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4 posts from May 2010

May 26, 2010

The biggest mistake lawyers make when trying to develop new business

The biggest mistake most lawyers make in developing new business is that they don’t listen.  In a shocking turn of events, they talk too much.

Experts agree that when you are building business relationships, you should spend 50% to 80% of your time listening. But when lawyers meet potential clients, many can’t find time to listen because they are so busy talking about how wonderful their firm is. 

The familiar term “pitch meeting” shows just how pervasive this mistake is.  Most lawyers seem to think that when they meet with prospective clients, their task is to pitch, to hurl, to throw out information.  In fact, any successful sales person will tell you that instead of pitching, you should be catching, listening to what clients have to say. 

The client is a lot more interested in her own problems than in your capabilities. If she did not think you were good, she wouldn’t waste time meeting with you. So you need to devote most of the meeting time to focusing on what she wants, needs, and feels. As the old saying goes, that’s why you have two ears and only one mouth.

As Steve Bell, Chief Client Development Officer at Womble Carlyle, put it:

When a prospective client agrees to a meeting, the lawyer needs to understand that he or she is already sufficiently credentialed.  Forget about the resume, the publications, and the victories.  Start asking good questions and listening carefully.

If you could use work in this area, try to become a more “active listener” by checking back with the speaker to make sure that each statement has been accurately heard.  Ask simple questions such as:

  • Are you saying…?
  • Do I have it right?
  • How does that sound?
  • Tell me more…
  • You seem to feel frustrated. Is that because…?

For more examples of active listening techniques, see Kevin Daley’s book Socratic Selling to learn to “master the art of the easily answered question.” The book includes many examples of non-directive probes you can use to help clients think through a situation without feeling pressured. 

Active listening will relax the speaker and get them to open up.  It is useful not just in business development, but in life.  As Steven Covey summed it up in The Seven Habits of Highly Effective People, “If I were to summarize the single most important principle in the field of interpersonal relationships, listening is the key.”

Listening sounds simple, and comes naturally to some people.  I am not one of them, and most lawyers aren’t either, because we have so much to say.

We all need to remind ourselves that clients do too. Professional salespeople have an old saying that “whoever talks the most will enjoy the meeting the most.” That’s one reason so many lawyers frequently hold meetings that they think are great but that never lead to new business.  If you want to build a relationship, you want the client to be the one who enjoys the meeting.

This post is a preview of material from the second edition of The LegalBizDev Desk Reference, which will be published next fall.

May 19, 2010

Legal project management (Part 9): Getting away from perfectionism

When Voltaire wrote the phrase “Better is the enemy of good” in the late eighteenth century, he was not thinking about the needs of legal clients.  But the phrase is extremely relevant to the challenges lawyers face today as they adapt to what Paul Lippe has called “the new normal.”

In the “old normal,” lawyers developed a culture of perfectionism in which no stone went unturned.  When litigators were trained to prepare for a case, they were taught to consider every twist and turn of any argument that could possibly be raised by the other side, no matter how unlikely.  When transactional lawyers were taught how to draft contracts, they were encouraged to draft language that anticipated every possible threat that might arise.

Clients seemed to care little about efficiency, and most lawyers did not care at all.  In fact, truth be told, the hourly billing model implied that the more inefficiency a client would pay for, the more hours would be billed, and the more revenue would be generated.

But the world has changed and legal budgets are tighter than ever before.  (For example, Lippe noted that outside legal spending by the Fortune 500 has dropped 17% in the last three years, from $16.7B in 2007 to an estimated $13.8B in 2010.)

In the new normal, clients want to be the ones who make decisions about what they will pay for.  Many have concluded that if a “perfect” legal solution requires more hours and a bigger bill, they would prefer a lower cost legal approach that is simply “good” and meets their most pressing needs. 

For example, I’ve written before about the lawyer I worked with who thought he had written “the perfect lease” for a real estate developer.  It may have been perfect in protecting the client’s interests, but it cost so much that the client refused to pay the bill, and the lawyer ended up writing off part of the cost.

The underlying issue of how to deal with perfectionism is hardly unique to the legal world.  The phrase “better is the enemy of good ” is often heard in other businesses when project managers discuss how to stay on time and within budget.

When I discussed the issue with Don Schrello, who has headed my Board of Advisors for more than a decade, he told me about his days as a manager for the Apollo program in the 1960s, when the US was racing Russia to the moon.  The Americans had a reputation for technological excellence and innovation, the Russians had a reputation for getting things done.   Desk signs were therefore printed up for key members of the Apollo engineering team with the words that were engraved over the entrance to the U.S.S.R. Technical Institute:

 RussianBestGood 

The rough translation is – you guessed it – “Better is the enemy of good.” 

According to one often repeated anecdote, when US astronauts needed a pen that would write in the vacuum of space, NASA spent over $1 million developing “The Zero Gravity Pen.”  It was later marketed to Earthlings by the Fisher Space Pen Company because its pressurized ink cartridges were said to write “in zero gravity, upside down, underwater, over wet and greasy paper, at any angle, and in extreme temperature ranges.” 

Russian cosmonauts faced the same challenge, but they believed “Better is the enemy of good,” so they used a pencil.

(This is a great story, except for one little problem: it is not quite true.  NASA did not pay for the development of the pen.  The patent owner, Paul Fisher, did.  And before the Space Pen became available, both Americans and Russians used pencils.  But the story is repeated to this day because it is such a vivid illustration of a fundamental truth.)

The pitfalls of perfectionism are becoming more obvious to lawyers as a result of both client pressures to reduce costs and the growth of alternative fees.  In a white paper on entitled “Creating the Law Firm of the Future,” Ralph Palumbo of Summit Law Group wrote: 

Today, most lawyers are paid as hourly laborers. The hourly billing system does not reward efficient legal service. Plodding, pedantic legal service is rewarded. When lawyers are paid by the number of hours worked, conscious or unconscious self-interest can and does affect a lawyer's judgment as to what legal services are required.

An experienced lawyer is often able to give an answer that has a 90% probability of being correct. If the lawyer spends only a few minutes giving the answer, the lawyer is paid little for his answer − despite the fact that years of experience and a high level of expertise and judgment is required to give a good answer.  Paid by the hour, the lawyer is under-compensated for the service provided.  If the same lawyer assigns two associates to research the problem and write memoranda on the issues, the probability that the client will get the right answer may increase from 90% to 95%. The lawyer will make much more money and, in a few cases, the improved probability may be worth the extra fees charged. But in most cases, the customer would have been better off to accept the 90% answer and pay less for the advice.

Some lawyers will find it hard to change their ways.  Others have concerns about “missing an issue,” however remote it might be.  Clients may help them make this transition by refusing to pay some bills.  According to the 2010 Client Advisory from Hildebrandt and Citi Private Bank, billing and collection realization rates have been declining for the last 12 quarters.  Could client dissatisfaction with over-lawyering be one of the reasons?

If some lawyers feel that strongly about continuing the perfectionism of the past, I don’t think there is a client in the world who would object to having extra hours devoted to their matters, as long as the lawyers pay for them.  But if clients are expected to pay the bill, they get to decide what they need.

May 12, 2010

Legal Project Management (Part 8): McDermott’s Deal Dashboard

If you believe what’s been written on the web lately, you’d think that the idea of applying project management principles to legal matters was brand new.  In fact, however, some lawyers have been focused on these ideas for years, developing new tactics and tools, often under the radar.

For example, consider Deal Dashboard, a web-based collaborative deal space custom developed for two former in-house lawyers who went back to firm practice.  It’s been available for several years, and is currently being used by a few in-house departments and one law firm.

When McDermott Will & Emery partner Byron Kalogerou conducted a demo for me, he explained that he had previously worked for 14 years as in-house counsel at Tyco, where a great deal of emphasis was placed on developing new systems to cut costs.  But when he moved to an outside firm and began talking about project management, he felt that he was living out his college motto: A voice crying in the wilderness.  (Kalogerou went to Dartmouth, so naturally the motto was in Latin: Vox clamantis in deserto.)

The Deal Dashboard offers a sophisticated set of web-based tools that, as a McDermott brochure puts it:

Streamline the M&A process, reducing inefficiencies and costs.  The Dashboard enables counsel to corral all of the moving pieces of a deal, so that everyone involved knows what needs to be done, by when, by whom, and at what cost.

Kalogerou notes that he and his former colleague, Terry Mahoney, who had also spent many years in-house, sought to develop a tool that brings transparency, accountability and predictability to the transactional relationship.

When work begins on a new deal, the client team sits down with McDermott lawyers to perform the kind of basic planning that professional project managers do on any new job: identify tasks, assign people to each task, set deadlines, and plan the budget.  The brochure shows how this works for a typical deal with tasks grouped into four phases: due diligence, negotiations, closing conditions, and post closing.

As the deal proceeds, tasks and issues are tracked online in the Deal Dashboard, so that every team member on both sides of the table can find out exactly where things stand, minute by minute, by reviewing the latest updates at a password-protected site on the web.  In the brochure’s fictional example, several high priority issues are highlighted for action, such as “plant lease – right of first refusal grant” and “determine whether pre-merger filing is required with the Federal Competition Commission in Mexico.”

Just as important, a budget for each phase is established online at the beginning of the deal, whether the work is performed on an hourly basis or for an alternative fee.  The system then tracks costs to date, and compares them to the budgeted estimate.  In the fictional example in the brochure, the negotiations stage was initially budgeted at $125K.  But by the time 75% of the work had been completed, only $85K had been spent.  The system calculates the “expected variance” from these figures to show that negotiations could be completed more than $11K under the original budget.  (When you do the math, if 75% of the work cost $85,000, 100% of the work would cost $113,333.  Subtract that from the original estimate of $125,000, and you’ll see a net savings of $11,667.)

McDermott has embraced the Dashboard and legal project management and is looking to deploy the Dashboard in a number of areas, including in litigation.  As Kalogerou notes, “Using legal project management and tools like the Dashboard drive efficiency into the way we deliver legal services; clients are demanding value from their law firms and we deliver it.”

The concepts of using an online system to facilitate team communication like this, and to track spending, would be old hat in any other business.  In the law business, this is a breakthrough.  But maybe not for long.  As these words are written, large firms are exploring a wide variety of tools that are springing up to meet the need to increase efficiency.  Because clients are demanding it.

To download a .pdf summary of this series, see the white paper in the project management section of our web page.  It will be updated from time to time as the series continues.  Additional information appears in the Legal Project Management Quick Reference Guide.

May 05, 2010

Legal Project Management (Part 7): Training

All of a sudden, legal project management training is hot.  Whether you want a one-hour webinar, a three-day workshop, or anything in between, someone has just the course for you.

What a difference six months makes.

Last November, Paul Lippe posted this query on Legal Onramp: “I am at a Law Firm Managing Partners Conference in Toronto and the question just came up on how can law firms learn about Project Management. Any thoughts?”

Just four people responded.  Of the four, I was the only one who mentioned a legal project management training program which was then in progress.  If Lippe posted that same question today, so many consultants would rush to describe their training that Legal Onramp’s servers might crash.

Why this sudden interest in legal project management?  As I noted in Part 1 of this series, it all started when the economy forced clients to get serious about reducing legal costs.  The first lawyers to get interested in legal project management were those who agreed to fixed-price fee arrangements, and realized that they could only make money if they became more efficient.  More recently, lawyers on hourly rate arrangements have begun to understand that there are only two ways to hold on to clients whose budgets were cut: decrease hourly rates and margins, or maintain profitability by producing an equally satisfactory result in fewer hours.

A few weeks ago, an article on Law.com poured gas on these flames with the headline “Dechert Puts Its Attorneys Through Project Management Training”.  Lawyers love precedent, and all of a sudden, project management proponents had one.  The idea that an AmLaw 50 firm was training every one of its lawyers inspired a sudden fear of falling behind.  The Law.com article did not say what the program cost, but it did say that “The training sessions…included no more than 20 partners at a time...for four- to six-hour sessions.” Given that Dechert has about 900 lawyers, that means at least 45 workshops.

I’ll leave it to others to guess whether the budget for this project was in six figures or seven.  But I am sure it was less than UK-based Eversheds’ eight figure investment of “more than £10m” ($16 million) on project management systems and technology and “training all of our people to apply our project management methodology.”  That program started several years before Dechert, and their web page describes two formal systems: RAPID Resolution, “a project management system for handling disputes,” and DealTrack, the “project management approach for all of our non-contentious work.”  (Although these efforts have been publicized for the last several years through the ACC Value Challenge, Eversheds has gotten relatively little attention in the press, perhaps because all 47 of their offices are outside the United States.)

The day the Dechert story came out, I started getting calls at 10 a.m. from firms that were suddenly thinking about offering project management training to all of their lawyers.  My ambivalence came out quickly in these discussions.  On the one hand, the customer is always right.  On the other hand, I find it hard to believe that a program to train EVERY lawyer is the best way for firms to spend their money in the current economy. 

From my perspective as a professional trainer, I believe most firms could achieve a much higher return on their investment by applying state of the art just in time, just enough training techniques.  (My financial advisors have pointed out that I could make a lot more money by training every lawyer, but I never listen to that kind of advice.)

When I started LegalBizDev 25 years ago, the company was named Brattle Systems and we developed custom training programs for government agencies and for companies from American Express to Zurich Financial Services.  Over the two decades that we specialized in custom training, the business changed significantly as clients cut back on traditional training budgets and shifted instead towards a more cost effective just in time, just enough approach. 

For example, in the late 1980s there was a huge market for people taking classes to learn how to use new software, but when was the last time you took a half-day class on a software program?  These days, when people want to know how to use advanced features of Word or Excel, few would consider signing up for a class or even looking up the answer in a book.  Instead, they use the convenient just in time, just enough training tools that Microsoft has built into each program, and simply look up what they need, when they need it.

Just in time, just enough training tactics have been applied to almost every field you can think of, including project management.  For one example, see the study of “The use of just-in-time training in a project environment” that appeared in the International Journal of Project Management.  The authors start by pointing out that “around 40% of the knowledge acquired in training is lost after a break of one month, rising to 90% after six months,” and go on to show how the problem can be solved. 

LegalBizDev is the first, and so far the only, company to adapt this pragmatic just in time, just enough model to legal project management training. 

Do I think our approach is the only one that will help lawyers increase efficiency?  Absolutely not.  To be honest, at this moment in time, almost ANY training approach can help lawyers to become more efficient.  Given the venerable hourly business model of the legal profession, nobody ever asked lawyers to be efficient, and few lawyers have tried.  With a little guidance, most can quickly come up with dozens of ways to save time and money.  As Lisa Damon noted when I interviewed her last year about SeyfarthLean, “If you get a group of lawyers and staff into a room to discuss how to make things more efficient, it’s very easy to find savings.”

However, please note that I said “almost any training approach.”  I’ve heard a few off-the-record horror stories lately of some rather dramatic failures in legal project management training.  In each case, the course was led by someone who knew an enormous amount about project management and very little about law firms.  Some were academics, some were well-known consultants.  But when they tried to teach the courses that had worked so well with other groups, they fell flat on their face with this critical, busy, focused, and impatient audience.

In a recent article about Canadian legal project management programs, Borden Ladner Gervais’ Andrew Terrett, a professional project manager and lawyer, explained how important it is to get it right the first time: “You only get one shot. [Lawyers are] a pretty skeptical group.”

The article went on to explain that these are confusing times, because “project management is so new to the legal profession that everyone is still trying to figure out what it can do and how to make it work.” 

I believe that project management is a key component in the sea change that is just starting to transform law firms.  It will ultimately require comprehensive, long-term, top-to-bottom changes in the way lawyers do business. 

The question is, how do we get from here to there?  What should your firm do today? 

I say start this long journey with a small step which accepts lawyers’ reluctance to change and their independent streaks.  The first step we often recommend is a large group presentation to review basic project management concepts and help lawyers identify simple and immediate action items.  With some firms, we recommend highly interactive workshops for small groups of key partners who work together to find tactics that fit each practice and personality.  When lawyers implement the action items from one of our presentations or workshops, they will see immediate results.  And when they talk to their partners about what worked, the best practices spread from the bottom up.

Some firms will undoubtedly prefer the “top-down” approach and choose to invest heavily in training for everyone.  That’s what Dechert and Eversheds have done, not to mention Seyfarth’s work with Six Sigma.  This approach will work too.  In the 20 years my company developed custom training, we created a number of very successful programs of this sort.  In one example, we developed and delivered a five-day, top-down training program for 3,500 government employees in 14 cities, and won an award from the US Small Business Administration as the best small business in New England.  Not just the best training company, but the best small business.

But we also know how complicated and expensive top-down programs can be.  To maximize the results, you need to pick just the right moment: when the audience accepts the fact that they need to change.  In my opinion, in the vast majority of law firms, now is simply not the moment.  Many lawyers still believe the good old days will be back soon and that there is no need to change the way they have practiced for their entire career. 

Can I GUARANTEE that our bottom-up just in time, just enough approach will be more effective than a top-down mandate from management?  Of course not.  But I can guarantee it will be a whole lot cheaper.

To download a .pdf summary of this series, see the white paper in the project management section of our web page.  It will be updated from time to time as the series continues.  Additional information appears in the Legal Project Management Quick Reference Guide.