THE BINGHAM CASE STUDY — PART I

“For the first time since I’ve been in this job, we have all the pieces we need to do our job.”

That was former Bingham McCutchen chairman Jay Zimmerman’s penultimate line in the September 2011 Harvard Law School Case Study of his firm.

Oops.

Harvard Law School Professor Ashish Nanda and a research fellow developed the study for classroom use. According to the abstract, it’s a textbook example of successful management. It demonstrates how a firm could evolve “from a ‘middle-of-the-downtown pack’ Boston law firm in the early 1990s to a preeminent international law firm by 2010.”

Oops, again.

Familiar Plaudits

At the time of Nanda’s study, the profession had already witnessed a string of recent big firm failures. He should have taken a closer look at them. In fact, only seven months before publication of the Harvard Study, Howrey LLP was in the highly publicized death throes of what was a preview Bingham’s unfortunate fate.

Bingham’s Zimmerman and Howrey’s last chairman, Robert Ruyak, had several things in common, including accolades for their leadership. Just as Nanda highlighted Zimmerman’s tenure in his study, two years before Howrey’s collapse, Legal Times honored Ruyak as one of the profession’s Visionaries. Along similar lines, less than a month after publication of the Harvard study, Dewey & LeBeouf’s unraveling began as partners learned in October 2011 that the firm was not meeting its revenue projections for the year. But Dewey chairman Steven Davis continued to receive leadership awards.

Perhaps such public acclaim for a senior partner is the big firm equivalent of the Sports Illustrated curse. Being on the cover of that magazine seems to assure disaster down the road. (According to one analyst, the SI curse isn’t the worst in sports history. That distinction belongs to the Chicago Cubs and the Billy Goat hex. But hey, anyone can have a bad century.)

Underlying Behavior

The Lawyer Bubble investigates Howrey, Dewey, and other recent failures of large law firms. The purpose is not to identify what distinguishes them from each other, but to expose common themes that contributed to their demise. With the next printing of the book, I’m going to add an afterword that includes Bingham.

If Nanda had considered those larger themes, he might have viewed Bingham’s evolution much differently from the conclusions set forth in his study. He certainly would have backed away from what he thought was the key development proving Bingham’s success, namely, aggressive growth through law firm mergers and lateral hiring. He might even have considered that such a strategy could contribute to Bingham’s subsequent failure — which it did.

To find those recent precedents, he need not have looked very far. Similar trends undermined Howrey, Dewey, and others dating back to Finley Kumble in 1988. As a profession, we don’t seem to learn much from our mistakes.

The MBA Mentality Strikes Again

What caused Professor Nanda to line up with those who had missed the fault lines that had undone similar firms embracing the “bigger is always better” approach? One answer could be that he’s not a lawyer.

Nanda has a Ph.D in economics from Harvard Business School, where he taught for 13 years before becoming a professor of practice, faculty director of executive education, and research director at the program on the legal profession at Harvard Law School. Before getting his doctorate, he spent five years at the Tata group of companies as an administrative services officer. He co-authored a case book on “Professional Services” and advises law firms and corporate inside counsel.

It’s obvious that Nanda is intelligent. But it seems equally clear that his business orientation focused him on the enticing short-term metrics that have become ubiquitous measures of success. They can also be traps for the unwary.

In Part II of this series, I’ll review some of those traps. Nanda fell into them. As a consequence, he missed clues that should have led him to pause before joining the Bingham cheerleading squad.

Meanwhile, through December 6, Amazon is offering a special deal on my novel, The Partnership: It’s FREE as an ebook download. I’m currently negotiating a sale of the film rights to the book.

7 thoughts on “THE BINGHAM CASE STUDY — PART I

  1. Dear Mr. Harper:

    Here is the summary of the case description from the Harvard Law School website (http://casestudies.law.harvard.edu/bingham-mccutchen-combinatorial-mathematics/):

    Abstract
    The case outlines Bingham’s evolution from a “middle-of-the-downtown-pack” Boston law firm in the early 1990s to a preeminent international law firm by 2010. Bingham achieved this transformation by following a strategy of sequential mergers, or “combinations” in the firm’s parlance. The case describes the approach firm management took to initiate and integrate these combinations, and ends with a question as to what the firm’s future trajectory might be.
    Learning Objectives
    The case allows participants to explore the positives and negatives of following a strategy of inorganic growth in professional service firms (PSFs); identification, negotiation, and post-merger integration in case of acquisition of PSFs; the challenge of alignment in a firm that is growing through mergers; and the challenge of leading a firm as it becomes larger and more complex.

    Had you attended any of the case discussion sessions on the case, you might have discovered it is a far cry from showering “accolades” on the firm. While I may not be omniscient, I strongly refute the claims in your piece and stand by the content of the case study and the discussion it evokes on the positives and negatives, benefits and risks of inorganic growth.

    Incidentally, often when I teach the Bingham case study, I follow that session with another case I have written to illustrate the fragility of law firms: The Demise of Howrey (please see http://casestudies.law.harvard.edu/the-demise-of-howrey/).

    I would have more respect for your observations if you had written anything in advance of 2012 that was critical of Bingham’s management structure or style. In the absence of any evidence on that dimension, all I can say is that you belong to that common creed of Monday morning quarterbacks who jump on bandwagons and point wisely in hindsight.

    Ashish Nanda

    • Dear Professor Nanda,

      Thanks for your comment. Part II will provide a fuller response. For now, suffice it to say that I have read your entire Bingham and Howrey Case Studies in great detail. Your suggestion that I belong “among the creed of Monday morning quarterbacks is simply incorrect.” I have been writing about the ubiquitous underlying trends that contributed to Bingham’s demise — and the collapse of other big firms — since 2010. You can find those articles on this blog, as well as in The American Lawyer. (See, e.g., “Fed to Death,” American Lawyer, December 2011)

      I look forward to continuing our dialogue.

  2. Dear Mr. Harper:

    I look forward to your specific article critiquing Bingham’s strategy, in your Part II, or in any other context.

    Otherwise, general remarks that things will turn out worse are likely to be correct roughly 50% of the time in a cyclical economy, not because of any perspicacity of the prognosticator, but because of dumb luck. Fortunetellers use this trick often, making generic predictions and then highlighting the fraction of examples that fit their predictions while forgetting the fraction that does not.

    I would challenge you to predict today which law firms are going to crash and burn in the next two years — and then let us review in two years how correct you were in your predictions. Failing that, I would suggest you limit your rhetorical pyrotechnics. It doesn’t behoove someone with a law degree to write like a yellow journalist.

    Regards,

    Ashish Nanda

    • Dear Professor Nanda,

      No one should ever identify publicly specific firms that they think will “crash and burn.” Nor do I understand why you think that such particularized predictions would be in any way relevant to what I have written here and elsewhere. (Perhaps you are aware that others have compiled such a list. In an Oct. 26, 2012 Bloomberg interview, Dan DiPietro at Citicorp (which has detailed financial information about most big firms) said he had a watch list — “a robust list” of firms that may fail. (See: https://www.youtube.com/watch?v=JTlJCg5R0CY) DiPietro won’t identify troubled firms by name either. Nor should he.

      The point is not to predict specific firm failures. As Part II will explain, I don’t fault you for failing to predict Bingham’s failure. But undue emphasis on short-term metrics of success often comes at the expense of long-term values. The result is a set of ubiquitous trends that are undermining the stability of many firms — regardless of whether they fail. One of those trends is aggressive growth through mergers and lateral hiring — bigger is always better. You might want to look at Professor Bill Henderson’s recent empirical work on the failure of aggressive lateral hiring strategies generally.

      All the best,

      SJH

  3. Dear Mr. Harper:

    Mr. Dipietro is a respected colleague and friend and so is Prof. Henderson. I am very familiar with their works and they with mine.

    Mr. Dipietro works with Citigroup and would be conflicted in his responsibilities if he were to publicly name firms. What are your constraints? My understanding is that you have no ability to make predictions in the future, only a willingness to engage in criticisms of the past — a Monday morning quarterback, in short.

    Prof. Hendersons’s work is consistent with work I had done in 2004, titled “The Risky Business of Hiring Stars” (please refer https://cb.hbsp.harvard.edu/cbmp/product/R0405F-PDF-ENG). That has very little to do with your extraordinary claims of knowing what and how I have been thinking.

    I have no problem with your “generalized predictions.” In fact, having a number of different views is good for the profession. What I take strong objection to are some of the low blows you landed in your blog:

    1. “According to the abstract, it’s a textbook example of successful management.”
    Misattribution at best.

    2. “At the time of Nanda’s study, the profession had already witnessed a string of recent big firm failures. He should have taken a closer look at them. In fact, only seven months before publication of the Harvard Study, Howrey LLP was in the highly publicized death throes of what was a preview Bingham’s unfortunate fate.”
    Did you notice I had written a case study on Howrey?

    3. “If Nanda had considered those larger themes, he might have viewed Bingham’s evolution much differently from the conclusions set forth in his study. He certainly would have backed away from what he thought was the key development proving Bingham’s success, namely, aggressive growth through law firm mergers and lateral hiring. He might even have considered that such a strategy could contribute to Bingham’s subsequent failure — which it did.”
    “[I]t seems equally clear that his business orientation focused him on the enticing short-term metrics that have become ubiquitous measures of success.”
    On what are you basing these claims? What’s your evidence that I focused on enticing short-term metrics? Have you seen an article by me analyzing Bingham’s evolution? Have you attended a case discussion of Bingham led by me? Have you talked with me? The answer to each of these questions is No. Then how come you are making claims on my behalf?

    4. “What caused Professor Nanda to line up with those who had missed the fault lines that had undone similar firms embracing the “bigger is always better” approach? One answer could be that he’s not a lawyer.”
    “….I’ll review some of those traps. Nanda fell into them. As a consequence, he missed clues that should have led him to pause before joining the Bingham cheerleading squad.”
    How terribly arrogant and rude!

    At a minimum, you owe me an apology for your sensationalist and evidence-free writing. I also notice you have not had the decency to place my comments on your blog yet.

    Regards,

    Ashish Nanda

    • Dear Professor Nanda,

      I posted all of your comments — and my replies — promptly upon receipt. You can view them by clicking on the “bubble” icon immediately to the right of the title of the post.

      -SJH

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