We at Dechert had our annual business meeting last week in Miami (tough duty). Nestled in the general atmospherics of bon ami and collegiality were sessions on collaboration and connectivity amongst the lawyers in our firm. Apparently the data suggested that law firms make more money when the partners of the firm work together. Flash. The mathematical proof of the blindingly obvious perhaps, but just in case, we were stentoriously and with great seriousness told that these conclusions were based on rigorous and exhaustive academic research; research undoubtedly paid for by the American taxpayer, along with other studies of similar compelling import such as why Americans don’t like lice.
But the point here is (and I’m not for an instant suggesting that making money is not a valid point) that collaboration is now essential to getting anything done right because we have all become so damn specialized.
All professionals and business folks, including those of us in Big Law, are under enormous pressure to be intensely specialized yet issues are never so neatly defined by those specializations which all too often also mark the boundaries of our intellectual domains.
I heard about “VUCA” down in Miami, a term which I hadn’t previously encountered, probably because I don’t entertain myself with management advice books whilst at airports. (Is there something about air travel that compels business people to read management books? They really are pretty awful. Is this just a homage to the overall awfulness of air travel?) VUCA stands for Volatility, Uncertainty, Complexity and Ambiguity. Who knew, besides those who indeed find joy and fulfillment by reading this stuff?
While I make fun, it is nonetheless a useful observation that in a world of increasing complexity and interdependence, we should all be reminded regularly that there are more things in heaven and earth than are dreamt of in your philosophy (sic) and perhaps particularly lawyers should be mindful that our clients don’t have discrete legal issues, they have business issues.
I was struck, while listening to all of this, that this tension between specialization and VUCA-ness is not limited to the law, but thwarts successful outcomes throughout the business world writ large.
An example: In my day job as a securitization lawyer, I am continuously struck by the differences in substance and in language across various securitization sub specialties. The asset-backed guys talk a different language than the CRE and CMBS gang, who talk a different language than the CLO folks, the derivative folks, the leveraged finance folks and the syndication gang. We all do fundamentally the same thing, but I can sit there and talk to one of my CLO partners and realize that after about 15 minutes that we are the proverbial ships passing in the night. Yet, another example of single people divided by a common language (Google saved me from attributing that to Churchill, to whom I attribute almost all smart things, but apparently it is another smart guy, George Bernard Shaw who first said something very much like it).
And because we have such a hard time communicating, we sometimes have a hard time migrating good ideas from one of our knowledge and experiential silos to another. Do Galapagos finches have this sort of trouble mating with a fellow traveling finch from Peru? I don’t know, but I’m guessing.
A recent example is a deal feature common to the middle market CLO business but heretofore unknown in the CRE securitization world. This is a re-issue mechanic which would allow the deal sponsor or collateral manager to re-offer existing bonds to the investors on an auction basis, producing a potentially lower weighted coupon for the transaction and more lucre for said sponsor. It is a nifty way to reprice liabilities with the intended externalities (negative for some of us) of reducing legal and banking fees. This is a great idea, at least in a market where spreads might come in and it has been in common currency in the CLO space for years. It has been nonexistent (until recently) in the CRE CLO space. Now, we are building it in and that leaves me wondering why in the world hadn’t we done that before and what else are we missing?
The really interesting question is, why are we missing this sort of easy win? The answer, of course, is we live in the echo chambers of our silos. When the likeminded talk to the likeminded, very few new ideas emerge. Very few new perspectives get developed, or even tested. “To a man with the hammer everything looks like a nail,” is a real problem. And with our baked-in confirmation bias, we don’t notice that anything is wrong.
We need active collaboration.
Active collaboration (with a gentle nod to the sensitivity of our French colleagues) is an unalloyed good thing. It is not just saying we ought to talk to each other more, it is not just saying we should think outside the box, it’s not just saying we should consult with colleagues, although it includes these things. We need to build systems to recognize and adapt to VUCA and make sure that good ideas get in broad currency and that indeed everything is not a nail. (Sidebar: How often do we confuse goals with strategy?) The answer has to be systems and procedures to facilitate breaking through silos and embracing what can be learned from collaboration.
Here’s an example: One of the things we’ve done here at Dechert is to set up securitization team meetings (inspired by what hospitals do to address surprises and failures in the operating theatre; delicately called “Mortality and Morbidity” meetings) to make sure all of us who do structured finance are exposed to all of the problems, all of the concerns and all of the good ideas and innovations that are bubbling up from the auto loan receivable space, in registered CMBS, CRE CLOs, LevFin, broadly syndicated CLOs, credit-linked notes, etc. It’s a really good meeting; it’s really popular. We all learn something every time that we get together.
Another thing we recently have done is to associate one of our financial litigation partners with every major new transactional matter. Now, don’t get excited, clients; that doesn’t mean we bill these people. However, we decided it was useful to pre-establish a bridge to the trial team so that the transaction lawyers would have a specific someone to talk to when risk and liability issues bubble up.
Have we done enough? Certainly not, but you get the idea. Collaboration doesn’t just happen because we think it is a good thing.
Using collaboration to breakdown silos and to really appreciate VUCA and its consequences might be one of the biggest challenge confronting us today in business. Complexity is endemic. The need to address problems with a combination of intense specialization and broad sensitivity to the broader context and the benefits of the learning of others, and to focus on finding solutions that may not be in your own tool box is going to become increasingly critical.
Maybe I’ll write a management book so someone else can read it on an airplane.