We also have a new blog, that can be found at http://forthedefense.org and we will be encouraging members to post. Of course, we welcome comments from others throughout the legal industry. We anticipate a most robust dialogue on the diverse issues facing the legal profession now and in the future. Speaking for DRI members, I wonder if you could include a link to DRI’s blog on yours so that we can continue a regular dialogue," said Marc E. Williams, President-Elect of DRI.  He is partner in Huddleston Bolen in West Virginia, and is a trial lawyer with a complex litigation practice.


Matt Homann's 10 New Rules of Legal Marketing

Matt Homann, law firm marketingAccording to lawyer and marketer Matt Homann of St. Louis, "Legal Marketing has changed.  It used to be enough to keep an ad in the yellow pages and belong to the Rotary Club.  Not anymore.  Times are tough, so I present to you Ten "New" Rules of Legal Marketing.  Let me know what you think.

  1. "My lawyer can beat up your lawyer" isn't a marketing strategy. "My lawyer will call me back before yours will" is.
  2. Google tells me there are 337,000 "Full Service Law Firms” out there. Which one was yours again? 
  3. Unless the person who founded your firm 100 years ago is still alive and practicing law, he's completely irrelevant to every client who's thinking of hiring you.
  4. Market to a "want" not to a "need." By the time your clients realize they "need" you, it's often too late -- for them and for you.
  5. Your “keep great clients happy” budget should exceed your “try to get new clients” budget by at least 3:1.
  6. Thanksgiving cards say you're thankful for your clients' business. Christmas cards say you're just like everybody else.
  7. Having the scales of justice on your business card says you're a lawyer -- an old, stodgy, unimaginative, do-what-everyone-else-has-done-for-fifty-years lawyer. Same is true for your yellow pages ad.
  8. Speaking of yellow pages, don’t abdicate your marketing strategy to their salespeople. They don’t know marketing. They only know how to sell you a bigger ad each year.
  9. Your future clients have been living their entire lives online and will expect the same from you. If you’re invisible on the web, you won’t exist to them.
  10. The single best marketing strategy in the world is to find your best clients and ask them, "How do I get more clients like you?"

TV vs. the Web for Law Firm Marketing

TV versus the Web for law firm marketingI asked my networks the following question: "I’m advising a law firm that is spending a ton of money on TV advertising (they do some plaintiff PI work, but also have a billable-hour business practice.) Which is a better marketing medium: TV or the Web? Give me your opinion."

Experts from the LawMarketing Listserv and other forums answered, coming from the fields of law firm marketing, advertising, web development, public relations and marketing strategy across North America.  A majority favored spending marketing dollars on the Web because of its ability to target clients and measure results.  TV was recommended for global law firms with mammoth budgets.

The analyses came from Steve MatthewsArt ItaloFrank FeatherJames Archer, Mitch TalenfeldCarrie McCrayLisa DuttonDan WallaceThomas VanHaarenGerald A. RiskinHeather M. MilliganDale H. Tincher, Andrew Havens, Rich Klein, Cecilia Alers and Bob Weiss.

For the details of their responses, please visit the Lawmarketing Portal at www.lawmarketing.com.

Obama Presidency is Good News for the Legal Profession

In my opinion, the election of Barack Obama as President brings all sorts of good news for the legal profession. 

Regulatory law. After 8 years of minimal regulation of business (except for crackdowns on illegal aliens), lawyers with a regulatory practice will see much more activity in their practices. If your clients include banks, private-equity funds or large oil companies, they will be targets of the new administration and will need plenty of counsel from you.

We will once again see trials, which had nearly disappeared from America's courts. This is good news for defense and plaintiff lawyers alike. Tort reform has been so effective that there are hardly any trials any more.  The National Center for State Courts reported  that the number of jury trials dropped 44% in the last 10 years. The movement has killed many areas of personal injury practice by limiting damages and making it difficult to file a cause of action to begin with.  But the Republican party and its corporate support base for tort reform is shattered.  Meanwhile  the American Association for Justice (formerly ATLA) will actively work to make it easier to bring

  • Product liability cases
  • Class actions against pharmacy companies
  • Limit companies' use of federal regulations as a shield from litigation under state law
  • Eliminate mandatory-arbitration clauses in consumer contracts.

Health Insurance Companies.  If your firm represents insurance companies that write health care coverage, you can expect to advise them on a raft of coming regulations.  Get ready if any of the following are your clients: UnitedHealth Group Incorporated, Aetna Inc., WellPoint, Inc., CIGNA Corporation, Kaiser Permanente, Humana Inc., Luxottica Group S.p.A., Medco Health Solutions, Inc., HealthSpring, Inc. and Genworth Financial, Inc.

Green Clients.   You're in good shape if you represent companies that reduce green-house gases, supply alternative forms of energy like wind-power, make hybrid vehicles or increase renewable energy resources.  Sure, their stock prices are down right now, along with the rest of the S&P 500.  But the new administration will be creating tax incentives and possible new funding your clients will want to know about from you.

Real Estate.  Residential real estate closings are fewer than ever, it seems.  But I predict that the new administration will force banks getting a piece of the $700 bailout to make mortgage loans, and not use the money to acquire competitors. Further, he's proposed a 90-day moratorium on home foreclosures, affecting 6.5 million households.  Banks dump foreclosed homes on the market, depressing prices.  This discourages people from selling their homes.   An increase in mortgage loans and break from the foreclosure flood can ramp up real estate closings.

Meanwhile, there is a boom in litigation in subprime loan/credit crisis litigation that includes:

  • For big firms, filing securities class actions, shareholder derivative suits, and ERISA lawsuits against failed lenders and investment banks. The plaintiffs include borrowers, shareholders, investors, issuers & underwriters, retirement plan participants. Defendants include lenders, issuers, underwriters, rating agencies, accounting and law firms, bond issuers and hedge funds.
  • For smaller firms, representing homeowners renegotiate terms or come up with "short sales" with their lenders.
  • Suits on behalf of developers, investors and contracts against banks that cut off their credit before the real estate projects were completed.
  • Advising home owners on J.P. Morgan's new offer of option adjustable-rate mortgages, which allow homeowners to make a minimum payment, as credit card companies do.

Labor Law.  Union members dwindled to only 12% percent of employed wage and salary workers, according to the Bureau of Labor Statistics. But the new administration is expected to shift the balance of power in favor or unions and against employers. In his speech to the AFL-CIO, Obama said, "We're ready to play offense for organized labor. It's time we had a President who didn't choke saying the word "union." A President who knows it's the Department of Labor and not the Department of Management. And a President who strengthens our unions by letting them do what they do best - organize our workers." More union members mean more contracts for labor lawyers to negotiate and write.

Government Contracts.  There will continue to be work in this practice, but it's less likely to be for defense contractors as the U.S. withdraws from Iraq.  I predict that the new contracts to be awarded will be for green technology, alternative energy producers, Internet projects that support network neutrality, expansion of broadband access, and construction of roads, highways and bridges.

Bankruptcy. According to Bruce Zirinsky, Cadwalader, Wickersham & Taft, some of the amendments to the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 will be repealed, especially the ones that made Chapter 11 less of a safety net for companies. It has become in vogue in recent years to have quickie Chapter 11s, according to Zirinsky. But as more companies are forced into Chapter 11, there will be more of a sentiment that bankruptcy protections are more important. BAPCPA took out the rights of Chapter 7, making it harder for individuals to hold onto nonexempt assets. "But as we see more and more mortgage foreclosures, I think people will try to reform this law," he said.

In sum, Obama's rising sun logo is the light at the end of the tunnel for law firms.

Black October for Layoffs in Law firms

The light at the end of the tunnelThe profession has demonstrated that that article "2009: Another Year of Economic Darkness for Law Firms" is based on fact. Law.com has even created "The Layoff List" as a running tally. (Also see below.)

Just take a look at the layoffs that have hit major law firms this year, particularly in October:

  • The demise of Thelen Reid Brown Raysman & Steiner, announced October 28, 2008. This was preceded by the firm's slashing 26 associates and 85 staff members in March.
  • The dissolution of Heller Ehrman, announced in late September.
  • Sonnenschein Nath & Rosenthal October layoff of 37 lawyers, 75 staff members, and 12 lay timekeepers. This follows Sonnenschein's dismissal of 124 employees, including 37 attorneys, six of whom were partners, in May.
  • Jenner & Block’s firing of additional 10 partners in October, on top of its firing of other 10 partners in May.
  • Katten Muchin Rosenman and Sonnenschein Nath & Rosenthal layoff of 21 associates and counsel in October.
  • Clifford Chance's dismissal of 20 lawyers in October.
  • Cadwalader, Wickersham & Taft cutting 96 attorneys in July.
  • Edwards Angell Palmer & Dodge layoff of approximately 10 associates in March.
  • Ten U.S. partners and two dozen associates voluntarily leaving Thacher Proffitt & Wood starting in January after a severe slump in the structured finance practice.