This is not a PEP-talk (summer Long Read)

After 25 years symbiotically-bonded to the legal profession, I’m afraid I groan inwardly when I hear talk of the latest revelations of law firm PEP (Profits Per Equity Partner – as if that TLA really needs spelling out these days to anyone in law).

We are, of course, approaching the annual Festival of Pants-Down, where everyone in the legal profession finds out what everyone else is claiming what they’re earning, via not just one but three legal market publications here in the UK.

A quarter of a century spent listening to lawyers obsess – or pretend not to be obsessing – about what everyone else is supposed to be earning in a given year is enough to send anyone demented, and I’m afraid I may finally have cracked.

If you are thick enough to calibrate your sense of self-worth around your perception of what the Jones’s are up to over the garden fence, then you really need to take a look in the mirror and ask yourself what your life is all about.

And much as many lawyers might protest they don’t really care, or don’t really look at the stated figures, or whatever, we all know that’s a fetid pile of dingo’s kidneys, as the dear-departed Douglas Adams might have said.

But then BigLaw lawyers and the cash they earn from their – frankly – crazy work schedules have long-since detached from the reality of most of us mere mortals.

I recall a conversation with a friend – happy with his life but on average earnings – about a dinner he’d had one evening with husband and wife law firm partners whose monthly disposable income – disposable mind you, disposable, let’s keep that word front-of-mind for a minute – was £90,000. Yes, £90,000 a month. After tax and all the bills they had to pay. Over twenty grand a week to play with.

And yet, they spent the whole evening at one of London’s finest restaurants arguing, bickering, bitching, back-biting and whining to my friend and his wife after one of them had gotten bored on Friday afternoon and decided to do a bit of online shopping. I say “a bit”, but how exactly one spends £40,000 in an afternoon online is a little above my social pay-grade.

This kind of behaviour, and crass discussion in front of those less ‘blessed’, is why Trump is in the White House and the UK is about to commit social and economic suicide, but I digress.

Lawyers’ obsession with PEP dates back to the time august legal monthly Legal Business – following in the footsteps of its then-dance partner The American Lawyer – decided to start publishing the results of exhaustive anonymous research among law firm partners about how much they earned, mystifying pretty much everyone, especially the accountants, who have never had to face the same scrutiny.

And boy did it work wonders. Lawyers were fascinated. Beyond fascinated.

Weekly publications The Lawyer and then Legal Week duly followed suit, each bringing new metrics, new angles, new nuances to the party. And hasn’t it been fun? It certainly was to research, and the effect it had on the legal market has been game-changing. PEP – in particular – has become the thing to aim for, the benchmark, the Blue Riband, raising it annually the sine qua non of managing partner survival. Nudging it above the £300k/£400k/£500k mark became the legal market equivalent of pricing things at £29.99, and in the upper echelons, £1.5m has become the new Olympus.

Of course, we all know PEP is a lie. The average (“public”) figure is manipulated, often bears little relationship to partner drawings and can be wilfully misleading as to the financial health of the organisation. In fairness to the press, they have, variously, tried to address this with the addition of the new metrics and exhortations to look beyond the headlines (eg the Lawyer and Earnings Per Partner), but the PEP genie (efreet, more like) is out of the bottle, and it ain’t going back in.

As useful as it has been to law firm chief execs, managing partners and finance directors to be able to set targets relative to their perceived competition, and to learn what other firms are doing, I have concerns about the effects of this annual circus on the psychology of lawyers and therefore on the psychology – and personality – of the profession itself.

And it is an important issue, beyond the profession. Lawyers, lest we not forget, rule the world. The US – by any measure still the only world superpower – is governed by a Congress dominated by lawyers, and recent presidents (Obama, Clinton) have been lawyers. Here in the UK, the two most successful prime ministers in modern times (Thatcher, Blair) have been lawyers.

For me, the real global struggle has never been Right vs Left, Capitalism vs Communism, but Law vs Unlaw (Chaos, if you will, though being a lifelong Dungeons & Dragons devotee, that has other connotations…)

Law must win that struggle, and it’s therefore vitally important who lawyers are and what they think of themselves.

If the essential measure of self-worth for the people who are really running the world is the amount of money they are making compared to their peers, then we may be in trouble.

And, let us not forget, what lawyers make is vastly inferior to the amount the truly rich are coining, compounding still further the lawyer’s sense of angst about burning their entire life away in order to “compete internationally” or whatever they have to tell themselves to justify some of the most aberrant working patterns on the planet (go on, deny it if you will…), and reinforcing the subservient mindset which apparently compels the delivery of such acrobatic levels of service in the first place.

It’s not necessary. Not. Necessary. Or, as one partner friend once related: “when one of my clients told me my team would need to work on Christmas Day in order to get the deal started as soon as possible, I told him to f*** off.”

But let’s not get bogged down comparing lawyers with other businesspeople when we have enough on our hands comparing lawyers with lawyers.

In hermetically-sealed markets, the wars for talent are always civil wars. Brother on Brother. Blues vs Grays. You dig me yet?

I love this Henry Ford quotation: “If money is your hope for independence you will never have it. The only real security that a man will have in this world is a reserve of knowledge, experience, and ability.”

The reason I love it is because it illustrates exactly the problem with the idolatry of PEP, and exactly the problem with the current direction of travel of the legal profession.

When I was a recruiter I acted for plenty of partners earning north of Generous Lottery Win every year who were miserable as hell because they had allowed themselves to become enslaved to PEP and, when their gravy train hit the buffers, found that they did not possess enough knowledge, experience or ability to continue earning the amount of money their lifestyle now demanded. #firstworldproblems #heartbleeds etc

The Magic Circle firms now engaged in a desperate battle to win a war they can’t win (see my blogs, passim) are busy bending, shaping, manipulating their financial structures in order to produce a PEP figure they have determined is a market necessity, fundamental to their ability to recruit and retain the best talent and…to do what, exactly? Are they happier as a result? Do they even think in those terms?

Happy firms – few and far between – are those firms who understand that earning healthy profit should be a function of Ford’s security triumvirate; happy lawyers are those who understand that earnings may ebb and flow from year to year, but that enriching the fundamentals – both for themselves and for the firm – is the most important thing in the long run.

As I look back over 25 years glued to the UK legal profession, I have seen PEP rise to dizzying heights, yet the happiness, contentment, fulfilment and sense of personal enrichment of lawyers, certainly in my circle, has not grown in tandem; in many cases, the reverse has occurred.

Over that time, some nice firms have fallen by the wayside, usually sliding into a gentle but ultimately non-enriching merger, and the nice partners have gone on being nice, usually disappearing from view quite quickly, caught in the manic undertow of the annual PEP frenzy.

The really nasty firms, firms whose partners would break down crying in meetings with me, who would ring me with tales of despicable behaviour on the part of other partners, tales of callous, mean-spirited, vile, arrogant and spiteful individuals, have gone out of business ignominiously, for the most part, collapsing like slabs of rotting meat sloughing off the side of a dead horse. Good riddance, though I wonder whether their inherent toxicity has travelled to those firms ‘fortunate’ enough to pick from these carcasses.

The PEP obsession did not create nasty firms, but whereas most of the truly unreconstructed firms have been swept aside by the progressive leavening of society as a whole, PEP has revealed the inheritors of the nasty mantle, who are nasty in a colder, harder yet still fundamentally antisocial way.

The PEP totem is planted in the ground of daily billing targets, illuminated by the light of screensavers which warn fee-earners not to leave the office until they have recorded ‘enough’ hours. It surrounds itself with the pastel shields of diversity committees and health advisors, rebadges HR as ‘talent management’ and hires workspace-design consultants and installs pink noise generators, but the truth seeps out here and there: sixteen weeks without a day off (including weekends); equity partners sacked on the first day of sabbatical; women logging on to the firm system the day after giving birth to deal with an “urgent” client matter; every deal commencement meeting in one Projects department fixed for Saturday morning, despite protestations from two mothers in the team; endless expensive holidays cancelled at the last minute, anniversaries, birthdays and weddings missed, sacrificed on the altar of ‘client service’. And on. And on. And on.

Yeah, you can punt the “oh well, it’s their choice” argument at me, and you’d be right. But that doesn’t answer the main point; whether the world’s ruling clique is at the behest of a self-created, self-perpetuating, self-flagellating monster, and what might be the consequences for individuals and, indeed, society in general, of such a pernicious obsession.

I’ve spent 25 years watching it, listening, thinking and I still don’t have any answers, only questions.

Never having toked from the PEP-crackpipe myself, I can’t say for sure whether any of this is right, but reflecting on it after 25 years of observation, for sure it’s not made me any happier either.

 

The world’s in flux. Lawyers need to man* up.

Sometimes I think lawyers forget what it is they actually do. I think it’s time for them to remember.

We live in a world where opinion polls can no longer predict elections. Societies divide and reform along unfamiliar lines and technology has created a yawning gap between the generations. The future has never been less predictable.

Against this backdrop of dysfunction, disarray and repatterning, Law is busily being reduced to a banal service-processing industry, lawyers apparently just marking time until Watson takes over.

Lawyers have largely failed to push back on the reductio ad processum – please forgive my Latin, alas I went to a Comprehensive School in the 1970s, and linguistic foundation for the unwashed masses went the way of free school milk – being forced on them by various legal services ‘gurus’, crusading in-house lawyers and technology companies determined to reduce law to Lego (nb. other plastic construction bricks are available…).

The slide of the legal profession into an ‘industry’ which increasingly defines itself by how many Pez-pellets of legal services utilisation it can profitably extrude is made worse, in my humble opinion, by the lionising of “the client” in the legal press and endless mawkish blogs.

This noble creature, a heroic arbiter possessed of powers to sense the “quality” and “value” of legal services, has attained an exalted status at conferences, around tables, behind lecterns and upon podia the length and breadth of the land.

Of course clients are important. Without them, you wouldn’t exist. They pay your bills. But just because they do doesn’t anoint them either with penetrating wisdom, per se, or with some kind of moral validity that the private practice lawyer (my client) lacks.

I mean, I’m sure that the developer of the next Angry Birds or the makers of silicon pectoral implants for men are adding meaningfully to the sum total of human endeavour but really… Really?

We are constantly told that clients want it faster. Clients want it better. Clients want it cheaper. Well, who doesn’t? I’d love to go into M&S every week and find everything cheaper when I do, but that’s not quite how the world works, is it?

There is even a theory that law firms themselves are obsolete, and are doomed to be replaced by the legal departments of their clients. God save us. Food companies already decide just how sick we will get from the amount of sugar and salt they sneak into our food. Car companies lie to us about emissions. Pharmaceutical companies bury research they don’t like the look of. The pursuit of profit neither signals virtue nor compels efficiency.

A tiny, tiny number of general counsel in big corporate organisations are doing amazing work with big data and outcomes and all the other things required to tie down slippery concepts like “quality” and “value”, but they are the exception, not the rule, and, meanwhile, the headlong pursuit of process poses a systemic risk to Law itself.

Law is not like other services. It is not like accounting (the “bean-counters” have their own detractors). It is not something which could be replaced by something else or be allowed to die off completely.

Oil rig explodes? Law. Poisoned water supply? Law. Territorial dispute? Law. Make sure you don’t get screwed on how this company works? Law. Promise you’d pay me this and you haven’t? Law. Want access to the kids? Law.

Law ultimately governs all the interactions between human beings in a civilised society. It is the backstop where all else has failed. It not only covers all the bases in disputes and non-disputes, it is the memory of society and of business, where governments and companies come and go.

The oldest English law firms have existed for longer than any of the political parties in this country, longer than virtually all of the modern states in the developed world, never mind the mayflies of the business world. Think of how important that is; the continuous existence of organisations across centuries of economic and political development. Yes, that.

Lawyers are the guardians of this system, the nearest thing modern societies have to the shaman. Break that, it’s not coming back.

And yet, before you run away with the idea that I have a head filled with wild romantic notions about hero lawyers, well I don’t.

I’ve been around lawyers for 25 years and learned that far too many of them are, well, not to put too fine a point on it, a bit crap. And a lot of the ones who aren’t crap are deeply average, and hence whatever they’re paid for doing whatever they do is too much.

Alas, like any guild, the legal profession is hobbled by the very thing which protects and enriches it. There is simply not enough reason for lawyers not to be average, and so – in the absence of external disruptors – a drive for process improvement and the ‘power of the client’ are doing the job of scrunching up legal services and sifting out the crap. Or that’s the theory.

But if law firms allow themselves to be degraded to the point where there are no large, well-resourced homes for true expert practitioners, then law will become just another commodity supplied and consumed by big business.

And in that scenario, just what happens to small businesses who can’t afford in-house legal departments? Where do they go for advice if law has effectively been dismantled and picked up by the big boys?

(You may think this is fanciful; but the narrative of BigLaw doom is silkily-persuasive).

Lawyers need to “man”* up. They need to remember their purpose, what they are actually there for, but without the arrogance that says “I can do this without having to explain why or how to you, lesser mortal”. Those days are gone.

They need to push back on people saying they should be cheaper not by bulling it out, but by working out what value they add and demonstrating it. And they should resist the idea that they are somehow less valid than the developer of a new app allowing your child to experience the thrill of running their own pizza restaurant, or the makers of new flavours of nicotine-laced water vapour or any number of ridiculous job creation schemes propped up by that most insidious of public subsidies, the Limited Company.

Lawyers will be the reason the tangerine toddler mysteriously elected to be Leader of the Free World will not get to turn the US into a banana republic. Lawyers will be the sanity in the Brexit process. Lawyers will ensure the contractors and architects and legislators involved in the Grenfell Tower fire will not get off the hook.

Lawyers make sure you don’t f*** up, and if you do, get you out of it or give you the framework to defend yourself against those who would cast you down. Price that up, why don’t you, procurement person? (sidenote: who’d be a procurement manager? I’d rather be picking litter off the highway).

Lawyers don’t charge “too much”, because the people who are buying the service all too often have no idea what they’re buying; but in order to avoid being ground into the dust of history, lawyers need to find new ways of telling clients why it costs what it does, new ways to demonstrate their value not just on the day-to-day stuff but also for those Black Swan moments.

And in the meantime, lawyers need to remember who they are. The last bulwark before human civilisation melts into chaos.

*with apologies to the significant proportion of the legal profession who are women and who are usually possessed of more cojones than most of their male counterparts! 

London bikes

Valueless values

As regular readers of my blog will know, there are a variety of issues which, not to put too fine a point on it, really grind my gears. I have enough hobby horses to stock a small cavalry regiment.

The subject of Values – or rather, I should say, corporate values, those statements of something-or-other that law firms feel they should have on their website – is in the vanguard of that little regiment of little horses.

My colleague Jamie White – creative director of Blackbridge Communications, and, for my money, the market-expert on law firm branding – and I once put various sets of these values in front of HR and marketing directors at a seminar, inviting the participants to guess which Magic Circle law firms they pertained to. We were unsurprised when nobody could guess. We were slightly surprised that some of those people failed to pin the values to their own firms.

This does not, in my view, impugn the professionalism of those individuals. But it does demonstrate that the ‘values’ in question were so generic that they were, indeed, and ironically, valueless.

ValuesI would love to see a firm have the cojones to put a statement on its website, in the Values section, along the lines of: “we were going to pay a consultant £40,000 to help us work out our values, but we decided to save the money and just say that we’re really, really good lawyers who care about your business”.

Actually, that would be just as pointless, not least because that statement still exposes what I think is a fundamental gap in values-based thinking: the difference between truth and aspiration.

The cleverest value-statements recognise this. They talk about striving for excellence, rather than being it, encouraginginnovation rather than demonstrating it, pursuing commercial solutions rather than always delivering them.

This is clever because it recognises that the law firm is a living, breathing thing that develops organically, and is rarely, if ever, 100% anything at anything. However, it also underlines that the values-statements are just that, statements. They correspond to the service a client will get from the law firm only insofar as every member of the firm – partner, associate, manager, assistant, secretary etc – believes it and lives it in every interaction.

The reality is that this is far from the case.

For instance, one major firm – I won’t say which one for reasons which will become obvious – has ‘innovation’ as one of its values, as many do. I recall talking to a client at a major investment bank whose experience of the firm was quite the opposite. He related having to repeatedly give the firm’s tax team documents provided by his accountants in order to prod them into developing the kind of innovative thinking they claim is embedded in their DNA. This is not an isolated example. It does not mean the firm is not innovative – it might or might not be – but this client scoffed openly at the idea as a result of his direct experience.

Managing this kind of reaction over dozens of practice areas and hundreds of partners is clearly impossible, but this is a firm which, while it has a reputation for excellence, never really struck me as being that innovative. Its website, for instance, is not particularly innovative, it does not seem to offer any particularly innovative services or interesting resources. If it wasn’t for the firm telling me it is innovative, I wouldn’t leave with that impression. Certainly, numerous conversations with its clients over the years have not convinced me of the validity of the claim. I can only surmise that the firm either thinks it is innovative – in which case I would ask against what benchmark, and how is this tested and retested – or, more likely, it wants to be regarded as innovative.

I would say that the firm’s feedback-response system was lacking in this case. The first time a client prods you when you have fallen down on one of your values is the time for self-examination, discussion, must-do-better. You don’t let it happen time after time.

In the maelstrom of corporate values, most of the useful signifiers – quality, excellence, commercial – have been so devalued by contrary experiences that I would doubt any client or prospective client of any law firm believes any of it. At £300, or £400 or £800 an hour – substantially above what pretty much any other tradesman charges for their time – most clients would expect quality and excellence, or striving for either, as a given. Commercial? What does that mean? As opposed to ‘uncommercial’, I guess, which is, bizarrely, the term most often applied to lawyers in my hundreds upon hundreds of conversations with clients over the years.

So, if that is the problem, what is the solution?

Well, before I say anything else, I’m quite happy to take £40,000 of your money to give you my in-depth thoughts on values! But on the basis you might want something a little more digestible, here goes…

First off, work out what it is you are FOR. What is the purpose of your organisation?

Most law firms I know do not have a ready answer for this. In fact, at a dinner with one client recently, I asked a group of partners what their purpose was. “To make money,” said one. “Profit,” said another, nodding. They all felt likewise. Similarly, in conversation with a law firm managing partner at a Top 30 firm last year, I asked what his strategy was. “To make more money,” he said. That would be an aim, not a strategy, by the way.

I contrast this with business outside the bubble that is law.

IHG, the hotels group, used to make most of its money through buying and selling hotels. Then, it took a long, hard look at itself and asked itself whether it really wanted to be a property company. No, it decided, it wanted to ‘Create Great Hotels Guests Love’. For IHG, profit became about delighting the customer, rather than making a turn on buying and selling bits of real estate. And so it sold virtually all of its nearly 5,000 hotels and now manages or franchises them, with a view to creating absolutely the best customer experience.

Or take Apple. Or Google. Or Pixar. Or Ferrari.

All of these companies simply ooze purpose. Yes, they want to achieve great shareholder returns but they inspire in their customers a loyalty, a faith, in fact, which goes beyond lining their pockets.

Ah yes, you might say, but these are not professional services organisations. It’s easy with products, more difficult with services.

To which I say, take professional services giant EY, one of the ‘Big Four’. Its purpose is defined as ‘Building a Better Working World’, rather than ‘Making As Much Money As Possible’.

You may say, “what on earth does that mean?”, but frankly any fool can see that it can mean any number of things. What is very clever about it, for me, is that it inspires thinking about what it might mean, ideas about how its people might put this into practice. It gives EY a banner to march under, a direction, a vision, a purpose.

I don’t think many law firms have this. I think they have become sunk in a never-ending game of relativistic PEP-comparison – “mine’s bigger than yours” – and in the process reduced a short-term business to a mayfly one. Talking to a managing partner friend of mine the other day, he opined that it is “impossible” in the law to invest for the medium-term, never mind the longer-term. “Oh, you can have the best intentions, to put aside a few million to invest in this or that, but when it comes to the crunch, if PEP looks as if it’s going to be a little bit off, you come under the most enormous pressure to manage to that year’s draw”. It is not the first time I have heard this, nor will it be the last, and it illuminates perfectly the strategy of the Top 30 managing partner I mentioned earlier – to make more money.

I guess there is nothing wrong with ‘Making More Money’ as a value. It is concrete, measurable, can be very specific. And it’s brutally honest.

But as Henry Ford said, “a business that makes nothing but money is a poor business”.

The poverty Ford spoke of is a poverty of the soul. It is something that many companies have already made the shift away from, whether they make soap powder or sell consulting services and they see business-sustainability in that shift; because the younger generation simply do not want to work for companies which do nothing but make money.

The law, as with many things, seems late to grasp this idea. But the more conversations I have with 40-something and 50-something lawyers who seem to want something more out of life, the more convinced I am that if law firms did more work on Purpose, and less on Values, the more of a future they would have.