Legal Business Development

Marketing advice for Harvard Law School students (Part 2 of 2)

When the time comes to find your first summer internship or permanent legal position, the way you relate to people will be absolutely critical.

In an article in The Complete Lawyer entitled “Critical Relationship Building Skills For Associates”, lawyer and consultant Arnie Herz argues that in the transition “from backpack to briefcase,” associates must develop new skills.  In law school, he says, “Intelligence is king.”  But in the real world of legal practice, “Relationships are king—healthy and lasting business relationships with clients, partners, team members and opposing counsel.  Intelligence, although necessary, plays a supporting role in making these human connections.”

Similarly, when Paul Bunge listed “Fifteen Rules For Winning as a Junior Associate”, his Rule Number One was “be nice to people.”  It starts with the senior lawyers who control your career and your workday.  The customer is always right.  From the perspective of junior associates, the most important customer is the lawyer who supervises your work.  And being nice to other lawyers is just the beginning, Bunge says.  Associates also need to develop strong working relationships with “secretaries, paralegals, clerks, court reporters, bailiffs and other support personnel... you need them more than they need you.”

And if the only thing you know about your first job is that you need one, consider the advice of Richard Bolles, author of What Color Is Your Parachute?, the best-selling job-hunting book in history:   “The most important thing [people] can do is get out there and do some informational interviewing, face to face and not with employers (initially) but with those people actually doing the jobs that they find attractive.”  This is not only research, it is marketing.

What you should do today

If people have never been your long suit, buy a copy of Dale Carnegie’s classic, How to Win Friends and Influence People.  Admittedly, the title sounds a little dopey.  I avoided reading the book until just a few years ago, although I had spent several decades getting a Ph.D. in psychology, teaching courses, and even writing a few psychology textbooks. 

But I learned more about people from Carnegie’s book than from all those academic studies combined.   He does not offer magical secrets or brand new insights, and an awful lot of it sounds like common sense.  But the book got me thinking in new ways about my own relationships, by pulling me in with stories, examples, and basic principles. 

I’ve convinced a few lawyers to read it, and they’ve been equally enthusiastic.  One grizzled senior partner told me, “This book changed my life.”  He was only half kidding. Another said that he keeps it in the table next to his bed for night time reading. 

For most lawyers, I think Carnegie’s most important advice is:  “Never criticize, condemn, or complain.”  Trying to get people to change by criticizing them is like trying to teach a pig to whistle:  it doesn't work and it annoys the pig.

Other folksy suggestions from Carnegie include: 

• Become genuinely interested in people, and show it.
• Address people by name.
• Encourage others to talk about themselves.
• Learn what other people are interested in, and talk about it. 
• Make the other person feel important—and do it sincerely.

After you’ve read a chapter or two, put the book down and try it out.

Start by getting to know a few more of your law school classmates.  In five years, all will have interesting stories, and many of you will be able to do favors for each other.  In twenty-five years, you will collectively be ruling the world, and the favors will get bigger.  As long as you start building stronger relationships today.

Womble Carlyle says Big Law has “changed forever”

Last week, Womble Carlyle announced steps to reduce its expenses, including layoffs and 10% pay cuts.  Since the ABA Journal recently noted that “In the last 15 months, more than 10,000 lawyers and legal staffers have lost their jobs at major law firms”, the fact that another large firm is cutting costs is hardly front page news.

What is news is the way Womble Carlyle described WHY they were cutting costs in the internal memo announcing these changes:

“The world of big law firms... has changed forever.  Clients are increasingly focused on managing the costs of all legal matters... Successful firms will be those who continuously strive to improve efficiencies and find ways to minimize costs without reducing the overall quality of the services they provide... Simply stated, like the business world in general, law firms must be able to do more with less.” 

These days, it seems everyone is talking about whether the current problems are simply a business cycle downturn, or whether they are the first signs of a fundamental paradigm shift, a change in the way law firms do business.  For some historical perspective on this discussion, see Ann Lee Gibson’s excellent series of posts on Law Firm Economic Cycles.

In his December 30 post entitled Perspective, Bruce MacEwen discussed the implications: 

“If you feel that what we're going through is a ‘normal,’ albeit severe and protracted, recession, we know how to deal with that. Pull in your horns, sit tight, control costs rigorously, and wait for the legal industry (a lagging industry) to pull out after the real economy does. 

If on the other hand you feel that we're experiencing a generational or once-in-a-career change in the way high-end legal services are bought and sold, then you need to stand on tiptoes, rather like a sprinter entering the blocks at the starting line of a race, prepared to bolt forward as soon as there's clarity enough (in your mind) to think the starter's pistol has fired....

This is where I actually think we are. We are all about to begin running a new race, one where incumbency will count for far less than it used to, and where a premium will be put on agility, speed, and foresight...”

Clearly, Womble Carlyle believes a paradigm shift is coming.  But most firms are moving far more slowly, or not at all.  One reason is that they’ve done so well in the past.  In 2007, I wrote a post entitled “Have Lawyers Been Seduced by Success?”  

If you like money, [2007 was] a great time to be a lawyer. In Citigroup's Law Watch survey of  "153 US law firms broadly representative of the industry," law firm revenue has gone up 9.8% per year since 2001. But as Bill Gates put it: "Success is a lousy teacher. It seduces smart people into thinking they can't lose." 

My discussion was inspired by Robert Herbold’s book Seduced by Success, which describes some “destructive behaviors that are created and nurtured by success.”  My post talked about how these destructive behaviors applied to law firms, including lack of urgency and defensive thinking. 

Herbold’s first chapter explained how General Motors went from the largest auto manufacturer in the world to the brink of bankruptcy.  Very simply, they failed to adapt to a changing world.  GM’s final chapter has not yet been written, but it is obvious that it has continued to slide downhill in the two years since that book was published.  When Rick Wagoner was forced to resign as GM’s Chairman a few weeks ago, USA Today (3/31/09, p. 2A) quoted several consultants who explained why.  “He was just too slow on the important decisions he had to make,” said one. “What these guys haven’t figured out yet,” said another,  “is... you have to take a whole different approach.” 

Of course, GM is not the only large company that is having trouble adapting to a changing world.  On April 4, the front page headline in my morning Boston Globe read:  “Times Co. threatens to shut Globe, seeks $20m in cuts from unions.”  On April 12, they published a followup analysis of the Globe’s financial problems with the title:  “What Went Wrong? - Secure in their profits, the Globe and other newspapers underestimated the impact of the Web.”  

As one expert quoted in that article put it:  “The newspaper business was a victim of its enormous success... They put very little effort and energy into trying to imagine how the world might change and what their position would be in a changed world.” 

I believe that many large law firms are now making that same mistake. 

At the Legal Marketing Association Annual Conference a few weeks ago, Altman Weil consultant Thomas Clay described the results of The Legal Transformation Study 2020, which “identifies key global trends and uncertainties that will shape the future of the legal industry and presents a set of planning scenarios from these forces.” 

When Clay described the fundamental characteristics law firms that will need in the future to “succeed, thrive and compete,” his list included: 

·         Courageously rethink business development models

·         Achieve a leadership position in pricing flexibility – alternative fee arrangements  

·         Be nimble – ACT in a rapidly changing marketplace  

·         Take the long view, but act now  

I don’t know whether large law firms can ever be nimble, but it does seem that Womble Carlyle is taking the long view, and acting now.  

By coincidence, one of the lawyers on a panel I moderated last week for West LegalEdCenter on alternative fees in large firms was from Womble Carylye.  In a future post, I will provide details of what Womble Carlyle and other firms are doing to provide more value to clients.  Their goal, as a panelist from Morgan Lewis put it, is to “get a bigger share of a shrinking pie.” 

Next week, I will conclude my brief series on marketing for Harvard Law students.  I apologize for interrupting that series, but I felt that this week’s post could not wait. 

Marketing advice for Harvard Law School students (Part 1 of 2)

This week’s post was written for a presentation I gave yesterday at the Harvard Law School on Business Development for Law Students and Recent Graduates.  The panel was sponsored by the Harvard Law School Program on the Legal Profession, which “conducts empirical research, develops new teaching materials and courses, and works to build bridges between the academy and the profession.” 

Like everyone else these days, law students are worried about the economy.  As if law school wasn’t stressful enough, now students have to plan their futures against a backdrop of law firm layoffs, pay cuts, and delayed start dates.

No one knows whether these changes are temporary, or whether they reflect the beginning of a paradigm shift in the way lawyers do business.  Either way, they call attention to the importance of a topic that is rarely discussed in law school: how marketing is related to long term success.

Your success in the first critical years of your career will probably have more to do with your relationships and marketing skills than with anything you’ve learned about civil procedure, property, contracts or torts.

And if you go into private practice, marketing could become a matter of life and death.  Whether you end up at a firm with hundreds or thousands of lawyers or at a small boutique, your firm’s health will depend on a steady flow of new business.

The economic crisis has raised the stakes.  In its 2009 client advisory, Hildebrandt International notes that “the current economic downturn in the legal market is likely to be deeper and longer than any we have seen in the last two decades.”  Hildebrandt also predicts that in the future “the right economic model for success could well be a firm with relatively fewer associates and partners than today, but with expanded categories of other lawyers (some of whom would be temporary or project specific).”  What does that mean to you?  Less job security, and more need for personal marketing.

The trend is up

For many lawyers, the idea of selling falls somewhere between undignified and unpleasant. According to Steve Barrett, formerly the Chief Marketing Officer at Drinker Biddle:  “The job of lawyers is to help people understand what they can’t do. Sales is all about what you can do.”  

And there is no question that law firms now devote more time and money to marketing than they ever have.  Consider the facts in this table:

	20 years ago	Today
Percent of law firm revenue spent on marketing	0.5%	2.1% - 2.6%
Sales training (percent of large firms that have tried this)	0%	85%
Client teams	0%	74%
Formal client satisfaction interviews	0%	56%
Legal Marketing Association	100 members	3,100 members

Many experts believe that the trend toward more marketing will continue to accelerate.  Other types of professional service providers, such as accountants and architects, typically spend 6% to 8% of revenue on marketing, several times more than lawyers do.  Firms that sell products as well as services – which some law firms may in the future – often spend 10% or 20% or 30% of revenue on marketing and sales.

But there are many conflicting opinions about what works best

If you ask successful rainmakers what works best in legal marketing, you are likely to hear a wide range of opinions, including:

• networking
• focusing on client service
• giving speeches
• writing articles
• getting publicity
• sponsoring events
• ranking high in internet search engines
• structuring fees in new ways to increase client value
• and much more

You may even find someone who recommends running ads during the Jerry Springer show.

Each expert embraces their views with great confidence.  It worked for them, so surely it will work for you. 

But the one thing that experts agree on is that none of these tactics work quickly.  You may have to invest in marketing for months or years before you will see significant results.  Developing new business is a numbers game, in which even the most successful rainmakers fail far more often than they succeed.

This makes it very difficult to compare tactics.  When should you give up and try something else?  No one knows.

The Gallup organization spent 40 years interviewing over 250,000 sales people in a variety of industries to answer the question:  what’s the best way to sell?  Their answer was:  it depends.  Successful sales people use a wide variety of tactics.   (For details, see the book Discover Your Sales Strengths by Benson Smith and Tony Rutigliano.)  What they have in common is that each individual finds something they like and are good at, that works--a tactic that fits their strengths.

But whether it starts with networking, writing in the ABA Journal, or getting quoted in The New York Times, marketing is ultimately all about developing relationships.

Everything you need to know, in seven words

When it comes to developing new business, everything lawyers need to know can be summed up in seven words:  meet the right people, advance the relationships.

Selling is like dating, and anyone who has ever gotten discouraged about romance knows that you may have to kiss a lot of frogs to find your prince or princess. Most lawyers have time for just a few frogs, so they must focus on the best prospects before puckering up.

Meeting the right people starts from a vision of ideal clients and referral sources, and continues with the discipline to focus on the few who are most likely to produce results.

Clients hire lawyers whom they trust and like. You don’t build trust by reading brochures, and you don’t build liking from a web page. The best way to build trust and liking is by sitting face to face and listening. (Notice that I said listening, not talking.)

After you’ve met a large number of the right people, it’s time for the last three words: “advance the relationships.” The word “advance” has a technical meaning to sales professionals, grounded in Neil Rackham’s research on over 35,000 sales calls. An advance is a specific action taken by either party that moves a sale forward, such as scheduling another meeting, getting introduced to someone new, or providing a list of references. Lawyers often love this concept, because it is so specific, concrete, and logical.

Rackham found that great salespeople succeed because they plan every sales call, and strategize how to get the largest possible advance. His SPIN Selling Fieldbook provides examples and guidance on how to brainstorm possible advances before a meeting, and then select the one that is likely to lead to the greatest progress. This takes effort and practice. But the ability to get advances is often the difference between success and failure. When you consistently find that you cannot get an advance with a particular prospect, it may be time to move on to someone else.

On the other hand, most law students have several years ahead of them before they have to start thinking seriously about bringing in new business.  Next week’s post will summarize what you should do in the meantime.

Alternative Fees (Part 11) – More on how to set a fixed fee

When I talked to four law firm founders during a recent West LegalEdcenter webcast on How boutique firms are delivering greater value with alternative billing, I was surprised by the number of different ways they set prices.  Even within a single firm like Pat Lamb’s Valorem Group there are “a limitless variety of ways to structure fees.”

For intensive, unpredictable work, Raymond & Bennett guarantees a budget for one phase of a case at a time.  According to founder Bruce Raymond, “this makes it easier for the firm to map out with the client what needs to be done.”  The budget agreement often includes an escape clause in case needs change.  And when one phase ends, the firm can begin planning the next one from a more realistic starting point.

Shepherd Law Group often negotiates a monthly retainer, such as a single price for all of a client’s employment policy advice.  “The help is unlimited,” Jay Shepherd emphasized.  “Hundreds of times over the years I’ve said to clients ‘Why didn’t you call me sooner?’ before a matter got bad enough to need legal help.”  The reason, of course, was that clients did not want to pay an hourly fee if they thought they could get by without a lawyer’s input.  With this retainer arrangement, clients talk to lawyers sooner, and can prevent problems before they occur.  “It’s a great way to build client relationships,” Shepherd said.  And if it becomes clear to both parties that more help is needed than originally planned, at some point the monthly charge can be renegotiated.

At Bartlit & Beck, the price can be as simple as a monthly retainer, or it may be based on a set of benchmarks which they have established over 16 years of setting alternative fees.  Fred Bartlit said that if other firms would typically charge $200K for a particular matter “We might do it for $100K.  The difference is held by the client.  If things don’t work out and the client loses, we lose too.”  If Bartlit wins the case, the client has total discretion to set the remainder of the fee.  It could be the $100K difference held in reserve, or it could be a multiple up to five times that amount.  Since the client defines that part of the fee, the payment will be totally aligned with the client’s perception of value. 

Similarly, Lamb said, Valorem has a “Value Adjustment Line on our monthly invoice.”  Clients can add or subtract whatever they think is fair to reflect the value they have received.  Again, the client bases the fee on results and satisfaction, and is the final decision maker.

In order to bid properly on a fixed price matter, law firms must invest time in due diligence up front.  Some of these investments produce new work, and some don’t.  “We turn down cases all the time,” said Bartlit.  In this model, investing in due diligence is part of the cost of doing business. 

You need to scope the work out carefully, Jay Shepherd said.  “Sit down with the client and figure out what you are selling.  Sometimes you’re in a rush but it’s important to figure it out up front.”  If there is a radical change later, such as a client desire for a motion to dismiss, you can always do a change order.

Shepherd believes that ultimately prices should be based on the value to the client, not the cost to the firm.  For example, success in a case about a secretary fired for chronic lateness is likely to have a lower perceived value than one for a CEO charged with sexual harassment, and that should be reflected in the fee.

Shepherd is such a strong proponent of this type of value pricing, that his firm has “tossed their timesheets” and do not even track their time on each matter.  “No client wants to buy time; they buy our services, our results.  Once you recognize this, I don’t see how you can bill by the hour.”  Some of his practices are based on the writings of value pricing guru Ron Baker, which I described in Part 7 of this series.  I also wrote there about the counter-arguments posed by proponents of another approach to pricing:  cost-plus.  This webcast discussion did not resolve the argument between value pricers and cost-plus pricers, but it did provide more evidence that people feel strongly on both sides of this issue. 

On the cost-plus side, the other three firms do track hours to establish benchmark costs for handling new matters, and to see how well they did at the end of each matter.   Bartlit & Beck refuses hourly work, no matter how high the rate, but both Valorem and Raymond & Bennett have a mix of alternative billing and hourly work.  Both do some work for insurance companies, whom Pat Lamb said will be “the last industry in America to abandon hourly billing.”  Bruce Raymond also quoted the example of a big Pharma company who was interested in alternative fees, but needed hourly records to provide empirical evidence.  “Show me how it saves money,” this client said, “so I can convince my finance and procurement people.”

What all four firms did have in common was their focus on saving money for clients.  As discussed in Part 7 of this series, when lawyers first start thinking about alternative fees, their natural inclination is to inflate the price by structuring fees to protect their own interests.  From a marketing point of view, that is exactly the wrong thing to do.

When you are trying to develop new business, the client comes first.  Of course ultimately fees must make business sense for the lawyer.  But clients come first.

For a summary of this series, see the LegalBizDev Guide to Alternative Fees, in the free resources section of our web page.

The “Law Firm of the Future” is open for business

For years, I’ve been reading about the changes we will see in the law firm of the future.   But until I spoke to Fred Bartlit, Pat Lamb, Bruce Raymond and Jay Shepherd during a recent West LegalWorks webcast, I did not realize that several “law firms of the future” are already open for business.

When I asked the panel what advice they would give to lawyers who are considering alternative billing, all four emphasized that switching to alternative fees is not a small step or an easy one.  Jay Shepherd, founder of Shepherd Law Group, said lawyers find it particularly hard to accept the fact that “Pricing is an art, not a science.  You learn from your mistakes... Think of alternative billing not just as a change in your billing,” Shepherd advised, “Think of it as a fundamental change in your business model.”

With traditional law firms, whether clients win a case or they lose, the lawyers always win by billing more hours.  But the law firms on this webcast are working hard to align their interests with client interests.  And that means that sometimes, as Valorem Law Group founder Pat Lamb put it: “If you lose the case, you’ll lose money.  You’ve got to accept that.”

This leads to a totally different mindset in which Valorem lawyers constantly look for ways to provide services more efficiently.  They even “police each other,” and openly discuss tactics such as who really needs to be deposed, and who doesn’t?

Fred Bartlit, founder of Bartlit Beck, said that there is no simple formula for setting alternative fees, and that “every deal is different.”  But his firm structures each fee to maximize the incentive to be efficient.  “If I lose, it comes out of my pocket.” 

This mindset is familiar to plaintiffs’ lawyers who live and die on contingencies.   They’ve learned to be hard-headed business people, and won’t accept a case unless they think they can win.  But elsewhere in the legal world, the billable hour model has inevitably led to inefficiencies, because the more hours you bill, the more you make.

In an economy that has clients screaming for lower prices, lawyers would be wise to lower costs.  And that means more than just reducing the number of billable hours.  When Bruce Raymond founded Raymond & Bennett, he decided to adapt the Walmart model of cutting out steps throughout the process of service delivery including “becoming a fully digital, paperless office,” eliminating support staff, and hiring a mix of virtual associates who work from their homes and traditional “brick-and-mortar” associates. “You have to get a firm set up for alternative fees,” he said, and that starts by cutting costs to the bone. Being scalable with professional and support resources introduces a lean “just in time” concept to law services delivery.

At Bartlit & Beck, there is no management committee, and “One guy (Skip Herman) runs the entire firm, from deciding which cases to accept to setting the price and staffing each matter.  We have no firm meetings and no conferences; Skip runs everything.” 

Bartlit noted that some big firms traditionally hire over 100 new associates per year, and that most leave within a few years.  This means a significant portion of the firm’s workforce is inexperienced.  “Who cares? Their inefficiency is billable,” he said.  “In the future, the ideal firm will be underleveraged with about 50 partners and three associates in training.”   

How fast will this future arrive?  When Bartlit started his firm in 1993 he thought change was coming quickly, but “I quit talking about this five or six years ago because nobody listened.”  In the last six months, however, he’s been getting lots of calls as a result of the economy.  He quoted management guru Peter Drucker’s belief that a shift to a new paradigm is almost always driven by an outside event.  And in 2009, you don’t have to look far to find dramatic outside events changing the legal market.  “Clients must cut 25% of their legal budgets,” Bartlit said. “Fewer lawyers are needed.  We have to write off all these assembly plants just like General Motors did.”

Exactly where this will lead the legal profession, and when and how, is still a matter of some debate.   If you would like to hear these visionaries discuss the details, I will be moderating a rebroadcast of this session on April 8 (12:30-2 Eastern) and answering questions online.   After that date, the recording will be available on demand at the WestLegalEdcenter.

In addition, on April 15, I will moderate a followup webcast on “How large firms are delivering greater value with alternative billing.”  Fred Bartlit will re-appear on that panel. With 70 lawyers in Chicago and Denver, his firm was small enough to earn the American Lawyer’s title as 2009 “Litigation Boutique of the Year.”  But it is also the largest US firm to work exclusively with alternative fees.  He will be joined by lawyers from two mega-firms:  Robert Fields, a leader in the Products Liability group at Womble Carlyle (over 500 lawyers), and Samuel Goldblatt, chair of the litigation department at Nixon Peabody (over 800 lawyers).

Of course, no one really knows how fast this new model will spread.  But make no mistake:  Right now, today, competing law firms are offering your clients more value and better service at lower prices.  What are you doing?