Valuing Black Sheep - A Note on Organizational Behavior and Innovation

I recently read an excellent article by Marc Scibelli regarding the utility of "black sheep" as disruptive innovators in an organization. (Hat tip to Bill Pollak for pointing me to it.) McKinsey reports that the black sheep at Pixar (the cutting edge animation movie studio) are defined as:

"...artists who are frustrated. I want the ones who have another way of doing things that nobody’s listening to... all the guys who are probably headed out the door.”

I've been a black sheep. I've recruited, trained and fostered black sheep. I've also recruited, trained and fostered, um, white sheep? You know -- company men or women who toe the line, do what they're told, and do it very, very well. No organization can survive without both.

Too many drones who do what they're told without disruption or complaint and you have a profitable six sigma-certified business that runs smoothly until it's obliterated by the competition. Too many black sheep with unbridled innovation and you have anarchy, like 1998 in Silicon Valley where any Stanford dropout could receive $100 million in seed money, a ping pong table and zero expectations for providing a sustainable, profitable business model! But in the real world, there needs to be a tension between keeping the trains running on time, and, if I may belabor the metaphor, developing new transportation systems.

This is not easy to do. Black sheep excel as individual contributors, and they thrive on breaking rules and flouting convention. Not only are they repelled by the typical staid corporate environment, most corporate environments reject them like mismatched organ transplants. Managers and leaders, even those with a little bit of black sheep in their own DNA, often lose these disruptor instincts as they become more adept at navigating the boardroom where, as often as not, you'll find even senior executives who value collaboration and fostering a sense of unity over achieving the optimal business outcome.

One classic American dream is the innovator who's rejected time and again by the establishment but in the end makes it big doing it his way. But there are more Tuckers than Michael Dells -- Tucker's automobile innovations were ahead of their time; Dell founded the eponymous computer firm in his college dorm room.  Not every black sheep generates innovation on the scale of Steve Jobs.  Also, innovation happens more often on a small scale than on a large scale.  Of course dramatic breakthroughs happen, but sometimes successful innovation occurs incrementally (so sayeth Seth Godin).  Every business on the planet needs to find ways to improve its widgets, which isn't the sexy stuff of movies.

For black sheep who wish to lead, the challenge lies in adapting, but without losing the desire and instinct to confront the status quo. It's hard to know when you've arrived. There are many good resources discussing the challenge of adapting one's style, including Myers-Briggs Type Indicator, or Goleman's work on Emotional Intelligence, or DuBrin's Your Own Worst Enemy, or HBR's The Young and the Clueless. They all speak to the need to evolve, to play the game, to develop a more collaborative style, because you can't drive change from within if you can't get in.

Some of us have a style which allows, even encourages, confrontation because it's often an effective path to getting multiple views on the table, from which the optimal business outcome can be determined, regardless of who originated the ideas.  It's not the confrontation per se that's desirable, but the good ideas that flow when colleagues have the freedom to speak openly.  You may not like my idea, and you'll illustrate all the reasons why your idea is better, but I understand this doesn't mean you don't like me.  And once the debate concludes, we head to the bar to celebrate with our colleagues after a hard day's work.  But some don't.

In many corporate boardrooms, and in many law firm boardrooms, there is a strong aversion to disruption, to confrontation, so after a tough session some will feel bruised, upset and confounded by the team's inability to get along -- forgetting that the team may have actually achieved the desired optimal business outcome.  Could the same outcome have been achieved by less confrontational means?  Undoubtedly. Would it have taken longer?  Who knows.  But there are different styles and without intensive regression testing in parallel universes, I'm not sure we'll ever determine if there is a best style.

Black sheep should be cherished, when they have the ability to constructively disrupt and innovate. Never-deviate-from-the-norm types should be cherished for their ability to execute today. The best organizations, and the best leaders, embrace multiple styles and encourage different approaches to achieve optimal business outcomes.

Portions of this post appeared previously on my personal blog.

The ACC Value Index - We're Not Worthy!

The Association of Corporate Counsel held its annual meeting recently in chilly Boston, and the next phase of the ACC Value Challenge was released:  make way for the ACC Value Index, a "client satisfaction measurement tool that helps ACC members share meaningful information about the value they get from their outside counsel."  I applaud the continuing effort to not just admonish law firms for not fully meeting client needs, but for providing practical tools and techniques to guide law firms in their efforts to deliver more value. We could go on for days discussing the need for yet another law firm rating system, and the pros and cons of closed vs. open systems, the merit of subjective vs. objective rating criteria, which criteria really matter, and so on.  In fact, that debate is already underway (here and here) and will likely continue -- in part because debating lawyer ratings is as prolific and inevitable as the ratings systems themselves!  ACC would probably be even more effective were it to, shall we say, align more with others singing the same tune in order to amplify the efforts. But this isn't a critique of ACC; they should be commended for helping to put a voice and a framework around issues many have been discussing for years.

What exactly is the value index?  Essentially, it's a scoring system that measures a law firm's efforts in six specific categories, plus an opportunity for unfiltered commentary, and ultimately the question at the heart of a client's level of satisfaction:  Would you use this firm again?  For the six primary questions, the rating scales from 1 to 5, with 5 representing excellent.  Others may raise the oft-repeated criticisms that 5-point scales tend to regress to the mean, and that ratings systems often reflect selection bias because dissatisfied customers make their view known in greater numbers than satisfied customers.  I'll merely say that simple is better if one seeks rapid adoption, and ACC's approach appears to meet that challenge.

What are the six rated categories?

• Understands Objectives/Expectations
• Legal Expertise
• Efficiency/Process Management
• Responsiveness/Communication
• Predictable Cost/Budgeting Skills
• Results Delivered/Execution

I have yet to see clear and consistent definitions of these categories, so it's likely there will be some ambiguity and disparity in how law firms and in-house counsel define and therefore rate law firm efforts.  But the entire rating process is subjective, so there will always be variability.  Nevertheless, I'll give my two cents for what each category entails, with references to my earlier blog postings reflecting the same themes. (As I said, there are multiple voices discussing these issues!)

Understands Objectives/Expectations - I don't know whether ACC has listed these categories in order of priority, but if so then this is an apt place to start.  So many engagements falter, and costs exceed expectations, because the outside counsel and in-house counsel don't have the same understanding of the desired outcome and the path to get there.  In business, surprise can be a fatal mistake, so setting proper expectations is critical.  In-house counsel share responsibility in not just explaining the issue, but if they have ideas on the optimal process to achieve the desired outcome they had best reveal it.  This doesn't mean the law firm must adhere to the approach -- after all the in-house counsel is often paying for the outcome -- but this should generate a dialogue regarding what's expected, and what level of risk the client is willing to take.

Legal Expertise - Many lawyers believe this is the primary asset the client is buying.  But in many cases, it's really just the table stakes to get in the game.  The firm wouldn't even be considered for the work if there wasn't already a belief that their legal chops are superior.  So it's not enough to do the work, but demonstrating innovation and an in-depth understanding of the relevant guiding authorities, based on prior experience, is critical.  This isn't done by producing a deal list, substituting quantity for quality, but by regularly discussing strategy with the client, identifying alternatives, and calculating the costs of different approaches, including doing nothing.

Efficiency/Process Management - This may be the single greatest growth area in law firm management discipline in the coming years.  General contractors build tall buildings incorporating tens of thousands of raw materials and pre-fabricated parts and relying on hundreds of sub-contractors and vendors over multi-year construction horizons.  Yet lawyers often insist that managing a deal or complex litigation is a unique experience requiring a new approach each and every time.  "No more!" demand the clients and, more to the point, the clients' clients.  The challenge is that billable hours drive hourly-based compensation but do not encourage efficiency, to say the least.  As more clients insist on alternative fee arrangements, lawyers must become better project managers, wringing efficiency from processes they've performed or led hundreds of times in the past.  Only now the price of inefficiency is borne by the firm.  And if the client is dissatisfied, then there are growing alternatives, and these organizations are all about efficiency.  (Interestingly, this post places some of the blame on law school training, which teaches lawyers how to pull an all-nighter but not how to manage a long-term project!)

Responsiveness/Communication - Many lawyers read this as speedy response times and 24/7 accessibility.  Of course there are clients who define responsiveness in this manner, but as often, probably more often, the better definition would be keeping me apprised of progress so there are no surprises, and so I can develop contingency plans when the unexpected occurs. This also means providing clear updates rather than confusing obfuscation.  Relying on the all-too-often inscrutable notes entered by each lawyer at time entry to inform the client of the project's status is insufficient.  Reduce the noise to a simple dashboard report, reflecting progress on key deliverables and highlighting questions and potential challenges.

Predictable Cost/Budgeting Skills - Hand in hand with project management skills are budgeting skills.  Imagine in our construction scenario above that two general contractors are competing to win the project.  One relies on long experience to provide forecasts and budgets within certain ranges and expectations, while the other claims similar experience but suggests that complex construction projects are too variable to pin down a forecast or adhere to a budget.  Who wins the work?  It's that simple.  Law firms that develop some rigor in providing forecasts and budgets will have a competitive advantage over the firms clinging to the "it's too uncertain to know" school, and they will have a greater opportunity to employ profitable alternative fee arrangements.  Sound financial management isn't the same as trying to win new work by lowering rates.  As many law firms have learned, at times the client is as concerned about predictability as total cost, so those firms that reduce rates when what's really needed is more predictability are leaving revenue on the table.

Results Delivered/Execution - Many lawyers read this as achieving a certain outcome, such as winning in litigation or closing the deal.  Business people often define the outcomes differently, based on their tolerance for risk and their business objectives.  Is the goal to launch the new product in a timely manner and generate new revenue streams, or is it better to delay the launch until every potential avenue for loss of IP protection can be identified and addressed?  Is the goal to win the suit, or to balance litigation and public relations costs with winning?  It's critical that law firms know explicitly what outcome is desired, and orient their actions to that outcome.  Sometimes the best choice is to do nothing.  Sometimes business people knowingly choose paths that expose them to legal risk, but they accept risk in every decision.  The role of the lawyer is to inform these decisions, to help quantify the costs to the business of the various viable approaches.

There are some understandable concerns with the ACC Value Index.  For example, at present, law firms do not have the opportunity to view any client feedback, though that ability will come in due course -- else the exercise would be somewhat ineffective in changing the behavior of those law firms rated poorly.  The anonymity of the program may lead some law firms to dismiss negative feedback.  And there will be some uncertainty as to what constitutes excellent rather than mediocre performance.  The age old questions "What are we doing well?" and "What can we improve?" have found a new locale but the fundamentals remain the same.  It's now more important than ever before to implement a structured and permanent client feedback program that starts by asking the questions relevant to the ACC Value Index, but delves more deeply into areas of particular strategic importance to the firm.  Only by knowing how clients feel can we improve.  And the best way to learn is to ask, something too few firms do according to numerous studies.  If simply asking can be a differentiator, just imagine the loyalty a law firm can engender by actually acting upon client feedback!  So why wait?

For additional insights into the Value Index, see this post by Fred Krebs, ACC President.

Is Pro Bono At Risk?

I recently had the good fortune to spend time with the Association of Pro Bono Counsel (APBCo), the organization whose members are charged with organizing and promoting pro bono efforts, primarily in large law firms.  At their day-long annual conference, my colleague Pam Woldow and I discussed the recent teeth-rattling changes taking place in the legal marketplace, and more specifically, what it means for pro bono efforts. First, let me say that after having spent countless hours over the years with legal marketers -- by and large a sunny, lively, high-energy and positive demographic -- I was pleasantly surprised to find pro bono counsel to be as lively and engaging, with a deep passion for pro bono and a deep belief that large law firms can be leaders of change.  I very much enjoyed the positive interaction and the focus on improvement during a time when sessions like this run the risk of turning to melancholy and frustration.

Speaking of risk, the fundamental question presented is whether pro bono is at risk.  Pro bono efforts, or offering free legal advice to those unable to pay, is an honorable practice well-suited to the community-minded attitude taken by so many large law firms.  But as recent events have unquestionably demonstrated, large law firms are businesses too.  And thus isn't the notion of deploying valuable and now limited resources, e.g., associates, to non-billable work a quaint notion at best, and irresponsible or even willful negligence?

In a word, no.

The traditional obstacles to promoting pro bono within a large law firm environment have usually focused more on practical matters rather than desire.  No matter how many words I write about the need to embrace better business practices, I hope I never see the day when lawyers stop acting out of a sense of duty to their community and profession and cease pro bono activities because it's not profitable.  Thankfully, large law firms by and large haven't taken this tone in the past, and I think with proper expectation setting, it won't be a problem in the future.

Associates on the partner track, or at least those hoping to maximize bonuses, struggle to maintain the proper balance between billable hours and other duties, such as professional development, pro bono and client development.  Through long effort, pro bono coordinators have succeeded in achieving parity between an hour spent on pro bono activities and an hour of billable client work.  In other words, within reason spending time on a pro bono case counts toward billable hour quotas.

The challenges now come from many fronts:  with a substantial increase in alternative fee arrangements, reward and recognition systems based on billable hours will need updating, and the pro bono lobby may not have as strong a voice as they did when times were flush.  The occasional partner who railed against the opportunity cost of diverting a valued associate away from client work may have an audience now, when associates are in shorter supply.

But these challenges also present opportunities.  Partners who have raised the opportunity cost argument tend to ignore the fact that defining a law firm's revenue potential under a billable hour model, e.g., the number of timekeepers multiplied by the billable hour rate multiplied by working hours available, imposes a greater opportunity cost than a law firm offering alternative fee arrangements.  Simple math suggests that if I can negotiate sufficient simultaneous alternative fee projects which generate fees regardless of the time invested, I have the potential to generate greater revenues than those with a self-imposed ceiling.  Furthermore, adopting tactics to improve efficiency so we can take on more alternative fee projects will lower our costs and improve profitability.  This isn't a rant against the billable hour (others are more eloquent on the topic than I) but an observation that a movement away from the billable hour doesn't necessarily lead to lower revenues and profits.

In fact, in light of the ACC/Serengeti survey released at the Association of Corporate Counsel's annual meeting, which declared that controlling outside counsel spend is the primary concern of in-house counsel, the reality is that moving away from the billable hour and toward more efficient operating models is now a requirement for all but a handful of firms.  And no, odds are that despite your innate pride in your firm, yours is not in that handful.

As clients demand efficiency, there are other downstream impacts.  For example, partners can't overstaff projects with associates-in-training, simultaneously delivering an education and generating fee income, compliments of the client.  This has led to an unprecedented number of associate layoffs, and a reversal of the impressive pay packages offered to Biglaw associates.  Equally impacted, but less newsworthy, is the loss of training opportnity for the associates who remain.  Will large law firms adopt the UK model, where an investment in PSLs (professional support lawyers) is far more common?  Will they return to the guild approach of apprenticeship?  Most firms will not make such revolutionary changes, at least not right away.

Cue pro bono, entering stage left.

In what other venue might an associate obtain an opportunity to cross-examine a hostile witness, learn how to navigate the endless bureauracy of a government agency, make decisions on the fly that, in some cases, have real life or death consequences?  The answer is, of course, pro bono.  To be clear, most pro bono work is less than glamorous, and you can only derive so much experience from helping a senior citizen file a social security disability claim.  But such as it is, this experience now has to come from somewhere.

As the business challenges of large law make headlines, some have predicted the end to the quality of life concern, or to the need for law firm diversity, or to the need for pro bono.  After all, with fewer associates we can only rely on those who are willing to pull all-nighters and stay on the treadmill that leads to the partner track, even if only a fraction will actually make partner.  And with clients focused on cost, won't the client be more interested in our fee than in how many women partners we have, or how many hours we devoted to pro bono last year?  Perhaps.  But I doubt it.  The lesson of recent events is that corporate counsel must accept that the legal function is like any other, and must adopt the practices of the other functions.  So if the corporation has a requirement for diversity in its suppliers, then despite the complications such a constraint imposes on the selection of outside counsel, the GC must find an outside law firm that has both the proper diversity footprint and an acceptable fee range.  Managing multiple and often competing constraints is what leaders of businesses do all day, every day.

So if pro bono, like diversity, will persist as a requirement in coming RFPs, why do so few law firms take the time to establish a well-oiled process for maintaining a record of pro bono achievement?  It's not an uncommon occurrence in law firms for the various functions to, shall we say, not get along famously.  Far too often, for example, the IT organization doesn't appreciate the marketing department acquiring new technology.  The Marketing department doesn't appreciate being asked to run events for the Diversity team.  The pro bono team promotes the firm's efforts without the assistance of the firm's public relations specialists, and so on.  This must end.  A holistic approach is needed.

My advice to pro bono counsel is to embrace the opportunity to help inform the conversation as compensation systems come under review in this alternative fee world.  Ensure that all marketers involved in responding to an RFP or otherwise promoting the firm's accomplishments have an up-to-the-minute scorecard of the firm's pro bono activities.  Ensure that the professional development team, what's left of them, has full insight into the sorts of experiences the associates are gaining in their pro bono efforts, which could perhaps become certified for professional development credit.  Engage the CFO in terms that she or he can understand about the quantitative impact of pro bono:  How many RFPs required a pro bono scorecard?  What was the value of these projects?  How well do pro bono-experienced associates perform in client satisfaction interviews (you do these, right?) as compared to associates who have no pro bono experience?  Which clients and targets, specifically, have a pro bono policy for their outside counsel suppliers, and which really mean it? If you're not sure, ask them.

I am a fan of pro bono and find it to be one of the most appealing aspects of the legal profession, and even as I counsel law firm leaders to become better business people, I do not want to see efforts like this fall to the wayside in a quest for profits.  I am now a fan of pro bono counsel, who have the passion, energy and desire to accomplish their mission in these challenging times.  If you don't know your pro bono coordinator in your firm, drop in and say hello.  I assure you, you'll be pleasantly surprised by how capable and willing they are to engage in the improvement of this profession.

Update: I just learned that this is National Pro Bono Celebration week.  Who knew?!  Several notable names in the legal community have spoken up in support of pro bono, even during these trying times.

No Sleep For You!

Legal tabloid Above the Law recently published an email from a Biglaw partner to all associates, admonishing them to check their email every hour unless "asleep, in court or in a tunnel."  The partner goes on to declare that "all of our clients expect you to be checking your emails often."  The back story is that a partner emailed a new associate a request to send a fax to "a relatively new client whom we were trying to impress" but the associate had left for the day and didn't attend to the task until returning in the morning.  The partner closes the lesson by reporting that "in this case it was no harm no foul, but I think we can all imagine scenarios when this could be a disaster." As the Association of Corporate Counsel annual conference winds down, and our RSS readers are deluged with reports of how in-house counsel demands are increasing, placing unprecedented pressure on outside counsel, it might be helpful to once again reiterate a fundamental truth in client service:  speed does not equal responsiveness.

Now I don't know the back story behind the back story.  Perhaps the client was in his office expecting a late night draft, but the "no harm no foul" comment suggests otherwise.  So let me superimpose my own experience and propose a likely fact pattern:  the partner believes that impressing a client requires speedy turnaround of work product, so he requested a late-night fax to the client's office which would greet him or her upon arrival in the morning, demonstrating the firm's round-the-clock responsiveness to his needs.  Trouble is, relying on a fax to send this message is a bit like sending the finest horseman to inform the townspeople of the latest Amber Alert.  Why not send an email if speed is your central concern?

But of more interest to me is the partner's assumption that speed is impressive.  Clients regularly complain about a law firm's lack of communication and responsiveness.  Translating this as a desire for speed is not uncommon.  However, what it often calls for is setting proper expectations, and then meeting (or exceeding) the expectations.  Given our presumed fact pattern above, if the client was advised that a draft memo would be on his or her desk at 9 AM the following morning, and it was, then the expectation was met.  Exceeding this expectation is admirable, but if the client wasn't in the office late at night to receive the fax then the impact of the speedy response is wasted.

Impressing a client is all about understanding his needs, setting proper expectations for what it takes -- how long, how much, how difficult -- to address these needs, then fulfilling the expectations you've established.  Obviously things change, and often in thorny deals and litigation time is of the essence.  So when lightning-fast speed is a need, build it into the expectations.  But be careful about demonstrating round-the-clock prowess to a client who is price-sensitive, because the first thought that will leap to mind may be, "We agreed on tomorrow morning.  I'm pleased that you sent a fax to my (empty) office 12 hours early, but I hope that any extra effort taken to beat the agreed-upon deadline won't be reflected on my invoice."

Clients can be confusing that way.  This is why we ask questions, set proper expectations and then use these as guidelines for delivering exceptional service.  Substituting our own definition of exceptional service is a short-cut that we sometimes can make only once in today's competitive market.