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4 posts from May 2009

May 27, 2009

It’s time to get serious about marketing

“I’ve been a lawyer for 31 years, and I’ve never seen it like this.  Do you have any words of wisdom for me?”

The question came from a practice group leader at a 1,300 lawyer firm who subscribes to this blog.  She had just finished reading my book, and was looking for more.  At the time, I was not sure what I could add to what she had already read.   

As I thought about this later, the answer came to me:   It’s time for lawyers to get serious about marketing.  It may not be a magic solution, but it is an unavoidable fact of life.

Rainmaking has always been important to financial success in the legal profession.  These days, it is becoming a matter of life and death for both firms and for individual lawyers.

When AmLaw 100 firm Wolf Block dissolved a few months ago, the Philadelphia Inquirer asked former Duane Morris chairman Sheldon Bonovitz what would happen to its partners and associates.  “Lawyers with solid business generation are going to be highly sought after....”, he said.  “[Others] will have a hard time, unless they are part of a group.”

When the Wall Street Journal blog interviewed consultant Peter Zeughauser a few weeks ago about job security at large law firms, he said “I think you’re going to see underperforming or poorly performing partners managed out... When I talk about poor performers... I’m referring not just to hours and billable rates, but also their ability to attract clients. I hear from a lot of managing partners the lament that ‘my partners don’t act like owners.’  I think these partners — the partners who ‘don’t behave like owners’ — are going to struggle.”

To thrive in today’s increasingly competitive environment, most lawyers need to spend more time on marketing.  This year, we recommend at least one hour a day.  We encourage more, but will settle for any improvement.  To participate in our coaching programs, lawyers must agree to spend an absolute minimum of three hours per week on marketing.  I know that these are high figures for many lawyers, but I also think that putting in the time has become a necessity in these challenging times.    

Law firms will also need to spend more on marketing, just to keep up with their competitors.   Traditionally, legal marketing budgets have represented about 2% of revenue, which is very low compared to other businesses.  The figure is typically in the range of 6-8% for professional service firms such as accountants, consultants, and architects and, and much higher in other types of businesses.  I am not sure what will happen to the percentage in 2009's stressed environment, but have no doubt it is heading up over the long term.

And no matter what their total budget, law firms need to get smarter about how they spend their marketing money.  I wrote last week about how large firms are analyzing the ROI (return on investment) of each marketing expense, and putting more of their budgets into items which can be directly linked to results.

The day that post appeared, the Wall Street Journal published a great article about increased spending on legal business development.  Maybe I loved it so much because of this quote:

“In the last few months, law firms have become increasingly aware that training lawyers in marketing and business development is a key way to drive business. According to a February survey of 120 marketing directors at large law firms -- conducted by legal market researcher, BTI Consulting Group -- business development is one of the few marketing areas where law firm executives are most willing to increase spending. Nearly 70% said they planned to provide more marketing coaching to lawyers.”

Or maybe the reason I loved it was that it highlighted the work of LegalBizDev coach Tom Kane, the co-founder of our LegalBizDev Network. 

Whether you decide to hire a coach or not, in this environment every lawyer needs to get more serious about analyzing the return on their marketing time.  For example, one lawyer I worked with recently was spending much of his marketing time in a leadership role at his local Chamber of Commerce.  The Chamber was trying to attract new industry to his city, and the lawyer was spending this time working with startups and undercapitalized firms that would not need legal help for quite some time.  So when he sat back and analyzed how soon all this work this might lead to new business, it became clear that he needed a faster payoff.   He decided to substantially cut back on Chamber meetings, and spend the time instead with current clients.  He is already starting to see results.

May 20, 2009

The down economy (Part 10): The Boston Roundtable meeting

A few weeks ago, senior business development professionals from some of the largest firms in Boston gathered for the quarterly meeting of the Boston Roundtable on Legal Business Development.  Our topic this time was “Developing new business in a down economy:  Challenges and opportunities.” 

Most people agreed that things are still getting worse.  As one put it: “The cataclysm is coming... Big firms are reaching down for more clients and small firms are reaching up.”  In this economy, every client is looking for greater value and “we all need to have a better understanding of what is in clients’ heads.”  (As in previous posts about the Boston Roundtable, all quotes have been checked by participants to insure accuracy.  However, names have been omitted to protect confidentiality and assure a frank discussion.)

The silver lining in the recessionary cloud is that it forces law firms back to basics, and makes them consider whether each item in the marketing budget is a solid investment in new business. 

“At a time like this,” said one person, “you shake out the things that are not important and the places where people hide.”   Said another:  “I’m certainly not enjoying this, but it’s a natural part of the business cycle.”

“The economy puts a new urgency on proving your worth, every day,” said a third participant.  She had recently switched roles within her firm, and now spends more time helping key practice groups to bring in new business in the short term.  The change will be good for her firm, and good for her job security.

There’s also more emphasis on measuring results.  One firm is adding a dashboard to its CRM to make it easier to keep track of the sales pipeline.  Another has begun circulating a spreadsheet listing every lawyer in the firm, and their deadlines for marketing action items. This type of transparency increases both accountability and results.

The firm with the spreadsheet also requires lawyers to “sign a contract” whenever a marketing expense is approved.  For example, lawyers who want marketing funds to pay for a trip to a conference must commit to what they will do before, during and after the conference to maximize the chances of bringing in new business.  Another firm holds coaching sessions with lawyers who plan to attend a conference, to help them figure out how to follow up, and to insure that they do.  “It’s a huge cultural shift to question lawyers’ participation in any conference,” said a third participant.  “But for the first time I am able to get lawyers to commit to specific steps to use conferences to build relationships.”

If a particular lawyer won’t agree to follow up, or doesn’t have a good marketing reason for traveling to a particular conference, the down economy has put the marketing people in a stronger position to refuse to pay for it. 

Sponsorships are also being evaluated more carefully than in the past.  When one lawyer wanted to use $10,000 from the marketing budget to sponsor a conference, the marketing person from our group said to him, in the nicest possible way:  “You should expect me to scrutinize requests like this. It’s my job to save the firm money.  Would your partners agree to pay for something like this?  Would you write a personal check?”

She did not say it out loud to the lawyer, but admitted in our meeting that she thought that sponsoring this particular program was a waste of money last year too.  But when the economy was strong, expenses like this were routinely approved.  The new, more competitive environment has forced law firms to look harder at expenses, and weed out the ones with the lowest return on investment.

One participant summed it up this way:  “We are in a process of behavior modification. To some extent, we created the monster by not fighting harder when the economy was strong and lawyers wanted to spend marketing money on the wrong things.  Now everyone expects to make a business case for every expense.” 

The transition to hard-headed analysis may be painful, but in the long run it will be better for marketing departments, and better for law firms.

May 13, 2009

Alternative Fees (Part 13) – Why has change been so slow?

Throughout this series, I’ve been writing about the ways that alternative fees can save clients money and help lawyers build stronger relationships with their clients.

 

The panelists on my recent West Legal Edcenter webcast on alternative fees at large firms are among the best known proponents of this approach. But when they talked about the speed of change, their views ranged from guarded to discouraged.

 

Harry Trueheart noted that at Nixon Peabody “We got involved in alternative fees more than two decades ago.  When people started talking about this, we got out in front.  We wanted to go with the flow and not resist.  But the flow was not as strong as we expected.”

 

Similarly, Fred Bartlit reported that when he left Kirkland & Ellis to found Bartlit & Beck 16 years ago, he thought that once the benefits became known, change would come quickly.  It didn’t.

 

Other experts have offered similar observations.  Last November, Law.com interviewed Susan Hackett, general counsel of the Association of Corporate Counsel, about the progress the ACC Value Challenge was making in promoting alternative fees.  According to Hackett, “Lots of clients' lips are moving, but their feet aren't moving.”

 

On the West panel, Richard Rosenblatt reported that at Morgan Lewis,  “We are pursuing alternative billing very aggressively.  We offer a veritable smorgasbord of billing options, and we believe that virtually all matters can be structured with alternative fees.  The biggest challenge is that clients are nervous about entering new territory.  They always ask, ‘Will this cost me more or less than hourly billing?’”

 

Of course that’s a perfectly reasonable question for a client to ask, and Morgan Lewis has devised several ways of minimizing the risk for both sides.  Some of their fixed fee arrangements include “risk collars” which compare the fixed fee to the actual hourly expenses.  In one example, “If the hourly expense is less than the fixed price, we offer a rebate.  If it’s more than 20% over, the client gets the first 20% free, but might pay half of whatever is over 20%.”

 

According to Rob Fields of Womble Carlyle, fees “must be transparent so the client can see that they won and they can defend the cost to their business people.”

 

Unfortunately, in some cases it can be very hard to prove that fixed fees lead to lower costs than hourly rates.  For example, alternative fees sometimes represent a paradigm shift in which clients are more likely to avoid legal problems by seeking early advice.  But how could you prove that problems were avoided and money saved?  Ultimately, fixed fee arrangements must be built on a foundation of trust, and trust is not the long suit for many lawyers.

 

Fields reports that at Womble Carlyle the deals that have worked out the best are the ones that were client-driven.  “It doesn’t mean the client has to come with the nuts and bolts of how this works.  The law firm may have those answers, but the client has to bring to us a clear idea of what they expect to achieve.”   

 

Although progress may be slower than some would hope, all panelists believe this is the wave of the future.  As Fields summed it up, “Alternative fees are necessary, a good thing, and inevitable.”

 

For a summary of this series and more, see the second edition of the free LegalBizDev Guide to Alternative Fees, in the Alternative Fees section of our web page.  The third edition will be released in July. 

May 06, 2009

Alternative Fees (Part 12) – What’s different for Big Law?

On April 15, I moderated a panel discussion for West Legal Edcenter on alternative fees at large firms.  Some of the discussions were similar to those in a related panel on alternative fees at boutiques.  But there were also important differences at large firms.

Harry Trueheart, the Chairman of Nixon Peabody (over 800 lawyers), noted that large firms have several advantages:  they can take greater risks if a client wants contingent or other fee arrangements, and they have a larger knowledge base.  This can lead to greater efficiency and better estimates of what things should cost.  But Trueheart and other panelists also talked about the special challenges in changing the mindset at large firms.

Fred Bartlit noted that at Big Law “there’s no such thing as a dry hole.”  Large firm lawyers expect to make a profit on every single matter, because every hour is billed to the client.  Clients may win or lose, but lawyers always win. 

At 70 lawyers, Bartlit’s firm does not fit the traditional definition of Big Law, but it IS the largest firm in the world that refuses hourly work and works exclusively on an alternative basis.  Bartlit & Beck structures every fee so that the law firm and the client win together, or lose together. 

Just as oil companies must accept the fact that they may invest millions drilling for oil where there is none, Bartlit says that law firms must accept the fact that in order to win big you have to be willing and able to sometimes lose.  This is such a fundamental change in mindset that he thinks it will work best in “greenfield” operations, where a new law firm is started from scratch to focus strictly on alternative fees.

But some large firms are beginning to embrace this philosophy.  According to Rob Fields from Womble Carlyle (over 500 lawyers), “The client needs to win on every fee, every time, even though at larger law firms, it’s difficult to wrap our minds around this.”  He described a large project Womble Carlyle recently started in which the client can choose whether to pay by the hour or to pay one of several predetermined fixed fees.  At the end of each matter, the client gets to pick the lowest price.  Of course clients love this, but it imposes significant demands on the firm. “We have to manage our staff closely and focus our resources on what the client values.... It gives you incentive to focus.” 

Richard Rosenblatt at Morgan Lewis (over 1400 lawyers) agreed that the key to success is “managing the work.  Everyone has to keep an eye on the budget weekly or even daily.  It requires a new level of discipline and rigor... And we also have to constantly ask are we doing enough?”  If a client feels that a firm is cutting corners to save money, the entire effort can backfire.

Harry Trueheart explained that as legal clients move in this direction:  “A lot of education will go into this and it’s not cheap.  Law firms will pay dearly as we as a profession learn to do this.  There will be winners and losers on the economics.  But many contractors manage their business this way and lawyers must learn this too.”

For firms that do invest in mastering these new ways of doing business, the payoff could be enormous.  When clients leave the billable hour behind, they are more willing to pick up the phone to ask for advice because they know it will not increase the cost.  “It invites the client to engage with us and increases the ties that bind,” said Rosenblatt.  “We’re now on the same team, and more likely to get the next engagement.”  The implication is obvious: “This is an opportunity to get a bigger share of a shrinking pie.” 

For a summary of this series and more, see the second edition of the free LegalBizDev Guide to Alternative Fees, in the Alternative Fees section of our web page.  The third edition will be released in July.