A lot has been written about the indictments handed down against the former Dewey leadership. To review, they are accused of manipulating the Dewey books and falsely representing Dewey’s financial condition, presumably for the purpose of keeping the Dewey ship afloat when it started taking on water in 2008. Unfortunately for these former leaders and the multitude of people and companies hurt by the Dewey demise, the shenanigans didn’t stop once the crisis of November 2008 was weathered. If the indictments are to be believed, the questionable conduct only ended as Dewey descended into bankruptcy.
Dewey’s problems went beyond a cooking of the books. Its strategy was suspect from the beginning and its tactics, including guaranteeing the compensation of partners right and left, were nothing short of mindless. When the Great Recession unfolded in the fall of 2008, the leadership at Dewey engaged in a DIY restructure, a fatal mistake. At this critical time for Dewey, true leadership would have recognized the seriousness of the problems, sought out expert assistance on how to fix them and then taken the needed steps, however painful in 2008, to fix them at their roots. Unfortunately, Dewey’s leadership failed and the rest is history.
Why did Dewey’s leadership fail so badly?
Ego. Steven Davis, Stephen DiCarmine and Joel Sanders did not ascend to their management positions without having self-confidence. Self-confidence is a good thing in appropriate doses. Unfortunately, their senses of self worth caused them to think they could bring an international law firm with 3,000 employees through the financial crisis of our time. They were incapable of understanding and managing the task at hand. A tempered hubris may have saved Dewey and themselves.
Fear. When facing the first crisis in November of 2008, no doubt they feared how Dewey’s banks, the partnership and the legal market would react to bad news. Underlying these fears was a probable concern that the firm was not strong enough to avoid chaos, a “run on the bank” and ultimate failure. They also probably feared for their jobs and their income. Rather than move beyond their fears to seek a lasting solution, however, management attempted to patch problems and allegedly lied so they could buy time.
Inexperience. Management’s inexperience in law firm restructuring undermined Dewey’s chances, especially because management did not turn to outside professionals. Without the skills and judgment of someone who had restructured law firms previously, management was temped to consider acts that proved ineffective and now leave them indicted for committing fraud. Their inexperience lead them to the edge and beyond, places they did not need to go.
Fear of Accountability. Dewey was formed in October of 2007- the culmination of a strategy devised by a management team that found it staring down failure a year later. At that point, the proper course was to design a lasting solution and describe it in a direct and sober conversation with Dewey’s banks and the Dewey partners. Unfortunately, obtaining buy-in was not assured and the conversation would likely have subjected the management team to criticism if not removal. Beyond November 2008, after the first books allegedly were cooked, the management team faced consequences scarier than criticism and a palace coup. Their responsibility for Dewey’s predicament, and their desire to avoid accountability, solved little, left Dewey ruined and resulted in their indictments.
Weakness. In times of crisis, tough decisions often must be made from an array of less than ideal options. Many times the best decision is not the easiest or the most popular. But it still must be selected. Making that decision-the right decision-takes courage. In November of 2008 and later, when tough and unpalatable options were presented, the courage needed to make the right decision was lacking. When mettle was required, weakness prevailed.
In the fall of 2008 the Great Recession hit and many businesses, including law firms, struggled to survive. While Dewey was not the only one to fail, its leadership did not give it a chance to survive. During that same time other large law firms faced dire consequences but managed through it due to great leadership. Wouldn’t you rather have those kinds of leaders?