Spot the difference

Two news stories today - both from "Roll on Friday" (always a good source!).

The first is about Eversheds who are, apparently about to outsource its entire fiance team. Well, I say outsource - the story in fact says that the team will be made redundant and the work moved to an outsourcing firm in India. Outsourcing does seem to be the current "thing to do" - last year it was redundancy, this year it's outsourcing. Eversheds are also, apparently, looking at outsourcing some legal work to regional firms.

The second story is about Edinburgh firm Shepherd & Wedderburn who have just announced that they will be compensating those members of staff who agreed to take unpaid leave last year. In the height of their recession, S&W asked staff to take unpaid leave to avoid further redundancies. Apparently 98% of their staff agreed with the proposal and the firm survived. One year on and now that things are recovering, S&W have announced that they will be repaying 50% of the amount staff lost by taking unpaid leave. Patrick Andrews, the firm's CEO (and I won't get into the whole subject of a law firm CEO who is really, at best, a Managing Partner) in on record as saying that "...[it] without doubt the right things for us to do for the medium to long-term". Absolutely - let's acknowledge that the staff did something for us when needed and so we will repay that trust in the firm as soon as we can.

Spot the difference in approach to a firm's staff. In one firm, staff appear to be thought of as drones who do not add any strategic value and who can be replaced by either cheaper people or machines. In the other firm, staff are people who contribute to the strategic future of the firm and who make a contribution which is recognised and acknowledged by the firm's management.

I know which I would rather be working for.

Too Early to Tell?

I read "The Lawyer" this morning. It carried, as its main story on the web site, "Streamlined firms emerge from ashes of annus horribilis". I wasn't initially sure whether I was going to read a good news story or a bad news story, although I was fairly sure that "The Lawyer" would try for some sort of sensational take.

I've read the story a few times now. It is based on a table of "information" about law firms, which I reproduce here:

The table shows partial results for ten firms, although four have no data for the turnover in the first half of this year. Some of the data seems strange. Have Freshfields really only made 4 people redundant? As it turns out no - I quote from the same article:

The total number of partner resignations at Freshfields Bruckhaus Deringer - the only magic circle firm not to have had a substantial redundancy programme - was much lower at 14.

So which is it?

The ten firms show an average reduction in revenue (for those showing data), of about 10% or so. All in line with what the firms have been saying we should expect. My point is this - is this really news? I'm not convinced that this story was ready:

1. Only 60% of the data was available
2. The top 10 UK firms are only really representative of the top 10 firms - they certainly are not representative of the rest of the top 100, never mind the bulk of smaller UK firms
3. The conclusion reached is that firm have performed much as expected
4. Do redundancies equate to streamlining?

So far as the last point is concerned - my view is that the two are rarely the same. If the redundancy round has been a strategic decision rather than a knee-jerk reaction, and if the people chosen for redundancy are the worst performing over a period of time, then this could be thought of as streamlining. I suspect this has been the case in most of the top 10 since I like to think that this huge firms will be reasonably well run. My experience with other firms - both mid-sized and small - is that there was rarely this amount of though given to the process.

I'm not sure, too, that the story showed a pattern of streamlining leading to recovery - which is suggested in the title.

Come on people - we can all do better than this, surely? If it's too early to tell with regard to any recovery, please don't suggest otherwise.

Plumbers' Houses...

When I was about 13, we moved to a new family home in Glasgow. It was a typical Victorian mid terraced house which was wonderful except for one thing. The plumbing was dreadful. There had been a series of botched and hurried jobs done over the years and so a complete overhaul was required. Fortunately we knew a very good plumber - the man who had sold his house to us. It seemed that the myth of "plumbers' houses" wasn't a myth after all. He was embarrassed that his own house had not been given the same level of service he applied to his work for other people - and so it was a matter of pride as much as a commercial piece of work, when he returned in the weeks after the sale, to restore the plumbing in the house to a high standard. He did very good work - he was a very good plumber. It had been too easy for him, however, to focus on the work he did outside his own house and to thing that it was not so important to perform his own work to the same standard.

I though of this story this morning when I read through "Roll on Friday" (required reading, I think). It was carrying a story about Allen & Overy being forced to rehire a German associate following a poor redundancy procedure. There is no doubt at all that A&O know the law with regard to redundancy and there is similarly absolutely no doubt that they are capable of preforming an effective redundancy procedure (goodness knows almost every law firm has, by now, had enough practice at it). This seems to be another case of "plumber's house". Whether one department or one partner did something without checking we will probably never know. The point is that even those organisations at the top of their game can have a blind spot. The important thing for any firm is to know that a blind spot can exist and to look for it.

For many firms (and I'm no longer picking on A&O here) the blind spot can be in the administration, management or marketing of their firm. Lawyers are almost never the right people to be doing this work - and yet most lawyers seem to think that they can do it. For example: "The Lawyer" (I don't only read the tabloid internet) reported on Monday that the Magic Circle firms had slashed their client rates to seek work (see here for the story). I'm sure that, in the short term, this will attract some new clients interested in the "big boys" charging £450. There are, however, some problems with this strategy (was it really a strategic decision I wonder...?) which may have been in the blind spot:

1. Imagine that you are a large corporate client who has been using A&O for some time. As a good client, you have not been paying the headline rates of , say, £700 but have negotiated rates down to £500. You've probably been feeling pretty good about this. Suddenly you see in the press that the same firm are charging £450 to smaller operations who have no history of loyalty. I'm sure you can imagine the telephone call...
2. Imagine that you are a smaller mid-market business. Suddenly you have two of the magic circle firms offering their services at the same rates you have been paying. This is great, surely? Well not always. Perhaps I'm too cynical, but I would expect that in two years or so, when the market has recovered, that my magic circle firm will dump me as a client since I'll be too small to bother with. That or hike the price straight back above £700 and let me walk. Either way I would not expect this to be a long term relationship.
3. Speaking of price hikes - it can be difficult to get a price back up. Look at it from the magic circle firm's point of view. You have been charging a client £650. They read the press, shout and scream and you agree to give them the £450 rate "on a temporary basis". Eight months later, you try to get the price back up to £650. "Don't be ridiculous", says the client, "that's a 44% increase!". The firm will be luck to get anywhere close to 10%. Even at at 10% annual increase, it will take four years to return to just over £650. The firm will have to get and keep an awful lot of new business to make up for that.
4. There is a danger that it sounds like panic measures. I can understand big clients beating their lawyers up at the moment on price - but I'm amazed that the firms did not include a privacy statement in the agreement. They should at least have tried to keep it quiet!

Every firm will have a blind spot - or more than one. The important thing is to know that they exist somewhere and to be aware of the need for careful thought in making decisions that can have a long term impact on the firm.

The point of my earlier story is that the magic circle firms, in particular, and most firms in general know that they need to be careful with their own employment procedures and they know that they shouldn't make snap decisions. Like plumbers' houses, however, sometimes they can be focusses slightly outside their own walls. Take the time and make sure your own plumbing is up to scratch.

The Cost of Redundancy

"The Lawyer" has a report today on Evershed's latest round of redundancies (see here for the article). Apparently they are looking to shed 22 people from their Real Estate practise offices.

Regular readers of this blog (and I'm delighted to know that there are some) will know that I have a pet topic of "knee-jerk" management and short-term thinking. I think I've stated before that law firm partners tend to like redundancy as a reaction to poor results or difficult times because it's easy to understand and a visible action on behalf of the firm (the "look - we're doing something" school of management).

It was very interesting, therefore, to read a report from the Chartered Institute of Personnel & Development (CIPD) titled "False Economy? The cost to employers of redundancy". It it an good, if technical, read and includes the formula: CR = nR + xH + xT + ny(H+T) + Wz(P-n) to find the true cost of redundancy by examining such variables as the number of people to be made redundancy, the redundancy payments, number of people subsequently hired, the hiring cost etc etc.

The key point for law firms is the cost of re-hiring people. This article reports a survey which found that it was cheaper to keep a lawyer inactive for 15 months than to fire and rehire. This will obviously depend on the level (and so cost) of the lawyer in question - but does not take into account the increased cost (through ineffectiveness) of of training a lawyer in the way the firm works, nor does it account for issues of staff morale.

The CIPD article ends with a comment that more firms (by which it means commercial firms rather than law firms) have been using methods other than redundancy such as reduced working, flexible working allowing for natural wastage and recruitment freezes to cut expenditure. They may have been doing this partly because they understand the cost of redundancy - but also because they have fewer "spare" staff.

I suspect that most law firms have now rid themselves of any spare staff who may have been hanging around. Care must now be taken to ensure that a proper analysis of all the costs is done to ensure that firms do not go through the damaging exercise of redundancy only to find that, within a short period (say 15 months), they need to rehire staff.

There is a danger that partners find that, rather than saving money, redundancy increases costs this year and re-hiring increases costs next year. There is another possibility - that by having a comparatively savage redundancy policy, re-hiring costs are greatly increased in subsequent years - when the good times return (as they inevitably will) staff jump ship to an employer who demonstrated staff-care.

"Our staff are our greatest asset"...

Stating the Bleeding Obvious

I remember being told many years ago, by one of the line managers I respected the most, that "the difficulty with the bleeding obvious is that it does need to be stated".

This phrase has never been truer than in the days of layoffs. Surely we all know that it can be incredibly expensive to lay staff off - and yet it sometimes appears that it is the first line of defence in some companies (and many law firms). Consider this post from the "Director Magazine" - the in-house publication from the Institute of Directors. Called "Think before you fire" it reminds us of the drawbacks to firing staff which I summarise here:

1. Increased cost
2. Lower productivity
3. Brand damage
4. Damage to leadership reputation
5. More claims from remaining staff

The article goes into more detail, obviously, but it's not rocket science is it? Surely we all know this stuff? And yet...

There are a number of reasons that it goes on - and why it probably shouldn't:

1. Many organisations have gained "slack" in their headcount - those people who are not performing, but who have been just a little too tricky to move out. In this economy, the pain is, perhaps, worth it. Think how much the firm would have saved, however, if they have been management properly all along.
2. It is a very visible expression of management action. "Look!" say the Board "See what we are doing to improve PEP this year. We are cutting costs!". Cutting costs - really? This year costs will be high because of redundancy payments and associated costs, and next year costs will be high because of recruitment fees.
3. It's something that people with limited management experience and knowledge understand. Well yes - but that doesn't make it the right thing to do. As far as cooking is concerned, I basically understand two dishes and know the number for pizza delivery off by heart - that doesn't make it a good diet, though. Good management is available to every firm. Hire professionals to do the job - not enthusiastic amateurs.

Perhaps this will define the next stage of my career - stating the bleeding obvious...

Flexible Working

Cobbetts were in the UK legal press (or the English legal press to be pedantic) today with an announcement of a four day week in some of its work groups - see here for the story from "The Lawyer".

In general I believe that this is a much more sensible attitude to a downturn in business that the wholesale redundancy programmes preferred by some. I suspect that it is a indication that the recession has lasted longer than Cobbetts thought and that they have divested themselves of most of those who were already on some sort of list - either because their billing was not up to scratch or they were on some other way difficult to work with - and so now they are faced with people they really want to keep.

Cobbetts are to be congratulated for doing this, as are other firms who have gone down the same road. They are also to be congratulated for doing it publicly.

The sign of the really enlightened firm would be one who introduced this sort of flexible working ("we're doing this because we value the people who work for us..." said Michael Shaw, the Managing Partner at Cobbetts) when times were good - then there would be no doubt that they really valued their people.

Wishful thinking, perhaps.

Downsizing - some data

A quick mention of Freek's latest blog "The Tricky Truth about Downsizing". 

A lesson to us all...

Times of Change

Beginnings are such delicate times - as, of course, are endings.

As jobs, or career stages, end, there is often a great focus on very operational things - especially money (see the UK Government's advice on redundancy). In the end, however, it isn't these "hard" aspects of personal change that are so difficult. It is the softer things - those more difficult to define.

I have been speaking with some very wise people (you know who you are) over the last week or so as I prepare my own fundamental change from employment (where I have been since I was about 19) to self-employment. Almost exclusively they have had positive things to say. Now that may simply be because they are all good people and so might be saying anything to make me feel better - and there may well be a part of that - but I believe them when they say that it will be a good move.

More importantly, more than one of my advisers/mentors (and, by the way, everyone should have at least one mentor) has suggested that, after a short holiday, I should sit down and examine my life, my goals, my aspirations - and decide what it is I actually want. With that in place it will be possible to design a structure to give the (now famous) work-life balance that I 'm looking for. All rather blindingly obvious - but I still needed both to be told it by someone else and then to ponder at length until it became my own. A good metaphor, perhaps, for a life in consulting.

So change is good. Expect it to be difficult (because there will be difficulties) but remember why we all made the decisions we made. Focus on the strategy and your goals and life will be great.

I'm looking forward to it.