Roy Heenan Claims Bean Counters Killed the Firm Culture

I suspect we will all be talking about Heenan Blaikie for a while, on Slaw and elsewhere.

Both Mitch and Gabriel have weighed in on this some more already, so I’d like to add here to my previous post on the subject and my brief interview with Drew Hasselback in the Legal Post.

Much of the commentary has tried to figure out what went “wrong.” Hasselback’s most recent article suggests that it was not strictly financial,

Just a month ago, things were looking good. Billings had hit a near-record $35-million for the month of December. And the full-year financial results for 2013 were nothing to sneeze at, either: profit of $75-million on revenue of $222-million.

Mitch points to faulty business practices, and that lawyers still focus on the profession of law rather than the business,

For those who still naively believe that law is a profession (not a business) where clients come ahead of personal monetary gain, HB clearly shows the opposite.

I write this post in defence of the legal profession, especially when contrasted with an undue emphasis on operating law firms strictly as a business. Sandro Contenta of the Toronto Star has an extensive article on Heenan this weekend, where he focuses instead on the shift in firm culture,

“We started this firm on a handshake, not on a partnership contract, because we knew that it had to be founded on trust,” says Roy Heenan, referring to the firm he launched with Donald Johnston and Peter Blaikie…

By the time partners voted for a merciful end, Heenan no longer recognized the place he founded.

Heenan Blaikie used to be the firm we all wanted to work at, based on its creative, cordial and supportive work environment. The flagship practice areas were in labour and employment law, entertainment law and commercial litigation. But somewhere along the line all of that changed.

The shift probably occurred while the firm opened nine offices across Canada, which corresponded with a greater emphasis on traditional corporate law. Heenan Blaikie was now competing with the other major law firms for the same business, but they weren’t doing this by approaching the sector with new ideas. They did it by emulating what everyone else was already doing.

I agree with Mitch wholeheartedly that the business approach most law firms use are flawed, and support the majority of the recommendations he makes for firm restructuring. But that’s not the problem here, and it’s not the reason why Heenan Blaikie dissolved.

To develop their growing corporate law practices Heenan Blaikie invariably sought senior practitioners with expertise in these areas. These partners came from other firms, where things were done differently than they were in Heenan. Their priorities, their values, their approach to practicing law was not the way things had been done in the past.

John Craig, a partner in labour law who taught me labour at Western, describes the firm as being a victim of its own success. I see it differently. These new lawyers were Heenan’s weakest links, and they were also the first to leave the firm once it started experiencing difficulty. Greener pastures lay elsewhere, because not everyone sees green the same way.

The shift trickled down to the recruitment level. Partners at Heenan tell me that they saw an undue emphasis during OCIs on a corporate culture and profitability, without appreciating the soft skills that some candidates offered (or lacked). They lamented that the new roster of lawyers at the firm were completely at odds with an older generation of lawyers who valued professionalism and collegiality. They were the lawyers that the rest of us didn’t want to work with, because we knew what it was like being around them.

Contenta says this factor probably bodes heavier than all others as an explanation for the firm’s demise,

Some partners talk of a “perfect storm” — fewer and stingier clients, more competition for contracts, tensions over restructuring, a sudden drop in profits, partners nervous about cuts to their incomes and rival firms smelling blood, and poaching.

But Heenan, the firm’s chairman from 1973 to 2012, says the real problem is the loss of trust, the firm’s founding ingredient. He describes a firm torn over the past year by infighting and clashing visions, where individuals and whole offices were accused of not pulling their weight, and disputes raged over practices that should be cut.

“It’s very hard to see it end as a result of squabbles, because I really think that’s what brought the firm down, rather than the financial situation,” says Heenan, 78, now the firm’s chairman emeritus.

“Once you start pointing fingers at this person or that person and this office or that office, that leads to discontent and discontent is what leads to departures.”

…Some managers began insisting on what Heenan describes as a bean-counting approach. They looked at hours worked and profit made.

Of particular contention appears to be the Paris office, which apparently wasn’t profitable enough for partners situated in places like Toronto.

My response would have been to mandate a 6-month rotation through Paris for all partners and associates over a 10 year period, with daily meetings in a local cafe over lattes, and force them to learn some work-life balance. They may have even been able to instill greater cohesion within a firm which ultimately cancelled their final in-person partner meeting to do it by teleconference instead.

Although some business practices like project management are desperately needed in law, there are some that are not. Despite the increasing popularity of JD/MBA programs in Canada, these have more direct utility to understanding technical components of corporate law than they do in running a law firm itself.

As we used to say in the health sector where I worked, patients are not beans, or widgets. Neither are billable hours, or clients. There are fundamental differences with the legal industry that require a unique approach to operating a law firm, one which hopefully maintains the idealism of professionalism.

The limitations of an MBA approach to business has been long identified in the literature. Robyn Wossum Hulsart states in her dissertation, The MBA degree: Does it do the job?,

Many business people believe MBA programs unduly emphasize quantitative abilities and analytical skills while neglecting essential human relations skills. It is the latter that enable a person to function well in a business organization. MBA programs have been charged and convicted in the print media of being too technical, too quantitative, not sufficiently oriented toward developing people skills, lacking in quality, increasingly irrelevant, behind the times and out-of-date by not being globally-oriented, by ignoring ethical issues in management, and by not developing students’ capabilities in leading, creating, and communicating. Critics claim the approach followed by MBA programs should be broader, with more focus on qualitative management and dealing with people. As employers question the value of the traditional MBA program, it becomes important to establish the skills business perceives as important or essential to the organization and the skills business perceives graduate business education should be teaching potential employees.

The problem with the new Heenan Blaikie is that it was too much of a business and not enough of a profession, and was therefore a faulty business organization. There was too much focus on “partner primacy” (a stand-in for shareholder primacy or income per partner metrics), and not enough emphasis on corporate social responsibility or maintaining internal integration within the firm. The problem was too much business and not enough professionalism.

Jeffrey Pfeffer and Christina T. Fong wrote in the Journal of Management Studies,

In terms of the messages sent to students while in school, again there is little evidence of an emphasis on high standards of professional conduct. In fact, some evidence would suggest that business schools are sending the implicit message that unethical behaviour is acceptable, at least as assessed by the prevalence of student dishonesty.

Their comments on how to improve business education to move away from strictly looking at increasing earning potential and instead improving the business function may be just as applicable to the rise – and fall – of Heenan Blaikie,

We fully understand that some, maybe many, will see our approach as naïve. After all, the dominant response to competition in the marketplace is to copy the competitors. Benchmarking is a valued activity and private companies have built lucrative businesses basically gathering information on what other organizations are doing and then re-selling that information into the marketplace. But, one can not benchmark one’s way to exceptional performance, and if an organization does what everyone else does, it will get, depending on its execution, pretty much the same results as everyone else.

Call me naive, but I think there’s a vision in Heenan Blaikie’s founding that is worth preserving, even if it is in a new generation of law practice which optimizes innovation to achieve exceptional performance.

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