BIG LAW — BIG MED — BIG MESS

A month ago, I informed readers that I was taking a break from my ongoing commentary on the legal profession. Instead, I’ve focused my blog on my personal journey through modern medicine after my cancer diagnosis. The American Lawyer, which has republished all of my “Belly of the Beast” blog posts for the past five years, ran the post inaugurating my new series. But I haven’t asked it to republish my eight subsequent medically-oriented posts, which seemed beyond the interests of its primary readership. For reasons that will become evident, I’m inviting republication of this one.

Having spent almost 40 of the past 50 days in the hospital, I’ve had an intimate look at the medical care delivery system from inside one of the nation’s top institutions. I’m now convinced that many big hospitals and law firms share an important characteristic: a lost sense of mission.

This criticism doesn’t apply to most lawyers or to doctors individually. Dedicated, conscientious physicians and attorneys abound. But the devolution of the leading segments of both professions to short-term business-oriented approaches has resulted in structures and constraints within which many of those practitioners must operate. Ultimately, clients, patients, and the workers within those institutions are paying the price.

How Did This Happen?

Not that long ago, doctors ran many hospitals. Today in the United States, only four percent (235 out of more than 6,500 hospitals) are run by physicians. Along the way, the quality of a patient’s experience has suffered.

As the New York Times reported recently, “[N]ew research suggests that having a doctor in charge at the top is connected to overall better patient care and a better hospital.”

“Dr. [Amanda] Goodall [the author of the study] said the finding was consistent with her research in other fields, which has shown, among other things, that research universities perform better when led by outstanding scholars and that basketball teams perform better when led by former top players.”

Dr. Goodall goes on to observe, “M.D. C.E.O.’s are more likely to prioritize patients because patient care is at the heart of their education and working life as a physician. When it comes to making hard budgetary decisions or rationing choices, M.D. C.E.O.’s may be able to make more informed decisions.”

Keeping The MBA-Mentality In Check

I’m not an anarchist. I have a master’s degree in economics and understand the importance of data-drivien decisions. But I also appreciate the limitations of statistics and the dangers of a myopic MBA-type approach to management. There is nothing wrong with using accounting and business methods in the process running complex organizations, including big hospitals and law firms. But when those methods dominate institutional culture — setting the tone from the top of a hospital or law firm — those organizations no longer exist to serve people. Instead, they develop a new purpose: to serve the short-term bottom line.

As Dr. Goodall suggests, ““I think the pendulum may have swung too far in the favor of managers. This is partially because business schools have become so prominent, as has the M.B.A. These qualifications are helpful, but it is possibly not enough just to have a management education.”

Lawyers still run most big law firms, but the trends toward non-attorney CEOs and non-attorney managers developing increasing power and influence within big firms is well underway. More pointedly, many lawyers in big firms have obtained MBAs and are increasingly relying on their newly-learned “management tools” to run their firms. That can be okay, provided they do not become too fond of their “MBA-hats” and lose sight of their more important JD mission — to serve clients. It’s easier said than done because maximizing short-term partner profits is how such leaders — and their partners — measure successful leadership.

Back To Basics

Most undergraduates go to law school because they want to do good. That message has emerged loudly and clearly from my prelaw students over the nine years that I’ve taught undergraduates at Northwestern’s Weinberg College of Arts & Sciences and over the more than 20 years that I’ve taught trial practice and legal ethics courses at the Law School. A similar impulse drives most people into the medical profession. Just as every lawyer’s mission should be to serve clients, medical care should be about a single-minded mission: patient care.

The dominant big law firm model has evolved away from helping clients and toward maximizing a firm’s short-term profits through a handful of definitive metrics — billable hours, hourly rates, equity partner leverage. Likewise, big medicine — if I can call it that — has succumbed to similar pressures — maximizing relative value units (medicine’s equivalent to the billable hour metric), minimizing costs, and squeezing workers in an effort to improve “productivity,” to name a few.

Similarly, a dominant and incorrect perception in both professions is that bigger is always better. The number of law firm mergers sets a new record every year. Hospital merger and acquisition activity is ubiquitous.

Lost Along The Way

Bigger isn’t better. As with law firms, increasing the size of hospitals works against efforts to create a sense of community, collegiality, and shared mission. Likewise, cost-saving isn’t appropriate when non-medical CEOs with MBAs introduce efficiency measures that ignore the potentially adverse impact on patients.

For more than two weeks, I’ve lived through situations that illustrate my point. For example, I don’t know the metric by which administrators set what they regard as appropriate staffing levels. But one nurse told me that some floors are regarded as “heavy” — meaning that patients have conditions that can require a lot of attention. That translates into greater demands on a nurse’s time. But if there aren’t enough nurses to handle the workload, the burden falls on those who are around. Transferring to a different floor or facility becomes an escape route. It would be interesting to study the nurse “attrition rate” from the “heavy” floors.

Law And Medicine

In the prevailing big law firm model, overworking people — attorneys and staff — maximizes revenues while controlling costs. One consequence is a five-year associate attrition rate for big law firms averaging 80 percent. In other words, for every 100 associates who begin their careers at a large firm, only 20 will still be working there five years later. Other consequences are more difficult to measure so they get ignored: the decline in worker morale and the lost productivity that results.

Do extraordinary associate turnover rates serve client interests? No. Do they foster a climate in which a shared mission of client service becomes the institution’s dominant ethic? No. Do they reflect short-term profit-maximization goals that are completely inappropriate for a profession that should regard itself as better than that? You bet.

Other instances from my medical experience seem equally divorced from what should be a central focus on the patient. They may seem trivial, and none is life-threatening. But collectively they reveal something about institutional focus.

For example, a patient may require periodic blood draws, but the doctors defer the timing of those draws to whenever the phlebotomists are “doing everyone else on the floor.” That might be efficient, but on my floor, that designated time is 4:00 am. Why does efficiency in the use of phlebotomists trump the patient’s need for sleep?

Here’s another: At 11:00 pm, when all of the lights in my room were out and I’d just fallen asleep, someone came in and emptied all of the trash cans. The following morning, I asked the nurse, “Who decided that 11:00 pm was a good time to go around waking people up to empty their trash?”

“That’s just when they come around,” she answered.

These and many other dictates from above govern behavior throughout the hospital. Where does the patient fit in the process of pursuing worker efficiency? At least when it comes to blood draws and trash removal, nowhere, it would seem.

Shakespeare Updated

Scholars still debate the meaning of Dick the Butcher’s line in Shakespeare’s Henry the Sixth: “First thing we do, let’s kill all the lawyers.” Were the Bard’s words — speaking through that anarchist — backhanded praise acknowledging attorneys as the source of law and order? Or was he going for the laugh that the play evidently received from contemporaneous audiences that had become weary — as Shakespeare himself had — of the misery that litigious lawyers could inflict on a person’s life?

Regardless of that controversy, I hereby invite debate on a new version of that line. I’ve adapted it to today’s medical and legal worlds: “First thing we do, let’s kill all the MBAs in big law and big med — so doctors and lawyers can recapture their professions.”

Actually, we don’t have to kill the MBAs. We just have to keep them in their proper place.

14 thoughts on “BIG LAW — BIG MED — BIG MESS

  1. Steve,
    Cleaning out one of my desk drawers and found your card.
    Have kept up with your illness through the North Shore Grape vine.
    Beth and I wish you the best, (out thoughts and prayers are with you)
    One of your original admires from the “Milt” days on the radio.
    Richard
    Take care and be well.

  2. Steve: As always, another excellent posting. One point worth noting about an MBA. MBA stands for masters in business “administration” – not in management, not in leadership and certainly not in people! I discovered the irony in this when having gone through the academic rigors I realized that not once had we ever even picked up a book written by Peter Drucker (the late father of modern management) or any of his contemporaries.
    God bless, Patrick

  3. I don’t see much evidence of the broad MBA-ification of law firm management.

    And I wouldn’t say the Big 4 have really suffered from business school thinking – Deloitte’s focus on innovation would be something many large firms would like to emulate.

      • Well, the kind of data I’d want to see is the proportion of members of law firm leaders with real power (ie mostly partners) who actually have a MBA. My experience is that any type of formal management qualification is much rarer amongst law firm leaders than accounting and engineering firm leaders. So I’m not sure why MBAs are the root cause of the problems with BigLaw. Did MBA thinking cause Dewey’s leaders to accept the kinds of terms with laterals partners that undermined the financial stability of the firm? Maybe it’s more fundamental sins that drives these decisions – the kinds of sins that you’ve documented well in relation to US law schools. Pride, envy and greed are three that come to mind.
        I just don’t see how MBAs are a necessary or sufficient cause. I think better explanations are to be found in the oversupply of law graduates, declining demand for law firm services, publication of PEP rankings and free agency.

        Now I am genuinely fascinated by the parallels between the legal and medical professions, particularly BigLaw. I think your explorations of these issues are a very worthwhile contribution. This particular parallel just doesn’t ring true for me.

      • My conclusions about the MBA-mentality that emphasizes short-termism at the expense of long-run values has rung true for thousands of Big Law attorneys who have invited me to address their partnership meetings, commented favorably on my many articles about this topic, and sent me confidential messages reaffirming my observations. Without exception, they bemoan the profession’s devolution and embrace my message (and many have paid me a lot to give it).

        Personal experience also informs my views. For 30 years, I was a litigator at Kirkland & Ellis. I lived through the firm’s transformation and watched the vast majority of other Big Law firms follow a similar path. The result is the prevailing Big Law business model that gives undue emphasis to deceptively simple short-term metrics (including billable hours, billings, and leverage ratios as the determinants of attorney value and compensation). Growth for the sake of growth has become another such metric. Your example, Dewey, followed an aggressive lateral growth strategy; in that respect MBA-type thinking helped to undermine Dewey.

        Formal management qualification (such as an MBA) for a firm leader is not necessarily the key factor, although firm leaders increasingly have it. Sometimes corporate/transactional attorneys with MBAs have led the transformation of their firms to a more “business-like” approach. Plenty of them have boasted about that achievement publicly. (I cite many examples in my book, The Lawyer Bubble – A Profession in Crisis.)

        Often, senior leaders have deferred to law firm management consultants (with MBAs, but not JDs) who have persuaded firm leaders that adopting the short-term metrics maximizes partner income and wealth. Again, using your example of Dewey, its CEO and CFO were non-lawyers who, by all reports, had enormous influence in the firm. Now they’re criminal defendants. Steve Davis is the only lawyer among the three principal defendants in the Dewey debacle.

        Income and wealth might follow a person’s successful legal practice; it should not be a myopic goal to which a firm aspires. You mention PEP rankings. Those are another example of a destructive short-term metric.

        If you don’t believe me about these trends and the current reality, consider Richard Susskind’s views. In his latest book, Tomorrow’s Lawyers, Susskind wrote that most law firm leaders he meets “have only a few years left to serve and hope they can hold out until retirement… Operating as managers rather than leaders, they are more focused on short-term profitability than long-term strategic health.”

        To that I would add that too many big firms now view clients as revenue streams to be maximized (especially in the current era of declining demand for big law firm services you correctly describe). That is the essence of the MBA-mentality. It is destroying the legal profession and, from what I’ve seen as a 40-day insider as a highly regarded hospital, the medical profession as well. Just as thousands of lawyers have endorsed my views, doctors for whom I have great respect have told me that my observations are “right on.”

        You need not answer one final question, but I’m curious: Are you a practicing lawyer (and, if so, for how long), someone who works on the business/consulting side of the legal profession, or neither? Sometimes where we stand is a function of where we sit.

  4. To your other astute observations about modern medical care, I suspect you came across this recently. http://www.nytimes.com/2015/03/22/opinion/sunday/why-health-care-tech-is-still-so-bad.html. It echoes your post describing too much data that is too difficult to use. It reminds me of a PBS interview of a Vietnam-era fighter pilot who noted the first thing they did after take off was to shut off many of the confusing and contradictory alarms, all intended to advise them of risks. The problem was that they interfered with real thinking and reacting to what was going on outside the cockpit.

    Best of luck as you navigate this “system.” I say system with some reluctance because it rarely appears to be as organized and rational as you might expect such a term to mean.

  5. Steve – really appreciate your writing on the legal and medical professions. Sadly, I am wondering about the airline industry today, after the terrible crash of the German Aerobus. Comments on PBS were that the airline industry is working for profits and consequently cutting the vetting, pay and training of pilots. I’m not sure what the long term effect of all of this will be but have contended that the downfall of the USA will be greed.

    • The problem is ubiquitous across all areas of our society. The MBA mentality and its emphasis on short-termism and accompanying metrics have made greed respectable. Personally, I think the problem began in the 1980s. At least in retrospect, that’ when the transformation of most big law firms began. By the 1990s, the trend was unmistakable. Maybe it’s a coincidence, but one-fourth of all advanced degrees awarded in 2005-2006 were MBAs. (In 2012, MBA’s comprised more than 25 percent of all master’s degrees; in 1971, MBA’s constituted only 11 percent of all master’s degrees.)

  6. We saw the change in Psychiatry in the early ’80’s – MBA’s into leadership positions and subsequent development of intensive treatment programs, especially for adolescents. Mental health professionals, including Psychiatrists were delighted because they could find billable hours for most of the daylight hours of each patient. This was in addition to the hospital (R & B) rate which increased dramatically. Even saw one Psychiatrist who did hard time for his consultation fees. Fortunately (or unfortunately) this mentality peaked in the late ’80’s and early ’90’s but left the general public with the impression that all psychiatric care was a scam or not worth the financial effort, hence, we are now underfunded and without services for those who need it the most – Sorry to digress. We are so hopeful that you receive the medical care and medical consideration that you need and deserve. Our kudos to Kit for her immediate and appropriate diagnosis.

  7. Henry Mintzberg is a world-renowned business thinker. He first came to prominence with his book The Nature of Managerial Work. Currently the Cleghorn Professor of Management Studies at McGill University, he is also a visiting professor at a number of business schools including INSEAD and London Business School. He was the driving force behind the creation of the International Masters Program in Practicing Management, a unique business education program. Mintzberg has a deserved reputation for provocative and controversial thinking. His book Managers Not MBAs develops one of my favorite themes: the shortcomings of the world’s gold standard in business education – the Master of Business Administration (MBA) degree. At a time when many major law firms have pursued collaborations with business schools, here is Mintzberg talking about the value of getting an MBA:

    “The MBA trains people out of context. It gives them the impression that you can manage anything. Because there is no context in an MBA program. Even when people have experience it is rarely used. The traditional style MBA does not use experience at all. Take case studies for example. Learning from case studies isn’t experience, it’s voyeurism. People who are already practicing management can learn from cases written about other people. But people who haven’t practiced management can’t learn from them that easily. Worse still, case studies are not used just to expose people to other kinds of experience; they are used to force people to make decisions based on the most superficial of knowledge. What do the people know about these companies that they are forced to make decisions about? They read twenty pages the night before. There was a survey of MBAs in Business Week a little while ago. The MBAs named their favorite chief executive. It was a top five list and none of them had an MBA.

    The dominance of the MBA as an educational standard has corrupted managerial practice. You have people coming out thinking they are prepared to manage, and they are not. And what is even worse you get people coming out who don’t even go into management, they go into consulting or finance. They do an end run around management and end up leaping from consulting jobs, or financial jobs, into chief executive chairs. And I think the performance of many of them is just plain dreadful. There are exceptions, but a lot of them fail terribly.

    What ii is, specifically, about an MBA education which I believe often makes people ill-equipped to be leaders in corporations . . . confidence without competence. Which to me is equivalent to arrogance.

    MBA courses tend to attract people who aren’t necessarily sensitive to people issues. We have a lot of evidence that these are people more concerned with numbers, and getting themselves ahead, than dealing with people. There’s a wonderful quote which comes from an interview with Harvard professor John Kotter. He did a study of the Harvard MBA class of 1974, tracking their careers. A journalist asked him if the people he tracked were team players. He said no, they want to run the team, create the team and lead it to glory rather than be a member of someone else’s team. And that is the antithesis of team working, wanting to run the team.

    We talk about top managers. But anyone who’s on top of the team is outside the team, and doesn’t know what is going on. We describe organizations as networks, and we talk about top managers, but anybody who’s on top of the network is outside the network. That is exactly what the Kotter quote suggests. These people don’t want to be part of the team, they want to run the team. It’s the obsession with having to be in charge. You know leadership should be earned. Leadership shouldn’t be granted because you have a degree and an old boys network.

    Nobody has ever been made into a leader in the classroom. Courses that claim to create leaders are dishonest. You can’t create a leader in the classroom. What you can do is take people and enhance their managerial skills, and enhance their understanding of their job, if they are already in positions of leadership.

    And I am totally against this notion that you can separate managers from leaders. This implies that leaders don’t have to manage, which means that leaders don’t have to know what is going on intimately in their organization. Which is wrong. They have to be connected, and management is the way in which they are connected. Nobody wants managers who aren’t leaders. So why would we want leaders who aren’t managers, leaders who don’t know what is going on, who aren’t connected. It’s a phony distinction!”

  8. I appreciate your insights and send you best wishes for a full recovery. As you’ve previously observed, this same trend has taken over the management of law schools — and by extension of our colleges and universities. Putting students first has fallen well below rankings, short-term revenue gains, and holding on to the status quo in terms of tenure. Understanding how these various industries are all embracing similar strategies and the cumulative effects on our communities and society is crucial for change to be possible. Thanks for your efforts in pulling back the curtain.

  9. Good post.

    I’ve written somewhat on this topic here (http://siliconhillslawyer.com/2014/10/25/emerging-tech-ecosystem-v-biglaw/ ) and here (http://siliconhillslawyer.com/2014/07/31/biglaw-smallfirms-disruption/). I read an interesting book a while back called the “Innovator’s Prescription” (by the same author as The Innovator’s Dilemma. In it he talked about how, to a large extent, what makes hospitals so spectacularly inefficient is that they are really 1,000 different businesses clumped into a single organization, with no really effective way to optimize for any of them. That is optimal for emergency/high-stakes situations where you need all of those resources in a single place to move extremely quickly, but for 95% of cases they cannot compete either on quality or efficiency with specialized institutions that actually understand their business model.

    I think the same applies to large law firms. Historically, there was a reason to have 1,000s of lawyers under one firm: friction in collaborating between law firms that were each using proprietary resources/technology. That’s simply not the case anymore (because of SaaS/the cloud), and the big firm structure is today largely about origination pyramids; with a need for tons of administration to manage all the different groups under one roof. In the tech space, you’re seeing lots of boutiques popping up that are very high quality, focused, leaner, have much lower rates, and the attorneys haven’t taken a cut on compensation because most of what they bill isn’t being sucked up by overhead and people not doing the work. It’s a big change, and I think it’s going to get bigger.

  10. Research universities perform better as centres of research when led by outstanding scholars, but do they perform better as centres of education for bright young people who don’t want to be academics?

    Actually, does any universtiy perform truly well in that regard, or do they just get a free pass because they are judged on research-focused criteria and because their students tend to do well due to credentialism and their own innate abilities?

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