Proximate Cause and Law Firm Dissolution

March 26, 2009 | Filed Under Legal Deflation, Law Firm Trends

Another week, another large law firm enters dissolution. This time, Wolf Block.

When you see a headline like this, it’s easy to link the bad economy to the news, and just move on reading. But sometimes the truth is a bit more complex.

In the case of Wolf Block, we have some rare insight here, from writer Chris Mondics of the Philadelphia Inquirer.

Mr. Mondics has done the reporting and takes the time to trace leadership changes at Wolf Block over the years, how this affected firm culture, and what this all meant when the economy started to go south in a big way. Here’s an excerpt:

For the fact is that Wolf Block’s internal dissension was so great, and the damage to its reputation so pervasive, it never had a chance to recover.

Getting the right mix of people by recruitment and cultivating a reputation as a place where people can be proud to work and where partners refer clients to other lawyers rather than jealously hoard them, is a process that can take decades. It can fall apart with breathtaking speed.

And then the knockout punch, something I think has happened to many firms over the years. Fundamental problems are obscured by a good economy, with increasing work and rates:

The firm hobbled along in a weakened state and even grew, buoyed by the exceptionally robust legal market of the last few years.

But when the economy soured, and the firm’s banker sought to tighten the terms of its line of credit, an essential economic backstop for many law firms, there wasn’t enough bench strength to see it through.

It’s really a great job by Mr. Mondics, and it likely highlights something we will see play out over the next year or two. You can’t really look at firm size, or revenues, or (perhaps) even profits to determine a firm’s inner strength.

So the proximate cause of the Wolf Block dissolution is a unique one. Maybe Tolstoy said it best (stretching the metaphor that a firm can be like a family):

Happy families are all alike; every unhappy family is unhappy in its own way.

(About the firm Anna, Karenina & Associates?)

Interview on Reducing Legal Costs

March 23, 2009 | Filed Under Cost Control

I will be appearing tomorrow evening (24 March 2009 at 8:00 p.m. EDT) with in-house lawyer and author Hanna Hasl-Kelchner on her “Ask the No-Nonsense Lawyer” series.

More details about the series and the teleseminar is here, and the “ask” page for the legal and client audience members to try to stump yours truly is here.

Hanna was an early pioneer on the Wired GC “Unglugged” podcast series.

Business Schools Get a B-

March 16, 2009 | Filed Under Managing, Compliance

The New York Times took a close look yesterday at business schools in light of the recent failure of many CEOs and senior executives who sported top-tier MBAs, wondering whether the current curriculum is up to the task.

A welcome bit of candor from one MBA school:

“It is so obvious that something big has failed,” said Ángel Cabrera, dean of the Thunderbird School of Global Management in Glendale, Ariz. “We can look the other way, but come on. The C.E.O.’s of those companies, those are people we used to brag about. We cannot say, ‘Well, it wasn’t our fault’ when there is such a systemic, widespread failure of leadership.”

That’s rather perceptive, since it gets at what the degree is supposed to confer mastery of: administration. Most companies now in the regulatory crosshairs probably needed less administration and more leadership.

You can’t have a debate without traveling down the Charles River:

Jay O. Light, the dean of Harvard Business School, argues that there have been imbalances both on campuses and in the economy. “We lived through an enormous extended period of financial good times, and people became less focused on risks and risk management and more focused on making money,” he said. “We need to move that focus back toward the center.”

I would disagree as most large companies have tremendous resources dedicated to managing risk. But unless the right people are overseeing it, and being hired to run it, all the theoretical risk models aren’t worth much. In addition, some of the smoking craters left by certain financial companies were from instruments designed to control risk that went sideways.

There could be some reason for optimism, although not for the business schools:

Some employers and recruiters also question the value of an M.B.A., and are telling young people they can get better training on the job than in business school. A growing number are setting up programs to help employees develop skills in-house.

That sounds good; perhaps down the road something similar will have to be done to plug the gap left in the training we received in law school.

William Lerach, Without Contingencies

March 6, 2009 | Filed Under Litigation, Regulation

The Daily Beast was able to sneak out a jailhouse letter from the former class-action lawyer William Lerach on how the government could go after alleged excessive compensation on Wall Street.

Even from behind bars, Mr. Lerach can be ingratiating at the highest levels: