There but for the grace...

Lessons learnt from the Clifford Chance memo

Associates at the New York office of Clifford Chance wrote a memo at the end of 2002 that was subsequently reported in the international press. The repercussions were significant for such a well regarded firm, but the lessons are relevant to every law firm that could easily find itself in a similar position. Gerald Riskin, a principal at Edge International and a former managing partner, uses the memo as a basis for a two-part article on the good, the bad and the ugly of law-firm management.

Clifford Chance is a great law firm. It is not only the largest but also, in the eyes of a significant number of sophisticated clients, the best in the world. The legal profession, however, is very fragmented and, as a result, has often failed to develop adequate sophistication in management. The challenge to do so at Clifford Chance is increased by its aggressive global expansion, including mergers. This is not a cheap shot at the management at Clifford Chance – it is more of an indictment on how law firms are managed in general. I have no doubt that Clifford Chance is populated by incredibly intelligent, well-meaning people who have the best long-term interests of the firm in mind.

Let me be clear. I abhor the fact that the memo was leaked to the press. That was wrong. If there were a way of identifying those responsible, they ought to be reprimanded – possibly even disbarred. It was a cowardly and vengeful act and such behaviour is not in keeping with my notion of the professional standards of the legal profession. If I were personally given a copy and it had not already been published, I would have protected the identity of the firm. Now that the cat is out of the bag, however, there is no reason to be coy – let’s convert this into a learning experience.

Lest competitors of Clifford Chance be tempted to gloat, I know of none with clean hands. I have had the privilege of working with law firms all around the world – many of whom are considered “blue-chip” firms – and can report that there is not a single one that can afford to throw a stone from its glass house. (If there is a managing partner out there who begs to differ, who resides in a firm where this memo could not possibly have been penned, please contact me. I will be happy to visit to verify without fee and if I agree, will write up your firm. I am not expecting the phone to ring.)

The media story

An article in The Times on 29 October 2002, by Jon Ashworth, appeared under the title: “Clifford Chance denies young lawyers charges”. It began with: “Clifford Chance, the world’s biggest law firm, was in full damage-limitation mode yesterday over suggestions that junior lawyers were ‘padding’ bills to reach their fee targets.” Here are some more choice excerpts from that embarrassing article:

“In a 13-page memo to their bosses, associates in New York complained that pressure to hit annual targets of 2,420 billable hours each was encouraging ‘padding of hours, inefficient work, repetition of tasks and other problems’. They allege ‘favouritism’ in assigning projects – ‘why aren’t attractive female associates ever out of work?’ – and complain about partners treating associates with contempt and screaming: ‘We own you!’

“The details of the memo were leaked to the press at the weekend. The firm spent much of yesterday reassuring clients, saying the negative feedback was limited to New York. Clifford Chance merged with the US firm Rogers & Wells in 2000 and has been struggling to reconcile two very different cultures.

“Allegations of ‘padding’ are highly damaging to Clifford Chance, which recently became the first international law firm to bill annual fees in excess of £1bn.

“One New York client said the consequences for Clifford Chance if the allegations were proven would be devastating. He said: ‘If this were to be established, I would never do business with them again and would probably explore rights of recovery. This is not a gentlemen’s club run for their benefit.’

“Associates put pen to paper after a damning survey by an American legal magazine ranked Clifford Chance as the worst firm in America for employee satisfaction. The survey, they said: ‘Captured neither the breadth nor the depth of associate anger and frustration.’

“Morale is clearly an issue. One associate tells in the memo of his boss of three years introducing himself at a party-not knowing who he was.”

The memorandum

The memo itself was arguably penned with good intentions. If you haven’t already read it, the box opposite shows how it began.

The memo alluded to the American Lawyer “Associates Survey” (the “Am Law Survey”). It says in part: “We were ranked as the worst firm in the country for associate satisfaction. Our prize was a profile under the title ‘In the Cellar’.” In the next paragraph, the knife twists with: “Clearly, that is terrible. Nevertheless, our research has convinced us that the Am Law survey captured neither the breadth nor the depth of associate anger and frustration.”

Setting the stage

The most striking aspect of the scandal that was created by the publication of the memo was that it was completely preventable. How ironic that this embarrassment should befall such a prominent firm. It is sad that Clifford Chance allowed its relationship with its associates to deteriorate to the point where it would score so poorly in the Am Law survey.

Satisfying staff is profitable

I hope that I can take as axiomatic that a firm is not going to garner peak performance from those who are disenchanted and demoralised. I think we all know from experience, research and even intuition that our most effective work occurs when we are enthusiastic, connected and appreciated.

For those that are obsessed with per-partner profits, there is now empirical proof that obtaining higher scores from all of the people that work in a professional-services firm in the following nine factors will drive greater profit. The list was extracted by David Maister’s best-selling book, Practice What You Preach:

Quality and client relationships;
Fair compensation;
Coaching;
High standards;
Satisfaction and morale;
Empowerment;
Commitment, enthusiasm and respect;
Long-term orientation;
Training and development.

I hope the argument that preventing the Clifford Chance associate malaise from developing would have benefits to the firm, including financial ones, is unassailable. How, then, might a firm enhance the satisfaction levels of associate staff? Let’s take as a given that this must be done without:

1. Turning over the reigns to the associates;

2. Encouraging blackmail or succumbing to it.

It may be most useful to explore lessons that we can learn from the complaints and suggestions contained in the Clifford Chance memo.

Lesson 1: Process, process, process, facilitation, involvement

The memo says: “Many associates feel that the decision to have the outside consultant, Arnold Kanter, and his team meet initially with only third and fourth-year associates represents part of the problem and not the solution. Many senior and junior associates expressed feeling excluded from the process.” They go on to say: “We are also concerned that the firm is looking for a ‘quick-fix’ to salvage the 2002 recruiting season and forestall mass resignation by associates.”

I have written elsewhere about our propensities as lawyers to be critical and analytical and more thinking than feeling. I believe that most of those involved in law-firm leadership around the world tend to manage as if they are solving a legal problem. They want all the facts, which they incorrectly assume they know, but usually boils down to intelligent speculation and supposition, then they want to unilaterally craft the perfect solution (which they discuss and debate in committee until the perfect result is designed). In this situation, Clifford Chance appears to have reasoned that “some process” would help, but shot itself in the foot by not involving the associates in designing that process. The decision to involve third and fourth-year associates was doomed, as unilateral problem solving will only work for drones that passively accept. Associates are not drones and are neither passive nor, I think the memo reminds us, accepting. They are the same genus of ferociously independent, critical and analytical, tense individuals who populate the partnership ranks. They are recruited for having the attributes that will someday make them partners (“just like us”). They are extraordinarily intelligent and want to participate.

Note this reference in the memo: “Let us help you construct the ideal firm. If you include us in the process and share information with us, we can achieve this goal. You have assembled a stunningly talented team of associates. We have trusted you with our development, our security and our careers. Thus, obviously we believe in you. But it is time for you to start believing in us as well. Treat us like colleagues. Treat us with respect. Treat us as future partners.”

So, lesson one is about the process of involving the associates in joint problem solving, which is magical compared to any unilateral approach to problems. Joint problem solving changes the mindset of those involved in the process. They participate in seeking solutions.

Note that the associates expressed a willingness to participate and “improve” in the following excerpt: “Clearly, we can also improve. Reading this memorandum and responding to it will be part of that process. We realise that the contents of this document may upset or surprise you. Please realise, though, that the purpose of this document is to help you. This firm means a great deal to us. Please join us in making it the greatest place to work in the country.”

Lesson 2: Listen – your people want to be heard

Note the plaintiff cry inherent in this sentence: “The 2,420 billable-hour requirement angers, worries, and harries virtually every associate in the firm.” Translation: “This is serious enough to pay attention to – look in our direction – hear what we have to say. Please.”

It is common in organisations to set up methods to measure the satisfaction levels of personnel within the firm. HR professionals in law firms must wring their hands and gnash their teeth, as we likely ask them to do the equivalent of operating while wearing a gag and a straight jacket. Why do law firms resist systems that would allow ongoing or periodic feedback from their people? Do managing partners deeply fear the results because they do not know how to react to them?

A sub-lesson here is that it is okay to say “no”. Associates do not mind hearing a negative provided that there is a sensible explanation. Some associates may disagree or debate, but they will still accept the verdict. They want the truth. Note the following reference in the memo: “If you can’t afford to pay what other firms are paying, admit it.” Now, in the instance of Clifford Chance this may not be an issue, but the question illustrates the hunger for unfiltered candour. Law firms notoriously avoid conveying difficult messages because they won’t face the issue. Too often they subscribe to the ostrich problem-solving method, that is, head deeply planted in the sand.

Firms should survey associates on an ongoing basis. They should also hold regular associate meetings. I personally like the idea of alternating meetings, such that the associates have a partner or partners present every second meeting. I favour letting the associates decide which partner(s) to invite. They will ask hard questions and raise issues, and the visiting partner(s) will sometimes have to take the questions or issues under advisement and come back to a future meeting with a response sanctioned by management. The point is that dealing constructively with those questions and issues will enhance the firm, and create an enviable relationship with associates. This leads to competitive advantage.

Further lessons will be detailed in part two of this article, which will be printed in the July/August of Managing Partner.

Gerald Riskin is a principal at Edge International and a former managing partner of an international firm. He can be contacted at: riskin@edge.ai.