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Q: A few months ago, Freshfields Bruckhaus Deringer announced it was reorganizing largely along interdisciplinary industry-sector lines — that is, creating a construction group, a financial services group, an energy group, and so on. As part of the restructuring, “global contact partners” were designated for major clients. The firm said that its rationale was to better serve clients. Does this kind of organizational structure really benefit clients, or is it just marketing-driven window dressing? A: Freshfields certainly isn’t the first firm to arrive at the organize-by-industry party, nor will it be the last. Some practices, like entertainment and real estate, have long been organized by industry, and the ’90s saw the development of several new interdisciplinary areas, such as telecommunications, health care, technology, media, and financial institutions. With strategic-planning theorists advocating organization by industry, law firms will continue to move aggressively in this direction. In general, I approve. Organizing by practice area is internally focused and serves the law firm’s needs, while organizing by industry is client-focused and serves the client’s needs. It typically results in greatly enhanced client service and more business for the firm, especially if it is seeking to create a brand name for its industry practices. Today, most significant matters involve more than one discipline. For instance, the acquisition of one company by another requires a team of lawyers drawn from securities, tax, regulatory, environmental, and real estate practices, among others. If I am in the health care or telecommunications industry, I want a firm that has a cross-disciplinary team of lawyers familiar with the issues peculiar to that industry. When a firm organizes itself by industry, it instantly tells me whether it has such a team. Moreover, I know that the lawyer heading that practice is the person I need to speak to if I have no other contact at the firm. In his groundbreaking book on strategic planning, “Value Migration” (Harvard Business School Press, 1996), Adrian Slywotzky found that in private industry, market leaders are organized “in a way that addresses customer priorities.” Two threshold questions follow from Slywotzky’s finding: What are the customer priorities, and what are the essential elements that address those priorities? In the case of legal services, I believe that there are nine important client priorities (listed in no particular order): ease of access, speed of service, expertise, quality, results, cost-effectiveness, predictability of cost, trust, and peace of mind. In addition, there are six essential elements of a law firm’s structure that address those priorities (again, listed in no particular order): pricing, product, staffing, compensation, the organization of service teams, and the service delivery model (considerations such as where the firm has offices and whether the advice is given in a meeting, on the telephone, on a Web site, or through an e-mail). If ease of access is important to a client and if the large matters that leading law firms want most to be involved in are increasingly cross-disciplinary, then organizing and branding by industry addresses such client priorities as ease of access, expertise, peace of mind, and perhaps even results. Turning to the question of assigning relationship partners to clients, client service consultants have advocated that practice for more than a decade, and in the legal services industry, the need for it has become acute. Leading law firms have grown into multioffice, multipractice businesses with hundreds and even thousands of professionals. It has become impossible for any single partner in a firm to know and understand how the firm can best serve the needs of the firm’s clients. Nor can any single client know the full breadth of capabilities of its outside counsel. Clients need an ombudsman of sorts to ensure that they are receiving a high level of service in the most cost-effective manner. The wisdom of assigning client-relationship partners has become self-evident to most forward-looking law firms. Now, the greater challenge is developing a compensation system and culture that motivate a firm’s partners to respond to the exhortations of the client-relationship partners. Rewards for rainmakers too often interfere with the work of client-relationship partners. The magic is in balancing rewards for the two; the beginning point is sharing compensation rewards between those responsible for landing the client and those responsible for nurturing the relationship with the client. After all, the ultimate measure of client satisfaction is whether the client expands its relationship with the firm. Generally, funding the additional compensation incentives for nurturing the account requires phasing out the client-origination portion of a partner’s compensation after a period of time. Some firms believe that simply introducing the client-relationship manager concept and organizing by industry will result in instant benefits for the client and the firm. Remember the lesson of Value Migration, though: All of the elements of firm structure must address client priorities. Simply organizing by industry and designating a client relationship manager will result in little meaningful gain. Q: Late last year the American Bar Association’s Ethics 2000 Commission presented its Report on the Evaluation of the Model Rules of Professional Conduct to the ABA House of Delegates. Is there anything there that managers of large law firms should watch? Has the ABA finally addressed the multidisciplinary practice issue? A: The report — the culmination of three years of scrutiny by an ABA commission — proposes the first major overhaul of the model rules since 1983. Although the report addresses many of the more pressing ethical issues facing lawyers today, it punts on the MDP issue. That is disappointing, but perhaps not unexpected. The model rules articulate merely a baseline, the lowest standard of acceptable conduct for attorneys. They are not aspirational and thus tend not to bring about radical change. Therefore, the model rules probably are not the right vehicle for addressing the philosophical issue of the role that lawyers can best play in a free-market economy. That discussion should be robust and take place free of the existing rules. If its conclusion turns out to be that lawyers should be free to organize MDPs to ensure the competitive vitality of the profession so that lawyers may continue to deliver the highest-value legal services to society, then the rules should be drawn accordingly. Instead, the ABA commission on MDPs proposed rule changes without first having the robust discussion. This sequence brought about a debate regarding the proposed rules, instead of a discussion about whether MDPs are the type of beast that the market wants. My perspective is that the ABA as an institution is dominated by a guild mentality and seems incapable of dealing with the economic realities of professional service firms. Perhaps this is because the free-market advocates within the profession are busy taking their firms to new levels of profitability, while the academics, debaters, and do-gooders for the profession among us lead the ABA. I am pleased to note, though, that the proposed model rule revisions include a progressive change with respect to multijurisdictional practices. By creating “safe harbors” relevant to big-firm lawyers, the proposed amendments to the model rules, if adopted by the various jurisdictions with regulatory authority over the bar, will sanction the current behavior of thousands of big-firm lawyers who currently have national, multijurisdictional practices. First, litigators would be allowed to prepare for a case in a jurisdiction in which they anticipate being admitted pro hac vice. Second, lawyers would be permitted to handle matters in jurisdictions in which they are not licensed if the matters are “reasonably related” to representation of clients in jurisdictions in which they are licensed or if they are “associated in a particular matter” with lawyers admitted in the jurisdiction. If adopted by the states, these provisions will go a long way toward acknowledging the multijurisdictional reality of big-firm corporate practice today. Recognizing the increased mobility of lawyers in the profession, the commission also proposes to legitimize the creation of firewalls to avoid imputed conflicts of interest without a client’s consent. These would permit a lawyer with imputed knowledge to move to a firm that would otherwise be “poisoned” by the knowledge as long as the moving lawyer did not play a “substantial role” adverse to a client of the new firm in a proceeding before a tribunal. Firewalls would also be created for former government lawyers, judges, lawyers who interview prospective clients (as in requests for proposals), third-party neutrals, and lawyers who perform short-term limited legal services, such as temporary contract lawyers. Adoption of these provisions would be a welcome boon to the alternative dispute resolution and temporary attorney industries. Hats off to the commission for its pragmatism in both of these instances. What remains is for the proposed rules to be adopted by the House of Delegates and then for the various jurisdictions to adopt them. With no fewer than 50 jurisdictions — each with provincial outlooks on the profession — it will likely be years before any real change occurs. The cumbersome nature of the process points out perhaps the greatest regulatory need facing the profession — federalizing the rules of practice in recognition of the pervasiveness of national practices and the onslaught of global practices. Peter D. Zeughauser is a legal consultant in the Corona del Mar, Calif., office of ClientFocus. He is also of counsel at Claremont, Calif.’s Shernoff, Bidart, Darras & Dillon. If you have a question you’d like Zeughauser to tackle, e-mail him at [email protected] or fax him at (212) 481-8255.

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