June 21, 2007  

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ALA Currents is a free newsletter about management trends and innovations provided exclusively upon request to members of the Association of Legal Administrators.

News & Views

NO SHORTAGE OF WORK FOR
LEGAL PROFESSIONALS

Business is healthy for many law firms, a new survey shows. Sixty-nine percent of lawyers polled said their firms are handling more projects and cases compared to one year ago; only 6 percent said their current workloads have decreased.

The survey, developed by Robert Half Legal, was conducted by an independent research firm and includes responses from 150 attorneys working for the largest law firms in the United States and Canada. All respondents have at least three years of experience in the legal field.

Lawyers were asked, “Is your law firm experiencing an increase or decrease in new cases or client projects compared to one year ago?” Their responses:

“Companies are looking to outside counsel to provide support for a growing volume of casework, ranging from large-scale litigation and patent and copyright issues to commercial real estate transactions and mergers and acquisitions,” said Charles Volkert, Executive Director of Robert Half Legal.

Volkert added, “Because projects may require special resources, many law firms are hiring legal professionals on a project-by-project basis to quickly access specific skill sets and expertise to handle complex discovery requests and other legal matters that have the potential to overtax current staff.”

For more information, visit Robert Half Legal online.

A NEW DANGER: DRIVING WHILE TEXTING

Forget DWI. The newest traffic-safety issue is DWT – Driving While Texting. Lawmakers are wrestling with this latest “distracted driving” issue, as electronic devices become increasingly integral parts of people’s lives. During the past few years, several U.S. states have outlawed the use of handheld cell phones while driving, and 38 states are debating bills that would regulate their use while behind the wheel. But few driver distractions are as potentially life-threatening as attempting to read and type messages while weaving through traffic. “I don’t think you’d find anyone who would say that trying to text and drive is not reckless behavior,” said a spokesperson for CTIA – the Wireless Association, an industry lobby group. The behavior seems particularly prevalent among younger drivers: A study conducted by Nationwide found that while 19 percent of all drivers own up to text messaging while driving, in the 18-27 age group it’s 37 percent. Meanwhile, a study by the state of Washington in 2006 blamed “driver distractions” for 7.5 percent of the 50,000 reported accidents in the first nine months of that year, with “operating a handheld communications device,” including texting, coming in fifth.

The Wall Street Journal, March 14, 2007

Management Innovations

GETTING RID OF BAD APPLES

Every organization has at least one: that employee who, for whatever reason, behaves as though coming to work is a fate worse than death. You know, the man who drags down coworker morale with his horrific attitude, or the woman whose absence transforms an office of formerly solitary cubicle hermits into a place where people productively work together to get extraordinary results. He/she is your company’s “bad apple.” And Joanne G. Sujansky, CSP, founder and president of KEYGroup, warns that if you want to keep him/her from spoiling the whole barrel, well, you’ve got your work cut out for you.

“It’s been our experience that bad apples usually comprise only a small percentage of an organization,” said Sujansky. “But because they require more effort to handle than other employees, it’s not uncommon for managers to spend a great deal of their time dealing with or listening to the bad apple’s various concerns or complaints, or the complaints they receive from other employees about the bad apple. Clearly, managers need to think about the illogic of such an efforts-to-results ratio!”

If managers don’t deal with their bad apples – either (metaphorically) cutting out the rotten behaviors or tossing the entire apple out of the barrel – their “spoiling” effects will only multiply. The first step, though, is to understand just what makes these employees so incredibly difficult to handle. Sujansky spells out some of the reasons that managers are so flummoxed by bad apples, along with some practical techniques for dealing with them once and for all.

Problem 1: Rather than try to bring their bad apple’s behavior to an end, many managers choose to simply move the employee to another department. By the time he/she gets to you, it seems impossible to fire him/her after being with the company so long. You’re tempted to follow the lead of your predecessors and simply shuffle your bad apples along to the next team – but all that does is move around the misery.
Solution: “Quite simply, you must create a culture that doesn’t allow people to pawn problems off on others.” said Sujansky. “If your culture allows bad apples to be passed around from department to department without any consequence for their behavior, well, that’s exactly what will happen.”

Problem 2: Managers expect team members to deal with the bad apple, but they can’t – or won’t. People have great difficulty giving feedback to their peers. They’ll almost always push the problem back to managers rather than confront the employee directly.
Solution: “The study shows that confrontation by team members can occasionally be successful,” said Sujansky. “The problem comes when team members don’t feel as if they have enough power in the situation. In these kinds of workplaces, clear and open communication is key. Healthy peer communication doesn’t just happen, though. Smart leaders know they have to foster it.”

Problem 3: Bad apples can be master manipulators. After all, they’ve stayed around this long for a reason. When you confront them, bad apples aren’t afraid to pull out all of the stops to redirect your attention from poor behavior to their more positive traits, or as is often the case, to some other employee. Maybe yours will mention an account she just brought in ... or maybe she will point out that one of her fellow employees was late to work for the third time that month.
Solution: “Regardless of what your bad apple is telling you in order to distract you, stay focused on addressing the issues at hand,” said Sujansky. “Simply say, ‘That’s not what we’re here to discuss,’ and bring him/her back to the subject of her destructive attitude. Rest assured that if you ignore it, you’ll have that same employee in your office the next month, and the month after that, as you attempt to solve the same problem again and again.”

Problem 4: Bad apples aren’t always poor performers. Some can be great producers for the company. The “good” qualities may make you reluctant to confront him/her, much less terminate the employee altogether.
Solution: “It’s important that you provide balanced feedback to all of your direct reports, including your bad apples,” said Sujansky. “Acknowledge the positive contributions your bad apple is making, but don’t be afraid to confront the behaviors that negatively affect others. Ultimately, you must decide whether or not the bad apple’s negative behaviors outweigh his/her one big accomplishment or singular skill. Keeping these positives a part of the organization may not be as critical as increasing the productivity of the whole team.”

Problem 5: Some managers are afraid to fire bad apples for fear of legal retribution. You may fear that if you fire, confront, or even discipline your bad apple, he/she will threaten to file suit for discrimination or harassment.
Solution: “Legal retribution shouldn’t be a worry for you if you follow the sound human resource practices required of a leader,” said Sujansky. “Great leaders should coach, provide balanced feedback, help the employee develop a plan for correction, discuss what you document, and document what you discuss. After each meeting, cite the problem, the action taken to correct or eliminate it, the dates, the result that occurred, and any comments that will help you to recall the sessions.”

“Another important point the study makes is that companies can avoid the bad apple disease altogether,” said Sujansky. Hire for talent and values and character, not just for skill sets. You can teach people the skills they need, but you can’t always teach work ethic, or integrity, or respect. Remember, culture is everything ... so make sure you build the kind you want, one employee at a time.”

CAN P2P EASE NETWORK CONGESTION?

TV shows, YouTube clips, animations, and other huge video files already account for more than 60 percent of Internet traffic, and within two years experts say it could reach 98 percent.

But help could come from an unexpected quarter: peer-to-peer (P2P) file distribution technology, said Hui Zhang, a computer scientist at Carnegie Mellon University. P2P had a somewhat seedy reputation as a playground for piracy, with millions using P2P “mesh” networks like Gnutella, Kazaa, and BitTorrent to help themselves to copyrighted content. But Zhang believes this black-sheep technology can be reformed and help deliver more video without overloading the network. Two snags keep content distributors and ISPs from warming up to mesh architectures.

First, to balance the load on individual PCs, most advanced P2P networks break big files into blocks, which are scattered across many machines. Reassembling those blocks uses precious bandwidth to broadcast metadata to keep track of which blocks are still needed. Second, ISPs hate P2P traffic, because it is a big money-loser. Still, networking and hardware companies have their eyes on new devices designed to help consumers download video and other files over P2P networks. Manufacturers Asus, Planex, and QNAP, for example, are working with BitTorrent to embed the company’s P2P software in their home routers, media servers, and storage devices.

Technology Review, March 12, 2007

Building Buy-In

EXTRA! EXTRA!
By Paul Trout

“You can’t always get what you want
But if you try sometime, yeah
You just might find you get what you need” – The Rolling Stones

The sound of the song just wafted through your head and a memory was drawn up from the past. Maybe you thought of participating in a peace demonstration. Perhaps you remembered the opening to the movie “The Big Chill.” Those younger might associate it with listening to the song on an oldies station (gasp!).

Few, though, would immediately associate it with business. However, as a legal management professional, your desires in business are made up of both wants and needs. The Rolling Stones recognized that to satisfy your desires means you have to “try sometime.”

Year after year, legal administrators come up with more ideas that fall outside the budget. Even in our personal lives, we often have less money than ideas. At home, we have a say with our own money or may discuss purchase decisions with a spouse. In the office, however, the decision to spend more money on an out-of-budget item after the budget has been set is far more complex. And judgment on how effectively that money was spent may be rendered by a broad population.

So, how does a legal administrator go about building buy-in for an out-of-budget item? Here are a few topics and questions to consider when determining whether to move forward with an idea.

Think Wide
When looking at the potential idea, think beyond the walls of that idea and look to the overall strategic business benefit. Then ask: Can this idea be attached to a larger firm goal? Better yet, can it be attached to a personal goal that the decision-makers have? If you can draw a fairly straight line between your out-of-budget idea and broader wants and needs, it’s one worthy of consideration.

Competitive Proposals
How does your out-of-budget idea stack up against proposed others? If you don’t already know what their ideas are, you can probably guess what requests your competitors will make. Are they requests of merit? What is the key value proposition to your proposal vs. theirs? And if you are making multiple requests for out-of-budget ideas, which of your proposals has the most merit?

Competitive People
Competitive proposed ideas have people attached to them. Who are those people? What value have they delivered the firm in the long- and short-term? How much political capital do they currently have? What are their relationships to the decision-makers? What is your relationship to them?

Affects and Effects
Your out-of-budget idea will have an effect on people or processes within the organization, both positive and negative. Have you determined whom your proposal will affect, both positively and negatively? By identifying the “What’s in it for you” factor for each person affected, you can quickly map out interests of other parties.

Assess the Influencers
There will likely be people you identify who are outside the scope of decision-makers and competitors who are important. They are called influencers, and they come in four flavors:

• Champions – These are people who could support your idea and have respect and power in the organization (either widely or on a particular subject).
• Allies – These are people with whom you have a positive relationship and who will align behind you when called upon.
• Neutrals – These are people whom the proposal may not affect directly and will achieve nothing by supporting or opposing you.
• Snakes in the Grass – They have an agenda they pursue out of spite or out of opposition to either an idea or, quite possibly, you.
• Fear vs. Hope – A seasoned executive who purchases legal and other services once told me that his buying decisions were based on fear vs. hope. If the idea someone proposed to him was one that he urgently needed and was afraid that if he didn’t buy, something bad would happen to him, that was a “fear decision.” He would extend himself far to ensure that money was found so that he wouldn’t find himself in boiling water. Others who proposed ideas to him that furthered the progress of the organization but were less urgent were “hope decisions” – ones that could be put off when tight budgets existed. Is your out-of-budget idea a “fear decision” or a “hope decision” for the decision-maker?

After considering each of these topics and questions, it should become much clearer whether your out-of-budget idea is one for which you should risk your own political capital. And whether you want a new printer or new partner, you “just might find you get what you need” more efficiently than ever before.

Paul Trout is a Managing Partner with Akina. He teaches associates and partners who were trained in the law but never in sales how to authentically build books of business. This article is an excerpt from one chapter of a book he is writing on the topic of Building Buy-In. He strongly encourages readers to submit case studies, learnings, or questions about Building Buy-In, which may become part of the book and appear in a future column. Contact him at ptrout@akina.biz or (312) 224-8028.

Caucus Insights

This section features condensed versions of recent discussions in ALA’s Large Firm Administrators Caucus ListServe, which is exclusively for people working in law firms with 100 attorneys or more.

THE TOPIC: Tax Effect of Deferred Income

For those on a calendar fiscal year, cash basis – if you defer any current year earned income of equity partners and distribute that money in the next calendar year (e.g., bonus pool money or any other piece of prior year earnings), what timetable do you adhere to ensure that the previous year’s earnings are included on the previous year’s K1s and tax return, and that the individual amount is factored into the individual's estimated tax payments on January 15 (which is either the answer, or that factor doesn’t matter)?

SELECTED RESPONSES:

1. Distributed by January 15. When we have “guessed wrong” on income – and it can be a guess, some years, with build-outs, etc. – we have discussed distributing again as late as March 1. We’ve ended up pushing the money into our capital account. Doing so means everyone has more “phantom” income.

2. We often defer payment of bonuses and up to 5 percent of profit well into the first quarter, depending on our economics in that first quarter. (We don’t use a line of credit, so we need to keep some working capital available.) We do get some grousing, but it’s that or a larger capital call. The partners do know their incomes by January 15 so they can calculate estimated taxes, and they typically get large distributions on January 15. It’s just not a 100 percent year-to-date distribution of the previous year’s earnings.

3. We distribute two-thirds of the deferral in January and one-third in February. On January 15, partners do not know yet whether they will receive bonuses, so they have to make a decision as to whether to make an “optimistic” tax deposit or a “pessimistic” one. I believe most of them allow for at least some bonus amount and have usually deposited sufficient monies to avoid any penalties. It’s not perfect, of course, but it seems to work here anyway.

4. Our members know by about January 12 a fairly close number for income ex bonus. By January 15, the proposed bonus schedule has been released. On a cash basis, Members receive about 95 percent of non-drawn earnings on January 12; bonus amounts are paid immediately following approval at our annual meeting, which is usually the second and sometimes the third Saturday in January; and the final 5 percent of non-drawn earnings is paid during the last week of January.

5. All partners receive statements showing their estimated shares of firm income on about January 13 so that they can make their January 15 estimated payments. They receive final statements on January 31, and the "true up" has never been dramatic. Our accounting department works pretty much night and day for the first two weeks of the year so that we have net income nailed down by the time that the first statements are issued, and the Management Committee has made its compensation decisions. The partners receive significant distributions on January 15 and January 31, and then smaller distributions at the end of February and in early April. All of the income, of course, is K-1 income to the partner for the previous year. The payments in the following year are just distributions of capital.

6. We pay partner bonuses in December. Since most partners just pay estimated taxes equal to 110 percent of their prior year’s tax, they really don’t need to know on January 15 what their final numbers will be.

7. Our partnership agreement requires our managing partner to determine “bonuses” by February 1 of each year. The payment or distribution of cash is usually made on or before February 15. The point (in response #6, above) on estimated taxes of 110 percent of last year’s tax liability is an “IRS safe harbor,” and we tell our partners to use that number for purposes of the January 15 tax payment.

ALA’s Legal Management Resource Center (LMRC) also has several articles related to this topic. Click here, to learn more.

Special Note: ALA members have free access to the ALA Reference Desk. Send any question on legal management here. Staff will conduct personal research on each question.

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