On 21 October a new piece of academic research was published. It explains why human brains decreased in size approximately 3,000 years ago. The reduction in human brain size 3,000 years ago was unexpected. It is a surprising fact about humans today that our brains are smaller compared to the brains of our Pleistocene ancestors. Why our brains have reduced in size has always been a mystery for anthropologists. Brains use up a lot of energy, and smaller brains use less energy. The externalization of knowledge in human societies, thus needing less energy to store a lot of information as individuals, may have favored a decrease in brain size. The new study suggests that this decrease was due to increased reliance on collective intelligence, the idea that a group of people is smarter than the smartest person in the group. These findings strongly support our mantra of using Swarm Intelligence in law firms. Lawyers operate self-centered Today law firms are still very much organized around individuals (partners), making even integrated law firms effectively barely more than a group of individuals sharing an office and some other resources. Although most law firms will probably argue that for their firm this is not the case, reality is that partners are competing with each other for matters, clients and resources. Furthermore within a law firm there are silos: the practice groups and offices. Each silo has its own resources being primarily the associates, secretaries and paralegals. No need explaining that this commonly leads to poor use of the physical and intellectual resources. It frequently is the root-cause of under-utilization of fee-earners, and thus has a direct negative impact on a firm’s bottom line. This self-centered and silo-based organization model comes not only at the cost of sub-optimal profitability, it also under-utilizes the intellectual and creative capital of the firm. Today law firm clients are facing increasingly complex challenges that go well beyond the expertise of one individual practice area. Helping clients navigate these multidisciplinary issues will require not only breaking down the practice group silos to foster cooperation, but it will also require tapping into the collective intelligence, experience and creativity of the firm. We call this ‘swarm intelligence’. Only the firm collectively will be able to find answers and solutions, were no individual partner or lawyer can. Just like our ancestors 3000 years ago. The world around us is getting more complex by the day. Law firm clients are real-life companies and organizations that must work very hard on a daily basis to remain relevant in their market. Almost every industry is facing new challenges these days. The banking industry, which has been going steady for decades, is now facing negative interest rates, a much tighter regulatory framework and stiff competition from crypto currencies and new entrants into their market. The energy sector is seeing transformative challenges it has never seen before. The automotive sector is disrupted by electrification and supply chain issues, and so has every other private or public sector comparable challenges of their own. All this calls for strategic ‘out-of-the-box’ thinking. Just applying experience from the past doesn’t cut it. Helping clients navigate these challenges and help lead the way to new market opportunities and new business models, requires skills and creativity that goes well beyond what any individual alone could achieve. General Counsel were first to recognize this need. On countless occasions GC’s have voiced their desire to get broader input from their outside counsel. This is not about handling individual mandates, but about exploring new ways forward, which is crucial for any company's future existence. Towards a collaborative culture I would argue that both law firms and clients would benefit from a more collaborative culture. What if a client is not the client of an individual partner, but a client of the firm. Clients would benefit because they would always have the best lawyer on the job depending on experience, expertise and availability. This even implies that the required skill could change during the course of a matter. Something that requires a business savvy negotiator in the start could require a patient technical lawyer later in the process. Even default discussing the strategy in a particular matter between the partners will positively impact quality. Would you as a patient not prefer your doctor to discuss your case with his colleagues to obtain their insights and opinions? I would personally not put myself in the hands of a medic who does not consult his colleagues. Why then would this be different as it comes to lawyers? Swarm Intelligence will unlock the full potential The way in which law firms operate now is geared towards rewarding individual performance and individual responsibility. Today all but a few exceptions lack a structured exchange of knowledge, expertise, insights and innovative creativity. Partners have basically no tradition or incentive to truly collaborate and tap into the combined brains of all partners (and all others) in the firm. It is not hard to see that a firm that would truly succeed in ‘melting the brains’ would become unbeatable. Just imagine how powerful all that combined knowledge, skills and brainpower would be. Now it turns out that humans are evolutionary primed to cooperate, one could argue that working solo goes against human nature. Humans, lawyers no exception, are really smarter together. We would advise our clients to securely embed collaboration and applying Swarm Intelligence across the firm. If incorporated properly and embraced wholeheartedly, it is guaranteed to contribute to your firm’s future growth and success. Both your partners and your clients will thank you for it.

As law firms over the world are hurdling back to the office, familiar pre-pandemic patterns reemerge. For this article I will focus on internal meetings. Meetings absorb more time and drain morale more consistently than any other corporate activity. Before the pandemic law firm managers were spending an average of 23 hours a week in internal meetings. For the other partners numbers were not as high, but still mounted up over the year to about 8 hours a week on average. I’m not sure if working from home has reduced these numbers as having too many Teams or Zoom call has been the most widely heard complaint over the past year. Now that lawyers are gradually returning to the office there is perhaps a once in a lifetime opportunity to rethink and restructure the way we communicate. This is the time to get rid of about half of all meetings. Meetings drain morale and drain energy What percentage of internal meetings in your firm, did actually start on time? Probably not that many. It is a common annoyance. I know of law firms resorting to drastic measures such as locking the door once the meeting has started, to enforce more punctuality, but to no avail. For what percentage of meetings would you say that all attendees come well prepared? Again, probably not that many. Typically no one has read any material or even the agenda. They just come in, take a seat and wait for things to happen. Partners have typically not prepared for internal meetings, which makes discussions inefficient and also a bit pointless as arguments have not really been thought through and are mostly based on the gut feeling of the moment, or on what someone else has just said. What percentage of meetings you are requested to attend has a clear purpose? Often the objective of a meeting is totally unclear. The meeting exists just because it exists. This could be the monthly meeting of the IT committee, the International Committee, you name it. Any meeting without a clear objective such as information sharing and coordination, or finding a solution for a well defined problem, is bound to be a waste of time. The fact that partners are late for internal meetings and/or bring their laptop to work during the meeting are sure signs that those meetings are doing more harm than good and should be scrapped. Ted Lasso doesn’t do meetings There is a hugely popular series on Apple TV right now that is called Ted Lasso. Since it started airing in 2020, it has won more than 20 awards among which 4 Emmy awards. The shows’ main character is a small-time college football coach from Kansas, Ted Lasso, who is unexpectedly recruited to coach AFC Richmond, an English Premier League team, despite having no experience at all in association football. If you’re not familiar with this series, it’s definitively worth giving it a try. Despite having no experience whatsoever in coaching professional football, Ted Lasso soon turns out to be highly effective at it. He manages to turn a group of individuals who are, due to their egos and lack of communication, dysfunctional as a team, into a close knit team of champions. For someone with my background, it is striking how many similarities there are with managing the partners in a law firm. Rest assured that I am fully aware that Ted Lasso is fictional comedy, nevertheless there are perhaps lessons to be learned. For one, professional footballers do not spend a lot of time in meetings like law firm partners do. And yet, there is the need for a lot of communication, but these tend to be brief, focused and held in the locker room. This illustrates that there is no need for formal meeting in order to have a number of highly talented individuals to adopt and execute a strategy and work effectively together to achieve a pre-set goal. And, before I forget, professional football players are also not participating in an IT committee or an international committee. They leave that to the real professionals to deal with. Focus on what is essential When returning to the office, prioritize spending quality time together. Focus on social interaction that will reinforce the fabric of the team and the culture of the firm. Make transfer of knowledge and a creative meeting of minds a top priority. Above all, stop wasting valuable time on pointless meetings. It is advisable to create a high threshold for scheduling a meeting. Internal meetings can only be called for if there is a ‘business plan’ outlining what the purpose of the meeting, who should attend and why, and what information needs to be available and what topics should be covered. No purpose, no meeting. At the end of each meeting briefly evaluate if the objectives have been met and what could have been done better. No meetings that become recurring by default! The return to the office after the pandemic is perhaps a once in a lifetime opportunity to break with bad meeting habits, so grab the opportunity. You will save valuable time and boost morale and firm culture.

I guess all of you are familiar with the now infamous Elizabet Holmes, founder and former CEO of Theranos. In 2014, Ms. Holmes, then 30 years old, was on top of the world. Theranos was valued at $9bn. With a few drops of blood, Theranos promised that its Edison test could detect conditions such as cancer and diabetes quickly without the hassle of needles. Bigwigs from Henry Kissinger to general James Mattis sat on the board. But by 2015, the fabric unraveled, and Elizabeth Holmes was exposed as a fake. The technology she touted didn't work at all, and by 2018 the company she founded had collapsed. Right now Ms. Holmes, now 37, stands trial and faces up to 20 years in prison if found guilty of the 12 charges of fraud against her. Lance Wade, a partner at the Washington law firm Williams & Connolly, is the lead lawyer for Holmes. During the trial’s opening statements on Wednesday 8 September, he argued that “Failure is not a Crime” and with that he has a valid point: there is no disgrace in failing. The fragile Ego In life there is no such thing as zero-risk. In whatever we do, there will always be risks. Even if we do nothing, there is risk. Each individual will have their own level of risk acceptance that can be split-up into four distinct domains: personal economical risks, risk to people that are close to us, physical personal risks, and reputational personal risks. "Often our egos are standing in the way of greatness. Not because the ego is too strong, but too fragile" The risk to suffer a financial loss is generally more acceptable than endangering the ones that are close to you. The risk of personal injury also has a high threshold as many have an unhealthy lifestyle and navigate traffic. More vulnerable than our body is our ego. Some would rather lose a limb than widely be seen as a failure. Perhaps we need personal recognition more than anything else in life. Just look at the concept of ‘losing face’. In rare and extreme cases people rather commit suicide than publicly losing face. Tragically, I know an example of a Managing Partner who did just that. Failure is an option, not trying is not The fear of failing is closely connected to the fear of losing face. Our fragile egos cannot cope with the prospect of having to admit that we did not succeed. Or even worse being publicly mocked for our failure. We rather do nothing at all. I would say such sentiments are stronger among lawyers than in the rest of the population. Lawyers are risk adverse by nature. Their profession forces them to focus heavily on potential downsides and pitfalls, rather than on opportunities. As a consequence it can become very hard to convince lawyers to venture out into the unknown. This hesitance will be manifest on many different levels. Propose to organize a high-level event for CEO’s and board members and immediate fear will be that many will not show up and that the ones who do will therefor think it is a total failure. As a consequence no event is organized. Try to convince partners to improve the quality of their practice and they will fear that if they do not succeed in attracting better clients and mandates, they will have lost part of their existing workbook and end up loosing money or even being kicked out of the firm. The problem is that not doing something is in itself also an act. By not acting, one does not avoid risks, but on the contrary introduce new risks that are beyond control. If the world does not act against climate change, the climate will act against us. Not trying something, out of the fear of failure, could turn out to be a costly mistake. If you do what you did, you get what you got. We are in the business of helping law firms to improve their position in the market. Invariably this entails change. Unless something changes, everything will remain the same at best. Preferably change is fueled by ambition. Ambition to grow. Grow as a lawyer, be the best law firm, get the best clients, win the best mandates. It is here were we immediately run into a problem. Ambition inherently comes with the risk of failure. All change comes with the risk of failure. In the face of the ever so slight possibility of failure, partners back-out. That is one of the main reasons (there are others!) why so often a brilliant strategy never gets executed and implemented. What if we fail… Bolster your egos Our fragile egos are firmly standing in the way of realizing our full potential. If only we did all those things that we didn’t do because we were so afraid of possible failing. Failure is not a crime, not trying is. TGO Consulting has defined 7 Core Lawyer Development Dimensions©. Confidence is one of them. For any law firm that strives to improve its market position, time spent on developing their lawyers’ confidence is time well invested. Egos should become less fragile and personalities more robust. No partner should be blown away by negative comments from others. Adversity should be the fuel that drives determination. As Nietzsche put it: "Was uns nicht umbringt, macht uns stärker" (what doesn’t kill us, makes us stronger)

I am sure that none of you have failed to notice that Germany has held its general elections last Sunday. With that, there has come an end to the era of Frau Merkel. She has been Chancellor for so long that Sunday’s first time voters have never experienced another leader. Almost like the Brits have never experienced another monarch except Elizabeth II. Angela Merkel has no doubt earned her place in the leadership hall of fame. She has largely contributed to Europe’s growth and stability and led Germany to remain a global economic super power. And yet, whoever will be her successor will introduce significant policy changes. This in fact is the fate of most leaders. No matter how successful they have been, their successors will break with their strategies and policies and start with a clean slate. In business, as you know, every new CEO will reorganize and take a loss in their first year. In part to symbolize a break with their predecessor and in part to create a quick win after the first year. The king is dead, long live the king. For the outgoing leader this can be a brutal experience. Not only have they lost the power, the status and the amenities, but also all what they have worked for appears to be teared down. This would feel as a kick in the back. Bitter feelings towards successor Now that we are officially in Q4 for many law firms the time has come to elect new leadership. This means that a number of managing partners is now in the final 3 months of leading the firm. This, in combination with approaching year’s end and the impact of the pandemic will make many of them reflect on their achievements. You will be surprised to learn how many past managing partners we speak with, have become disappointed with their successors. Especially if the new leaderships abandon part of the policies and strategies they had introduced. This could feel as a late vote of no confidence or even a stab in the back. Some former managing partners have bitter feelings towards their successor. Let’s explore how to avoid ending up that way. A law firm is not a company The majority of publicly traded companies has a change in leadership at least once every 10 years. Rarely this is triggered by the retirement of the sitting CEO. In order to please their shareholders companies have to periodically shake things up to signal that they are still vital, innovative and relevant. Keep the same old leadership for too long and risk see the share price dwindle or falling prey to activist investors. Law firms are very much unlike publicly traded companies, as they bear more resemblance to a family owned business not constantly having to please the financial markets. This is not a weakness but a strength, as it allows for a more consistent long term strategy. From this perspective sudden changes in style and direction should be rare. So why does it happen so frequently anyway? Lack of vision, lack of agility, lack of communication Only ever having been practicing lawyers, newly appointed law firm leaders are not well prepared for their new leadership role. Could you imagine any other company hiring a CEO without any relevant management experience? Probably not. As a consequence a large percentage of law firm leaders merely acts as caretakers. They preserve more or less the status quo and attend to the nitty-gritty daily chores. They don’t break things, but they also don’t inspire. Lack of vision will ultimately turn against this type of managing partners as even if everything runs as smooth as it could, there still is among partners that yearning to grow, improve and innovate. No-one will ever thank you for being a good caretaker managing partner, so avoid being one. Lack of agility and adaptability is another reason why the next managing partner might drastically want to change course. As time progresses, markets change, society changes, the partnership changes, and so on. When things change, one needs to adapt. Adapt to meet new demands, but also to explore new opportunities. We have seen managing partners that started out as visionary leaders in their early days, but failed to adjust the strategy as the world around them changed over time. Leaving their successor no other option than change course as soon as they have taken over the helm. What worked in the past, may not work today. Managing partners that missed agility and adaptability, risk ending up frustrated with their successor. This might well be the case for Mrs. Merkel. Despite her undisputed achievements as a world leader, she failed for example to recognize the importance of investing in infrastructure and state-of-the-art broadband and mobile network (Germany is ranked number 30 in the world on data connectivity). Being a law firm leader can sometimes become a lonely existence. When still a partner, it was easy to be ‘one of the boys’ (or girls) and socialize, do banter and gossip. As a managing partner, things are different and everything you say or do has gravitas. Hanging out with other partners might be interpreted the wrong way by some others. Over time law firm leaders run the risk of losing touch with what’s going on in the partnership. This could leave them blind sighted if their strategy or style of leadership is losing support. Their one day successor will become the voice of the signals the former managing partner has ignored. Back to Germany, this seems to apply to Merkel’s party CDU/CSU who had to endure an historic loss. Ignore the signals at your own peril. Advice to Managing Partners old and new Once elected managing partner, you are expected to lead. So lead, don’t be a caretaker. Remain agile and flexible while pursuing a coherent strategy. Communicate with your partners on a daily basis. Leave no-one behind or feel excluded. Stay open to bottom-up ideas and initiatives while keeping an eye the bigger picture. Become part of a continuous path of steady improvement.

Almost invariably business law firms have their offices in the most prestigious locations in the tier-1 cities in the country. As where the headquarters of large, listed companies are predominantly found outside of the city centers or even in more rural areas, law firms occupy prime property. After salaries, rent and occupancy are the biggest cost for any law firm. It is not just the uber-expensive location, but there is typically also a lot of ‘unused space’. Law firms tend to have a very large lobby, designed to impress visitors. There will be more meeting rooms than ever will be used at the same time, there will typically be an inhouse restaurant or cafeteria, and sometimes an auditorium, a bar or a rooftop terrace. Despite the very high price per square meter, there is hardly any urgency to use the space as economically as possible. For a law firm, more perhaps than for any other type of business, their prestigious location and slick and expensive office, is closely tied to their identity. Being on a triple-A location in a fabulous office is part of who they are. It oozes a sense of prestige and success that radiated to clients and employees. The office is used as an endorsement of the brand. A law firm that has a prestigious office in the heart of the financial business district, must be better than a law firm that is in an efficient modest building on an industrial estate. That is what everyone will believe. I even personally know of a newly started law firm of young lawyers. At first they occupied a relatively small office outside the city center. Despite their great quality they struggled to attract the big clients and the right talent. Then they decided to be bold and signed a contract for renting one of the top floors in a newly built skyscraper that is one of the tallest in the world. Although this was at the time way too big and far too expensive for this small law firm, it soon paid off tremendously. Because of their now super-prestigious location, new clients came in and talent started to apply for jobs. For this law firm, in hindsight, the location became instrumental to their success. Work from home? Maybe not Now that is seems that the worst of the pandemic is behind us, law firms are discussing how and when to get safely back to the office. I have written about this before. Although with the Delta variant, the outcome of this discussion keeps shifting, it looks like a majority of law firms will opt for a hybrid solution, where employees will be required to be 3 days per week in the office and are allowed to work 2 days from home. This may sound reasonable and smart to you, but to me it sounds like a bad idea. Allow me to give three arguments why hybrid working maybe is not so smart. 1. Security and confidentiality For any law firm, confidentiality is core to its existence. That’s one of the reasons why we protect the attorney client privilege. Lawyers typically work with highly sensitive confidential information that you don’t want to end up in the wrong hands or even worse, on the street. For that reason law firm offices are set up like a fortress, almost impossible to penetrate without permission. Both physically and electronically. No visitor will ever be allowed on a ‘production floor’ or access to the lawyers’ network. When lawyers are working from home, there are no such physical or electronical barriers. There is no oversight who sees what document or overhears a telephone conversation. This is waiting for disaster to happen. You take your office and data security serious for a good reason. Don’t create multiple weak spots. 2. Training on the job and mentoring Learning to be a good lawyer is dissimilar to learning to be a financial controller or a software developer. The latter two are mostly about mastering technical skills. Becoming a lawyer is different as transfer of experience and development of human skills are core to the profession. You become a great lawyer, only by studying the behavior of another great lawyer and copying part of that. Observing, listening and asking questions are crucial. In theory it might be possible to get a law degree by only studying remote. It is impossible to become a lawyer the same way. Proximity and person-to-person interaction are needed. If there is less of this, the quality of the lawyers will absolutely decline. Don’t forget, many lawyers are introverts by nature. Give them half a chance and they will stay comfortably at home. 3. The ecosystem Last but not least, your fabulous office on that prestigious location. It is not just that because you have spent so much on the office, you should use it. In theory you could scale down or move to a less expensive location altogether. The office as it is, is more than just a symbol of the past. Your office creates an ecosystem, that itself is part of a larger ecosystem. This ecosystem is where talent thrives and where the constant buzz creates a sort of ‘magic’ that is converted into cash. Together in one space, one building and one business district, people will achieve more than they ever would individually behind their screens at home. I am not aware of any business law firm, which does not use it’s location and office to attract talent. It is an attractive privilege to work in the lively and hectic business district, where you are surrounded by great restaurants and bars to meet and hang out. Where you can go out during lunch break and browse nice shops. Maintaining the ecosystem could well be core to a law firm’s success. Don’t let that slip away. Get everyone back at the office and allow for few exceptions, certainly not structurally one or two days a week. Show leadership, bite the bullet, be though. Later they will thank you for it.

In 1992 American author and relationship counselor John Gray published a book that instantly made him famous. The book has sold more than 15 million copies and it was the "highest ranked work of non-fiction" of the 1990s, spending 121 weeks on the bestseller list. The title: ‘Men Are from Mars, Women Are from Venus’. This title must have been a stroke of genius and it has been applied to many other situations in which structural misunderstandings between certain groups exist. In the context of this article one could perhaps paraphrase and say ‘Some Lawyers are from Mars, and some Lawyers are from Venus’. Working with lawyers from all parts of the world, we find remarkable similarities despite cultural differences. If you have been to the annual IBA meeting, you will know what I mean. There is this instant feeling of recognition and familiarity. However, some differences can still be sensed: this is particularly true when you interact with China and connect with Chinese lawyers for the first time. In the eyes of European, American and Australian lawyers, sometimes it seems PRC lawyers are from a different planet even though superficially we would expect all lawyers to be the same. TGO Consulting has been working with China for many years and we have developed some great relationships and cherished friendships. We find China a great source of inspiration and innovation. We learned through experience that we fundamentally need to adapt our way of thinking and reasoning when we communicate with our Chinese friends. This article, which is co-authored by my good friend Mike He, is to help lawyers outside China to better understand where Chinese Lawyers are coming from. In doing so, we aspire to contribute to less frustration and surprises, and a smoother cooperation or referral business. Understanding where China’s legal industry is coming from The modern Chinese legal industry according to our understanding started only around 1990. So, unlike the Western world, in China the legal industry is only a few decades old. After the recovery of the lawyer system in China in 1979, lawyers were viewed as civil servants who worked in state-run law firms. It is not hard to imagine that lawyers then were reluctant to develop new practice areas or new clients as they received fixed salary no matter how much they contributed to the firm. Thanks to some pilot programs in 1988 which encouraged “more pay for more contribution”, many law firms transformed into cooperation firms and finally partnership firms in 1990s which allowed lawyers to keep a percentage from the revenue they bring to the firm. With the growth of the Chinese economy and release of the long-suppressed impulse for wealth, the percentage a partner can keep reaches a high level and a strict eat-what-you-kill model gradually becomes the dominant remuneration model for most Chinese law firms. The major advantage of eat-what-you-kill model is that it greatly motivates the partners to develop their own clients, business and revenue. For partners at their early stage, they can easily control the cost (such as lawyers’ salary) and maintain it at a relatively low level so that they could earn more margin and flexibility. For law firms, it is also one of the easiest ways to attract more partners and build a relatively large-scale law firm instantly. However, the downsides are also obvious. As partners mainly get profits from their own revenue and clients, selfishness and low professionalism breed. It is usually very hard for partners to refer cases to each other or cooperate on the same projects due to lack of profit-sharing mechanism as well as trust on each other. It is not hard, however, for a partner to leave a firm with his or her clients due to lack of loyalty to the firm and bond to other partners. Most partners in Chinese law firms would have their own P&L and only the bare minimum of costs would be shared. It will come as no surprise that this form of partner remuneration will drive partner behavior. Moreover, it will also tend to confuse the clients when they feel the astonishing gaps in lawyers’ professional skills and service between different teams within the same firm due to the lack of standard recruitment and training at the firm level. One should also not expect commitment from other partners unless there is a strong monetary incentive. As a result of the rapid increase of economic development and a shared entrepreneurial spirit among the Chinese society, many Chinese partners, even today, are driven by the unlimited impulse for the pursuit of fortune and independence. Though many Chinese lawyers and law firms have realized the advantage of cooperation and commitment to the firm and have made some serious and solid efforts, the majority of the Chinese lawyers and law firms still embrace eat-what-you-kill model. This in many aspects is fundamentally different from lawyers in many countries in Europe and America where in various gradations there is more emphasis on cooperation and the firm as a whole after so many years of exploration and evolution. Only 1% of law firms in China has a lockstep profit sharing system. Many of today’s partners in Chinese law firms have completed a study and gained experience in the US and the UK before setting-up or joining a law firm in China. As the result of the study, exchange or working experience of many Chinese managing partners in UK and USA in 1990s and early 2000s, they brought the “Prometheus fire” - lockstep remuneration model – from Magic Circle firms in UK to the Chinese legal market. In 2000s, a very limited number of Red Circle firms in China started their lockstep reform. The outcome is mixed. Thanks to the (modified) lockstep reform, one particular firm developed so quickly that it became one of the top tier Chinese law firms within a relatively short period of time. The lockstep reform created a sense of altruism as the partners there seem to care more about how to jointly pitch a giant/top client and develop it as the client of the firm instead of worrying more about who this client belongs to and how much margin he or she can get. Moreover for this particular firm, the lockstep reform also contributed to the increased investment on the firm’s branding, facilities, administrative service, recruitment and training as a whole. Many young talents from international law firms chose to join the firm as they were quite used to its similar remuneration system, and its high standard of talents and professionalism. Likewise, many multinational companies also chose to hire the firm as it can provide them with united strength from different offices and different practice areas. On the opposite side, another firm who adopted a pure lockstep approach encountered a total “Waterloo”. Many talents left due to the reform. It was not until 6 years later that the firm involves “merits” evaluation into its remuneration system again. It was a bitter memory that most of the partners and lawyers do not want to remember even till now. Why is the outcome so different? The two examples unequivocally show us that lockstep is certainly not the ‘holy grail’ for Chinese law firms or even all firms. Lockstep, in theory, can create a sense of common interest, generate more resource to key clients, encourage cooperation, attract partners who value professional performance, and gain comparative advantage when the market competition is fierce. However, lockstep must be implemented cautiously according to the very strategy, need and reality of the firm. Lockstep is a means of remuneration to better serve the interest of the firm and its lawyers instead of a sacred end by itself. To be more specific, the problem is, essentially, seniority must not be the only indicator that measures a partner’s contribution to a firm. Individual motivation to make more fortune and the fair sense of “more contribution, more payment” shall be respected. Otherwise like in the second and failed example, young, energetic rainmakers may vote by their feet as the result of the long-lasting sense of “exploitation” by those senior partners who earn much more according to their points while contribute much less according to their profit-generating performance. 4% of Chinese law firms turned to hybrid model while 95% still have undiluted eat-what-you-kill Facing both the challenge of talent loss as well as the demand of deeper integration among the firm, quite a few top-tier Chinese firms tend to embrace “modified lockstep” nowadays (including the above-mentioned two firms now). About 4% of law firms has adopted a hybrid system of profit distribution, which we are also used to in other parts of the world. Eat-what-you-kill model remains no doubt the most popular model among Chinese firms. Usually, an equity partner in such firms submits 10%-40% of his or her total revenue to the firm in return for its light-touch contribution to branding, office facilities and office administration. The partner then has to pay from the remaining 90%-60% of his/her revenue the salaries of the lawyers in his/her team. Whatever remains after the cost of being with the firm and the salaries of the lawyers in the team have been deducted is the personal income of the partner. Typically, the partner in a traditional Chinese law firm will end up keeping 50%–70% from the total revenue he or she earned every year. No remuneration system is perfect and can solve all problems once for all. The golden rule is: the remuneration system should match and serve the firm’s strategy. It is gratifying that more and more Chinese firms have realized that and are gradually combing the elements of both lock step system and eat-what-you-kill system into a hybrid system which suits their strategy and culture. On one hand, law firms must recognize and respect the annual financial performance of the partners and their legitimate need to be rewarded accordingly. On the other hand, law firms must also create a pool of common interest by recognizing and respect the historical contribution and non-financial contribution of the partners to the firm’s interest. Only through this way can law firms achieve a delicate balance and develop in a steady and vibrant manner. Transforming from a pure eat-what-you-kill model to a hybrid model, many old law firms are given a second life and are gradually regaining their strength step by step. Adopting the hybrid merit-based model combining both revenue performance and seniority or contribution to the firm from the very beginning, many new firms are attracting more and more partners to join and leading a new exciting wave of firm development in China. Getting to know the Chinese legal market The legal industry in China is developing at a rapid pace. By the end of 2020, there are more than 520,000 Chinese lawyers and 34,000 Chinese law firms in China. Non-litigation practice areas such as capital markets, M&A, private equity and venture capital are booming in developed regions like Beijing, Shanghai and Shenzhen. Traditional litigation and routine legal consulting for enterprises are still the dominant practice areas for lawyers in less developed regions. According to 2020 Global 100, 6 out of 10 largest firms in the world are Chinese law firms. At least 5 PRC law firms have entered the Global 100 with regard to total revenue per year. At least 5 PRC law firms have more than USD 1 million in profit per equity partner. There is another PRC law firm which has 83 offices and over 10,000 lawyers worldwide. The vast majority of lawyers outside China has little or no knowledge or understanding of what is going on in the Chinese legal market. There are great opportunities for cooperation and doing business. This is the first in a series of articles that will help to bring you up to speed. The second article will be published later this year. About my co-author Mike He My good friend Mike He is the co-author of this article. Mike holds an LLM from Harvard and he is the Chief Strategy Officer at Merits & Tree Law Offices. His firm is a typical example of a hybrid remuneration system. Unlike many traditional Chinese law firms, M&T partners share M&T’s profits (one firm, one profit pool for all) instead of splitting the revenue (one firm, different profit pools for different partners and their teams). For those young partners, the firm almost fully focus on their annual financial performance so that they could be encouraged to generating more clients and increasing their revenue. For those senior partners, the firm divide the evaluation elements into two major parts – (A) annual financial performance and (B) other factors such as historical contribution, seniority, and management – so that a sense of common interest can be formed while their annual merits can also be recognized and appreciated. Through this hybrid remuneration system, M&T strives to build a “one firm” firm with excellent professional quality, integrated cooperation and self-motivated talents. It is now widely recognized as one of the most promising law firms in China.

We are now well into September. The holidays are behind us and in the early morning there is a slight scent of autumn in the air. The legal industry almost desperately needed the summer break. The workload has been high and the work from home left everyone fatigued. After we re-energize, things will surely be better, or will they? Around the world, companies and law firms alike are trying to get to grips with the future of work. Are we going to ask everyone to get back to the office, or can people continue to work from home? Are we going to demand that everyone at the office is fully vaccinated or at least can show a recent negative test result, or do we consider this outside the domain of an employer? Can we organize larger in-person events like seminars or even a partner retreat, or is this still too risky? These topics are simultaneously on the table in boardrooms around the world. They are wrapped in uncertainty regarding resurgence of the virus, the effect of vaccinations and how governments are going to respond. We are absolutely not out of the woods yet, and it seems that no one know what the endgame will be. Will mask wearing become as normal as let’s say wearing socks? This month traveling came back with a vengeance Just looking at our own situation at the moment, there has been a seismic shift. After one and a half year working from behind our screens, now there is a frenzy of in-person meetings. It seems as if everyone is seizing the possibly short window of opportunity to schedule meetings, lunches, dinners and partner-retreats. That means that this month we will be clocking more airmiles than in the whole 20 months before. What also becomes apparent is that the easing of restrictions is not evenly spread around the developed world, or even Europe. As some of you may know, I am a strong believer in the power of binging people together in one room, one building or even one business district. A recent academic study showed that this even creates measurable economic benefits. Brought together people and businesses are more creative and make more money than if they are alone. After the demise of Kodak, other businesses in Rochester New York, which were totally unrelated to Kodak, produced fewer patents and the patents that were created were of less value and importance. If a successful company takes office in an office building, on average the revenue of the other businesses in that same building grows by 2%. People do become more successful if they are part of an ecosystem. This builds a compelling case for getting everyone back to the office and for maintaining in-person relationships. Remote working and Zoom simply don’t cut it. We need to focus on sustainability! To be frank, on the one hand I feel happy that we can finally meet our clients again in person after more than one and a half year. Our clients are happy that their partners can meet. Associates are happy that they can hang out with their team and their peers. On the other hand, personally I feel guilty about the vast amount of air-travel that I am going to do and I know that this will not be sustainable on the long run. Something will need to change. At TGO Consulting we have committed ourselves to reducing our carbon-footprint by 33% over the next three years (as compared to 2019). As air travel out of all the things we do has the highest impact, it will mean that we will travel less and on top of that we will compensate for all CO2 emissions each time we do travel. All this means that, as far as we are concerned, Zoom is here to stay. Easily 33% of all meetings can be done remotely, especially those about operational or factual matters. We are encouraging all our clients to do the same! Introducing Mansi Jasuja Over the past two years or so, we noticed that businesses are increasingly asking their law firms question on sustainability and diversity. Today this topic is almost universally part of any RFP or pitch. For law firms it is getting harder to get on a panel or remain on a panel if they cannot show that they have at least some sort of sustainability and diversity policy in place. It is not only clients that ask inconvenient questions, but also recruits are shunning firms that do not care about sustainability and diversity. Because we care about sustainability and diversity ourselves, and because we increasingly get questions from our clients, and because we see a wider need and opportunity in the market, we have set up a Sustainability Practice and developed the TGO Sustainability Scan©. Both are now ready for launch. Our Sustainability practice, which also includes diversity, is headed by Mansi Jasuja. Mansi has an impressive track-record and over a decade of experience with international companies and organizations. We are thrilled to have Mansi as part of our team. The TGO Sustainability Scan© has been developed and perfected over the past year. It is, to the best of our knowledge, the first of it’s kind specifically tailored to the legal industry. The scan will comprise all aspects of sustainability and diversity in a firm. It will provide law firm leaders with a clear and practical overview of the current state and provide actionable handles for improvement. It is advisable to repeat the TGO Sustainability Scan© on a yearly basis in order to track progress. It provides law firms around the world with a meaningful answer when clients or recruits ask the questions. If you are interested in improving your sustainability and diversity score, just send an email to: mansi.jasuja@tgo-consulting.com

I don’t know if you have noticed, but several elite US law firms are engaged in a full on salary rage. It all started on 10 June when Millbank announced that it would raise the salaries of 1st year associates to $200.000 (for their German office starting salaries were raised to €160.000). One day later Davis Polk announced $205.000. Since then the parade of associate salary increases has yet to come to an end, with law firms such as Weil Gotshal, Sidley Austin, Sullivan & Cromwell and Clifford Chance all unveiling raises in line with the scale set by Davis Polk & Wardwell. If salaries keep increasing at the current pace, starting lawyers might be making half-a-million by the end of this decade… As ludicrous as it might seem to pay someone fresh from university and without any relevant experience a $200.000-plus salary, for the elite firms that have leapt into the latest round of associate salary increases, even after issuing special bonuses earlier this year, it’s a no-brainer. Many posted record profits in 2020, and surging deal work this year places them in a position where these added expenses will likely have little to no impact on their profitability in 2021. What puzzles me, are not the salaries as such. What does puzzle me is why these elite law firms have to resort to such extreme salaries in the first place. Let me explain: imagine you are a freshly graduated cook, and it is your ambition to one day become a Michelin star chef. What would you do? You would most likely try to get an apprenticeship at a Michelin star restaurant, to learn from a famous master chef. Last weekend I read an interview with a well-known sommelier, she literally followed that route and early in her career was ever so grateful that she could work in the cellars of a famous restaurant, even as the hours were bad and the salary low. If you want a career in the fashion industry, you must try to get a poorly paid apprenticeship at Vogue or one of the great fashion houses. So why is it that aspiring top-lawyers only want to work with the elite firms if they are paid a ludicrous amount of money...? It does not make sense. Having Sullivan & Cromwell on your resume will open doors and is worth more than a Harvard Law School degree. So what is going wrong here? Two weeks ago, I published an article highlighting the issues that associates are dealing with right now. Many are close to a burn-out or even facing mental health issues. As I wrote in that article, “in the first quarter of this year, more lawyers left their firm, than in the whole of the year before. At the same time, because of the amount of work, law firms are desperately trying to hire new talent. Partly to replace the ones that left and partly to scale up production. These two conflicting interests of overworked lawyers at the one hand, and almost out-of-control demand and the opportunity to make unprecedented partner profits, are at a high risk of spiraling out of control”. This was written just hours before Milbank send out its press release. The elite law firms need the hands to get the work done. Not having those hands will harm their revenue and profitability. This league of elite law firms is closely monitoring each other, as they can not afford to get out of line with their peers. If the PEP at one firm would drop out of pace, it would immediately lead to a departure of high-potential rainmakers and an inability to attract lateral talent to fill the gaps. Joining the salaries-race is therefor not an option but inevitable. Ending up in this situation is however the result of poor strategic choices in the past. Multiple times, in previous articles, I have written about the Creation-Production-Divide Concept©. In short the Creation-Production Divide Concept© distinguishes between two components in the legal process. On the one hand there is CREATION, which is the process in which the legal strategy is decided. This component is heavily reliant on human skills. It does typically not involve a great amount of time and it is what has the greatest value to the client. The 'Creation' is what makes one lawyer different from the next. This is where specially the elite law firms should invest. This is what gets them their clients. The second component, PRODUCTION. Execution/Production is mostly labor intensive and therefore costly, but it has little added value to the client. There is also not much relevant difference between lawyers as it comes to production. This is the part of the process the elite law firms should have almost completely automated by now. The problem these law firms are having with automating production, is that they fear it will undermine their business model. Since lawyers are billing for time, they will make more money as they spend more time on the client. Investing in technology to make lawyers more efficient, feels like spending money to earn less. This does not fly well if you are in a tight race to remain in the top-10 as it comes to PEP. So here we are, we need to hire more people to just do ‘document work’ most of the time. Work that to a large extent could be done by a small number of lawyers who are augmented by technology. The elite law firms have to resort to paying crazy salaries to apprentices that should in theory be eager to work for peanuts, just for the learning experience. The reason being that these young lawyers are clever enough to understand that they to a large extent will just be ‘document monkeys’ working on ‘Production’. Since all the value is in ‘Creation’ this (production) is not a relevant learning experience. If talented young lawyers were offered the opportunity to ‘carry the bag’ of an experienced partner and be in his/her presence most of the time, accompanying to important client meetings, they would perhaps even be willing to accept the statutory minimum wage. Just being a cog in the billing machine, no thank you, then I want my fair share of the profit.

This week (on 15 June 2021) the Financial Times reported that Morgan Stanley CEO James Gorman sent a tough message to New York-based employees who do not want to return to the office, arguing that if they are comfortable dining out in the city, then they should feel safe working at the bank’s headquarters. “If you can go into a restaurant in New York City, you can come into the office and we want you in the office,” Mr. Gorman said the bank had learned it could operate “with a little more flexibility” during the coronavirus pandemic. But he signaled that he would take a dim view of employees who did not work regularly in the office. In the financial services world, Morgan Stanley, certainly is not an exception. Notably Goldman Sachs has been very vocal and explicit that they want to see their bankers back in the office. Already early May Goldman CEO David Solomon distributed a memo notifying all US staff to be ready to report to the office by last Monday 14 June, while UK employees would be called back one week later. In other parts of the world where more progress in combating the coronavirus pandemic has been made, like the Asia-Pacific region, the bank’s offices are nearly full with returnees. JPMorgan Chase has sent a similar notice to all bankers and staff, as have several other big international banks. Little over a year ago, the pandemic left most of us with little choice but to work from home. For most law firms this represented an almost complete break with the work-from-home policies that existed by which working from the office was the rule and few exceptions were allowed. When this changed overnight, law firms quickly adapted and most were full up and running within a week. It is fair to say that the quality of the work did not suffer and that service to clients has remained uninterrupted. This as such is a major achievement of the legal industry as a whole. As the pandemic subsides we are faced with the question ‘what next?’ When we will make up the balance after one-and-a-half year working from home, there will be lessons to be learned. For starters, lawyers can be super-productive if there are no distractions and no ordinary workday limitations such a regular office-hours. Working from home, lawyers recorded more billable hours than ever before. The flipside of that coin does not shine as much, as the omnipresence of ‘the office’ in the home has vaporized the boundaries between work-life and private-life, causing widespread burnout and mental-health issues. Lawyers are feeling fatigued and exhausted. Lawyers should be called back to the office There is clearly one category of lawyers that suffered the most as a consequence of the mandatory work-from-home, these are the trainees and the junior associates. As any lawyer remembers, after you graduate from law school, you have to go through a steep learning curve before you begin to have a basic notion of what you are supposed to do as a lawyer. This type of training can only be done on the job by getting instructions, asking a lot of questions and mirroring behavior. Working from home makes this process very hard and partly impossible. There is no such thing as online apprenticeship. Young lawyers must be called back at the office as soon as possible. No exceptions. This requires the presence of those who teach and mentor them, so they should also be in the office, but perhaps not all of them all of the time. As some of you may know, one of TGO Consulting’s core concepts has to do with what we call ‘Swarm Intelligence’. This concept is derived from the observation that creativity, innovation and the ability to find solutions to complex problems, thrive when people meet, interact, communicate and share insights and ideas. This process functions best when everyone is in the same office. Also the so called ‘watercooler’ or ‘coffee machine’ encounters have proven to play a pivotal role in firm-culture, teambuilding and internal communication. True value is created when people meet and interact. Another argument to get everyone back at the office as soon as this can be done in a safe manner. And then there is the slight matter of all the cost of the expensive real-estate that law firms occupy. After salaries, for law firms housing is the highest cost. Invariably business law firms are in expensive locations and attach great value to having an impressive super high-end office to convey a message of success to visitors, clients and staff. This makes law firm offices very different from normal corporate headquarters or offices. For the legal industry, a power-office is very much part of the identity. Speaking to partners at different firms about the possibility that they could split offices, share offices and economize on their real estate expenditure, not one of them was interested in doing it, neither for themselves, nor their firm or associates. And definitely not the partners. This is yet another argument to ask people to come back at the office, it is there anyway and it costs a lot of money, so use it. Returning to the office will also reinstall the natural boundaries between work life and private life, and with the return of business lunches and watercooler breaks, it will also make the workload more bearable. Requiring lawyers to return to the office might help prevent burnout, stress and mental health issues. Also because it allows to watch-out for one another. The office should be different from how it was before I guess its clear that I am a strong advocate of lawyers getting back to the office. This however does not mean that I think we should go back to as it was before. I strongly believe that we should use the pandemic to change for the better. Working from home has taught us to that many meetings do not require in-person presence in order to be effective. Specially purely operational meetings can more efficiently be held online. This holds for internal meetings as well as meetings with clients. This will save time and by reducing travel, it will also help save the planet. Another thing I feel we need to get rid of are the standard office-hours. They date back from the early 20th century and they totally make no sense for a modern professional services firm. In this day and age we should give lawyers the freedom to come and go as they deem fit at any time of day and at any day in the week. Lawyers should be monitored for output, not for sticking to the 9-to-5 regime. Lastly, I would encourage law firms to partially redesign their expensive offices in a way that focusses on enabling interaction between people, rather than isolating them in small rooms or cubicles. An office will have most added value if lawyers frequently meet and interact without prior planning. Just sitting a whole day behind ones desk does not make sense. Then you could as well be working from home.

Despite the global pandemic, the legal industry has been doing exceptionally well during the past year. Almost without exception law firms reported their best financial results in history. The present year, 2021, is well on track to even surpass last year’s outstanding figures. As time progresses, it has become evident that exceptional results do come at a price. For 15 months now, most lawyers have been working their butts off coping with client demand. Being forced to work from home, there were no boundaries on worktime. Working across time zones, workdays could become only limited by the amount of sleep needed. All this is not an issue if it happens incidentally, now that it has been the new reality for almost one-and-a-half year, it has become a major issue. Data show that lawyers’ mental wellbeing is at an all-time low. In the first quarter of this year, more lawyers left their firm, than in the whole of the year before. At the same time, because of the amount of work, law firms are desperately trying to hire new talent. Partly to replace the ones that left and partly to scale up production. These two conflicting interests of overworked lawyers at the one hand, and almost out-of-control demand and the opportunity to make unprecedented partner profits, are at a high risk of spiraling out of control. We are seeing a rapid rise in bonuses as law firms desperately try to retain associate talent and persuade them to keep putting in the hours to do the work. Today at some firms associates are getting $164.000 bonuses to keep working 100 hours a week. From my perspective, this is nothing less than sheer madness. It is not sustainable, and it is not a solution to the problems. Talented young professionals are not taking it. Earlier this year, in March, a shockwave was sent through the financial world as a group of young Goldman Sachs bankers in a leaked PowerPoint slide deck, asked management for 80-hour week cap. They warned that they might quit unless their grueling working conditions improve. An internal survey showed they averaged 95 hours of work a week and slept five hours a night. Their personal relationships also suffered as did their physical and mental health. The report even includes bar charts showing the analysts’ deterioration from job stress. Before they arrived at Goldman, the analysts rated their mental and physical health on a scale from 1 to 10, with 10 being the healthiest, at 8.8 and 9, respectively. Since then, those numbers have plunged to 2.8 and 2.3, respectively, according to the bar charts. There are other strong signs that talented young professionals are revolting against the present workload. All over Instagram, associates are posting photos of themselves working in remote locations—brunch, a beach bar in Miami, a funeral—with the caption “plz fix,” a nod to the universally hated subject line and the culture of managers having zero boundaries between their attorneys’ legal work and the extraneous, nonbillable hours of their lives. The ‘plz fix’ is a general theme,” said the Am Law 100 law firm associate who created BigLawBoiz, an Instagram meme account with 102,000 followers. “While everyone agrees we’re paid well, everyone feels underappreciated and overworked.” Lawyers appreciate the Instagram content that compares the lofty image of Big Law with the daily toil of being a cog in the billing machine. Associates recognize the absurdity of the prestige because at the end of the day they know they are kind of a document monkey. According to BigLawBoiz there’s a lot of young lawyers that have a lot of self-worth and ego tied up in the fact that they work at a Big Law firm in a major city working a billion hours a year and don’t really have much going on outside of that. Forget about four-day work week. How about seven? I hope you are by now convinced that there is a serious issue. Knowing you are just a cog in the billing machine and having to put in up to 100 hours a week, is not sustainable. Throwing money at it, like an increasing number of law firms is doing, is not a solution. On the contrary, it only emphasizes that it is about PEP more than anything else. Now that we are all slowly returning to the office, what can be done? So if money is not the solution, what is? Perhaps we need to consider the 7 day work week. Bear with me, I am not saying that lawyers should start working 7 days a week, on the contrary. What I’m saying is that we are still having a work week and working hours that were conceived for blue collar factory workers at the time of the industrial revolution. Today, there is no rational argument requiring every employee adhering to the same inflexible working schedule. Professionals should have the ability to choose any day and any time to complete their work. Secondly, law firms should adopt a work-from-anywhere policy instead of just work-from-home. Obviously that workplace needs to meet certain criteria as it comes to confidentiality. Lawyers should still be encouraged to come to the office, but this will only have added value for in-person interaction. Going to the office and just sit behind your desk in your cubicle does not make sense anymore. Offices should become social interaction hubs, rather than a place of labor. Thirdly, law firms should improve their Project Management with great urgency. Part of the stress is needlessly created because of poor planning and unclear communication. Being an associate and having to check your email all night waiting for the partner’s comments on your draft, and not knowing how much work still needs to be done as a consequence, can create a great amount of stress even if you are not actually doing other billable work while waiting. It would be easy to go on with other suggestions to relieve the workload, but the article would become much too long. Professional Project Management and Workload Planning & Allocation are great and useful tools. In the face of an assignment overload, they will only help so much. Perhaps the time has come for partners to get more selective in accepting new mandates. If work is abundant, perhaps go for the better clients and the most interesting mandates and leave the ‘breadcrumbs’ to the mid-market firm, that is a few tiers below. Why not choose quality over quantity and reduce the workload while making the work more interesting at the same time…

So far this year I have put a great deal of emphasis on the fact that being a successful lawyer is more about human attributes than about anything else. For clients, legal expertise is simply a given, something clients just expect lawyers to possess. Just like any of us will expect that a dentist knows about your teeth and how to maintain and repair them. Surprisingly in real world conversations I have with law firm leaders, I find a number of them very hard to convince. The first hurdle that needs to be taken is the acceptance that it is not the legal skills that make a lawyer successful in the market. This is often difficult to accept, as anyone who made it partner has invested years of practice to master the tricks of the trade. Accepting that it is not primarily about this knowledge, might feel like many years wasted. Obviously this feeling holds no ground since lawyers need to learn to master the legal skills anyway. Even if it turns out not to be the decisive factor, a lawyer still cannot do without. A lawyer, just like the dentist, needs to acquire technical skills on the job. Second obstacle to overcome is the acceptance of Lifespan Learning. Basically what we are saying is that a lawyer is never finished training. There is no such thing as a ‘finished lawyer’, just like there is no ‘finished football player’. Even Messi and Ronaldo still have to participate in training. For lawyers, in reality, personal development stops pretty much once you have about five years of experience. The concept of Lifespan Learning, where you need to structurally develop, learn and improve from the first day you arrive fresh from law school, until your day of retirement three decades later, is somewhat alien to most partners. Having said that, it is worth mentioning that there seems to be one almost universal exception: Leadership Development. Even those firms that push back against the concepts of focusing on the non-legal skills and of Lifespan Learning, often have some sort of ‘Leadership Program’. We have noticed that Managing Partners and their HR lieutenants seem to find ‘Leadership Development’ a super important and attractive thing to offer to their rank and file lawyers. The question is why? Clients need lawyers, not leaders Leadership Development seems to provoke noble connotations. Who does not want to be the next great leader? Who did not secretly want to be like Nelson Mandela or Jack Welch, or Steve Jobs for that matter? Yes, Leadership Development sounds appealing, but the question is do we need this in a law firm? I would be inclined to say that law firms do not need this and that such programs are in general a waste of time. A law firm is in the business of helping businesses excel by taking care of their legal needs and obstacles. It does not take leaders to do that, it takes smart people with the right knowledge, experience and a lot of human skills. At no point will the client be better served by having a lawyer who successfully completed a Leadership Development program. To put it even more provocative: attributes that make great lawyers, in general make bad leaders. So why do Leadership Development Programs have such a wide appeal? It seems that poor practice management might be one of the root causes for that. Unfortunately there are still many partners that do not excel in project management and have a difficult relationship with the younger lawyers in their team as a consequence of that. If a partner is bad at project management, the workload for the associates will be irregular and unpredictable. Often work needs to be done ad hoc at the very last minute. This is not an issue if it happens every now and then, but it soon becomes a major issue if it gets structural. Poor project management also leads to poor training of young lawyers on the legal skills. Partners who manage their practice poorly, often don’t find the time to instruct less experienced lawyers, they falsely believe that it is faster if they do it themselves. Often this goes hand in hand with poor communication skills and lack of emotional intelligence. To reduce the corrosive and demoralizing effects of this type of shortcomings, law firms are offering training to both the partners and the associates. To masque the fact that a ‘defect’ needs to be repaired, the training is offered as ‘Leadership Training’. No partner wants to be told that he/she is particularly bad at managing their practice or communicating with their team, but every partner wants to be a leader, right? What I’m saying here is that law firms should stop being obsessed by the concept of leadership and focus on what really matters: being the best possible legal advisor/facilitator to your clients. This would mean embracing and adopting the concept of Lifespan Learning on the 7 core TGO Lawyer Development Dimensions©. Just to refresh your memory, these are: Business Knowledge, Practice Development, Practice Management, People Skills/Emotional Intelligence, Creativity, Presence/Confidence and Integrity. A career-lifetime of training and developing on these 7 domains will help nurture and maintain the best possible lawyers, capable of delivering unparalleled value to clients. As a parting shot, I need to point out that as I have written before, a law firm also would be well advised to have some sort of partner management development program. This will make partners better in understanding the business model of the firm and will make management transitions much more efficient. This is however an entirely different topic.

Trust me, I never ever thought that I would write about my vacuum cleaner. There is hardly a more mundane and low interest appliance that I can think of, and yet here we are. The other day when our old vacuum cleaner broke down, we had to buy a new one. I don’t know about you, but I’m totally not familiar with the market for vacuum cleaners. I spent two evenings on procurement, familiarizing myself with the different offerings on the market. Doing this actually brought back some early memories. I remember my parents always looked at the National Consumers’ Association product test results before buying a new household appliance. They invariably went for the ‘best of test’ and consistently ended up being disappointed. Any product that comes out ‘best in test’ based on a highly subjective list of criteria, is unlikely the best under real world conditions. After two nights of research, we bit the bullet and went for the Dyson and never looked back. It is great, it simply is the best vacuum cleaner that we have had, even though according to the Consumers Association, it did not come out ‘best in test’, partly because it is expensive. A poor man buys twice Last weekend the Financial Times published an interview with Pascal Soriot, the CEO of Astra Zeneca, the embattled pharmaceutical company. The article provides an interesting insight in the differences in the way the UK and the EU have negotiated the contract for the supply of the Covid-19 vaccine. As where the EU team was led by Sandra Gallina, a seasoned Brussels’ career bureaucrat, the UK team was led by Kate Bingham, a biochemist and successful venture capitalist. As where the EU probably negotiated a better price, the UK negotiated early preferential delivery and a large supply. Both examples, the vacuum cleaner and the vaccine, illustrate that it is time to review and reengineer the traditional procurement process. In the legal industry for the past decade or so, clients have used multiple tools to get a better deal and lower their external legal spend. Despite these industry wide individual efforts, data shows that effectively clients are paying more, not less. In the real world, procurement doesn’t seem to work very well. It is not about the price, but about the value Just like any other purchase, be it a vacuum cleaner or a vaccine, ultimately the purchase price should not be decisive. Benjamin Franklin, one of the Founding Fathers of the US, used to say, “The bitterness of poor quality remains long after the sweetness of low price is forgotten”. Also using an ultimately subjective list of ‘objective’ criteria rarely leads to the best result. It is always better to focus on value, rather than on price. So what exactly is value? The answer is, it depends, but is on an individual level always in the eye of the beholder. That is one of the primary reasons that ‘objective’ criteria don’t tend to work. This also explains the power of brands. Many premium brands are objectively way too expensive, but are highly desirable nevertheless. Some premium products are even highly impractical and still people pay vast sums of money to own them. Why spend money on a premium sportscar that can carry only two passengers with no luggage, is highly uneconomical to drive and cannot handle speedbumps, if you can buy let’s say a Mercedes E-class for 30% of the price? For an individual, ‘procurement’ is not a rational process. On a corporate level Value is closely tied to Return on Investment. Companies are in the business of selling and making money. Spending money should in this process only be a means to an end. Typically companies are happy to spend money on things that help them make money, and not so much on things that are merely considered a cost. This does not mean that price is unimportant, it means that price should be considered in relation to Return on Investment. The higher the ROI, the more can be invested. Narrowed to the legal industry, this means for example that for employment law, a company would be prepared to pay a lower rate for a lawyer that handles the dismissal of an individual employee, and a very high rate for the lawyer that manages to prevent Uber drivers to be considered employees. Could be the same lawyer, but two entirely different value propositions. For further explanation please have a look at our TGO Value Matrix© The dreaded procurement process We have all been there. We are putting a lot of energy in a pitch, only to be left totally frustrated because the only element the client seems interested in, is the price. Or even worse: you are required to provide all sorts of non-relevant information, that takes a great amount of time to assemble and says nothing about your quality or ability to handle the mandate. Sometimes you’re left with the unpleasant feeling that the potential client only needed your proposal to get the price from their preferred supplier down. O, how much we hate this type of pitch. I’m with you on this. It is a stupid process and it does not work. There are tons of data to prove that it does not lead to a better product or to a lower price. What is important is that companies (and governments for that matter) upgrade to Procurement 2.0 and start using the ROI principle. This means that there should be a clear relation between money spent and Return on Investment. Law firms can play a pivotal role in this upgrade process, as they should stop putting equal price on all hours. I am aware that this opens up a can of worms, on which I will elaborate in the weeks to come. To be continued!

Earlier this month Wall Street giant Goldman Sachs told its bankers in the US and the UK that they should be ready to return to the office in June, as the two countries loosen restrictions in response to falling Covid-19 cases. In Asia, the bank’s offices are already nearly full with returnees. Spring has arrived on the Northern hemisphere. Not just literally, but also in a figurative way. As mass vaccination programs are slowly picking up pace and the infection rates and hospital admissions are starting to drop, European countries are gradually awakening from a yearlong hibernation. Step by step societies and economies will be opening up over summer. This process is commonly referred to as “getting back to normal”. People and businesses can’t wait for things to get back as they were before. The fundamental question however is whether we should want things to get back to what they were before? Perhaps it would be better not to get back to normal, but use the opportunity to become better. I suggest we go for ‘Normal 2.0’, a new, different and improved normal. Businesses have got the message As everyone who has tried to quit smoking or lose weight can testify, it is incredibly hard to break with old habits. Even if the habits are bad or harmful. It often takes a forceful disruptive event, like a heart attack or a coronary bypass, to stop smoking or permanently lose weight. Unsolicited we have all experienced such impactful disruption as Covid put our lives upside down. As Winston Churchill put it: “never waste a good crisis”. Following the economic news, it is clear that businesses have got that message. Being under permanent scrutiny from investors and markets, most businesses have drawn valuable lessons from the pandemic and have made structural strategic changes in their operating model. Some have rigorously adapted their supply chains to become less dependent on one supplier or one region. Others are embracing robotics to become less dependent on humans for their output and production. Very few businesses are in fact going ‘back to normal’ The legal industry could be the odd one out. Talking to law firm leaders and following the international legal press, it seems that the legal industry aims to return to the old ‘Normal 1.0’ from before the pandemic. Sure, there is a lot of talk about ‘hybrid working’, meaning that lawyers will not be required to be at the office all the time every day of the week, but that’s about it. So for the legal industry, where are the opportunities to make things better? The two most obvious areas fit for improvement seem to be working hours and training & development. Working hours For a milk farmer, the main source of income are his cows, as they produce the milk the farmer can sell. Likewise for a law firm the associates are the revenue creating machine. Farmers want their cows to produce as much milk as possible and law firms are no different as it comes to billable hours. For the past year lawyers have been working like mad, as the boundaries between private time and work time got completely blurred. This might have been good for business, but is bad for mental health and general wellbeing. This is reflected by the numbers. The past 4 months more associates switched firm or left the profession, than in the whole of the year before. Law firms are trying to combat burnouts and outflow by throwing money at it. Unfortunately that does not work. The solution is in smart automation, better project management and structural workload planning and allocation. We will be happy to elaborate and assist you with that. Lifespan Learning I have been writing about this before: there is no viable future for lawyers that only excel in legal skills. The world in which lawyers operate has changed and keeps changing. Perhaps more than legal technicians, lawyers need to be business enablers and entrepreneurs. The former because that is what clients demand and the latter because being a lawyer ultimately means running a business. Now that everyone is returning to the office, it seems the ideal moment to introduce Lifespan Learning and roll out a structured permanent training program for all your lawyers, young and old, to learn and develop on the ‘7 Core TGO Lawyer Development Dimensions©’. You will not only find that pretty soon you will make more money, but also that lawyers will get more motivated and that cohesion and collaboration across the firm will significantly increase. Lifespan Learning is also a great tool to attract talent and once onboard keep them from departing. Normal is a missed opportunity For the legal industry, 2020 has been a record year. Never before have partners made so much money. It is tempting to think that if you make a lot of money, you must be on the right track. If I make more money than you, than my method must be better, right? On top of that also 2021 has been incredibly busy so far, so why change a winning formula? Well, think twice: in order to keep being successful, you will need the best talent in the world. The firm with the best talent is the firm that will win. Right now is perhaps a once in a lifetime opportunity to switch to Lawyer 2.0 "everything must change for things to remain the same" Guiseppe Tomasi di Lampedusa (Italian writer)

Three months after the Trump administration ended and President Biden took office, we have seen a swelling wave of announcements from law firms that have hired former Trump officials as partners. On 27 April for example, Jones-Day, Morrison & Foerster and Womble Bond Dickinson proudly released statements that they had landed heavy weight former officials. While perhaps the Trump administration has been somewhat controversial, the practice of appointing former government officials as partners is nothing new for US law firms. Actually in the United States the principle of ‘Revolving Doors’ where there is a permanent fluid exchange between the private sector and the government, has always worked quite well. The government hires industry professionals for their private sector experience, their influence within corporations that the government is attempting to regulate or do business with and in order to gain political support from private companies. Industry, in turn, hires people out of government positions to gain personal access to government officials, seek favorable legislation/regulation and government contracts in exchange for high-paying employment offers, and gets information on what is going on in the government. Scientific papers have demonstrated the consequences of the revolving doors practice and the side effects of those movements can be beneficial both for the companies and for the regulatory bodies (government). In the United States, the revolving doors practice for the legal industry not only exists between law firms and the government, but also between law firms and in-house legal there is a fluid exchange as former GC’s are hired as partners and partners move to a GC position in-house. Not successful outside the US One might be inclined to assume that what works well in the US, will also work well in the rest of the world. Unfortunately, this is not the case. Sure, also for law firms outside the US it could be tempting to hire a former government official, someone from a regulator or a former General Counsel. The motives are no different from those in the US: expert insider knowledge and a valuable network. Unlike in the US, this type of hiring mostly ends in disappointment on both ends. Let’s have a closer look at why this might be the case. Having analyzed a few dozen of ‘outsider’ partner hires in Europe, it shows that in more than 80% of all cases, the inability to build a significant practice becomes the main disappointing factor. For status reasons, the former government officials or General Counsel are predominantly appointed in partner positions. Off-counsel positions are rare, as it is often unpalatable for a former high-ranking official or a GC to be given a second-tier position in a firm where partners are clearly the top-dogs. The issue with a full partner position is that it not only comes with high rewards, but also with high responsibility. Law firms expect each and every partner to create a certain amount of revenue and contribute their fair share to the profit pool of the firm. For outsider partners this can be very hard. Switching from a salaried high responsibility position, where everyone would treat you with high regards because of your position, to a role where you have to charge by the hour and may be challenged by your client on everything you say, can be incredibly hard. It is the number-one reason that outside the US most outsider partner appointments ultimately fail. This is less of an issue in the US. The reason is in the revolving doors. Whereas in the US there is a more or less constant exchange between outside and inside the law firm, most outsiders have had previous law firm experience when at the point where they are re-hired in a partner position. In Europe for example where there is no revolving door tradition, it is more like closing a door behind you and entering a new space without the intention to go back. It might do more harm than good If you are a law firm outside the US it would be advisable to use great caution as it comes to hiring outsider partners. You now already know that the odds will be stacked against you as it comes to success. What we see happening is that, instead of bringing the great connections with the regulator or the client that the law firm is looking for, when things do not work out the relationships get worse than before as a result of the former official/GC being bitter and disappointed. Outside the US, appointing outsiders as a partner in most cases also does not lead to better business. Former GC have little or no ability to help bring in new clients, as this is not the nature of the relationships they have with the GC in their network. Law firms have a tendency to be over optimistic in this respect. Outside the US, law firms tend to have a strong culture based on growing their own talent. It can already be hard for a partner who comes in as a lateral hire from another law firm to fit in. It is even harder for those who are not raised within a law firm to adjust and feel at home and thrive. What about academics? One only needs to take a look at the partner profiles of the US elite law firms, to realize that there is no similar revolving door tradition as it comes to academic positions. Where in the German speaking part of the world almost every partner is a Doctor and some even also Professor, this is not at all the case in the Anglo Saxon world. Here academics are frowned upon as there is much more focus on delivering client results than on displaying theoretical knowledge. If you are doing a pitch with a US firm, you might even want to leave your academic titles out. Retired Partners? A special species in this article on outsider partners is the ‘retired partner’. In the past, partners that retired withdrew from the lawyer world and attended their rose garden, became an investor or a consultant. Today, many partners feel far too young when they have to retire and want to continue being a partner. The number of retired partners that are re-hired as a partner at another firm is strongly on the rise. The new firm hopes that with the retired partner comes the book of business and the reputation. In reality it does not. Hiring partners that are retired at their original firm is not a great idea in general. It demonstrates an inability to home-grow talent. Strong law firms should avoid raising the average age of the partners. Conclusion A system of revolving doors as it has been in practice for decades in the US is great. It tends to raise the quality on both ends. Appointing outsider partners without a structured influx and outflux is generally not such a great idea. Once the revolving door is just a normal door, 80% of the appointments end in disappointment.

Friday 9 April Thomson Reuters once again published its annual ‘State of the Legal Market’ report. The report comes in two different versions, one for the US market and one for the UK market. Typically the reports contain no real surprises. The graphs that illustrate the findings keep following a predictable trajectory over the years. In this year’s UK edition my eye was caught by the graph on page 12: ‘Areas UK partners feel firms should be focusing investment’ At first sight the data seem to show nothing unexpected: 74% say they want to invest more in Technology and 76% wants to spend more on Innovation. This is in line with what law firms have been saying over the past five years. Spending appetite on other areas like Marketing or Recruitment remains the same or will decrease. It is not the graph or the data that drew my attention, it was what is blatantly missing: Humans! None of the respondents plans to invest in training and development of people. Perhaps it was not even an option in the survey, I don’t know. What I do know is that this is a serious oversight that we need to discuss. Goldman Sachs Last week Swedish computer-driven hedge fund IPM announced it would close down. Computer-driven hedge funds attracted tens of billions of dollars in assets from investors during a surge in interest around five years ago, as firms looked to technological developments such as machine learning and big data to gain an edge on human traders. Five years later it became apparent that technology delivered poor returns. On 12 April, Goldman Sachs released a statement that it had found that successful sustainable investment decisions require a human touch that algorithms so far have been unable to match. Two years ago the picture was different. Electronically traded funds were edging out more hands-on portfolio management partly as part of a cost-saving drive, largely because of an optimistic belief in a technological future. For the financial industry an ever so slight advantage over the competition can have a tremendous impact on the bottom line. The big players have been investing heavily in innovative new technology. It turns out not all investment has met expectations and human bankers have come back in focus. It is no surprise, given the difference in business model that the Legal Industry is trailing far behind the Financial Industry if it comes to the cycle of technology investment. Still it is surprising that there seems to be little or no spill-over from ‘lessons learned’. Creation-Production Divide Concept© In 2018, after having done extensive research and data analytics, we have introduced the Creation-Production Divide Concept©. If you are not familiar with this concept you can read-up on it in chapter-4 of our book ‘A New Dawn’ (2020) or in chapter-11 of our book ‘Data & Dialogue, a relationship redefined’ (2019). In short the Creation-Production Divide Concept© distinguishes between two components in the legal process. On the one hand there is Creation, which is the process in which the strategy is decided. This component is heavily reliant on human skills. It does typically not involve a great amount of time and it is what has the greatest value to the client. The Creation is what makes one lawyer different from the next. After Creation (but also to a limited extent intertwined) comes Production. This is all execution needed to turn creation into a tangible legal product. This phase typically is document review and document creation. Production is mostly labor intensive and therefore costly, but it has little added value to the client. There is also not much relevant difference between lawyers as it comes to production. The Creation-Production Divide Concept© clearly demonstrates that for a law firm the added value is in the Creation and thus in the human skills of the lawyers. From that perspective it becomes incomprehensible that around 75% of law firms say that they will increase spending on technology and innovation, while they do not even mention investing in human skills. Looking from the return on the dollar, it is clearly People first, Machines second. Invest in people! Somehow people have dropped off the radar for law firms as too much energy and effort has been directed towards Legal Tech. I want to argue that it is high time that people get back at the center of attention in the legal industry. Every lawyer should be structurally trained and educated from the first day onboarded until literally the last day before retirement. Today training is largely limited to legal knowledge and basically stops the day a lawyer is promoted partner. This is poor use of human capital and potential. At TGO Consulting we have developed a lawyer development model based on 7 dimensions. None of these TGO Lawyer Development Dimensions© are legal as developing legal skills is already deeply embedded in every law firm big or small. The TGO Lawyer Development Dimensions© are all human skills and non-legal practice skills. We know from experience that investment in these skills delivers a healthy return on the investment. It has also proven to be a great recruitment and retention tool as young lawyers are looking for employers that have a structured personal development program. To be clear: TGO Consulting is not a training provider, but we will be pleased to help you set up a methodology and program for permanent development for every lawyer in the firm. Please inquire, as we will also be happy to explain the TGO Lawyer Development Dimensions© in more detail. And before I forget: it makes perfect sense to also invest in technology and innovation as this will help making the Production component more efficient and less labor intensive. Your clients will love you for it, but it might undermine your business model through the reduction of billable hours. No worries, there is a remedy for that. Will elaborate on this in a future article.