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5 posts from October 2012

October 31, 2012

Law firm winners and losers

The demand for lawyers is going down, and the supply keeps going up. With clients spending less, the result is a worldwide game of legal musical chairs, with a growing number of lawyers being left with nowhere to sit down.

In 2005, in the first post in this blog, I wrote about an RFP that Tyco had issued to increase the value their law firms provided. Before then, Tyco had used 167 different law firms for product liability cases. The RFP was designed to combine all that work within a single firm to maximize efficiency. To me, the most interesting fact was that when Tyco made their choice, they selected a firm that was not one of the 167: Shook Hardy & Bacon, a firm that they had no previous relationship with.

According to an ABA Journal article seven years later, the relationship grew, and “today Shook Hardy is Tyco’s sole legal services provider for product liability, automobile, and general liability matters.”

The article quoted Dennis Lynch, chief litigation counsel at Tyco, “I think it has worked well because we’ve truly partnered with them…They’ve gotten to know well the players here, the business, products and obviously the law department.”

But that is not to say that building a partnership was easy. The article also quoted Shook Hardy partner Paul Williams who “admits the learning curve for Shook Hardy was steep.”

Firms need to reduce that learning curve, since a recent survey found that 46% of law departments report that they are working with fewer law firms than five years ago, and another 16% report that the number of firms is the same, but they have switched to different ones. When the music stops, you may need some new skills to make sure you still have a place in the game.

Improved skills could even help you save your firm.  You think your firm is perfectly safe now? That’s what they thought at Dewey LeBoeuf, Howrey, Heller Ehrman, Thelen, and Thacher Profitt. Each of these firms had hundreds of lawyers a few years ago, but now the firms are gone. A large number of smaller firms have died as well.

Every law firm that has gone out of business had its own unique problems. But people often use this as an excuse to say: This could never happen to us. Actually, it could.

When the American Lawyer ran a cover story on Dewey’s demise  they interviewed nearly three dozen former partners and staff and conducted detailed reviews of documents ranging from audited financial reports to the firm’s bond offering circular. They concluded that “Dewey’s death was the product of years of bad decisions, and of greed on the part of senior partners.” The implication for lawyers at other large firms was: Don’t worry. It was just a few bad eggs. You are safe.

I have no reason to doubt the facts quoted in the American Lawyer, but I interpret them differently. Dewey failed because its leaders were overly optimistic that the kinds of strategies that had worked in the past would continue to work in the future.

Their business decisions would not have led to bankruptcy a decade ago. Bad decisions simply did not lead $900 million dollar firms to fail at a time when larger economic forces were pushing all large law firms up.

As pricing pressures increase, so do the bad decisions.  For example, in “Growth is Dead,” the Adam Smith Esq definitive series on the current state of the profession, Bruce MacEwen has written about “‘suicide pricing’ in response to RFPs… bids—from name-brand firms, mind you—that are so breathtakingly low one wonders how they could possibly make any money. The short answer is they can’t. These bids come in 5, 10, 20, 40% under what my clients think would be reasonable for the matter.. in a desperate and/or deluded attempt to keep the factory whirring away.”

Ten years ago, there was a lot of room for error. Now there isn’t. As Warren Buffet famously said, "It’s only when the tide goes out that you learn who’s been swimming naked."

Large law firms had a great run of success through the first few years of this century, with constant expansion and ever-rising salaries. But that’s over now. As Dan DiPietro, Chairman of Citi Private Bank, put it, “The industry will not return to the golden era of double-digit profit growth any time soon.”

And, as Microsoft founder Bill Gates stated, “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”

In other industries, many people have experienced great success and thought they couldn’t lose. Here are some of the companies they used to work for: TWA, Pan Am, Eastern Airlines, MCI WorldCom, American Motors, Montgomery Ward, Woolworth’s, Standard Oil, RCA, Compaq, Digital Equipment Corporation, Wang, Drexel Burnham, E.F. Hutton, PaineWebber, and Lehman Brothers.

But the world changed, they didn’t, and now all those companies are gone. So are lots of others.

In the last few decades, the forces of global economic change and technology have radically transformed many industries including telecommunications, airlines, retail, mass media, and medicine. As jazz great Miles Davis said in his autobiography: “The world has always been about change.” These same forces are now transforming the business of law.

In his apocalyptic book The End of Lawyers? Richard Susskind argued that, “For many lawyers, it looks as if the party may soon be over.” (p. 270) As a result of advances in information technology and pressures toward commoditization: “The market is increasingly unlikely to tolerate expensive lawyers for tasks (guiding, advising, drafting, researching, problem-solving, and more) that can equally or better be discharged by less expert people, supported by sophisticated systems and processes.” (p. 2)  As a result, Susskind wrote, “Lawyers who are unwilling to change their working practices and extend their range of services will…struggle to survive.” (p. 269)

Change is never easy, and it will require both inside and outside counsel to make a substantial investment in learning new skills and experimenting with new ways to do business. As Harry Trueheart, the chairman emeritus of Nixon Peabody, put it:

Law firms will pay dearly as we as a profession learn to do this. There will be winners and losers.

There’s still time to decide whether you will win or lose.  If you want to lose, ignore the need to change your behavior and better meet client needs. 

But if you want to win, it is a time to stop acting like a risk-averse lawyer, and start acting like an entrepreneur, and turn your clients into raving fans.  As Camden Webb, a partner at Williams Mullen, put it after completing one of our project management programs:

Don’t hold a series of committee meetings for a year and then do a top-down analysis. Just do something

 

Lpm-paperback-cover-final-Sept 18-1

 

This post was adapted from my new book “Legal Project Management, Pricing, and Alternative Fee Arrangements” which will be published in February.  A draft of the book is currently being reviewed by experts from over 50 law firms.

 

October 24, 2012

Maximizing legal project management results: The case of Bilzin Sumberg (Part 3 of 3)

According to Jim Shindell, the Real Estate Practice Group Leader at Bilzin Sumberg: 

We have always thought that we need to be efficient, but LPM coaching has given us a much better understanding of how to get there and what interferes with efficiency in a transaction.  We were reactive in the past.  Now we are becoming more proactive.

In his weekly 30-minute coaching calls with Steve Barrett, Jim said, “We worked on ways to help us manage transactions to be efficient, to price matters more effectively, and to think a project out well ahead of time in order to staff it properly.”  

Many of the calls involved looking back at historical transactions (with some of the facts changed to ensure client confidentiality), and re-engineering the transactions to see how they might be done differently if they were new projects.

“We are looking to develop templates to help us identify all the tasks required in advance for any project, so that we are not reinventing the wheel every time that we put out a price estimate,” Jim said.

The idea is “to break each transaction into the smallest possible parts, and then to re-imagine the transaction and all that it requires.”

The resulting templates and checklists offer many benefits to clients, including an early identification of key steps in a transaction. 

They also offer the best way to predict what transactions will cost, Jim said, so that no one is making things up by extrapolation or merely using wishful thinking.  In time, Bilzin plans to refine the task codes it uses to track costs and analyze the historical record of how long things take under a variety of conditions.  But clients can’t wait, and templates and checklists provide a great way of offering more accurate estimates today.

“The idea is to be able to establish meaningful cost estimates, in advance, for our clients in the transactional matters that we handle,” Jim explained. The process of making a time investment up front through better planning and analysis actually saves time in the long run by permitting the firm to respond quickly and accurately to client requests for quotations.

Things move fast in the world of real estate. When a project is ready, the developer wants it to start immediately, and time is money. If we can move quickly with a cost estimate, Jim said, that is a service both for our clients and for ourselves.  And “that is why we are working so hard to develop the firm’s institutional knowledge and collective data base.”

In the current highly competitive environment, Jim said, “if you’re not able to properly and quickly determine your prospective costs in a matter, you will find yourself losing certain business, or perhaps not even being able to compete for business. And that includes a lot of good, highly sought real estate development business, not just business where the key determinant is price.”

In general, when it comes to LPM, “As a firm we have made significant progress, but we still have a long way to go. The firm’s leaders are squarely behind LPM, and just about everyone thinks it’s a good idea.  But it’s a lot easier to say it than to do it.” 

That’s why LegalBizDev is now working with a few key practice group leaders on the best ways to sustain and expand the use of LPM.  The thing that impresses me most in the sustainability interviews so far is the level of commitment and LPM sophistication.  The partners at Bilzin know how much they still don’t know, and they see the benefits of expanding their efforts.  

But that’s another story.  Stay tuned in coming months for more details.

This series was written by Jim Hassett and Jonathan Groner.

October 17, 2012

Maximizing legal project management results: The case of Bilzin Sumberg (Part 2 of 3)

Litigation partner Scott Wagner was one of the first lawyers to volunteer for LPM coaching with LegalBizDev’s Steve Barrett after the retreat presentation described in Part 1 of this series.

Although Wagner usually represents defendants in antitrust cases and other types of complex litigation, he is now spending a good deal of his time representing plaintiffs in a huge civil antitrust case pending in the Northern District of California.

Wagner’s clients are distributors and purchasers of products containing LCD screens.  The background is that manufacturers of LCD screens were criminally charged with price-fixing and some were ultimately convicted.  In cases like these, purchasers and others who suffered financial injury from the price-fixing conspiracy often sue the alleged conspirators for damages.

“When I signed up for the LPM coaching, I wanted to think about what I could do to get better in budgeting time and money for each case,” Wagner said. “To some extent, this sounds like simple math, but figuring out the whole universe of tasks isn’t easy.”

One good example was accounting for the time that he and his team spent in daily monitoring of the criminal antitrust trial.  “This is time that we had to budget, but it is also time that we wouldn’t normally think about,” Wagner said. “What Steve helped me to do was to think through, in advance, all the phases of a case, all the possible twists and turns and the directions it can take.”

The result, Wagner said, was that he became much better at “giving the internal team and clients a more realistic estimate of what a case will cost.” He is now able to estimate how much time – and money – a case will require, under various assumptions.

In addition, he said, the legal project management process can help plan the staffing of a case. “Perhaps instead of two associates assigned, you may find that you need just one, or maybe three or four.”

Wagner’s coaching included three months of weekly calls with Barrett, with unlimited support available between calls.  Like many others at Bilzin Sumberg, Wagner found that his other commitments required him to miss some weeks here and there, so his weekly calls were extended over more than three months. Assignments were taken from the Legal Project Management Quick Reference Guide and were specifically tailored to the facts and the needs of the LCD case that Wagner was pursuing.

“The biggest take-away,” Wagner said, “is that budgeting is possible. The conventional wisdom is that it is not possible in litigation. But actually, you can come up with a budget that is useful to your client and can lay out all the contingencies to know what the litigation will likely cost.”

For Alan D. Axelrod, chair of the firm’s Corporate & Securities Group, LPM training is all about looking at the law firm as a business, which is the way its clients see themselves. “I think that in the 80s and 90s people didn’t look at law firms as businesses – but everyone got a rude awakening in the last few years.”

“From a project management viewpoint, you must develop skills to make sure that work is not duplicated. You always needed to get the deal done as quickly and effectively as possible. But now you also have to think about getting the deal done efficiently,” Alan said. “There is often a balancing required between the goal of completing it as soon as possible and still being as efficient as possible.”

More and more clients are requesting caps, estimates, and similar fee arrangements for M&A and other transactional work, Alan said.  “One client whom I had worked with many years ago is now back growing its business.  We just did an M&A deal for them, where we carved out the due diligence aspect on an hourly basis, and came up with a flat number for all the rest of it, in the form of a cap. If it comes in lower, we told them, ‘we’ll bill you for whatever it is.’”

Another transaction he’s been working on with Steve was just cleared by the SEC and it will come in within budget.  “In this one, we were aggressive in terms of the fixed fee number that we bid.”   Although Bilzin already had committed to the price before the coaching started, the coaching was still useful and “it was very important to develop the template to help monitor the actual versus projected cost.”

 “The program with Steve was helpful, and as we get more and more experienced with LPM, it will become even more helpful,” Alan said.

“The bottom line is the legal business has become so much more competitive – clients are looking for value and recognizing that the required work  needs to be correlated with cost. If you don’t move with the times, you’ll be in trouble. LPM is one of the key tools for keeping up.”

This series was written by Jim Hassett and Jonathan Groner.

October 10, 2012

Maximizing legal project management results: The case of Bilzin Sumberg (Part 1 of 3)

 “Legal project management demands a new way of thinking about providing legal services,” according to Al Dotson, a member of the Executive Committee at Bilzin Sumberg and the practice group leader of its Government Relations and Land Development Practice Group.

Before I started on our firm’s LPM initiative, I approached new client engagements with a simple thought: ‘You, the client, have engaged me. My hourly rate is X,’ and that was the end of the discussion.  Now, I approach new engagements more in terms of developing a mutual understanding with the client about the services we will provide, the time it will take, the team required, the budget, and the relevant reporting milestones.

Al explained these ideas when I conducted a panel discussion with him, Jon Chassen and Mitch Widom at Bilzin’s annual partner retreat last March.  All three partners had just finished a pilot test of LPM coaching with LegalBizDev’s Steve Barrett.  For about three months, each lawyer had selected real world matters to analyze and identified the key issues from our Legal Project Management Quick Reference Guide that were most critical in each situation.  Then they reviewed the best practices described in the book, and discussed exactly how to apply them to increase client value and protect profitability.

At the retreat, all three reported benefits, but Al’s remarks got the most attention because his LPM activities had already led to new business in just a few short months.  Dotson represents real estate developers and contractors in highly complex matters that involve a series of government regulatory agency approvals, and his developer clients loved the approach because they use project management to run their own businesses.   One of them was so impressed by the legal project plan Al had produced that he asked Bilzin to take on a significant amount of new work.

I give a lot of LPM speeches at retreats, and I must say that whenever it is possible to conduct a panel like this after my speech, it always gets a better reaction.  After all, who would be more credible: an outside consultant, or a respected colleague they’ve worked with for decades?

The reason Dotson first volunteered for the program was that

I was looking for better ways to organize my work, and to respond to clients’ and prospective clients’ desires for budgets.  Clients are looking for a way in which I can describe the work in advance, both in terms of what the cost of the whole engagement will be, and in terms of manageable segments of work.

Dotson described the LPM coaching he received as “spot-on” in that it helped him organize his complex matters in terms of their component parts, and to plan better for possible contingencies that may occur.  “This coaching was far from a theoretical exercise,” he said. “This was a discussion of specific matters that were before me, and how to approach them.”

In weekly telephone sessions of about 30 minutes each, Barrett walked Dotson through key problems and issues that he was encountering in his practice, and how best practices from other firms might apply.  Dotson then followed up by completing written assignments based on LegalBizDev’s materials and the existing project management literature.

As Dotson summed it up: “This coaching has been very beneficial to me in client management and in client development.  I believe that it applies to all areas of law.”

Bilzin Sumberg is a Florida-based firm with about 100 lawyers, with, according to its web page, “a local footprint, a national presence and a global perspective.”  As a result of the discussion at the retreat, a number of other partners became interested in discussing how LPM could help them.  

All 51 partners were offered the option to complete the same three-month coaching program that Al, Jon, and Mitch had received.  Eight people signed up right after the retreat.  Based on their results, another 14 signed up a few months later, for a total of 25 partners in the program so far. This represents almost half of the firm’s partners.

We have coached lawyers from many firms on LPM using a variety of approaches and we believe Bilzin has made more LPM progress, more quickly, than any other law firm.  The reason is that they had the highest percentage of partners who made a commitment to our intensive three month coaching program.  (We work with one AmLaw 100 firm that has put more total lawyers through this program, but because they are so much larger, their percentage is lower.)

Many firms have offered one-time training classes to a large number of lawyers, and a few have spent years in intensive re-engineering of business processes.  But as far as we have been able to determine, no other firm on the planet has gotten such a large percentage of the partnership actively involved so quickly in making immediate changes that benefit their clients and their business. 

If you believe everything you read on the web, you might think that some law firms have completely mastered LPM.  Those of us who work in the trenches have a more realistic view.  If I had to rate the legal profession’s overall LPM progress on a scale of 1 to 10 over the last few years, I’d give it only a 2 or a 3.  Some individual lawyers and practice groups deserve a much higher rating, but when it comes to entire law firms there is a huge gap between perception and reality.  Perhaps marketing departments have done too good a job of publicizing the successes of lawyers who are using LPM, while overlooking those in the same firm who are disinterested or actively opposed to it. 

A few weeks ago, I wrote a post about a recent LPM survey from ALM Legal Intelligence which reported a slow pace of LPM progress.  This finding was not a surprise to anyone who has ever worked at a law firm.  Insiders know how independent lawyers can be, and how hard it is to get everyone moving in the same direction.  When Patrick McKenna and Gerry Riskin wrote one of the most influential books about managing law firms, there is a reason the book was titled Herding Cats.  

The intensive LPM coaching approach works because each lawyer focuses on immediate ways to directly benefit their individual practice.  And when it works, they tell their colleagues.

Next week, we will discuss some of the changes that have occurred in other practice groups after Bilzin’s retreat.

This series was written by Jim Hassett and Jonathan Groner.



[1] http://www.patrickmckenna.com/PatrickJMcKennaBrainmatterCreationsHeardingCats40029.aspx

October 03, 2012

Project management tip of the month: Keep clients informed as matters progress

Ask every major client whether they would like monthly or weekly status reports, which can improve client relations and avoid misunderstandings.  The best format may be a simple one page report of what has been accomplished since the last report, what is planned for the next period, and any issues or challenges.   

The first Wednesday of every month is devoted to a very short and simple tip like this to help lawyers increase efficiency, provide greater value to their clients and/or develop new business.