This decade has been bumpy from the onset. First covid, then skyrocketing inflation upsetting the global economy. Not to mention the effects of extreme weather around the globe. It doesn’t look like things will change for the better anytime soon, unfortunately. While these events have induced a lot of misery for many, the legal industry has remained largely unaffected. Both 2020 and 2021 have been the best years on record. Lawyers that feared the sky would fall down when covid struck, could not have been more wrong. I, myself, was not on the side of doom back in 2020. On the contrary, I was convinced the legal industry could weather the storm and the economy would be buoyant once the covid wave was over. I still believe that would have happened if not for the Russian invasion in Ukraine that sent energy prices soaring and disrupted supply chains. Invariably when we move from one year to the next there is a tsunami of articles by reputable and non-reputable authors analyzing and predicting the future. I have read the analyses from the Economist, Bloomberg, the Financial Times and many others with great interest, but I don’t think reality will unfold as predicted. Who could ever have foreseen that China would abandon their extremely strict zero-covid policy from one day to the other? Legal Industry getting nervous Law firms are looking back at 2020 and 2021 as the best years in their existence. At least from a financial perspective. Profits grew double digits as there was high demand and costs were down. Extremely high workload, causing stress and anxiety, were notable side effects. When demand cooled down a bit in Q2 of 2022, initially this was widely welcomed. Providing a bit of relief and time to breathe. When interest rates rapidly started to rise and it became clear the economy would enter into a recession, relief turned into panic. Once again law firms fear the sky will fall down on them and I see firms that translate their nervousness into cost cutting and lay-offs. We all know that if one firm starts with lay-offs, others will follow. In that aspect law firms are like lemmings. There is this sense that the other firm will somehow be smarter and your firm should follow in order not to fall behind. I beg to differ. Looking at real world data, how bad is it? Lets have a closer look at what is the actual situation for the legal industry. Expenses are up. Direct expenses (salaries) are up 15,4% over the past 12 months (industry average for larger law firms), while indirect expenses have grown by 3,8% over the same period. The growth in direct expenses is mainly the result of aggressive hiring and rising salaries and bonuses. We can expect indirect expenses to grow faster in 2023 as housing costs will be further adjusted. Looking at the demand side the picture is not quite as dramatic. The most prominent characteristic of law firm financial performance in 2022 was the substantial slowing in demand growth that firms experienced throughout the year. On a year-to-date (YTD) basis through November 2022, overall demand contracted by 0.1%. Over that same period law firms increased their rates by an average of 4.8%. Which means there still has been growth in revenue. Looking at clients’ expectations regarding their legal spend over the coming year, almost half of companies expect to increase legal spending as opposed to only 19% expecting a decrease. Analyzing these real world data, it seems highly unlikely that the legal industry will be facing serious headwinds anytime soon. Sure, extreme growth has come to an end, but we all knew that wouldn’t last anyway. For 2023 I personally do not foresee serious demand issues for the market as a whole. (How the M&A market will develop is harder to predict, but I would expect a rebound towards Q3/Q4) Should law firms shed staff? For the legal industry, like many other industries, the pandemic fundamentally changed the employment dynamics. Faced with ‘insane’ workloads and working from home, more talent than ever took the decision to leave their firm. At the same time law firms increased recruitment to compensate for the leavers and to help meet demand. On balance this resulted in about 4% growth in lawyers (FTE). Now faced with more lawyers, growing expenses and normalizing demand, what would be the smartest thing to do? Many law firms have learned the hard way during the 2008/2009 financial crisis, that it is a lot easier to fire lawyers than hiring them back once the market rebounds. Lack of well trained experienced lawyers will result in high cost of lost opportunity. In other words: the short term cost savings do not outweigh the lost revenue in the longer term. Having said that, this is the time to more critically evaluate the quality and potential of your associates (and partners). Invariably there are hiring mistakes or lawyers that have not developed as expected. While law firms should always be critically assessing the quality and potential of each lawyer, this is the time to upgrade the average. While structurally and objectively going thorough that process, please do not forget to offer development opportunities to all lawyers, associates and partners alike. The law firm that becomes the best talent development machine will be the one that will come out on top. In the end being a top-law firm is about human talent more than about revenue. Growing talent is growing reputation and profitability. It is the best investment you can ever make.

The meteorological summer of 2022 has come to an end. I hope all of you have had the opportunity to unwind and have returned to your offices invigorated and full of energy. Over the past 6 months, the world in which we live has dramatically changed. Soaring energy prices, rampant inflation, an emerging food crisis. Behind all this is the war in Ukraine, rising geopolitical tensions, record heat and unprecedented drought. Who, like me, expected new roaring twenties after Covid, could not have been more wrong. This are once in a generation dystopian times and this will affect us all. Revenue drop After the legal industry has had two of their best years in history in a row, revenues around the world have now started to drop. There has been a sharp decline in M&A activities to the extent that even trainees and associates at the elite investment banks are starting to get worried about their jobs. Bars in the financial centers across the world are reporting an increase in visitors, a telltale that the corporate finance world is not swamped with work like it used to be a few months earlier. If it rains at the investment banks, it will drizzle at the law firms. Also in the legal industry, M&A activity is slow as are other practices that are closely tied to capital investments. Most other practices seem to be holding up fine for now. Rising costs In an industry that is tuned for eternal growth a revenue drop (not just a lower growth rate) is bound to create tensions and panic. Certainly since costs are rising at the same time. There is higher marketing and BD costs, higher salaries, higher recruitment, higher occupancy (energy), and so on. Many law firms have also made high numbers of new partners in the past two years. Less revenue, higher costs and more partners. This doesn’t sound good, does it? When Covid hit in March 2020, the legal industry braced for a hit. Many firms took strong measures to safeguard their liquidity. While this was a clear overreaction driven by fear, fueled by the unknown, it could well happen again. Partners as a group have their own distinct dynamics. Even if on an individual level the majority of partners does not feel alarmed, the group might panic. Once the herd moves there is little management can do than follow the direction of the herd. Avoid panic It is in times like this that law firm leaders need to act proactively and remain in full control. Do not hide, do not wait for one or more partners to take an initiative or ask questions. Law firm leaders should act first, decisive and firmly. Please allow me to give you some pointers: 1. Make sure you have adequate management information For any manager it is essential to have reliable real-time management information. This is especially true if business is at risk. Make sure you have weekly data on workload and utilization. Also closely monitor the influx of new matters. It goes without saying that all fee earners must keep up to date with entering billable time in the system. It wouldn’t hurt to remind them. 2. Do not start cutting costs Yes, costs have increased since 2020 and 2021. The costs of salaries have increased for most firms. Partly due to growing headcount and partly due to raising salaries and bonusses paid. Client events are back and so are conferences. This increases the marketing budget. We would not recommend that you start cutting cost in order to preserve the profit per partner. You will know by now that it is extremely hard to find and keep talent. Many law firms learned the hard way during the financial crisis in 2008. Once talent is gone it is gone and it will be near impossible to get them back once the economy bounces back. Also, you are well advised to keep investing in marketing and business development as this is especially important in times of slowing business. 3. Trust your partners. Invest in cooperation and a sense of stronger together If as a managing partner, you have the illusion that it is your task to manage the firm, I’m afraid you cannot be more wrong. Managing partners should provide guidance and a clear direction regarding the strategy and the priorities. For the execution they must rely on the partners. While this is true when there is a nice tailwind, it is even more important when there are strong headwinds like right now. Show your partners the direction to go, motivate and monitor, but don’t deprive them of their personal responsibility and autonomy. Put great emphasis on cooperation. The partnership is so much stronger as a close knitted team, than as a sum of individuals. 4. Communicate! In times of ‘trouble’, you don’t want your partners or anyone else in the firm guessing or speculating. When people start to speculate about the future, they are in this economic climate inclined to pivot towards the worst case scenarios. No need to say this is bad for morale and will lead to panic and calls for immediate action. Once this starts to happen, management will quickly lose control and become the playball of the sentiment. The only way to prevent things spiraling out of control is communication. Don’t leave people second guessing. Communicate frequently and openly. No hiding, no silence. This is also applicable vis a vis your clients: communicate more than you usually would. 5. Use the moment The legal industry has seen unparalleled workloads over the past two years. Leaving everyone exhausted. At times it seamed like there was only work and then more work. When the business cools down like it is to be expected, one should embrace the moment to recuperate and get better. Probably the best thing a law firm could do in the months to come is to invest in people development. This is exactly what we are already doing with some of our clients. We help them set up structural personal development programs for their partners (and associates). Such programs focus entirely on the 7 Core Dimension© that we have identified. Partners, without exception, highly appreciate, structural support in building a stronger practice. The future is uncertain and too volatile to reasonably predict. We have no choice than to act on incomplete information. Today not even the Central Banks can make accurate predictions for the next quarter, so why would law firms have a crystal ball? Amidst all this uncertainty, if you stick to the five pointers, you will likely emerge stronger once the skies starts to clear.

The relationship between a client and its lawyer has traditionally been a personal one. Even after lawyers had started to work together in law firms, there still is this very personal relationship between the lawyer and the client. I have written about this topic multiple times, raising the question whether a client is the client of one partner or a client of the firm. I have raised this fundamental question on many occasions with partner groups and almost invariably the individual partner wants to ‘own’ the relationship with their client. As it comes to ‘client relationships’, partners have kept behaving pretty much like sole practitioners. Arguably to a large extent also clients see the relationship with a lawyer as a very personal one. This is most prominently demonstrated if a partner decides to make a lateral move and switch firm. Data shows that under such instances over 50% of the clients decides to follow the partner to the other firm, even if this means an organizational nightmare. At the same time clients are complaining that law firm partners work in silos, don’t share information and are hesitant to invest in a relationship that they do not ‘own’. Those same clients are also increasingly expressing concerns that specialization in law firms has gone too far. Sure, clients like to consult every now and then with a partner who has an exceptional deep and detailed knowledge of a certain niche topic, but commonly clients would prefer their outside counsel to have a broader interest and knowledge. All sectors of the economy are facing tremendous challenges Law firm clients are real-life companies and organizations that must work very hard on a daily basis to remain relevant in their market. Almost every industry is facing new challenges these days. Industries face geopolitical issues, supply chain disruptions, rising costs and increasingly hesitant end-consumers. Investors, who have been seen record after record, are now facing a bear market. The energy sector is seeing a combination of challenges it has never seen before. The automotive sector is disrupted by electrification, and so has every other private or public sector comparable challenges of their own. All this calls for strategic ‘out-of-the-box’ thinking. Just applying experience from the past doesn’t cut it. Helping clients navigate the changes in the market and help lead the way to new market opportunities and new business models, requires skills and creativity that goes well beyond what any individual could achieve. General Counsel were first to recognize this need. On countless occasions GC’s have voiced their desire to get broader input from their outside counsel. This is not about handling individual mandates, but about exploring new ways forward, which is crucial for any company's future existence. Recently I had a conversation with the GC of one of the world’s leading new technology companies. This particular company is enlarging its product portfolio and its global footprint at a rapid pace. In doing so, the company faces a myriad of novel legal challenges that can make or break its very existence. A multi-talented lawyer remains a white raven This GC gave me two great examples of outstanding assistance from outside counsel. Example one was about a situation where the company was making a major investment abroad. As there were multiple countries that were very keen on attracting this investment, national and local governments were offering all kind of ‘sweeteners’ to make the decision fall their way. For this reason, the GC had engaged a tier-1 state-aid partner from a very reputable law firm. One might expect that a partner with such specific specialization would have a narrow and limited scope. Not this partner who was in his early forties. The GC told me this partner had such an exceptional understanding of the company’s business and strategic objectives that he had asked him to take the lead on all negotiations, way beyond just state-aid issues. Obviously, this partner would pull in other partners from his firm with other specialist knowledge, but it was him who was heading the negotiations and who had the lead. Unfortunately, this type of partner remains a white raven as this GC was not aware of any other partner at any of their panel firms across the world that would have this ability. This is a great example of a partner who, despite having a narrow specialization, has maintained a broader knowledge of the law, has a deep understanding of the client’s business and who knows to tap into other partners when needed. Involving third-parties in a workshop The other equally rare example this GC gave me was about a workshop organized by one of their panel firms. One of the elite law firms, has offered them to set up a one-day brainstorming workshop to discuss the strategic issues this company is facing, from many different angles. They did not only invite the legal team, but also members of the company's commercial, finance, production and engineering team. From law firm side also all kinds of experts were present. All of this was free of charge. The best thing however was that they also invited other third-party experts at the firm's expense. The GC told me that this workshop had been very professionally prepared and conducted. One day brainstorming and exchanging ideas from many different angles had provided several valuable new insights for his company. No need emphasizing that this became the start of a close relationship, that made the law firm a lot of money. We need swarm-intelligence to face strategic challenges This article is meant to argue and demonstrate that lawyers should stop working as individuals and in silos. The changes clients are facing in today’s market go well beyond what any individual could offer. Clients want their law firms to make full use of ‘swarm intelligence’. At TGO, we often call this the process of 'Melting the Brains'. Clients need access to all the knowledge, experience and creativity available within the firm. Clients also want to team up with lawyers and other experts at the same time to find new insights and solutions to the serious challenges they are facing. Working alone is sooo 2021, teamwork is the future. At TGO Consulting we have extensive real-world experience in helping elite law firms to truly collaborate, use and apply swarm intelligence at the benefit of their clients and their firm. We have a proven track record in helping to 'melt the brains'. Once the process of ‘melting the brains’ really takes off, this will be clearly reflected in the financial performance and the reputation of the firm. As such the program will easily pay for itself. Please contact us to find out how we could help your firm!

Remember the Airbus A380? It is the world’s largest passenger airplane. A humongous double-decker with a wingspan of 80 meters and a max take-off weight of 570.000 kg. The A380 has a maximum seat capacity of 853. The first plane was delivered in 2007, the last one in 2021. It certainly has not been the commercial success that everyone envisioned when setting off on its 30 billion Euro development. Obviously the aviation industry and the legal industry are not comparable in any way. What both have in common is the paradigm that bigger must surely be better. Perhaps even more than any other industry, law firms can become obsessed with the scale of numbers. For many law firms size equals success. The bigger the firm, the more successful it must be, right? Well, in reality probably not. Let’s analyze the merits of size and while we’re at it, dismantle some myths along the way. The metrics of size On a basic level the required size of a law firm will depend on whether it is a full service firm or a boutique, and on having a national or an international practice. Boutiques that strongly focus on one practice area or industry do not need to be sizable to serve their clients and be commercially successful. Around the world there are numerous examples of extremely profitable high-end boutiques that are less than 100 lawyers in total. High-end full service firms would by nature need to be bigger than the boutiques. For a full-service firm, the engine is typically the Corporate/M&A practice that will need to have a certain size in order to handle multiple complex transactions at the same time. M&A is considered the ‘engine’ since transactions typically generate a lot of spin-off for other practice areas such as Competition, Finance, Employment, and so on. In order to deliver the required level of service, each of these departments also has to meet certain minimum size requirements. If the firm is aiming at the top-bracket in their market, there are however not only minimum size requirements, but equally, maximum size-limits for each practice group. Allow me to illustrate this with the example of Employment as a practice group. Any full-service elite firm outside New York and London, would probably need about 2 employment partners with a team to service their transactional needs. As it is unlikely that the Employment practice will get 100% of their work through M&A, they will also have to find employment clients of their own. The problem is that in most markets there simply is not enough high-end employment matters around, so the Employment team will feel forced to accept mid-market work which does not fit the firm’s strategy and for which it will be extremely hard to charge the normal hourly-rates. Not to mention that on top of that conflicts with potential M&A clients will further limit their market. While there is, depending on the strategy and on the market, always a minimum size for a full-service elite law firm, there also pretty soon is a maximum size, after which the average quality of the practice will decline. Too many partners for the amount of strategic mandates, will inevitably increase the volume of less profitable plain vanilla work. When practice groups become too large they will feel forced to take on lower quality work to meet their targets. This will in the end increase the profitability gap between the leading successful practices and the rest. This will over time result in a ‘two-speed’ firm, where part of the partners is highly successful and the others are structurally trailing behind. No need highlighting that this on the long run will create tensions. Economies of scale The past two decades have been the heydays of law firm mergers. Merging was not just fashionable, it was generally considered the ‘silver bullet’. Many firms that had a weak performance merged with another firm that often also had a weak performance, resulting in one bigger firm that still had a weak performance. Merging rarely is the solution to a fundamental problem. Law firms also seek to merge for other reasons like entering into a new market. Take for example the UK magic circle firms looking for a foothold in the lucrative US market, or the mergers between UK and Australian firms hoping for a lucrative piece of the Chinese market. Both endeavors did not work out as planned. Undeniably also some of these mergers have been a great success. In 1999 Allen & Overy set up shop in the Netherlands by grabbing the 35 best partners of the renowned Dutch law firm Loeff Claeys Verbeke, which then ceased to exist. A&O almost instantly became a top-player in the Netherlands. It is not only hope and despair that drive law firm mergers. Increasing the power to invest in technology or marketing have also become motives. And there’s the FOMO category: fear of missing out. Others are merging, they must have a clever plan, so our firm should also merge because bigger is better. The downside of size When a law firm becomes too large for the market they are in, the average quality of the partners and the mandates will go down. The spread between partners and between practice groups will grow, and there will be a high risk of becoming a two-speed firm. Also with every expansion of the partner group, the firm will become harder to manage. Beyond a certain size, partners do not really know each other, which will hinder strategic collaboration, team spirit and firm culture. Above a certain size, partners will become more focused on their own interests and even less on the firm’s interests. Partners feeling the pressure to perform will increasingly feel frustrated by conflicts of interest that prevent them from taking certain clients. Last April, Dentons, a global giant with more than 10.000 lawyers, lost a $32 million malpractice law suit as the court rejected their claim that their Swiss Verein structure would allow them to serve conflicting interest as long as the clients were in different countries that were technically independent. The court did not buy that. The Big-4 Two weeks ago, at the end of May, it transpired that global accounting giant Ernst & Young is weighing a historic separation of EY’s audit and advisory businesses after years of criticism over perceived conflicts of interest between the two. Auditors are tasked with holding companies’ management to account and resisting pressure to sign off on numbers without proper evidence while their advisory colleagues prefer to keep clients sweet to generate fees in areas such as tax, deals and consulting. In conclusion The main message in this article is that law firms would be well advised to stop pursuing size for the sake of it. In the end profitability is more important than revenue, and strategic focus and a high-trust close-knit partnership have more value than having the highest number of partners. TGO Consulting would be happy to assist you in determining what would be the optimum size for your firm, your market and your ambitions. Why not schedule a meeting to explore?

End of May I had the privilege of being invited as a speaker at the ACC conference in Madrid. ACC stands for Association of Corporate Counsel, the largest organization of in-house lawyers in the world. The conference committee wanted me to talk about ‘Unlearning traditional legal speak and thought – Retooling hard skills to lead and more effectively partner with the business’. While this might just seem like one of those typical vague and lofty topics that can be found on any conference’s agenda, there is actually a great deal of relevance behind it. Primarily there is the fundamental question whether a lawyer that is employed by a company, is first and foremost a lawyer before anything else? While some may say: “obviously, yes”, I would beg to differ. Any employee in a commercial organization is fundamentally hired to help the company reach its commercial goals. Employees that have no added value in that process will ultimately be made redundant. A commercial company is not a law firm. Lawyers in a company are expected to keep their eyes on the business. Prize draw Allow me to share an example from my days in a corporate legal function. At the time I worked at one of Europe’s largest apparel retailers. The company operated in a high volume segment of the market that is super competitive and highly sensitive to price. In one country one of our main competitors had held a mid-season sale event that involved a lottery and a price draw. Customers who made a purchase during the event could potentially win some attractive prizes, among which a brand new car. No need to explain that our company lost customers and market share to that competitor during the period of the event. As things are in a highly competitive retail market, my company immediately set off to organize a similar sort of event. The problem was that lotteries and prize draws legally were not allowed in that country. We asked our external law firm for advice. The answer we got after several weeks was many pages long, but in essence it said that indeed we could not do it. Legally such events were not allowed. After we had received and digested the outside counsel’s advice, I sat with my team and we discussed how we could help our company to remain competitive in the face of competition. What we came up with is this: it turned out that the law on which the prohibition of prize draws and lotteries was based, was almost a century old. There was already a proposal put to parliament to abolish the ban on such commercial events. In addition we found that there had not been any enforcement from the government on this for almost two decades and that in the unlikely event that we would be prosecuted, as a first offender, the maximum penalty would be the equivalent of €25.000. Realizing that our company would lose close to a million in revenue, our advice to the board was to accept the risk and go ahead. Probably no need to say that the board decided to go for it and that nothing bad happened. On the contrary, our event became a tremendous commercial success and became the new standard-to-beat in the market and was annually repeated for many years. Lawyers must keep their eye on the money I have also shared this real-world story with my audience at the ACC conference. It illustrates how company lawyers are part of a wider ecosystem, geared towards supporting and enabling the companies success. It illustrates that company lawyers are not first and foremost lawyers, but are primarily team members with expert legal knowledge. While this might seem a futile semantic difference, it is not. It is a totally different mindset and attitude. Lawyers in a company are not the guardians of risk and compliance as they often like themselves to be portrayed. Risk and compliance are everyone’s responsibility. If not, the company is doomed. Company lawyers are well advised to remember that their primary role is to help their employer to be commercially successful. Of course limiting risks is an important part of this as risks could turn out to be costly. But more important than the risks, is the opportunity. The reason I’m writing about this is because this also holds true for you, the external counsel. Back to my example story on the prize draw: while the external counsel was technically right, they still did not provide the right answer. Lawyers at law firms are well advised to also be very aware of how their client exactly makes money. Understanding the Business (interests) is one of the TGO Core Dimensions© that distinguish the tier-1 lawyers from the tiers below. For any lawyer, both in-house and outside, it is of crucial importance to understand how a company makes money. Only after you fully understand you are able to deliver value. Back in the days when I was with the retail company, the outside counsel (one of the 4 leading firms in the country) failed to understand, rendering their legally correct advice useless. TGO Consulting has a method that has been tried and tested to help partners develop and grow on the 7-Core Development Dimensions©. Understanding the Business is one of them.

On Tuesday May 10, Britain's heir-to-the-throne Prince Charles took center stage at the opening of parliament, replacing the 96-year-old Queen Elizabeth who missed the grand set-piece event for the first time in almost six decades. The 73-year old Prince Charles has been prepared to one day succeed his mother since the day he was born. While such extensive preparation is a basic routine for a future king or queen, outside the world of hereditary heads-of-state, leadership succession is haphazard. Succession of the leadership in a family run business commonly comes with challenges. In this context it is absolutely worth watching HBO’s ‘Succession’ (cast pictured above). This series centers on the fictional Roy family, the dysfunctional owners of Waystar RoyCo, a fictional global media and entertainment conglomerate, who are fighting for control of the company amid uncertainty about the health of the family's patriarch, Logan Roy. The leadership transition does not go well. Drama assured, leaving the company in a free fall. The transition of fashion label Gucci from the 2nd to the 3rd generation became a well documented non-fictional leadership disaster. The plot even involves a murder and the Gucci family ultimately lost control of the company. Founding partners’ challenges While the majority of law firms still bears the name(s) of the founding partner(s), these partners left the firm long ago. In the legal industry most of the elite law firms have long been institutionalized. However, there is a number of firms where the founding partner(s) is/are still present. The majority of these founding partners are set to retire in the next five years or so. The succession of founding partners today cannot be compared with the succession of founding partners before the year 2000. The main difference is the way in which the legal industry has professionalized. Sullivan & Cromwell was founded in 1879 by Algernon Sullivan and William Cromwell. Skadden was founded in 1948 in New York by Marshall Skadden, John Slate and Les Arps. Kirkland & Ellis was founded back in 1909 in Chicago. I could easily go on, but you will get the general idea. All these firms had their leadership transition from their founding partners decades ago when the legal industry was still in its infancy. For any founding partner who is retiring in the near future, things could not be more different. The stakes are unmistakably higher and the business climate is far less forgiving. It must have been during the 90’s era, when the legal industry truly reached adulthood. Revenue and profits exploded and law became a business. The last decade of the 20th century created many new opportunities. It was during this era that a number of today’s most successful law firms around the world were founded. It is precisely this group that will be facing the transition challenges that come with the unavoidable departure of their founder(s). Visionaries One only has to take a look at the legal directories like Chambers or Legal500, to realize that many founding partners as a lawyer have a tier-1 reputation in their field. Commonly founding partners are not just respected lawyers, but they are also visionaries and successful entrepreneurs. It is the rare combination of these qualities that forms the foundation for their firm’s reputation and success. While founding partners may have this characteristic in common, the way in which they are leading their firms is far more pluriform. On both ends of the spectrum we know founding partners that have a demanding and overwhelming personality and that want everything done exactly their way (imagine the lawyer equivalent of Apple founder Steve Jobs) and those who have the ability to unite and inspire new talent around them (perhaps more like Google). The later has the ability to let thousand flowers blossom while the former is more a big tree in which shadow it is hard to grow. There are multiple roads to building a successful law firm. Regardless the road, the leadership succession when the founding partner departs, will leave the firm vulnerable and it might trigger the firm’s downfall. Preparing for leadership transition Back to Prince Charles. Monarchies teach us that it is of vital importance to thoroughly prepare the future leader (and a group of spare leaders, just in case). The example also shows that the heir-apparent may in the end not be the best choice. Prince Charles and his wife Camilla are not very popular and some suggest that it might be better to skip them in favor of William and Kate. Law firms are not known for preparing their future leadership. Commonly newly appointed managing partners have no clue of what it really takes to day-to-day lead a multimillion dollar highly professional organization with hundreds of employees. That is why at TGO Consulting we have our law firm leadership program by which we help our clients to prepare partners for a future leadership role (managing partner or practice group leader). It makes good business sense to educate your partners on how to run a successful professional law firm. Prince Charles' example not only shows us the importance of preparation. It also illustrates to keep an open mind as it comes to leadership succession, especially when it concerns the founding partner(s). Typically founding partners surround themselves with a small group of partners that they have worked with since the early days. Together they have gone through the ups and downs and between them there is a high level of trust. It seems no more than logical to choose the successor from this small group. While understandable, it might not be what is the best for the firm. The partners that helped build the firm, may not be the ones that are best poised to lead the firm into the future. Maybe the future does not require continuation but change? Sometimes the best choice is not the obvious choice. It is important to at least keep an open mind. At TGO Consulting we help our clients figuring out what profile is needed to continue the firm’s success over the years to come. We help overcome the political sensitivities and personal disappointments that may come with this process. Radical approach Mutatis mutandis, all of the above also applies to any firm where one strong charismatic leader has been at the helm for more than a decade. While not founding partners these managing partners often have characteristics with founders in common. As a parting shot, I would like to point at the most radical of all succession strategies: just leave from one day to the other and let the firm sort it out without you. I know it sounds like a crazy idea, but we are all mortal and there is always at least a theoretical possibility of a founding partner getting a stroke or being hit by a train. Luckily in reality this rarely happens. However in the handful of cases where it did happen, the firms were just fine. Disaster unites and an acute urgency mutes the ubiquitous political games. Don’t let it come to that. We recommend founding partners and their firms start thinking about leadership transition early on. We will be happy to support you during this process.

Last year, in 2021, we bought a century-old (1913) country school in one of the most beautiful parts of Sweden. The idea is to turn it into our corporate off-site retreat. A place away from the hustle and bustle of the economic centers of the world, where we together with our clients can focus on strategy or group dynamics for a couple of days without distraction or interruption. The new property ticks all the boxes: it is an iconic emblematic Swedish building that oozes character and atmosphere. It has 7 airports within 1 – 4 hours by car. It is beautifully situated, one can regularly spot moose from our back yard. There is glass-fiber broadband internet and all the other amenities that one would typically expect in the ‘civilized world’. As said, what we bought was a school, and we have to first convert it into an off-site retreat before we can actually use it for our purpose. By December 2021 we had all the paperwork done and had received the necessary permits. In January construction works commenced. While we will keep large parts of the 600 m2 school untouched in order not to lose the character and authenticity, a number of serious changes also need to be made. The school has 9 toilets (for children), but not a single shower. Being a school, the building also does not have a kitchen. We also need to create a possibility for up to 12 guests to spend the night. It will be clear that we have a sizable project at hand. Managing such a project while running a successful consulting practice at the same time is no mean feat. It requires a lot of energy. Because the building is over 100 years old, it is impossible to predict what the builders will come across when opening or removing a wall. Many design decisions can only be made after deconstruction has started. Many plans need to be changed or adapted based on what is found. On top of that there are currently huge supply chain issues. Despite all this it is an incredibly fun project to do. We feel very fortunate being able to do this. It is likely the most motivating and inspiring project we will ever do. The result is going to be absolutely stunning! Working on this project, it became clear that there are evident parallels to be drawn with the execution an implementation of a strategy by a law firm. Therefor we would like to share with you some of our insights, as they might prove helpful. 1. The goal is clear, but the path is flexible For our project we have a clear vision of what the goal is. We will create a corporate off-site retreat to use with our clients for discussing strategy or group dynamics, and for workshops and training. It needs to accommodate 14 for meetings, break-out, breakfast, lunch and dinner. Our clients must be able to stay over for 1 to 3 nights. We keep the original character and atmosphere of the school intact, but will infuse it with some high-end design additions. While the goal and the vision are fixed and will not change throughout the project, we need to be flexible in the execution and interpretation. Based on real world facts, the project requires us to be creative and flexible. Due to construction limitations or availability (or price) of certain selected materials, we have to constantly adapt and make new choices. For a law firm’s strategy it is no different: the strategy itself is engraved in stone and will not change. For the execution however, one need to be flexible, pragmatic and responsive to what happens along the way. This is exactly why having a clear strategy is so important: it is easy and tempting to wander off course, and to lose sight of the end goal. To our clients we often illustrate this by putting an object firmly on the table: "this is your goal and beacon. It does not really matter how you get there, as long as you get there". There are always more options on how to reach the goal. Give your partners some flexibility in what path they take, as long as the keep moving towards the goal. 2. Rigorously track progress Managing the refurbishing process, we quickly noticed that builders are not verry skilled in thinking ahead. In general the carpenters, electricians, plumbers, painters and other craftsmen do not take into account that the materials they need to complete the job need to be ordered well in advance. This problem is enlarged with the current supply chain issues due to post Covid backlogs and the war in Ukraine. We solved this by ordering all materials that are crucial to the design ourselves. We have been sourcing literally all over Europe and are monitoring delivery status on a daily basis. This approach has been successful. Not only have there been few (minor) disruptions for the builders, we also did not have to compromise on the design or the quality of the materials used. The lesson for law firms is that when it comes to executing and implementing a strategy, it is essential to set milestones and to track progress over time. Too many Managing Partners see their term go by without achieving material tangible results. Despite all good intentions. As a manger you need to be on top of execution all the time, if not, no goals will be achieved on time, if ever. 3. You have to trust people While it is definitively our investment, our school and our project, we must respect the input and expertise of other people. We are not builders, so it seems obvious that we listen to their professional opinions. In reality this requires a delicate balance as the builders are not necessarily always right. On several occasions the builders claimed a certain solution was not possible, only to admit after a bit of sparring and conversation, that indeed there was another way to solve the problem without compromising quality or aesthetics. The balance is knowing when to push back and when to just accept their expertise. It is also important that the crafts people keep feeling personally committed and responsible and don’t start relying on us to correct them if they come across a problem or make a mistake. Our law firm clients will recognize this. It is not uncommon that managing partners or the executive committee take the lead when it comes to implementation of the strategy. Sometimes it happens that management allows for little room for personal interpretation by the partners. Everything needs to be done a planned. Invariably this leads to mutual frustration. Management must trust the partners. What also must be avoided is that the partners sit back and wait for management to instruct them what to do. Also partnerships cannot do without personal commitment and buy-in from the individual partners. Don’t deprive them of that responsibility. 4. Doing the fun stuff first Converting an old school into a high-end corporate off-site retreat takes time. Realistically there will at least be a year between making an offer on the building and hosting our first off-site with clients. That is without taking the current supply chain issues into account. Objectively one year from school to corporate off-site retreat is fast, but that is not the way the human mind works. To us it feels almost infinite. While our vision and concept were already clear from the very beginning, it seems to take forever to convert into a tangible result. This at times can be frustrating. There is a tendency to compensate for that frustration by trying to realize quick wins. At one point I put effort in having a TGO sign produced and placed on the building. Objectively this made no sense, but it gave me at least a feeling that visible progress was being made. The TGO sign was harmless, but I recognize the necessity to remain vigilant and consciously fight and resist the temptation to spend time and effort on things that are not essential right now, but that compensate for an emotional craving for visible progress. In organizations like law firms this is no different. Like our project it will take at least a year for any strategy implementation to become visible and produce tangible results. Like us, partners are inpatient and are looking for quick results. A new website is a typical example. While it is hard to argue that, just like our TGO sign, a new website is essential for the strategy to succeed, it is often impossible to resist revamping the website early on. Just like for our off-site project, a fair warning is in place. Don’t give in to the temptation to spend resources on things that are not essential right now. Keep a rigorous focus on what you need to achieve and act to match that goal. Our TGO sign did not materially draw our resources, a new website or a CRM system will draw yours... All photos are taken by the author at the location of the TGO Off-Site Retreat

The last week of April traditionally the world’s most successful law firms get very nervous. There is huge anxiety as the American Lawyer’s May issue gets published. The May issue contains the Am Law-100, an overview and ranking of the financial figures of the 100 largest law firms in the US. These rankings are closely watched and studied in detail. Law firms that go up will celebrate and those going down will face difficult internal discussions. In this article I will not go into the details of this year’s Am Law-100. We have made an analysis and if you are interested in that, just send me an email. No, in this article I want to zoom in on the kneejerk reaction of partners to compare themselves with others. As we work with clients that belong to the world’s elite, I know that even within the top-10 of the most profitable law firms in the world, partners will be extremely unhappy and stressed if their firm drops one place in these rankings. Profit per Equity Partner for the top-10 starts from $5.533.000 upwards. One would be inclined to think that such earnings come with extreme self-confidence, but that is not the case. Even the very best of the elite tend to focus on the few firms that are doing better and not on the almost 100 firms in the list that are doing – substantially – worse. If you own a Porsche “Oh Lord, won't you buy me a Mercedes Benz? My friends all drive Porsches, I must make amends” This is a famous line from a song recorded by Janis Joplin in 1971. Mercedes today is not what it used to be back in the days, but you will get the general idea. People measure their personal success always compared to others that are doing better. If you are the first person in your neighborhood who is able to afford a Porsche, you are over the moon, proud and happy. If your neighbor then buys a Ferrari, your happiness is gone overnight. In our mind, success is not defined by owning a Porsche as such, but by how our Porsche compares to our neighbor’s car. For law firm partner compensation the same mechanism applies. A destructive mechanism I cannot remember how many times I have got the question what I think of Kirkland & Ellis. K&E is the number 2 in this year’s top-10 of the super-rich elite law firms. The firm is known for its aggressive and competitive culture and for their army of salaried partners. Other firms are preoccupied with Kirkland’s success and contemplate if they should try to copy their formula. My answer is invariably: “you are not Kirkland, are you, and you do not want to be Kirkland either” This kind of sums up the essence: what works for one law firm, might not work for the next. Every law firm has its own unique set of partners and culture. Take for example Kirkland’s large pool of uber-competitive extremely hard working non-equity partners. This is so uniquely tied to the DNA of K&E, that it will not work for any of the other firms in the top-10 (except perhaps for Latham & Watkins). In that same top-10, Wachtell Lipton, who has been the unrivalled number-1 for as long as I can remember, employs a business model that is in almost any aspect the complete opposite of K&E. Wachtel only has 91 partners, all of them full equity. Wachtell’s leverage is much lower than Kirkland’s. The PEP at Wachtell is $8.4 million, which is about 20% more than at K&E. So should a firm try to copy Wachtell rather than Kirkland? Obviously not. Any law firm would be ill advised to try and copy a law firm that they are not. The example of Kirkland and Wachtell is intended to demonstrate that two completely opposite strategies can both equally lead to success. It is also intended to highlight that the strategy should always match the culture and human capital of the firm. Wachtell would never be successful with Kirkland’s strategy and vise versa. Tough discussions ahead Most of our readers are not with Kirkland or Wachtell, so there will always be a tendence, either latent or manifest, to compare with other firms that are in the same market. As in most markets financial performance of the competitors is more opaque than in the US (and even in the US one should not forget that all the numbers are self-reported), there is always speculation that another law firm is having really great results that outperform the own firm. As the economy slows down, partners will increasingly argue that the competition is doing certain things and that their own firm is lagging behind or missing out. This obsession with the competition combined with the feeling that the own firm has sub-par performance is inevitably creating a distracting and destructive discussion. Rather than focusing on what your firm is ‘doing wrong’, it is far more effective to be confident about one’s own culture, strengths and opportunities. My advice would be not to focus on what the competition is doing and trying to copy those, but to have your own independent strategy and focus on the execution. If you need help with that, we are there.

Contrary to the expectations at the onset of the pandemic, 2020 and 2021 turned out to be the best years on record for the legal industry. Almost without exception law firms reported their highest profits ever. Hiring activity was also at an all time high, as demand for both experienced and junior lawyers soared. Some firms went as far as paying over $200.000 for a starting lawyer fresh out of university. The main driver of the activity was Quantitative Easing. Unlike the 2008 financial crisis, this time governments poured unprecedented amounts of liquidity in the market. With so much money available and with interest rates near zero or negative, it is no surprise that investors went looking for yield. During the last two years there have been record levels of IPO’s and M&A activity. In some markets SPAC’s became hugely popular. In order to let capital work, anything would go. Swamped with work and scrambling to find the lawyers to handle it, partners worked to exhaustion over the past two years. 2022 looked like starting off strong and continuing the trend. Maybe not as good as the previous years, but still better than average. Then the war started and almost overnight the mood changed. Global dealmaking fell to its lowest level since the start of the coronavirus pandemic as surging inflation, tougher regulation and the war in Ukraine led to a slowdown in what had been a record period of mergers and acquisitions. Just over $1tn worth of deals were struck in the first quarter of 2022, 23 per cent lower than the same period last year, with all continents facing a decline in M&A activity. Also the number of IPO’s has started to drop significantly. As inflation rises sharply and Central Banks are testing raising interest rates and are winding down their bond buying programs, economic optimism is fading quickly. Global supply chain problems and China’s strict zero-Covid policy are further adding to the woes. 2022 will not be as good Given the economic outlook, the legal industry should prepare for 2022 to be less booming than the past two years and expect a decline in revenue. While there is no reason whatsoever to be worried, law firm leaders are well advised to start managing their partners' expectations, while taking precautionary measures at the same time. When there is no growth or if revenue drops, law firm partners get nervous. If the firm is doing well and revenue grows, partners tend to believe that their firm is doing better than the competition. If business is good, this creates a false sense of confidence and optimism. The past two years partners were happy even if competing law firms grew more. As soon as things slow down the exact opposite happens. Partners feel that all other firms are doing better. If business is slow, there is a misguided feeling of being hit harder than the market. Law firm leaders should anticipate their partners getting more critical on management and strategy. Expect a strong tendency for partners to get more hands-on involved in the management of the firm. This will particularly be true for the M&A partners who are expected to get uneasy and insecure due to the reduced amount of work. As M&A partners typically have a significant contribution to the firm’s overall results, they have lots of clout and their opinions cannot be neglected. In the Dutch language we have a phrase that translates as ‘panic football’. It’s when you’re playing football, and you panic because you’re behind the other team, and you’re so desperate for a goal that everyone is kicking the ball and it’s going in all different directions. Any law firm leader will recognize this and know this is likely to happen as partners start throwing in ideas how to reduce costs and how to regain revenue. Just like in football, this behavior leads nowhere. Strong leadership required It is in times of headwind and adverse conditions, that the capable managing partners are separated from the rest. When the going gets tough, strong leadership is required. Only law firm leaders with a vision and a steady strategy will be able to calm down their partners. Weak managing partners get eaten for breakfast and will soon be a ‘puppet’ dancing on the strings that are being pulled in contradicting directions by the rainmakers in the firm. While this might be the right time to cool down the recruitment frenzy and become more critical to whom you are hiring, instead of just hiring anyone at any prize, it would not be smart strategy to stop hiring altogether. The same goes for cost cutting, don’t get zealous, there is no reason to panic. Yes, it is entirely feasible that profitability declines a bit, but that is no reason to panic. Especially right now, after the pandemic, it is important that law firms keep investing. During the pandemic there have been huge reductions in the cost of marketing and travel. When business is down, these are the areas to invest. We at TGO Consulting advise law firm leaders on all strategic matters. We can help you in avoiding falling victim to the side effects of the economic recession. Especially right now it is important to stay strong and to keep steady.

Now that accounting has completed the books on 2021, many law firms are in the middle of the annual partner appraisal cycle. For some firms, this is merely a formality for deciding what cut of the profit a partner will receive. The majority of firms however is set out to use the opportunity to agree on targets for the next year, and to discuss opportunities for improvement. When I talk to managing partners these days, or with other members of the appraisal committee, invariably they mention how completely bogged down their schedules are. One just need to do the math’s to see how this works out: on average it takes a total of one hour for preparation and another hour for the appraisal, so two hours per partner. This is multiplied by the number of partners in the committee plus the time of the partner who is being appraised. All this would not be an issue if the process would produce tangible results and directly contribute to increasing profitability. The problem is it doesn’t Partner appraisals are like pulling teeth. In general people feel uncomfortable when being judged. Lawyers no exception. It just does not feel right if another person tells you what you do right and what you do wrong. It highlights an inequality in the relationship: the assessor/judge is superior to the assessee. Partners in law firms tend to be hyper sensitive to this type of relationship. Lawyers are highly skilled in using language to divert a conversation, and are masters in finding arguments to explain any situation. The combination of resent and avoidance does not provide fertile ground for future change. Partners who are being assessed will politely sail through the motions without damage, only to return to their desk and continue what they were doing. No amount of assessment will change the behavior or performance of a partner. The annual partner assessment in its present form is a total waste of time. How depressing… How to do it better There are basically only two reasons for a person to significantly change its behavior: trauma/fear, or self-insight. The later can only come from within, as where the former comes from the outside. Material changes in behavior do not happen on the basis of rational arguments. It is not that kind of process. Everyone knows that smoking is bad and that it is unhealthy to be overweight, but that does not trigger behavioral change. We all know on a rational level that the world is heading towards a climate catastrophe, but we don’t change our behavior. Within this framework, why do we expect partners to change their behavior or performance after we tell them? Back to basics, partners might change when they genuinely fear being kicked-out. Sometimes, even that is not enough. So if change is not triggered by reason or arguments, and possibly not even by fear, self-insight is basically the only shot we have. But how do we make partners want to change out of self-motivation? Self-assessment A method we have developed and promoted over the years is partner self-assessment in combination with peer review. Let’s examine the benefits of self-assessment first. Rather than confronting a partner with the opinion of the managing partner or a committee, which will force the partner into defense and deflection, the partner is asked to self-assess and present the result of the self-assessment to the assessor(s). This fundamentally changes the dynamics of the conversation. The partner is no longer shielding him/herself from ‘critique’, but building a case instead. This creates a much more open attitude. The assessors on the other hand, do not take their personal views and opinions as a measurement but use the collective opinion of the whole partnership as the basis for the discussion. This makes the arguments much more objective and less personal, which makes the discussion a lot easier. The combination of self-assessment and peer review, has proven to be the most effective method so far. We have actually seen partners adjust their behavior and improve their results after using this method for the assessment conversation. Turning the tables Changing the conversation from critique to self-improvement does have a big impact on the effects. Within this framework it is essential to recognize that improvements on the business side, will inevitably result from development of a partner’s soft skills. At TGO we have defined 7 Core Development Dimensions©. One thing that highly successful lawyers all over the world have in common, is that they score above average on these 7 dimensions. Counterintuitive as it may sound, shifting the focus from improving the practice to personal development, will almost immediately result in better business results. Investment in partner development is probably the most profitable investment any law firm can make. It all begins with methodical self-assessment. Curious? Just inquire!

In the essence, being a lawyer is a solitary profession. This is especially true where lawyers represent a client in court, but also if it comes to transactions or advice. The responsibility for the client is seen as a personal responsibility, not a collective one. Traditionally the relationship has always between an individual lawyer and the client. Although over the past decades, with the emergence of professional law firms that are ran as businesses, this paradigm has certainly shifted, the relationship is still personal at the core. The high number of lateral partner hires that bring their book of business corroborates this. Not just the lawyer-client relationship, also the pressure to perform is very much an individual one. Regardless the profit distribution system, partners see themselves pushed to create ever more revenue. In a merit-based system because it directly influences the income, in a lock-step because no-one wants to be in the bottom 10% and risk being kicked-out. If it comes to performance pressure, there is little safety or comfort in the collective. If it comes to creating revenue, each partner is pretty much on his (her) own. Therefore lawyers demand a high level of autonomy to run their practice. At the same time, their firms want to have a firmwide strategy in order to manage its overall reputation and performance. This is where a tension arises: how to balance between control and autonomy? Why control is necessary Any law firm which operates merely as a group of individual lawyers that happen to be under one roof, will soon hit the ceiling as it comes to growth in (financial) performance and reputation. In order to grow, a firm needs its partners to be aligned on what type of mandates and clients the firm is looking for. One also needs a firmwide system that deals with formal and strategic conflicts of interest. A partner accepting a position on a panel and agreeing on exclusivity, could end up costing the firm a multiple of that revenue in lost opportunity being unable to accept lucrative mandates from other companies operating in the same sector. The necessity to coordinate also arises as it comes to recruitment and training of associates, knowledge management, the use of firmwide standards and templates, and so on. Management is at the core of tensions Like governments or business leaders, law firm managing partners and their board have to manage and lead the firm to strengthen its position and financial performance. Unlike governments and business leaders, law firm leaders have little enforceable powers on the execution level. Having their hands tied while expected to lead the firm towards a better future, can leave law firm leaders frustrated. Some law firm leaders resort to dictatorial behavior or to introducing strict rules and policies that every partner has to adhere to or, if not, face financial penalties. While ruling by ‘fear’ might seem like a solution, in reality it seldom is. In order to make things work, law firm leaders have to strike the right balance between control and autonomy. Thomas Hobbes Leviathan In Leviathan (1651), Thomas Hobbes argued that the absolute power of the sovereign was ultimately justified by the consent of the governed, who agreed, in a hypothetical social contract, to obey the sovereign in all matters in exchange for a guarantee of peace and security. In his introduction, Hobbes describes this commonwealth as an "artificial person" and as a body politic that mimics the human body. The cover of the first edition of Leviathan, which Hobbes helped design, portrays the commonwealth as a gigantic human form built out of the bodies of its citizens, the sovereign as its head. One must keep in mind that it is almost 400 years ago, that Hobbes wrote his masterpiece. It is therefore not the ‘absolute power’ of his sovereign that I would like to highlight in the context of this article, but the theory that each individual needs to hand-over part of his autonomy in order for the state to function and flourish. By losing part of his autonomy, the individual will be better-off as it will result in a more stable and effective government. For modern day law firms this is no different. As much autonomy as possible Partners in a law firm cannot have unlimited autonomy and expect at the same time their firm to be successful and strong. One cannot have the cake and eat it. Part of the autonomy must be transferred to the leadership in order for it to be effective. Law firm leaders are tasked with looking after the long term interests of the firm as a whole, even if this would go against the individual interest of some of the partners. Law firm leadership must have the authority to unilaterally decide on the strategy and other topics that are fundamental to the firm’s reputation and financial success. At the same time, within that strategy, it is the responsibility of the individual partner to decide how to accomplish the goals that are set. The firm decides on the ‘what’ and ‘when’, but the individual partner decides on the ‘how’. Unfortunately, it is not uncommon that law firm leadership wants to dictate the ‘how’. Inevitably this leads to failure, which in turn provokes even tighter control and micro-management from the leadership. If you want your strategy to succeed, set a limited number of clear and realistic goals of which no partner may deviate, but grant your partners as much autonomy as possible on how to achieve them.

Do you remember how end of June 2017 business operations of Danish shipping giant AP Moller-Maersk, American pharmaceutical giant Merck, French construction giant Saint-Gobain, German consumer goods provider Beiersdorf, and many other companies were severely disrupted by an unprecedented cyber-attack? The total cost in lost revenue alone is estimated to have been well over a billion Euros. It was not only large international businesses that were affected by the notpetya malware. On 27 June 2017, the Madrid office of DLA Piper was hit first and within hours, the entire firm was locked down across the world, unable to access phones, emails and other forms of communications. 3,600 lawyers in 40 countries were affected. They were without phones and without email. The ransomware attack on DLA Piper sounded a different type of alarm for Big Law. The world’s biggest firms are just as prone to ransomware attacks as any other company, and the potential ramifications of a network-crippling malware infection are wide-ranging for a service industry that holds the legal fate of corporations in its palm. Consider litigators unable to access motions on a deadline. Trial lawyers preparing for arguments without key documents. Transactional lawyers unable to communicate with clients attempting to close multibillion-dollar deals. And of course, anxious and possibly angry clients. Perfect storm 24 March 2022, White House National Security Adviser Jake Sullivan has warned that a Russian cyberattack on a NATO ally could trigger a collective response: “We could see circumstances in which a collective response by the alliance to a cyberattack would be called by an ally,” said Sullivan. “That is absolutely something where we and other countries could bring capabilities to help a country defend itself and respond.” Sullivan made the warning a day after President Biden said that “evolving intelligence” suggests Russia is “exploring” revenge cyberattacks for the sanctions imposed on the country following its invasion of Ukraine. The possibility of cyber warfare has never been higher than it is right now. Given Russia’s reputation and track-record, the effects could be devastating. Of course no one knows what will happen. If it comes to Russian cyber-attacks, western critical infrastructure seems the most likely first target, but an orchestrated attack on businesses, or even law firms, can absolutely not be ruled out. Any state sponsored sophisticated attack is a serious risk, but it is the combination with the present hybrid (or full-time) working from home, that creates a perfect storm. All high-end law firms are expected to have state-of-the-art cyber-security systems and policies in place. The problem right now is that such high-end defense systems have been designed for the office. When lawyers (and/or assistants) are working from home, the defense is seriously compromised. Every kitchen table and every shared WIFI-point expands the surface of attack for a hacker to exploit. Structural remote communication by email, phone or Teams, increases the likelihood of clicking on an malicious link. Law firms need to be on extremely high alert! Ultimately you cannot stop it Russia is home to some of the most sophisticated hackers in the world. A state sponsored cyber-attack will exploit several zero-day vulnerabilities and will be able to bypass even some of the most high-end defense systems. Even if the attacks would be specifically targeted, there will most likely be a lot of collateral damage, due to the networks by which systems are interconnected. Law firms should not rely on their firewalls and virus-scanners. This is the time to perfect your response scenario and your contingency plan. Does everyone at the firm know what the drill is, when a cyber-attack hits? For most law firms, the answer would be “probably not”. When the cyber crisis hits, you cannot afford to lose even a millisecond of time. The action needs to be immediate and operate as a well-oiled machine. 1. Draft a cyber-attack response plan* 2. Test the plan and improve if necessary 3. Rehearse until it becomes second nature to every single employee Besides an established and well rehearsed response, a law firm also needs to have back-up and redundancy systems in place. A dual-server or a back-up server, is of little use, if they can both be down or encrypted at the same time. If email server is down, what is the alternative to communicate with clients? If all mobile phones are encrypted, is there an emergency supply of new out of the box replacements? Paper files, fax machines, a traditional landline, removable data storage, a typewriter, some of the redundancy and back-up systems will probably be antique by today’s standards. 4. Have ‘air-gaped’ back-ups of everything 5. Have redundant communications and production technology Of all these measures, having a well-rehearsed response procedure is the most important. This must include a method for immediately notifying every single employee across offices that there is a situation in which the pre-practiced plan is in operation. You need to be able to do this if potentially all communications are down. You also need to communicate with your clients. Time is running out. According to the latest military intelligence, cyber threat is imminent. I recommend that you have a critical look at your plan right now. Let’s hope you won’t need it. *At TGO Consulting we are not IT or cyber security experts. We do have expertise on all aspects of crisis communication. Making a Cyber Attack Response Plan is teamwork by nature. Our experience and expertise will have added value in such team.

We live in troubling times. The pandemic is not over yet, Russia has launched the largest and most brutal military invasion in modern history, energy prices have sky rocketed, inflation is rampant and serious food shortages have become a realistic scenario for large parts of the world. Amidst all this gloom, one could be forgiven not being aware that Tuesday 8 March was International Women Day. On the occasion, The Economist’s glass-ceiling index was published. This is their annual measure of the role and influence of women in the workforce. Being a citizen of the Netherlands, I did not find the 2022 index uplifting. The country ranked 21 out of the 29 countries represented. This despite politicians and business leaders always having their mouth full of the importance of gender equality. Parole, parole, words, empty words… Legal Industry rock bottom Fortunately the index ranks countries, not companies or industries. If industries would be ranked, the legal industry would no doubt be close to the bottom. In Europe there are by now percentage wise probably more female bus drivers, than there are female equity partners in tier-1 law firms, despite law firms advocating equal partnership opportunities for women. Parole, parole, words, empty words… Me, being a man, I probably should not enter into the social, political or ideological dimensions of this discussion. This article will focus on the business aspect: law firms, in order to excel, need to retain the best possible talent. Statistically, 50% of that talent has to be female. Any law firm that does not have close to 50% female equity partners, is missing out on talent opportunities. Let’s examine where the alleged efforts to appoint more female equity partners do derail. Different rewards Recently I had a conversation with a highly successful litigation partner. While he had always had a majority of women in his team, he had never made a female partner. He praised the female lawyers in his team for their diligence and reliability. He told me how, on many occasions a female associate had spotted an omission or mistake that he himself had missed. To him, in his mind, the female lawyers in his team were crucial. He could not imagine having to run his practice without them. And yet, during the two decades that he was now a partner, he had never promoted a woman, but he did promote two men. Women were just Santa’s little helpers. Indispensable, but never eligible to be the next Santa. The issue here is that male and female lawyers are each rewarded for entirely different skills. Male lawyers are encouraged to be bold, outgoing, outspoken and take risk. They are forgiven for sometimes being a bit sloppy. Female lawyers on the other hand, are rewarded for being diligent and precise. Women that are brash or outspoken are disliked. Women are supposed to act nice, be social and serve. This sets women up for failure if it comes to future partnership. During their time as an associate, they are rewarded for exactly the opposite of what makes a good partner. Men on the other hand are rewarded on future partner characteristics and are forgiven if they are not a model-associate. Perhaps female partners are women’s worst enemies? During the run-off to the last US elections, I watched a TV program that asked ordinary Americans for which of the two candidates they intended to vote. Surprisingly immigrants who made it to middle-class were overwhelmingly supporting Trump, who is openly anti-immigrant. Apparently if you have had to struggle and fight to make it yourself, you less inclined to support others getting the same for free. In that same spirit of thinking, female partners do typically not promote new female partners. Female partners tend to raise the bar for women to become partner even higher than their male fellows. Maybe this is in part because they don’t like competition? Being one of the few female partners makes you a bit special. Once the number of female partners would start to grow, that special status would fade. Women prefer to stay at home One of our friends, let’s call him Anthony, is a partner at one of the elite law firms in his country. He is a modern man and certainly not sexist or anti-feminist. When it comes to women becoming partner in his firm, he feels a bit sad and disillusioned. He tells me he has had so many conversations with talented female associates, trying to convince them to apply for partnership. The women he talks to, in his mind, all indicate that they rather be at home with the children, than trying to become a partner at the firm. The problem here is that Anthony, hears what he expects to hear. Perhaps the women he speaks with even tell him what they feel it is what they are supposed to say, think and do anyway. All this of course makes no sense. Raising and looking after children is not the exclusive domain or responsibility of women. In any divorce, men want equal rights to the children. So if men expect equal rights when the relationship ends, why wouldn’t they have equal rights and responsibilities while it lasts? Often the partners in a law firm portrait partnership as an all-consuming occupation. Partnership implies the will to sacrifice everything private: it will ruin your relationships, you will have to return early or depart late for holidays, and you will not see your children grow up. Painting such caricature will scare away anyone in his/her right mind, so don’t blame it on the women. We need to drastically adjust the image of partnership. Being a partner must become an appealing proposition, not an invitation to hell. Stop talking, take action When I saw the poor position of Netherlands in The Economist’s index, I wrote in an article that the ambition should be, to next year at least have a score above the OECD average. Words alone will do nothing the help achieve this. Only action counts. Law firms, I would encourage to set hard targets for increasing the percentage of female equity partners. You may have noticed that I consequently mention ‘equity’ when it comes to partnership. I am of course aware that it is in fashion to appoint women as salaried partners. While this beefs up the numbers towards the outside world, it is ultimately even more insulting than not appointing female partners at all. It is time to start acting and stop talking. Law firms cannot afford to lose 50% of the best talent. Read more in an outstanding article by Lisa Hakanson: Diversity, a hard nut to crack *"Parole parole" (transl. "Words words") is a duet song originally performed by Italian singer Mina -pictured above- and actor Alberto Lupo. It was released in April 1972. In 1973, Dalida and Alain Delon recorded the song in French as "Paroles, paroles", that became an international hit and a classic in France. My father used to love this song, and I remember it as a child.

Let me first explain the picture above the article. The photo depicts not just a random armed fighter. The person photographed is the Right Honorable Mr. Ivan Mishchenko, who is a judge at the Supreme Court of Ukraine. The translated text above the article in which this photo originally appeared reads: "It doesn't matter who's a lawyer, who's a prosecutor, who's a judge — we're all united." Monologue of the Supreme Court judge who took the machine gun” The article was published on 5 March. A lawyer I know, who also knows Mr. Mishchenko personally, has assured me that this photo is real. Bye bye Russia Over the past week there has been an exodus of western companies out of Russia. Each and every day we have seen new announcements of companies producing and/or selling consumer goods, which are not only closing their operations in Russia, but also stop selling through independent outlets. Apple, McDonalds, IKEA, Shell, Disney, Hennes & Maurits, Adidas and General Motors, the list goes on. Since the invasion on February 24, more than 300 companies (and counting) have halted Russian operations, far exceeding the 200 big companies that quit South Africa over Apartheid in the 1980s. Doubt in my mind Last week, I published an article ‘Moral Duty’ in which I advocated boycotting all companies and individuals that have direct or indirect ties to Russia. Seeing the above picture of Ivan Mishchenko has made me reflect on my point of view. First and foremost, the picture is a stark reminder that this war is not fought from behind a desk, but on the ground while risking real peoples’ lives. Mr. Mishchenko is not writing opinionated articles. Maybe what I am doing is too easy, I don’t know? Secondly, some of the companies that are now rushing out of the Russian market, do this because of the public pressure. There is an outraged and angry mob of media and consumers that demand that companies abandon everything Russian. There is little or no room for nuance. Right now it is black or white. This polarization is as such not new. It has been growing since Trump and been manifest also during Covid times. Thirdly there is the question if economic pressure will have any favorable effect. There is actually little or no historic evidence indicating it will. In all recent examples where strong international economic sanctions have been imposed, the real world effects have been quite the opposite. North Korea, Iran, Venezuela and Cuba for example have all hardened their positions and their regimes have not been overthrown. Fidel Castro remained in power until he was eventually succeeded by his brother. Why would things be different when it comes to Russia? How likely is it that because of the sanctions and boycotts, Mr Putin will be forced out and replaced by a nice pro-western anti-authoritarian successor? Perhaps the sanctions and boycotts will only make the Russian population suffer and make them more nationalistic and anti-west? What about the legal industry? In last week’s article I have shared with you part of the conversations I had had with a number of our clients regarding their interests in Russia/Russian clients. My point of view at that point in time was that it would be best to terminate all their direct and indirect Russia related business. Drawing parallels with Nazi-Germany, there was a strong emotional feeling not wanting to end up on the wrong side of history. Any lawyer who back then would have legally represented either the German State or companies such as IG Farben or Krupp, would have been held accountable after the war. The question for me today is, where does this moral responsibility end? There will be little doubt that western lawyers should steer clear of representing the Russian State or any of its entities. Also Russian state-owned or state-controlled companies are a no-no, as are persons and entities that are on the sanctions list. Then comes a large gray area. Let me give an example: individuals that are on the sanctions list, do own properties in the west. The problem is that these properties will not be in their name, but will be owned by a company or other investment vehicle instead. The ultimate beneficiary owner will most likely be invisible through a network of companies located all over the world. So if the property is seized and the legitimacy of this action is contested in court, should a law firm take that client? Calibrating our moral compass The present situation is equally terrifying as it is confusing. We don’t live in a clear cut world, where the good guy wears a white hat and the bad guy always a black one. The only way to navigate these troublesome times is by keeping an open mind and taking into account different opinions and points of view. Our moral compass needs frequent recalibration. This can only be done through discussion and exchange. At the same time this should never be used as an excuse for not taking a moral stance. There is a real war going on, and we need to pick sides! Not taking a position and just accept the money will never be defendable. One of the challenges is that we live in times where in the public opinion there is no tolerance for nuance. This is one of the main triggers for the corporate exodus from Russia. Let’s once again look at that picture of Mr. Mishchenko, before we either turn a blind eye because we serve mammon, or claim the moral high ground from the safety behind our desks. It is a strong reminder that this is very much a war of bullets and bombs, and not of hollow words. I’m afraid I do not have a clear cut answer, but I am happy to contribute to a discussion at any time. Please don’t hesitate to reach out! PLEASE SHARE THIS ARTICLE IN YOUR NETWORK (Update: on 10 March 2022 I have been directly in contact with Mr. Mishchenko, who authorized the use of his name and picture for this article)

According to schedule, I did not publish an article last Friday. In hindsight, I’m glad I didn’t. Whatever the topic, it would have been irrelevant at that point in time. Friday 25 February 2022, the world watched in horror as an incredibly large old school invasion force descended upon Ukraine. Marking a pivotal moment in world history, not seen since the first of September 1939. Aggressive use of military force is back in style. The “rules-based international order” just took a direct hit. Dreams of world-peace are shattered. I felt shell-chocked. Despite the horrendous events, over the weekend the first glimmers of hope appeared. The world seemed to become more and more united by the hour. Initially it was governments getting univocal in condemning the war and announcing or increasing sanctions, even if it could hurt their home economies. Soon commercial businesses joined, closing operations in Russia, terminating joint ventures, withdrawing products and product support for their Russian customers. Even Russian performing artists, athletes and sports teams, are now subject to a global boycott. It is heartwarming to see that, despite our differences, when push comes to shove, we stand united. It is realistically the only way to gain some leverage on the superpower the Russian Federation is. The Legal Industry With the Covid scenarios still fresh in memory, the legal industry initially focused on sanctions, the most apparent legal aspect of the Ukraine invasion. Overnight newsletters were compiled and client briefings got organized. During the weekend however, this started to change and my phone started ringing. The last couple of days, since Sunday late afternoon, we have been in constant conversation with some of our clients seeking consultation on what to do with their Russian clients. The fact that we were part of multiple discussions proved to be immensely helpful in quickly establishing ‘best practice’ Let’s face it. Many ‘business law firms’ all over the world are doing business with clients that have direct and indirect ties with Russia. Those clients are not on any sanctions list and every organization or individual has a right to legal representation. Business Law Firms, by nature are a-political and do not take a moral stance. There are also strict bar-regulations preventing a lawyer to just drop a client. But this time it is different and most of us do not want to end up on the wrong side of history. Based on the conversations we have had with some of our clients, I know that there have been heated discussions within partnerships. Some partners took the strictly legal point of view: it is not against the law to represent Russian clients and they are entitled to a lawyer. Others primarily feared the financial impact, as Russian clients accounted for a substantial part of the firm’s revenue. At the other side of the table were those partners that feared reputational damage if the firm would continue to represent Russian clients. And then there were those who literally said they would quit if their firm would not act. Tough decisions had to be made and there was an immense pressure of time. Law firms must act and choose sides now. "Most of us do not want to end-up on the wrong side of history" At the time of writing, without exception, the clients we have advised throughout this process, have decided to terminate all their direct and indirect Russia related business. These are incredibly difficult decisions to make. It is not that the Russian clients are the enemy. In most cases these are longstanding loyal clients. On a personal level this are people we know, like and respect. Unfortunately all this is ultimately irrelevant. On the brink of World War 3, it is our moral duty to stand united. We have no choice but to act and we owe it to our children and our grandchildren. If you still have not made up your mind, I urge you to do so right now. What happens next? “Prediction is very difficult, especially if it's about the future!” (Niels Bohr 1885-1962). I certainly do not have a crystal ball, and I must admit that I did not foresee that we would end up in the mess in which we are right now. With that caveat, I could imagine several scenarios how this all would end. In my mind most of these scenarios do not end well, and the one that does, seems highly unlikely. I read in an article that Putin used to tell how as a child in Leningrad, he and his friends used to chase rats with sticks and loud noises. At one time a huge rat that they corned against a wall, suddenly attacked Putin fiercely, leaving the young boy injured. Perhaps today Putin is that rat. Now that he has maneuvered himself in this situation, what is his endgame? Putin does not strike me as the sort of person that handles defeat or losing face well. Even if he manages to win the war he will be an outcast like Kim Jung Un for the rest of his days. Russia will remain isolated behind a new iron curtain. The only favorable way out of this mess does not include Putin. A change of leadership in Russia is probably the only positive scenario from here on. This is unlikely to happen and if it happens it should happen from within Russia. Standing persistently united as a world in boycotting everything Russian is the most important thing we must do to help trigger such event. On the short term such actions will hurt us in equal amounts as it will the Russian people. I’m afraid this is a hardship that we owe to future generations. Please do not give up nor give in! PLEASE SHARE THIS ARTICLE IN YOUR NETWORK!