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Saturday, 26 February 2011

If you aren't in on Saturday, don't bother showing up on Sunday

When he was CEO of Goldman Sachs, Hank Paulson reportedly had a notice sitting on his desk that read "If you aren't in on Saturday, don't bother showing up on Sunday". Very droll. The message was intended, no doubt, to make the point that it would take 24/7 commitment to keep up with his legendary work rate. If you'd been one of his team, maybe you'd have signed the Faustian pact. By that point, Paulson had amassed a personal fortune estimated at $600M. If you'd already made it onto his staff, presumably you'd be sitting on a paltry $100M. If you worked hard and got lucky, you too could hope to get the top job.

For those who aren't familiar with it, "tournament theory" makes predictions about what happens when there is very sharp differentiation in reward inside an organization. The best writing on this is by Tim Harford, the FT's Undercover Economist (http://bit.ly/nGfNq). In a nutshell, the theory says that businesses find it very difficult to measure and reward competence. As a proxy, they set up a tournament, where marginal differences in performance lead to extremely different outcomes in reward. The classic example given is of two gladiators. Both go into the ring but, during the ensuing combat, one will die and one will come out alive. The difference in outcome is very stark. The reasoning goes that your boss is overpaid not to motivate him/her but to motivate you to try to get promoted. The theory is supposed to explain some of the more extreme behaviour you see in business life.


What could possibly be a better example of tournament theory in the workplace than the banks? The extreme differentials in pay and bonuses seem to be exactly the kind of environment where tournament behaviour will thrive. Judging by some of the more lurid employment tribunal claims, perhaps it does. However, before moving on, we ought to record that Paulson's work rate benefited all of us when he became one of the key players in preventing the world from sliding into the abyss in October 2008, the month when the ATMs nearly shut and the much-promised "cashless economy" briefly came to mean all of us growing potatoes in our back gardens.


I don't personally find tournament theory wholly convincing, because I'm unpersuaded (at least consciously) that money is this central as a motivator. However, when you put it together with theories on how people compete for status, I suspect there is some truth in it.


If you've read this far, you're probably thinking "where's he going with this?" The question I've set out to explore is "why is overwork so endemic amongst lawyers?" When I trailed this topic two weeks ago, I admitted that I didn't have any easy answers. That said, the simplest point to make is that, for law firms, the hourly billing system rewards effort rather than results. Clearly, time-based billing systems are one major cause of overwork amongst out-house lawyers. If you work harder, you bring in more money, so you overwork. It's so obvious, it's barely worth saying. However, it's not a sufficient explanation.


Tournament theory also plays a part. In many law firms, the reward differential between those at the top of the equity and the associates is steep enough to support the theory. The associates think they have to work like hell to make partner, although they're wrong about this. Partners in law firms don't make up people who work hard. They make up people they think will help make them rich. The way to make partner isn't to slave away, it's to look like you're going to outclass all the current partners. 


But tournament theory isn't a complete explanation of overwork among lawyers either. It fails to explain overwork by partners who've already made it to the top. It also fails to explain overwork by in-house lawyers, which is very widespread. Several of the in-house Tweagles I follow seem to work regularly at the weekends. I confess I sometimes do too.


So what's the answer? Is it that many in-house lawyers trained in law firms and overwork has become their new normal? For some that might be true. Or is it something endemic in our nature? Is this a self-selecting problem for the profession? Does becoming a lawyer attract a particular kind of personality? Perhaps. 
In an interesting and timely post this week, Paul Gilbert published an article called "Do not be the tenant of your problem, but the architect of your solution" (http://bit.ly/fHvdwA). A core thesis of Paul's post is that this is a problem of mentality. Collectively, we've allowed ourselves to believe that being busy is more important than getting results. 

I think Paul is probably right that mentality is a major part of it, although I suspect it's a function of "all of the above" and some factors which aren't covered here. If so, as a profession we've slipped into the mistake of the law firm associates who think that working hard and being busy is the route to being partner. That's a pretty serious blunder for a large group of smart people to make.


I find it painful to agree with this conclusion, even in part, because it conflicts with a particular prejudice of mine. I'm suspicious of people who claim that achievement can be effortless. This is something of a cult in England (and I mean England not Britain). You might call it the cult of amateurism. This is the mindset which believes that some clever chaps in Cambridge split the atom with a biscuit tin and a few pieces of string or that David Gower never had to practice cricket, just turn up at the crease. It might sound romantic, but this is dangerous nonsense. In his book Outliers, Malcolm Gladwell argues that to be good at anything, you have to spend more than 10,000 hours doing it (http://bit.ly/7r8WB). That sounds a little too neat, but he's headed in the right direction. Like it or not, the future really does belong to the professionals not the amateurs.


So, where does that leave us? To be good at anything, you have to work hard. But it's results, not hard work that count. In broad terms, our profession has got confused about this fact. Perhaps the smart associates have the right answer: work like hell, get good at lawyering and then swan around making it look effortless. Just one word of caution. While you're putting in the required 10,000 hours, don't get confused and start believing that hard work is an end in itself.

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Following my elevator pitch on Legal's role, I'm heading in a similar direction next time. The topic will be "Name the behaviour - what makes a lawyer successful in-house?"

Saturday, 19 February 2011

Principles Based Regulation - let's not do that again

Imagine yourself back in the Spring of 2007. Everyone was feeling pleased with themselves. The problems with our system of capitalism had been solved. We'd outsmarted all the generations that preceded us, even the brainy ones who thought they understood the dismal science of Economics. 

The cycle of boom and bust had been abolished, through the wonders of excellent economic management. Ed Balls had been appointed City Minister the previous year. In his first speech, he promised that "nothing should be done to put at risk a light-touch, risk-based regulatory regime". The public was frolicking about in a bath of cheap debt.


Two rather different documents had just been published. The first was from the UK's Financial Services Authority. In April 2007, they produced a treatise explaining the benefits of PBR, which you can find here (FSA on PBR).  


According to the FSA: "Past experience suggests to us that prescriptive standards have been unable to prevent misconduct. The ever-expanding rule books of our predecessor bodies and our consolidated Handbook, designed to prevent misdemeanour, have not stopped further misselling, market misconduct or other detriment. Instead we believe that detailed rules have become an increasing burden on our own and the industry’s resources."  They went on to say that PBR "will allow us to deliver better regulatory outcomes in a proportionate way that is more efficient and effective."  


As we all found out in 2008, this confidence was misplaced.  Among the (perfectly good) principles set out in the FSA's document to which the regulated banks seemed unable to adhere were: 


2. A firm must conduct its business with due skill, care and diligence.

3. A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.
4. A firm must maintain adequate financial resource.

At this point, you might object and say that it's easy for me to demonstrate the weaknesses in the FSA's analysis with the benefit of hindsight. True enough. But it was also possible at the time and people were doing it. Time for our second document. 


In March 2007, Lawrence Cuningham, Professor of Law at George Washington University Law School, published a 30,000 word scholarly essay entitled "A Prescription to Retire the Rhetoric of 'Principles-Based Systems' in Corporate Law, Securities Regulation and Accounting."  You can download that paper here (Cunningham).  The core argument is that complex regulatory systems cannot be properly described as either "rules-based" or "principles-based". In reality, a mixture of both is required. 


In two telling passages, Cunningham writes: "Rules and principles are imperfect categories to describe individual legal or accounting provisions.  While some provisions may fit neatly into such categories, rational systems of law or accounting partake of both types and hybrids running across a continuum.  Even when it is possible to classify individual provisions as rules or principles, fairly characterizing entire systems as rules-based or principles-based is an essentially impossible task." 


He goes on to say: "If it is infeasible to establish a principles-based system of corporate law, securities regulation or accounting, then it is misleading to promote the possibility. Accordingly, the labels should be retired and regulators who use them greeted with skepticism that they are operating under unfortunate by-products of jurisdictional competition." 

And there you have it. You need broad principles and detailed rules. Without either, you're going to come unstuck. Any lawyer who'd ever studied law and equity could have told you this. You have to ask whether people were listening to the lawyers when PBR was being advertised as the cure for regulatory systems. Actually, you need to go further and ask whether anyone had ever read their Montesquieu. Whose idea was it that any single body, in any sphere of activity, should be put in charge of promulgating regulations, investigating alleged breaches of those regulations and imposing penalties for violations?

Let me close with a more homespun example. On a Saturday morning, your correspondent is often to be found wandering the aisles of his local supermarket, carefully studying a list of items provided to him by Mrs K. In a "Principles Based" world, the list would probably contain something like this: "(i) Buy things which are healthy. (ii) Buy things the kids like. (iii) Look out for special offers. (iv) Find things which are high in fibre. (v) Consider the welfare of the chickens that laid the eggs" or similar. Make up your own list. If I had a principles based shopping list, who knows what I'd actually decide to buy? 


On the other hand, a rules based shopping list would probably say "Buy 12 medium eggs". Much easier to know what to do. But if I didn't know that our household favours free range as a matter of principle, I could also buy the wrong thing. 


As a General Counsel trying to advise a company, PBR is as confusing as a principles based shopping list. Any serious system of regulation needs to contain rules and principles. If non-lawyers tell you otherwise, take on the debate. If any lawyer tells you otherwise, ask them where they went to law school and whether they can get a refund.

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Next time, the previously promised post on overwork amongst lawyers. 

Saturday, 12 February 2011

It's your job to ignore thousands of e-mails

When the UK's satirical magazine Private Eye wants to refer my profession, they often use the phrase "a proven lawyer". And nothing proves a lawyer more convincingly than the desire to ensure all the loose ends are nicely tied up. It's almost a professional requirement to be a little OCD. Asking yourself "did I remember to lock the front door?" ten times on the bus to work is not really all that different from asking "did I cross reference sections 17.2(a), 9.1(b) and 4.3 with the Statement of Work in Schedule D?"

This mentality in every lawyer is the product of thousands of hours of painful training at the hands of what seem (at the time) like sadistic pedants. It takes an ocean of red ink scrawled across their work to get each lawyer to the point where attention to detail is second nature. By the time that humiliation is over, they're usually able to be rigorous in writing like nobody else, although it can leave them awfully unforgiving. My wife, an employment lawyer, thinks Eats Shoots and Leaves by Lynne Truss is an important reference work and that anyone who hasn't mastered the apostrophe is a simpleton who probably ought to be denied the vote. 

But this mentality is a burden when it comes to e-mails. Ah yes, e-mails. The expression "drinking from a fire hose" might have been invented to describe the feeling of managing your e-mails. Unless you devote all your time to it, which means endlessly studying the Blackberry in meetings, you can easily emerge from two hours doing something else to find there are 30 new messages waiting. All too soon, there are hundreds of messages in your inbox. 
As I write this late on a Friday, after 14 difficult hours at the office, I have 979 e-mails needing review over the weekend. That is iniquitous.

In a previous role, I was put on stage as part of a panel to answer questions from about 100 of the company's European legal team, a small slice of the 1,200 lawyers in that particular company. Someone asked me "How did you get promoted to your current role?" I answered "By ignoring thousands and thousands of e-mail requests". This mostly generated a look of disbelief, but it's actually true. 

A great employee crushes their boss's objectives. I say "crush" very deliberately and I mean objectives in the ordinary sense, not necessarily what's written on your annual objectives statement (although, if your company is well run, those too). That's what my boss wants from me and what I want from the people who work for me. If the true objective is "buy that company" or "protect our IP", we do the company a huge disservice if we then unilaterally decide to spend our time and expertise answering requests about contract employees in Portugal or the venue for the company's Christmas party.  


The e-mails you receive originate from people for whom the message is in some way important. You need to be respectful of that fact, but it doesn't mean the message is important for you or what you need to achieve. But, and this is the tricky bit, it can be. I was once sent an e-mail which said simply "We're thinking of opening an online store and selling direct to consumers. Are there any legal issues?"  In my elevator pitch on the role of Legal, I said "keep the business and its employees out of trouble". Unless you read messages like that one, it's easy to miss something and leave the company open to a lot of risk it isn't equipped for.

So, unfortunately, you do need to read all your e-mails. But you also need to be absolutely ruthless about what you do with them. The really important ones deserve to be turned into meetings or phone conferences, so the issues can be dealt with properly. 
Of course sometimes your response needs to recorded or there needs to be absolutely no ambiguity. Fine. But, in aggregate, most e-mails deserve to be filed or deleted without any action. At the end of the year, if I was lame enough to write "I answered all my e-mails" as an achievement for my appraisal, my boss would rightly respond "so what?" 

If the request concerns the contract for the company's coffee machines, the worst that can happen is you get bad coffee and have to change the machines (although @LegalBizzle asks me to qualify this - the legal team will have to spend a fortune in Starbucks). Be polite with the person who sent the request, but reach straight for the Delete button. The coffee machines are important to the staff in Indirect Sourcing (the artist formerly known as Purchasing). But not for you. Sometimes, the easiest response is to phone the sender and ask "What would you do if I wasn't here?" When they tell you, answer "Good idea. I'd do that then. Good luck." Try it and see what happens. I've been doing that for more than a decade with no noticeable ill-effects. In the meantime, I've got a lot of other things done. 


In practice, the critical thing is not to "plough" through your messages. You need to open each one and spend severals seconds thinking "what shall I do with this?" before you take any kind of action. It's important not to answer most of them, because sending replies only generates more traffic. That can create a game of chicken, with both sides determined not to be the first to give up, exhausted. 


With lawyers, I believe we're influenced by our views on the sanctity and importance of the written word. This distorts our behavior when it comes to e-mails. Yes it's in writing. No, that doesn't mean it's important in any way. Do not treat your e-mails with reverence and try to deal with all of them. If you do, you'll be unable to crush your boss's objectives. And if your boss's objectives are, as they should be, some part of the company's objectives, you'll be missing the main event.

So, the title of this blogpost is factually accurate. It really is your job to ignore thousands of e-mails. Perhaps you'll be thinking "That's all very well, but I could get fired for ignoring my messages". No, you won't be. You will make mistakes. I do. But if you are more ruthless about your e-mails, you'll spend more time on things that are really important. Overall, you'll do a better job.

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Sometime soon, we need to kick off a really big debate about how to link law firm billing to value. But, that needs some careful thought. Next time, I'm going to write on a subject for which I have no easy answers. The issue is overwork among lawyers, which seems to be endemic. The blogpost will be called "If you aren't in on Saturday, don't bother showing up on Sunday."

Sunday, 6 February 2011

What does Legal do exactly? An elevator pitch.

As a junior in-house lawyer, I worked for a company that lost its way a little. Part of the recovery plan was the appointment of a new COO, a well known hatchet man who specialized in removing costs. Our GC was desperately keen that this new COO should meet the Legal team, so he summoned us from around the world to a meeting at global HQ, just outside Boston.

For some reason known only to the GC, all 80 of us we were made to line up, like wedding guests, in order to shake the COO's hand as we entered the conference room. By the time I reached the front, about 40 people had already passed. I heard him say "Gee, there sure are a lot of you guys". Several of us winced. I couldn't help responding "We're very cheap" and grinning at him. It was the best I could do at the time, but it's hardly a sales pitch.   


More recently, one of our business leaders wandered up to one of my team and asked "How does your work improve the experience of our customers" to be met with the reply "I'm not sure it does". Oh dear.


It's supposed to be axiomatic in business that everyone should have an "elevator pitch", which is what you'd say if you found yourself in the lift with one of your Board members for two minutes and they asked "what do you do for the company?". You can read a short description of an 
elevator pitch at this link http://bit.ly/ej1oULIt's amazing how many in-house lawyers, even some GCs, when asked what their function does, cannot give a crisp reply.

Whether you work in-house or out-house, if you think this doesn't apply to you, then let me contradict you. Every senior management team has a responsibility to remove unnecessary cost from its business, to make the company healthier and more successful for everyone else. So, if you don't know and cannot explain how your work drives the company's top or bottom line, you can expect to be cut. In fact you can't complain when you are. That's how companies are run.


Fortunately, Legal departments and the out-housers they use are often insulated from their failure to have a snappy explanation of what they do by the fact that their business leaders often "hate lawyers" but "love Bob / Brenda" (delete as appropriate), the individual lawyer they actually work with. 
That's helpful, but if you lead a Legal function, or aspire to, that isn't going to be good enough. You'll need a crisp explanation of what Legal does. Here's a short attempt ...

"Well Mrs Board Member, I'm glad you asked me that. Legal's role breaks down into six basic
things. 

First, we help the business grow
, which 
includes everything from commercial contracts, to mergers, joint ventures, acquisitions and disposals, as well as intellectual property protection. In some cases, we're involved in advocacy to governments.

Second, we keep the business and its employees out of trouble, 
which includes creating policies around areas of risk, especially non-financial risk, such as conflicts of interest, insider trading, bribery, competition law, then embedding processes to prevent these risks, detecting violations and responding to them appropriately.

Third, we manage litigation
, which should be obvious, since preventing, defending, initiating and prosecuting litigation is a core competence of lawyers.

Fourth, we ensure regulatory compliance,
which varies a lot between organizations, but includes the maintenance of a group's subsidiary entity structures and, in a listed company, disclosure and transparency requirements.

Fifth, we partner with other functions 
which generate legal issues, including providing employment advice to HR, advising Tax and Treasury and supporting functions like Procurement and Real Estate.

Sixth and finally, we meet our own commitments as a function
, which includes development of talent inside the department, budget planning, resourcing and managing the panel of external legal advisers.

If you wanted all that in one phrase, Legal's role is to
 help you grow faster, sustainably, with fewer mistakesOh look, this is my floor. Well that was it in a nutshell. I hope that was helpful."

This is certainly not supposed to be exhaustive and no doubt you can throw critique at it. The emphasis would need to vary a lot in different companies. 
In my own Legal department, I have a spider diagram which breaks each of these down in some detail. Nobody seems to like it much, except me. But, since I run the department, we persist with it.

My core point is not whether this elevator pitch is right or not. It's whether you have one at all. I think you should.
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Many of the lawyers amongst you be thinking that this is a clear case of spin over substance and nothing counts like grinding out the work. I agree substance is what matters, but that doesn't include the endless grind that lawyers seem to fall into. Next time, I'm going to write on "It's your job to ignore thousands of e-mails".