Reprinted from CALIFORNIA LAW BUSINESS MARCH 18, 2002
© California Law Business. All rights reserved.


"No Pain, No Gain"
The major changes required to sustain a firm range from the difficult to those which are truly daunting.
BY BOBBIE MCMORROW

Two years ago, a young partner in the tech boomtown of Reston, Va., spoke to me with unbridled confidence about the expansive future of his firm's global practice. He obviously did not anticipate his current circumstances, sitting with a rumored 50,000 square feet of empty, expensive space, containing several lateral partners without any business of their own, let alone any hope of new business from their now-disrupted telecommunications client base.

Having had privileged access to dozens of firms at various critical points in their histories, I have great empathy for the difficulty of managing law firms. The major changes required to sustain a firm range from the difficult to those which are truly daunting. And yet I can't help but ask: Why must major change in these organizations so often be precipitated by wrenching events and accompanied by so much pain and suffering? Clearly, it would be more desirable to read the internal and external environments to anticipate, or at least hedge against, major disruptions.

So then: Why don't we? What gets in the way of seeing and diagnosing the current reality? What gets in the way of a matter-of-fact, detached understanding of the current organizational and market reality? The answer is critical because it can be a major impediment in setting the direction of a firm. Some of the explanation is specific to managing the contemporary law firm, but I have come to believe that much of the answer grows from a common human experience that plays out in our lives and the lives of our organizations. This has been a revealing and provocative way to discuss change with my clients.

Unfortunately, omniscience is not an option. Blessed and plagued by being human, we will always be somewhat limited in seeing and assessing all the parts of any system in which we play a part. This is not a bad thing. It is a human thing.

There are many influences that make it difficult to fully discern reality - let alone to find the clarity and insight necessary to make optimal choices. These influences also include our beliefs about who we are in the world. Our vision of reality can be seriously distorted when our individual identity and our roles in our family, career and society appear threatened by the prospect of major change. Consciously and unconsciously, we all yearn to feel safe and so we create false realities as safe harbors.

In the best-selling book, "Who Moved My Cheese?" the littlepeople protagonists, Hem and Haw, so identify with the cheese supply that they build homes to be near the cheese. One values the large hunk of cheese for what it says about him as an individual in the neighborhood, how important and powerful he has become. The other relishes the comfort and security for his family that the cheese provides.

In contrast, the much more instinctual mice, not burdened by over-analysis, notice the cheese supply is diminishing. They set off as soon as the cheese is gone.

The littlepeople were unable to accurately observe the small changes to the cheese reserve as they occurred. Worse, they remained attached to their beliefs and their fear. Because less cheese challenged their identities, roles and beliefs, they resisted the one clear inevitable option until it was almost too late: leave their present location, however comfortable, and look for more cheese.In the world created by resistance and fear, Illusion, Delusion and Denial become the three blind mice that prevent the truth from being seen. Beliefs about ourselves or the systems we are in become concretized in our organizations as illusions. We maintain these illusions through delusional thinking, which can become so strong that we deny the validity of information that contradicts our illusions. This may sound extreme or unique, but it is commonplace.

In my years advising law firms, I have observed the underpinnings of pervasive resistance to change, which create a major impediment to taking the first step toward bold, yet informed, change.

Examine your current reality. This is the most critical step. If you cannot see reality in a way that is objective, probing and self-evaluative, further steps will be so diluted, misdirected or confused as to be rendered impotent.

Illusions form when we forget that we and all we create are part of the natural world of impermanence. Reality is in flux, deconstructing and reconstructing at all times. The dictionary defines illusion as: "Something that a person wrongly supposes to exist; a false belief about the nature of something."

In organizations, if an idea, belief or picture of how things are - or have to be - remains unanalyzed and unchallenged, it becomes solid as concrete. Locked down. Must be. Won't, can't, shouldn't change.

We fail to evaluate these illusions for validity, health and longevity. Unexamined, these become the basis of illusion.

Another way to think about the myth of the survivor firm (explored in "Survivor Myths," Feb. 4, 2002) is that increased competition greatly challenges beliefs about safety and identity. Among law firms, the common fear may be, "Have to survive to be safe; no change; hold onto my position in life." An illusion is formed to keep safe the identity.

Our friends the littlepeople's illusion was "cheese always there." For a California law firm circa 1988, also described in the first article of this series, the illusion was "clients always there." In Reston, Va., two years ago the illusion was "clients' work always growing." In each instance the illusion seemed real.

Until the early 1980s, Howrey & Simon's reality seemed to be "top firm, successful, leaders in antitrust". To this day a number of its antitrust victories continue to set legal precedent and be studied in graduate economics classes. Solid, right? Then a precipitous drop of antitrust litigation brought profits per partner under $300,000 and the bottom fell out of a once prestigious partnership. The firm encountered a new reality that forced change upon it. Today Howrey Simon Arnold & White commands a leading position in its historical practice of antitrust law as well as intellectual property and the global commercial litigation practice. The firm achieved profits per partner in the $800,000 range for 2001.

But in 1982, its platform was burning.

How could a firm freefall from the pinnacle to the pit without any of its brilliant lawyers waking up? With flames circling, managing partner Hal Baker realized that his market analysis and understanding of the firm's competitive advantage had been faulty - ironic for experienced lawyers whose very specialty made them experts at the laws and trends of market position and competition.

Firm leaders' assessment of their position made sense. Dominant in antitrust litigation for 20 years, they had withstood political and judicial changes without their market position being effected. Consequently, they came to see themselves as invulnerable to market forces. Diversification was not an imperative. Therefore, they operated as though the antitrust platform would always be there.

There are many influences that make it difficult to discern reality fully-let alone to find the clarity and insight necessary to make optimal choices...
Our vision of reality can be seriously distorted when our individual identity and our roles in our family, career and society appear threatened by the prospect of major change.

Howrey & Simon had created itself an illusion: "Invulnerable." For them, proof of their belief abounded. But invulnerable is an illusion because it neglects the first principle of change: Inevitable.

An illusion cannot stand by itself though. It must be maintained to stay alive. This is the job of delusional thinking.

Once we concretize a belief into an illusion, such as "invulnerable" or "always there," we commit to maintain it. Why? Because for us it appears real, unchallengeable. However, the arguments - or delusional thinking - that allow us to maintain the delusion are often faulty or based on false realities.

The telecom practice in the Reston, Va., firm provides a case in point. Enormous, well-funded companies - Global Crossing, Qwest, L3 and WorldCom among them - dominated Wall Street's optimism of the power of the Internet. It was inevitable, according to "new, new thing" thinking that globalization would force fiber optics throughout the U.S. with worldwide just around the corner. Naturally, law firms had a major role to play.

The delusion obscured reality. Second- and third-world economies were already desperately behind in infrastructure financing and sidelined on the information highway. And in the U.S. and parts of Western Europe, neither regulatory nor business initiatives had solved the end-user problem of making final connections to homes and businesses. Millions of miles of fiber optics were laid but not installed to the final user. Which translated to no revenue.

The often bloody and expensive battle within the new industry for technology, people, money and market share obscured the true and full reality of the telecommunications industry, which was not examined by Wall Street or its law firms. "Growth forever" was the illusion, propelled by delusional thinking.

Such illusions, when concretized, become sacred cows. Upon these delusions, firms may build expensive offices, hire lateral partners without business and an army of associates to service not just existing work, but, more expensively, work they are sure will come "because the platform throws off so much new business."

Yes, all growth takes risk. And true dominance takes unusual foresight and risk. But when the idea, or strategy, becomes a concretized belief instead of a living process challenged by new thinking, delusional thinking is keeping our created reality in place.
Often, there is a warning voice trying to let us know that our "reality" may not be. That's where denial comes in to protect its friend, illusion.

Denial is turning away from the warning voice, cogent argument or new information, without giving it its full hearing. Over the last 10 years I have been asked by a number of firms to assist in their New York growth initiatives. My advice is to do the full examination, ask the difficult questions and review the relevant precedents. The analysis of whether any firm should be in New York is an example of the three-blind-mice support group. What appears solid is a false reality constructed to resist the fear of not being big enough or important enough.

A few years ago, the mantra of any "successful" law firm was "have to be big in the Silicon Valley." Today, again, it is "have to be in New York."

Such strategies can be based on beliefs that do not fit who the firm truly is, its markets, or its economics. Delusional thinking makes us vulnerable to intoxicating and grandiose ideas: "Have to be global player ... globalization of markets ... important platforms ... capital markets ... lots of business there, higher rates, too ... ."
New York is a real city with real markets. And I love assisting firms in analyzing and executing such major growth initiatives. But New York is not for every firm. It can be an important place to do business if you have the right clients, market share, strategic plan, partners and financial wherewithal. If you don't, then New York as a marketplace is a powerful illusion. My observation is that most out-of-state firms have had two or three complete turnovers of partners and associates in New York City. And most beleaguered managing partners will admit spending twice the time understanding and managing their New York office compared with any other office.

Is it worth it? If the "have to ... " is concretized and a firm spends millions of dollars supporting the illusion, it is unlikely to wake up one morning and heed the voices calling for sanity. Or those saying, "It's not working."

at this point illusion busting is extremely difficult. Denial has set in. Advice, questions and observations are only a warning. Denial doesn't let the warning in long or loud enough to threaten the illusion.

If we recognize the importance of taking off our blinders, then we have to ask: What is getting in the way of seeing the full reality? Illusion, delusion and denial become important concepts to understand in our individual thinking and to see at work in our collective patterns.

The convergence of the dot-com bust, Enron, Kmart, Global Crossing, the recession and the unique catastrophic events of Sept. 11 have allowed the word "delusion" into the general press and op ed columns. This is a good thing. We are questioning our own collective reality. We are looking at our false realities or illusions about who and what we are.

Though we resisted the voices, we now realize there were many who tried to warn of our vulnerability to terrorist attacks. To listen, we would have had to deal with our fears of attack, of not knowing why we were vulnerable, even hated. We would have to face the threat to our very survival. Instead we found comfort in false reality, with delusional thinking that lulled us into the invulnerable illusion.

Many of us denied that we played a part in the hatred and confusion easily apparent in world conflicts. By resisting the changes that we see today as inevitable, we got just what we feared: a profound change to our identity as a nation, to our collective responsibility for the safety of our lives, to an understanding of our connections to the suffering of the world.

Remember, a full examination is not a tearing down of core values, or a chance for the cynicism of our time to have its sway. Used properly it is an opportunity within the most realistic frame to renew our vision and mission, our reasons for being together.
Previously, in this column, we asked: How is it that firm after firm can seek growth, add lawyers, acquire a firm and not tinker with the culture (even if it is dysfunctional), the services (even if they don't match the current market) or the pockets of unprofitability (even though they impact everything from the profits per partner to the firm's ability to attract talent). One answer is that the powerful trio of illusion, delusion, and denial holds in place the second tenet of change: Resistance.

Human beings consistently, pervasively and naturally resist change. Given these intractable tendencies, from which even the most gifted lawyers and leaders are not exempt, how can we hope to truly examine reality? In future articles I will share a few cogent examples of how courageous inquiry and tough self-assessment can help law firms avoid the three blind mice and prepare for the future.

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