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March 2014 Newsletter

March 4, 2014

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Dear Friends and Colleagues,

By now we are all familiar with the story of that huge sunken ship that hit the rocks only to have the captain save himself while the crew and others scrambled to find safe ground, struggled to survive, or worse.  But enough about Heenan Blaikie.  Well, maybe not just yet.  Much has been written in recent weeks about the dissolution of the firm, though other than a self-congratulatory “called it” in last month’s newsletter referencing my November 2013 prediction, I have resisted the urge to add to the chorus of Monday morning quarterbacks.  Here’s my, perhaps-less-charitable-than-most, take.

This is not, as some have suggested, a tragedy, a heartbreak or a disaster.  This is an embarrassment.  University of Calgary Law Dean Ian Holloway, in his superb piece in the National Post on February 11th, touched upon two key points in his version of the oft-given eulogy.  First, in paraphrasing the firm’s founder, Roy Heenan, it wasn’t that the firm was unprofitable ($75 million on revenues of $222 million last year); it was that the firm was less profitable than it had been.  Second, was his lament over lost loyalty.

The two, of course, are directly related.  When revenues drop while expenses go up and net income shrinks, loyalty erodes fast.  Partners in law firms and the Associates they put on lock-step compensation plans—rarely tied to merit but rather based solely on staying alive another year to be worthy of a higher hourly rate and a corresponding higher base salary—have an expectation, nay, an entitlement, to earning more this year than last.  As compensation committees across the land have been relaying to their Partners these past several weeks, that Costa Concordia has sailed.

As the Dean points out, firm revenues are under attack from the triple team of globalization, commoditization, and technology.  In the face of this assault, most firms don’t build a war chest or plan for the long term; rather, they often fund the business through a line of credit, not out of cash flow and draw down every available net nickel every year for Partner compensation.   Among most firms there is a pressure to keep up with the (Bennett) Jones’s prompting lesser firms to over-commit to fancy and at times unnecessarily lavish space, Associate salaries not tied to performance, expensive planning retreats, layers of non-billing senior partners travelling around doing important management things, flashy marketing campaigns and student recruitment drives…all on the expectation those revenues will keep climbing.  But when the music stops, the elbows fly as one at a time chairs get pulled away.

And who are the first to jump ship?  The very Partners whose very expectations have not been met by the very failing that is their very own making.  It wasn’t a group of Heenan Associates who first bolted from Toronto, Montreal, Calgary and then, well, everywhere. It was Captain Francesco Schettino who decided on the “salute maneuver” that brought the ship too close to shore in the first place and it was management’s half-baked opening of a foreign office; poorly timed series of pricey leases and renos; and ill-conceived lateral recruits (or all of the above) that caused the ship to sink.  And who are the ones left packing boxes and shutting the doors today (yes, actually today)? Hint: It isn’t a large group of Partners.  It’s the Associates who are also trying to wedge into an already diluted and over-crowded junior market and the staff who, based on recent press, wish right about now that they knew a good labour and employment law firm.  Which is, ironically, what Heenan used to be.  I’m sure they’ll be performing their own version of the “salute maneuver” as they ride down the elevator one last time later today.

While the general populace can be forgiven for not throwing a telethon on account of a law firm’s dissolution, one must feel for the hard-working staff who have toiled away for years and the young lawyers, some of whom were recruited to the firm after the Partners felt the hull scrape along the shoreline  I hope these folks land somewhere and we’ve been doing our best to help those we can.  But I also hope the firms that are quick to take in the Partner refugees are doing their share for the staff and Associates, too.  Some are; many aren’t.  I’m not so naïve as to point out the irony in the rush among some firms to add those they once pronounced “tier two” (or worse) to their ranks but I would like to think the life-rafts appearing from everywhere have room in them for the “women and children” too.  I’m also aware that these firms are running a business, not a church and they are under no obligation to bring over staff and Associates just because.  I’m simply saying that the profession is under scrutiny, grabbing headlines on account of its inability to run a business, (though I’d be ok with a $75M profit), so it would be nice to see them handle the salvage operation right, that’s all.

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Having now alienated my law firm and Partner base, I’ll change gears to something happier–March.  Not just because it’s my birthday and that of my business partner, Terry Stein (he’s older) but it means Spring is around the corner.   And if that’s the case, then it’s time for our annual fundraiser in support of Alzheimer’s.  The 2014 Calgary Pro-Am Alzheimer’s Hockey Tournament is taking place April 5 and 6.  Over the past three years the Pekarsky Stein Pro Bonos have raised over $200,000 for Alzheimer’s research.  You can help add to our total by clicking here and donating whatever you can.

We also completed our annual strategic planning process recently. Thanks to our friends at Hotel Arts for hosting us so warmly.  It was a great day of planning and strategizing about ways to continue improving our value proposition to our clients and increasing awareness of our humble enterprise without compromising our core values of boutique service, community involvement and excellence in what we do.  We ended the day with a few frames of bowling, and perhaps a pint or two, in the basement of The National, proving yet again that we best stick to our day job.

Finally, we formalized our annual donation to the Alberta Children’s Hospital with a cheque presentation and photo op on the roof of our office building.

So there you have it, like March itself, in like a lion and out like a lamb.

Stay Warm,

Adam

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