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2 posts from May 2017

May 17, 2017

The top five ways to increase LPM results (Part 1 of 2)

by Jim Hassett and Tim Batdorf

In the last few years, many legal clients have been demanding greater efficiency and more predictable budgets. Law firms have responded by investing in legal project management (LPM) to increase client satisfaction and profitability.  They have tried a variety of approaches to this evolving specialty, including LPM coaching, training, hiring LPM staff, and purchasing new software.  Some of these initiatives have been quite effective in changing lawyers’ behavior, and some have not.

This two part series provides a high level summary of the five most effective ways to increase LPM results:

1.  Focus on changing behavior and solving problems

In 2011, when the LPM movement was just getting started, the Association of Corporate Counsel and the American Bar Association published an account of a meeting “at which leaders of corporate and law firm litigation departments rolled up their sleeves and tackled the complex issues surrounding present day concepts of value in litigation.” After the meeting, the authors of a follow-up report emphasized that future progress will not be based on improved understanding or increased knowledge. Instead, “The challenge is change/behavior management.” It’s not a question of knowing what to do; it’s a question of actually doing it.

At about the same time, many firms started implementing LPM by launching large-scale education programs. Lawyers love precedent, so when one AmLaw 100 firm announced that it had trained all of its partners in LPM, a number of others jumped in to do the same thing.  These training programs enabled firms to “check the LPM box,” write RFP responses praising their own LPM efforts, and put out press releases. What they did not accomplish, however, was to get many lawyers to change the way they practice law.

As the chair of one AmLaw 200 firm that invested heavily in LPM training put it in our survey Client Value and Law Firm Profitability

Every shareholder and top level associate [in our firm] has had a full day of project management training. I’d like to tell you that they use it, but they don’t.(p. 193)

LPM requires partners to change the very way they practice law.  And as the managing partner of another AmLaw 200 firm in our survey put it:

Project management is not natural to lawyers. We’ve always been trained to get the case done well to win, but now we also have to get the case done efficiently, and that is not part of the natural toolkit for most people. (p. 191)

It is not exactly news that education does not necessarily lead to behavior change. Taking a workshop about how to lead a healthier life by exercising regularly, losing weight, and eating more vegetables does not mean that you will actually do any of these things.

The key to getting started in changing behavior throughout an organization is to help lawyers solve the problems they face, such as living within a fixed fee budget or increasing realization.  And the best way to do that is to first identify lawyers who are motivated to change, and then to coach them one-on-one to create quick wins.

2.  Aim for quick wins to create internal champions

Lawyers are most likely to change their behavior if they are provided with convincing evidence that it is in their own self-interest. If respected colleagues say that LPM helped to make a fixed fee deal more profitable, or to avoid a write-down with a difficult client, they will listen.

As ALM Legal Intelligence noted in a survey entitled Legal Project Management: Much Promise, Many Hurdles (ALM Legal Intelligence, 2012, p. 17), “The quicker there are demonstrable positive benefits, the faster other partners will take notice.” (p. 17)

The value of quick wins in changing behavior has also been shown in many other professions.

A few years ago, John Kotter published a Harvard Business School Review article entitled “Leading Change:  Why Transformation Efforts Fail,” summarizing a ten-year study of more than 100 companies.  Most of their change efforts had failed, and Kotter outlined eight phases that were necessary for success:  generating a sense of urgency; establishing a powerful guiding coalition; developing a vision; communicating the vision clearly and often; removing obstacles; planning for and creating short-term wins; avoiding premature declarations of victory; and embedding changes in the corporate culture.

Kotter, who is now a Professor Emeritus at Harvard Business School, went on to refine these ideas in a number of publications, including the book Leading Change, which TIME magazine listed as one of the "Top 25 Most Influential Business Management Books" of all time.  According to Kotter (p. 123), short-term wins:   

  • “Provide evidence that sacrifices are worth it
  • Reward change agents with a pat on the back
  • Help fine-tune vision and strategies
  • Undermine cynics and self-serving resisters
  • Build momentum”

When LegalBizDev coaches lawyers in LPM, we look for the low hanging fruit that makes it easiest to generate short-term wins such as better budget control, improved client communication, or negotiating changes of scope.

In more than three decades in the training business, LegalBizDev has found that the single most important factor in success is selecting the right people to be trained. This is particularly critical in an area like LPM, where there is resistance and skepticism about changing behavior.

We recommend starting with lawyers who are open to new ideas and who have the most to gain. That could be the key partners who are responsible for new alternative fee arrangements. It could be relationship partners who are worried about protecting business with key clients that are looking for greater efficiency and increased value from their outside counsel. It could be an entire practice group that is considering new checklists, templates, and processes to improve its competitive position. 

Experience has shown that our training pays for itself several times over by enhancing client relationships and profitability. That success creates a new group of champions within the firm who will spread the word that legal project management can help serve clients better.

The exact individuals and groups will vary from firm to firm. But in every case, the best lawyers to begin focusing on LPM are those who are (i) open-minded about change and efficiency, (ii) in a position to benefit when LPM makes a difference, and (iii) influential enough to credibly spread the word of their success.

To be continued in Part 2.....

 

May 03, 2017

What lawyers could learn from other professions about change

Over the last few decades, many lawyers have gotten comfortable with their own success. But, as Microsoft founder Bill Gates has noted, “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”

As the law firm marketplace has become more challenging, a number of law firms have already lost. Just ask the lawyers and staff who used to work at Bingham McCutcheon, Dewey & LeBoeuf, Heenan Blaikie, Howrey, Heller Ehrman, Thelen Reid & Priest, or Thacher Profitt & Wood. Each of these firms had hundreds of lawyers at one time, but now the firms are gone.

These failures have often occurred with little warning to the rank and file. In a study of 37 large law firm collapses since 1988, John Morley of Yale Law School concluded that “law firms often go from apparent health to liquidation in a matter of months or even days and they never manage to reorganize their debts in bankruptcy and survive.”

Every law firm that has gone out of business had its own unique problems. But lawyers often use this as an excuse to think: It couldn’t happen here. Actually, it could. As Richard Susskind summed it up, “The legal market is in an unprecedented state of flux. Over the next two decades, the way in which lawyers work will change radically… Unless they adapt, many traditional legal businesses will fail.”

This type of rapid change has been seen in many other industries. In 2014, a medallion to operate a taxi in New York City cost about $1 million. According to a recent Bloomberg report: “Owning one used to be akin to owning a gas-guzzling, money-printing machine.”

However, thanks to the success of Uber, Lyft and ride sharing services, by 2017 a medallions’ value had been cut in half, and it is still declining.

There are many other examples of people who 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, RCA, Compaq, Digital Equipment Corporation, Wang, Drexel Burnham, E.F. Hutton, PaineWebber, and Lehman Brothers.

But the world changed and they didn’t; and now all those companies are gone, along with many others.

In the last few decades, the forces of global economic change and technology have radically transformed such industries as telecommunications, airlines, retail, mass media, and medicine.

Similar forces have now begun to transform the business of law. One of the most interesting analyses of lessons from other professions was offered by Clayton Christensen, author of the Innovator’s Dilemma and a professor at Harvard Business School, in a keynote presentation at a Harvard Law School conference on “Disruptive Innovation on the Market for Legal Services.”

Here's one example Christensen presents:  A few decades ago, steel was made in massive integrated steel mills, which were quite expensive to build and to operate. The products they produced ranged from low-quality rebar to the high-quality sheet steel used to make cars. Then, in the late 1960s, new technology enabled mini-mills to produce steel much more cheaply by melting scrap in electric furnaces.

At first, the steel produced by mini-mills was low quality and only satisfied the rebar market. Integrated mills were happy to let the rebar business go away because its gross margins were about 7%, and they could make 12% with higher quality steel.

For a while, everybody was happy. Mini-mills had a 20% gross margin and made a ton of money taking over the low-tier business. And the average gross margin profits of integrated mills went up when they stopped making rebar, because they had eliminated their low-margin work.

But by 1979, mini-mills had driven the last high-cost integrated mill out of the rebar market. When the mini-mills had only each other to compete with, the price of rebar collapsed by 20%, and none could make money. Naturally, the mini-mills concluded that if they could make better steel, they could go after a whole new market. So they attacked the next tier, angle iron with 12% profits.

Again, the integrated steel mills seemed happy to let them have it because they were making 18% on sheet and structural steel, and again their average profits went up. And the same thing happened again. Everyone’s profitability improved in the short term, until the last high-cost integrated mill was driven out of the middle-tier business in 1984 and prices again collapsed by 20%.

Mini-mills then found a way to make high-quality steel, and they now account for 85% of North America’s steel production. All but one of the integrated mills has gone bankrupt.

Could something similar happen in the legal profession, with lower-cost competitors first taking away the simplest work (say e-discovery and contract lawyers) and then gradually moving to more complex matters?

It is always dangerous to generalize across industries, but if you’d like to consider whether law firms are immune to massive change, you might want to study the history of other industries that thought they were immune, including:

  • Travel agencies
  • Bookstores
  • Newspapers
  • Airlines
  • Video rental stores
  • Mini-computer companies
  • Railroads
  • Canal operators
  • Buggy whip manufacturers

As jazz great Miles Davis wrote in his autobiography, “The world has always been about change.”

Now it’s lawyers’ turn to change.

This post was adapted from LegalBizDev’s new LPM Tools and Templates.