60 posts categorized "Books"

December 17, 2014

Bloomberg interview regarding my new book (Part 1 of 2)

This interview originally appeared in Bloomberg BNA’s Corporate Counsel Weekly.  A pdf of the complete interview can be downloaded from our web page.

Bloomberg BNA: Tell us about your new book Client Value and Law Firm Profitability – what was your goal and who did you talk to?

Jim Hassett: In the last few years, millions of words have been written by law school professors and consultants about how the demands of the clients of major law firms are changing and what law firms should do about it.

The only thing that’s been missing from the conversation is statements by the people who actually run large law firms. These senior decision makers deal with these issues every day, and their very livelihood depends on coming up with the right answers. I wanted to hear their honest opinions about these highly sensitive issues but knew they could not speak openly if they were quoted by name, so I devised a research approach built around anonymity. I conducted every interview myself, and promised that while firm names would be listed in the report, the name of every individual I interviewed would remain confidential and no quote would be linked to a particular person or firm.

Leaders from 50 of the AmLaw 200 agreed to speak with me for this book. Forty-two percent were managing partners or chairs, and the remainder were senior partners and staff, including CEOs, COOs, and CFOs. They were indeed unusually frank in their responses, including the AmLaw 200 chairman who said that “Lawyers are about as dumb as you could possibly be about understanding how our product is made. The lawyers who understand how to make it and who can manage that process efficiently are going to be the winners.”

They also spoke freely about both problems and solutions, like the managing partner who noted that “I have a $10 million practice. But that could be a disaster for a firm, because it could cost them $11 million to get $10 million. But nobody ever talks about it that way.”

Bloomberg BNA: What was your most surprising finding?

Jim Hassett: While almost everyone agreed that client demands for greater value and lower fees have been putting pressure on law firm profits, firms were remarkably inconsistent about how they measure profits. When I asked, “If you compare profitability for two lawyers in your firm, is there a software program or formula used to calculate profitability or is the comparison more intuitive?” a surprising 26% said there was no such formula or program and that the answer was intuitive. For the other 74%, definitions and formulas varied widely, including total revenue, profits per equity partner, leverage, several different types of realization, and a variety of approaches to cost accounting.

To dig more deeply into this important issue, we conducted follow-up interviews with industry leaders from firms that sell software to analyze law firm profitability. Jeff Suhr, a VP at Intellistat/Data Fusion, reported that his company currently has 91 clients actively using their tools. How do they calculate profitability? Ninety-one different ways. The fundamentals are basically the same, but there are important differences in the assumptions and details. These differences can have significant implications for the way profitability is interpreted and can affect the way in which the figures are used to motivate lawyers to change their behavior so that they can better meet client needs in a way that can be sustained.

Bloomberg BNA: What are law firms doing to protect the bottom line?

Jim Hassett: They are trying lots of things, with mixed success. According to our data, the two most effective ways of protecting profitability are quite new to the legal profession: legal project management (LPM), and new staff positions in such areas as pricing, value, and LPM.

Other tactics have led to more mixed results, including relying on new technology, knowledge management (KM), and contract attorneys and outsourcing. The book includes many quotes from proponents saying that technology, KM, and outsourcing were the most valuable steps they took, and from others who said that they were a waste of time and money. These differences of opinion can be traced both to the different needs of different firms and to the details of how they tried to implement change in each of these areas.

Bloomberg BNA: Lots of people seem to agree that legal project management is important, but what exactly does it include?

Jim Hassett: That is an excellent question. The field is so new that experts disagree about what should be included and excluded from the concept. This has slowed progress, as seen in the remarks of one senior executive who noted: “We were just at a board meeting last week where we were talking about whether we should do formalized project management training. My answer to that is obviously yes, we absolutely should. But first we need to agree on what legal project management is.”

In my book Legal Project Management, Pricing and Alternative Fee Arrangements, I reviewed the short history of this movement and proposed the broad definition we use in our coaching, our training, and this research: “Legal project management adapts proven management techniques to the legal profession to help lawyers achieve their business goals, including increasing client value and protecting profitability.”

This broad definition includes everything from budgeting and communication to process improvement, knowledge management, and personal time management. We believe splitting hairs over what is and is not LPM is just another excuse to avoid action. Law firms need to move as quickly as possible to the real problem: What must we do today to meet client needs while remaining profitable and competitive?

Bloomberg BNA: Where is the pressure for LPM coming from?

Jim Hassett: From clients. One of the best sources of information about client demands is the Chief Legal Officer Survey which Altman Weil has been publishing for the last 15 years. (Full disclosure: LegalBizDev is a strategic alliance partner of Altman Weil.) One key question in the 2014 survey, which was released in November 2014, was, “Of the following service improvements and innovations, please select the three that you would most like to see from your outside counsel.” This year’s answers from 186 CLOs were greater cost reduction (58%), more efficient project management (57%), and improved budget forecasting (57%). Since LPM leads to cost reductions and to improved budget forecasting, you could say that the top three client requests were LPM, LPM, and more LPM. 

In business, everything starts with meeting client needs. But lawyers who understand LPM and apply it to their practice are still a tiny minority. As one senior executive put it: “One of the problems that we have, and frankly that most firms have, is just teaching lawyers how to manage a project, getting them out of the habit of just automatically starting out with some rote process. Just because the client says, ‘I think I might have a lawsuit’ doesn’t mean you go off and conduct 40 depositions. Lawyers need to sit down and talk about what the client is trying to accomplish. It might turn out that we are able to accomplish the client’s end goal without taking any depositions.”

When I asked about which aspects of LPM were most critical to firms’ short-term success, it is interesting that the top two areas participants singled out were defining scope and managing client communication. These issues cannot effectively be addressed by the expensive software that so many firms see as a starting point. They require partners to change their behavior and become more efficient.

Adapted with permission from Corporate Counsel Weekly Newsletter Vol. 29, No. 48, December 10, 22014. Copyright 2014, The Bureau of National Affairs, Inc. (800-372-1033) www.bna.com.   

November 05, 2014

Tip of the month: Embrace experimentation aimed at quick wins and developing champions, one practice group or one lawyer at a time

Lawyers love precedent, and many law firm committees are postponing action until they see evidence proving the value of a “one size fits all” perfect solution that will fit their entire firm.  But there is no silver bullet, and firms that continue to look for it could go out of business while they wait. The key to success is, as Stuart J.T. Dodds put it in his book Smarter Pricing, Smarter Profit, to “think big and start small.” 

The first Wednesday of every month is devoted to a short and simple tip to help lawyers increase efficiency, provide greater value to their clients and/or develop new business. This month’s tip is explained in detail in Chapter 7 of my new book Client Value and Law Firm Profitability.

October 29, 2014

Business development best practices: Follow up

This is one of a series of occasional posts summarizing the most important best practices from my book the Legal Business Development Quick Reference Guide which is now also available in a Kindle edition.

There’s no way around it: business development takes time. To build new business, you must follow up, week after week, month after month, and year after year.

In The Sales Bible (p. 197) Jeffrey Gitomer sums it up this way:

Most sales are made after the seventh no…It takes 5 to 10 exposures (follow-ups) to a prospect to make the first sale…[so] you’d better have what it takes to persevere through the follow-up process and not quit.

For many busy lawyers, the best way to assure that you will follow up is to “make an appointment with yourself” for one or two blocks of time that will be devoted to business development every week, such as 2-4 PM every Tuesday and Thursday. Put the time in Outlook or your weekly planner, and try to avoid scheduling anything else at that time. When something comes up that is more critical, as is sometimes inevitable, reschedule your marketing time.

We recommend setting this time block in the middle of the week, at a time when you are likely to be able to reach clients and prospects. If you think Mondays and Fridays are the best times to discuss new business with your clients, try it, track the results, and then decide.

It also helps to share your results with a colleague, a coach, or even a relative or friend. Simply knowing that someone else is watching will make you more likely to follow up.

Finally, you will need a good system for tracking To Dos.  Different lawyers prefer different approaches, and the best format is the one that contains the information you need, in a form that you will keep up to date.  My favorite is a simple list with three columns like this:

Who

Priority

To Do

Tom French

High

Hold telecon, based on key questions from the Quick Reference Guide 

COO at ABC Corp

High

If COO provides info for press release, finish a draft ASAP

Ms. Johanssen

Medium

Send agenda listing questions for the next meeting

Mary K.

Medium

Hold satisfaction interview

Tom S

Low

Call to set up a meeting

Falco Inc

Low

Meet in early June

This type of overt prioritizing will help you assure that if something simply doesn’t get done due to lack of time, it is likely to be the item that will have the least impact on the future of your practice.

Or better yet, use Outlook or any other program to keep your list.

And then don’t forget to actually follow up.  Week after week, month after month, and year after year.

October 22, 2014

Book excerpt: What should law firms do to improve profitability and LPM? (Part 4 of 4)

This series was adapted from my new book Client Value and Law Firm Profitability, which was published at the beginning of this month.

Given all the options and competing claims about LPM, what should a firm do to get started? Our answer is explained below at the end of this book: embrace experimentation and, as one of our clients put it, “just do something.” Start small, and find out what works for your firm.

Once you have grassroots support from influential internal champions, then you will be in a position to decide whether you might benefit from professional project management staff, depending on the unique needs of your practice area and your clients.

Remember that in this study’s ranking of LPM issues in Chapter 4, the two most critical were defining scope and communicating with clients. Neither can be delegated to project managers. Lawyers must first be committed to changing their approach before it makes sense to hire others to help them.

The big picture recommendations in the next section about starting “one practice group or lawyer at a time” include evidence that the development of internal champions and quick wins has proven its value in changing behavior in a wide variety of professions. So it is not surprising that a number of participants in this research cited the same approach:

I try to find an internal champion to move things forward. I worked with a partner in one department that bought into LPM and we gave a joint presentation on it. Word got out and another department asked to provide the same presentation to them. Many times once attorneys get a taste of LPM they get interested and want more. – Senior executive

We’ll have to have to have some guinea pig partners who are willing to try it and then be willing to testify as to how it has helped their numbers and their client relationships. – Senior partner

Because we’ve had some demonstrable LPM successes, enthusiasm for it is growing. – Senior executive

However, even with the support of champions, LPM is not quick or easy to implement. As one senior partner emphasized, there are no magic solutions:

Top management has to make it a priority and communicate it all the time, make it part of the culture. It will have to be ingrained in people, and it’s slow. When people use the tools and the resources, and they are successful, they will communicate their success to their partners. Others will want to use it, and LPM will work its way around. But that will take some time. We don’t know exactly how long it will take.

Some firms will find it valuable to hire professional project managers to support lawyers’ efforts, as in this quote from one chair:

We’re going to start hiring different people to manage the non-legal aspects of the practice, not the relationships. That’s what has to be done. Lawyers are notoriously bad managers. You could be a fabulous trial lawyer but not be able to get your hours in on time or bill on time. You might not be able to collect on the bill. With all these different components, it’s better to look to a project manager on accounts receivable, on AFAs, on collections, rather than the lawyer.

Another firm chair that has gone down this path has been very satisfied with the results:

I think that project management skills are absolutely critical to achieving value and managing well, which is why we have people who actually make this their life’s calling. People who are certified project managers, who are trained in it, who actually know what it means when you talk about Agile Scrum, as opposed to somebody thinking it’s a flexible rugby player. Project management is a profession, and the people in the profession need to understand how the legal business works, how lawyers think. How you would manage a project at IBM is not the same way you would manage a project in a large law firm. But when we have good project managers working as part of the client service delivery team with the clients, clients love it. They just love it. It adds so much value, it’s unbelievable.

(Agile Scrum is an approach to project management that starts from the assumption that customers often change their minds about what they want and need as a project proceeds. It therefore replaces extended upfront planning with rapid development of partial solutions which can be tried out on clients and adapted until they meet true needs. Many professionals believe that this will become an increasingly common approach to LPM as it evolves.)

There can be little doubt that the trend of using LPM professionals will continue to grow, especially in large firms. It is also safe to predict that the level of LPM sophistication needed to compete effectively will continue to increase.

In the next few years, the most interesting developments in LPM are likely to involve moving away from traditional project management models to cutting edge alternatives. For example, in one of the most widely quoted texts on LPM, Robert Wysocki talks at length about how traditional project management solutions apply only when the client’s goal is clear and the steps required for a solution are clear. In many legal matters, neither precise client goals nor complete solutions are known at the start. These complex and ambiguous situations will therefore require the more modern LPM approaches explained in Wysocki’s text, notably Agile project management that is derived from the “Agile Manifesto” signed in 2001 by 17 influential software developers and says in part:

We are uncovering better ways of developing [products] by doing it and helping others do it. Through this work we have come to value:

  • Individuals and interactions over processes and tools
  • Working software over comprehensive documentation
  • Customer collaboration over contract negotiations
  • Responding to change over following a plan

That is, while there is value in the items on the right, we value the items on the left more.

Agile project management is an iterative trial and error process that focuses on continuous improvement and responding rapidly to situations when they change in order to minimize the total work required.

But before firms can get to that level of sophistication, they need to start with the basics. And as one chairman in our research summed it up:

Most of our clients are no better at understanding or applying legal project management than we are. But in the future, the fact that you can actually do something on time and within budget is going to become an important indicator of whether or not you really are a good lawyer.

A pdf of this entire series can be downloaded from Altman Weil Direct, where it originally appeared.

 

October 15, 2014

Book excerpt: What should law firms do to improve profitability and LPM? (Part 3 of 4)

This series was adapted from my new book Client Value and Law Firm Profitability, which was published at the beginning of this month.

As law firms struggle with internal pressure to retain and improve profitability and external pressure to satisfy client demand for greater value, one tactic has risen to the top of most law firm lists: legal project management.

As discussed previously in this blog, the field of LPM is so new that experts have spent quite a bit of time arguing about what it does and does not include. If you accept the very broad definition that we have been using for the last several years—LPM adapts proven management techniques to the legal profession to help lawyers achieve their business goals, including increasing client value and protecting profitability—it is easy to see that the vast majority of law firms could benefit from implementing LPM in some form.

Which brings us back to the question of exactly how to do that. Educating is relatively easy, but changing behavior is very hard. It is also the central problem in legal project management. The Association of Corporate Counsel and the ABA conducted a meeting a few years ago, “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.” In an ACC Docket article summarizing the event, the authors noted that 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 getting lawyers to do it.

In this research, the managing partner of one firm that invested heavily in education but failed to see much behavior change had this to say:

Project management will probably have the longest-term positive impact, but it’s been the biggest challenge, because it’s something that hasn’t been easily absorbed by a lot of the lawyers. When busy lawyers start scrambling around, the inefficiency creeps right up. At our firm, project management has not met expectations. But it’s improving, and I do think long term it will have a really big impact.

If there is one thing that participants in this survey agreed on, it is that it is difficult to get lawyers to use LPM, as seen in these comments from five more firms:

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. – Managing partner

Getting people to manage engagements is very difficult in this business. So we’re at the discussion rather than the implementation stage. – Chair

We’ve done a better job on the front end, on the developing and pricing piece. Where I don’t think we’re doing as much as we could is on the legal project management end, thinking about whether there are more efficient ways to actually complete certain kinds of work. – Senior executive

We have clients, especially in litigation and corporate, who are saying we need to implement LPM. But it’s hard to get our lawyers off the dime. – Senior partner

I think that it will require a lot of work, and daily support from the top, not just lip service from the partner team twice a year. – Senior executive

Given that the formal field of LPM is so young, and that many lawyers resist its fundamental ideas, it is not surprising that there are still disagreements about what approach to implementation works best. Several major vendors—including my company—offer different solutions. Each believes strongly in its own approach and frankly has a vested interest in proving its effectiveness.

Generally, implementation approaches fall into three broad categories: training, coaching, and law firm staff. Of course, these are not mutually exclusive and many firms use all three, along with software, as described in the next section. All of these approaches can have positive effects. The hard question that every firm faces is one of cost-effectiveness: which approach will produce the greatest impact today for the lowest cost.

Historically, most firms have started with some type of training. Lawyers love precedent, so when Dechert announced in 2010 that it had trained its partners in LPM, a number of firms jumped in to do the same thing. This led to some great press releases about how these training programs proved that firms were committed to LPM, but precious little in the way of results. Consider these comments from three firms that invested in extensive LPM training programs:

Every shareholder and top level associate has had a full day of project management training. I’d like to tell you that they use it, but they don’t. – Chair

Training raised awareness, but I think it will take a longer campaign to significantly move the needle in terms of our ability to change the way we do business. – Managing partner

I don’t want to say it’s stillborn, because that’s too fatalistic, but it has not taken hold like I had hoped it would. I think that there are some attorneys who probably are using it in their own way, but as an institutional concept it has really been put on a back burner. – Senior executive

It took a few years for it to become clear that training every lawyer in the firm was not a cost effective way to go, and that led people to less ambitious programs such as short sessions of “awareness training” that set stage and identified the lawyers who need to dig in more deeply.

In our experience, the most effective way for firms to build LPM momentum is not with large group training, but rather with one-to-one coaching for influential partners to enable them to directly experience the benefits of LPM. As a result, they will become internal champions who will lead efforts to adapt LPM to the particular needs of their firms, practice groups, and clients.

A pdf of this entire series can be downloaded from Altman Weil Direct, where it originally appeared.

October 08, 2014

Book excerpt: What should law firms do to improve profitability and LPM? (Part 2 of 4)

This series was adapted from my new book Client Value and Law Firm Profitability, which was published today.

The key to success is to come up with information and systems that increase the behaviors that are of greatest benefit to the firm. But it isn’t easy:

When you start digging into profitability at the matter level, you get set back. You can make the numbers say whatever you want, but did you consider headcount or overhead? Some of the offices might not be as busy so you want to spread the work to them. We’re willing to take a little hit. There’s a big picture we’re trying to achieve, and when we’ve tried to get into the weeds a little bit too much, it can backfire because we get bogged down with some of this stuff. So my idea is to take the long view. It’s very difficult to understand profitability at the matter level, and in some ways that’s a misguided approach because there are just so many factors to take into account. If you can slowly start to chip away at all these areas, then that will have a beneficial improvement upon your profitability. It’s all about improving your portfolio. – Senior executive

The real challenge is to use our profitability tool in a way that motivates all of the partners to their maximum effort toward profitability, without creating the wrong sorts of behaviors, like hoarding work or fighting unduly over origination credits. – Chair

Many firms are getting serious about training their lawyers to think differently about revenue, discounts, and profitability:

Our firm has really invested a lot of effort in arming ourselves with the tools to try and deal with understanding profitability. – Chair

Our CFO visits offices and trains people on profitability. – Managing partner

We fully intend to educate our attorney base to be more aware of these things. In particular, when attorneys approach our AFA subcommittee with a project that involves an AFA, part of the response is to address the profitability of that proposal and to explain to them when the particular pricing doesn’t make sense for us to take it on. – Senior partner

Left to their own devices, most lawyers are probably at a 5, on a 1 to 10 scale of understanding. But we educate them up to a 9. So it’s something in the middle. We have a very keenly-focused financial accounting regimen at the firm that is constantly preaching this, that all work and all books of business and all new clients are not the same. And consequently, our lawyers have a better than average instinct on this. At the end of the day, our pricing reflects this because we don’t give our lawyers total carte blanche to open up a new client at a new rate. We encourage them to bring in the clients, but then we work with them very closely as to whether that client at that rate makes sense. And sometimes it’s very timekeeper-dependent, what kind of leverage we’re going to have on the assignment. – Chair

In summary, while there is still much uncertainty about the most effective tactics, there can be no doubt that firms are increasingly focusing on questions such as:

  • How should our firm define profitability?
  • How should we communicate this definition to our lawyers?
  • How should we train lawyers to manage legal matters more profitably?
  • How should we compensate lawyers for bringing in and managing more profitable work?

Of these, the last question is by far the hardest. It is simply not possible to create a compensation system that makes everyone happy. The trick is to figure out which lawyers are most essential to the continued health of your firm, and how much do you need to pay them to keep them from leaving. Basically, my advice is to ask around and find the best compensation consultant you can. You’re going to need help.  (This is not an advertisement. LegalBizDev does not provide compensation consulting. It’s too hard.)

Last year, an AmLaw 100 firm that was just beginning to think seriously about those questions invited me to speak at a practice group leader meeting about pricing trends. When one participant asked what I thought was the most critical issue, I said it was determining the difference between low prices that are acceptable and prices that are simply too low to make business sense for that firm. “Where do you draw that line in the sand?” I asked. The chairman replied, “We don’t even know where the sand is.”

But that was then. Now that same firm has a number of new pricing and management initiatives in place and a new pricing director. Clearly, firms are making progress. It is just very, very hard.

A pdf of this entire series can be downloaded from Altman Weil Direct, where it originally appeared.

 

Today’s publication of my new book Client Value and Law Firm Profitability

For months, I have been writing in this blog about my new book Client Value and Law Firm Profitability.  Today, it is available on our web page for $95, with volume discounts on orders of two or more copies. The book can also be ordered from Amazon, in both paperback and Kindle editions.

Here is part of the press release that came out with the book:

About two-thirds of the time, when legal clients say they want “greater value,” law firm leaders believe it is nothing more than a request to pay less. Although profitability is essential to law firms’ success and survival, about one-quarter of major law firms don’t measure it formally but only assess it intuitively. For those that do measure profitability, the two most consistently effective ways to preserve it are legal project management and adding new staffing in pricing, value, and related areas. 

 These are just a few of the findings of a study of law firm leaders I conducted in 2013 and 2014 for my new book Client Value and Law Firm Profitability, which is being released today. I confidentially interviewed law firm leaders from 50 AmLaw 200 firms. Forty-two percent were chairs or managing partners, and the rest were senior partners and executives.

Since the participants in the study were promised that they would not be quoted by name, they were unusually frank in their responses, including the law firm chairman who said that “lawyers are about as dumb as you could possibly be about understanding how our product is made. The lawyers who understand how to make it and who can manage that process efficiently are going to be the winners.”

The interviewees also felt free to speak about both the business problems they face and possible solutions, like the managing partner who noted that “I have a $10 million practice. But that could be a disaster for a firm, because it could cost them $11 million to get $10 million. But nobody ever talks about it that way.”

 

September 24, 2014

Book excerpt: What should law firms do to improve profitability and LPM? (Part 1 of 4)

This series was adapted from my new book Client Value and Law Firm Profitability, which will be published in a few weeks.

This research was designed to help lawyers make the best possible decisions about how to adapt to a rapidly changing marketplace by providing insights into the actions and opinions of their peers.  In the months preceding this book’s publication, a number of conferences have been held by law schools to discuss the challenges facing the legal profession.  Countless articles and several books addressing these changes have also been written by law school and business school professors.  And consultants have written far more – probably millions of words on how client demands are changing and what law firms should do about it.

The only thing that’s been missing from the conversation is public statements by the people who run large law firms.  These senior decision makers rarely publish anything on their tactics and strategies, or even attend conferences.  They are the ones who deal with these issues every day, and whose very livelihood depends on coming up with the right answers.  What do they think?

To answer this question, I interviewed chairs, managing partners, executive committee members, CEOs, CFOs and other senior executives at 50 AmLaw 200 firms between June 2013 and January 2014.

Based on those confidential interviews, there can be no question thatclients are demanding more value than ever before.  There is, however, much less agreement about the best way to remain competitive in an increasingly challenging environment. 

There are many signs that as times get tighter, firms are paying more attention to profitability and to its role in compensation:

I think you’re going to see the pressure in law firms increase about how the pie is split. When things were going well, it was easier to take care of the worker bee partners, who are great lawyers. It’s going to be tougher now, because everybody’s strategy is through lateral hiring, and you don’t want the great brief writer. What you want is the person who has five to eight million dollars following him or her, or the group that’s going to bring 20 to 30 million dollars. – Senior executive

As the pressure goes up, the emphasis on total revenue is being replaced by an emphasis on profitable revenue:

Historically, virtually all law firms overweighted revenue. Often two partners who produce five million dollars each are treated equally for compensation, even if one of those partners used six and a half million dollars of resources to produce that revenue, and the other used three and a half million. – Senior executive

We merged a few years ago with a firm that principally focused on total dollars in the door and allowed billing attorneys to set their own rate exceptions without much oversight. We focused on those decision points that reduced realization, and the lack of profitability in a million dollars received that takes two million dollars of effort to generate. Consistently reinforcing these basic concepts through our BI tools and in the compensation system has resulted in significant margin improvement. – Senior executive

There are still far too many lawyers who respond to cost pressure by offering discounts, without understanding the implications:

Most of our partners have been doing things in a particular way for a long time. And the carpet is moving under them, because the market is changing. A lot of times, their reaction to competitive pressure is to just cut rates but not examine the way they deliver the service—not change the way they practice to be able to offer more value for the same price, or reduce the cost to deliver the same value at a lower price. Demand is down. Price pressure is up. So some lawyers will just say, “I don’t want to talk about value based billing arrangement. I’ll just give clients a big discount. They’ll be happy, I’ll be happy….” It’s really remarkable how few attorneys appreciate the economics of discounting. They just don’t get the math. They never had to before. – Senior partner

It is easy to make clients happy by just cutting the cost.Not enough lawyers have really embraced building a better mousetrap that makes clients happy while at the same time maintaining profitability. – Senior executive

Lawyers are proposing a 10% discounted deal or a 20% discounted deal, or a blended rate deal, but then they’re going to literally do everything the same way they’ve always done it. They don’t think about it in terms of profitability yet. So we’ve got a lot of catching up to do. However, at one recent conference I attended, it sounded like there are still a lot of firms that aren’t much ahead of us. – Senior executive

Many firms are working to fill this gap and develop new tools and approaches:

I’ve been with the firm a little over a year, and part of the reason that the firm brought me in was that we needed to look at our operational infrastructure and basically get caught up with the rest of the AmLaw 100. We didn’t have the ability to really measure profitability. We could just barely measure it at the firm level and at the office level, but not at the practice level, not at the client level, or matter level. About three months ago we finally started using a business intelligence platform that allows us to measure those things, and we’re still trying to make that part of the culture. – Senior executive

Life used to be so much easier. The world has changed, and I think in the new environment, to preserve and enhance existing client relationships and to get our nose in the door for new client relationships, we’ve had to be more flexible on pricing, particularly in the alternative fee context. I think we’re in a brave new world here, where we have to learn a lot of new sciences and employ a lot of new techniques. – Senior partner

Some firms are providing lawyers with very detailed reports, like these:

We developed a real-time report on our intranet that is role-based. For example, if you are a client attorney, then your report will show all the clients on which you have any client credit on any matter, and it will show you the components of profitability. The report shows you collected revenue, the costs associated with that revenue, the profit, and the profit margin. Then it shows you the number of hours that are in it, the revenue per hour, the cost per hour. Then it breaks down timing differences on billing and collecting time. And then it shows you the traditional measures of profitability such as realization rates at the various levels. You can click on a client and it drills down to the matter level, so you see it for every matter. And then you can click on every matter and it drops down to all the timekeepers, and you see it across the board for all timekeepers on each matter, all those same metrics. We built the database to go back 10 years. You can do it for time periods of year to date, rolling 12 months, from inception, or for any other time period. – Senior partner

Other firms are concerned that too much data can be counterproductive:

One of the traps you can fall into is giving people a lot of data but not giving them information. Simply revealing realization or matter profitability, just putting it out there, would not really advance the management goals of getting people to focus more on profitability. What you would engender is more questions about “How come she got paid more than I did?” That kind of stuff. – Chair

Merely sending canned reports to partners will not result in many partners changing the way they manage their practices to improve profitability. We need to better develop a process whereby partners with profitability challenges receive the help they need to improve profitability in a manner tailored to the issues presented by that partner’s specific practice. Otherwise they look at the report and say, “This is crap. It’s wrong.” – Senior executive

A pdf of this entire series can be downloaded from Altman Weil Direct, where it originally appeared.

 

September 10, 2014

Case Study: Update on LPM’s benefits at Bilzin Sumberg (Part 1 of 2)

Last December I wrote in this blog that “no law firm on the planet has achieved more LPM behavior change, more quickly or more efficiently” than Miami firm Bilzin Sumberg.  Since then, the firm’s LPM success has been featured by others in books and at conferences.

As explained in my book Legal Project Management, Pricing, and Alternative Fee Arrangements, their breakthroughs were built on a foundation of providing LegalBizDev’s individual coaching program to the majority of their partners (26 out of 51).  That coaching was completed in May 2013.  By then, the LPM had reached critical mass and had developed enough momentum that no more coaching was needed.  The partners themselves and Bilzin’s internal staff took ownership of moving the effort forward.

No one at Bilzin Sumberg would say that their LPM work is done.  As the chair of one AmLaw 200 firm put it in my new book Client Value and Law Firm Profitability:  “It’s an evolving process.  I don’t think there’s ever going to be a point at which you can say: ‘Now I’ve arrived.’”  But Bilzin Sumberg’s continuing experience provides valuable lessons in the best and most cost-effective ways to get started, and what happens next, so we will continue to update their results from time to time in posts like this.

Jon Chassen, a partner in the real estate group at Bilzin Sumberg, was one of the three lawyers in the firm’s original pilot test of LPM coaching at the beginning of 2012 with LegalBizDev principal Steve Barrett, and his success encouraged other partners to give it a try. Jon’s practice focuses on complex real estate deals  and on real estate deals with unusual twists. He often works closely with litigators to solve his clients’ problems, although he is not a litigator himself.

Jon says that a lot of things that he learned in the LegalBizDev coaching were similar to techniques that he had been trying to implement throughout his career.  The coaching crystallized and formalized these methods and techniques.

In Jon’s practice, LPM works best for larger transactions, where at the very outset, you need to design an engagement letter that spells out what you will and will not do for the client. “This way, the engagement letter guides the entire project. It establishes the scope of the project so that everyone in the transaction, outside lawyer and client, knows what role they will play. Then, as the transaction changes in unexpected ways, the engagement letter can be modified to reflect changing expectations.”

“Sometimes it’s relatively easy to anticipate that the scope of work will change and that the project will become larger or smaller than originally anticipated,” Jon says. “Sometimes, the changes are completely unanticipated. Either way, LPM techniques permit the lawyer and client to make changes pretty much on the run. I can now see at a glance who needs to be added to the team, who is dropping off the team, and so on. I see immediately when we’re at a fork in the road, and what the possible choices are at that decision point.”

“LPM also permits me to delegate more effectively. Since all the assignments to attorneys are made well in advance and carefully specified, I don’t need to be the funnel point on everything. If I have a lawyer working on a particular set of documents, I can trust that he or she will complete that assignment.”

“I am a bit technologically challenged in terms of creating charts and work flows. But with the use of LPM techniques and with people in the firm who can help me, I can now create these charts in a very useful manner. The chart will tell me what happens next. Who needs to get involved? LPM helps me come up with answers to those questions.”

Carter McDowell’s practice as a Bilzin Sumberg partner involves land use, zoning, environmental, and other regulatory approvals for major building projects, including regional malls, resort hotels, industrial complexes, professional buildings and marinas. Carter completed LegalBizDev’s three month coaching program in its second wave, after the pilot test.

“At the end of the day,” Carter says, “LPM is mostly about organization.”

“It enables you to step back and look at the process and compartmentalize it. It also enables you to look at it in the largest possible sense, from the very beginning.”

For one major project on South Beach that Carter has worked on, he made a very specific LPM outline of all the aspects of the project and of the budget associated with each aspect.

“We separated the project into several parts,” Carter says, “and we made several updates to each part as we went along. The government, after all, doesn’t take a linear path in granting approvals, so this LPM document has helped us plan each step. Our client used the LPM document on an ongoing basis.”

“In the South Beach project, there have already been seven hearings at which some sort of approval was granted, and two more approvals remain to be granted,” says Carter. “Each hearing is before a separate board. So the LPM document was helpful in documenting and managing the whole process.”

“We actually prepared the LPM document as soon as our client acquired the property. It was that long ago.  The client had asked us to put together a list of the most likely tasks that needed to be accomplished. So we used the LPM document to prepare that and we have updated and expanded it on an ongoing basis.”

“The firm now has sophisticated budget software (ENGAGE). On this project, the financial department staff at the firm established the outline of the document before the current software was available. So in this case, I don’t manipulate the software myself. I do receive reports from the financial people. They have been very helpful and responsive.”

“The document has led us on more than one occasion to go back to the client and to say, Here’ s a hearing that we hadn’t anticipated, so we updated the budget to include that process.”

“The LPM process is working well to enable us to provide our clients with better service at a lower cost.  Some of the procedures that we documented repeat themselves in other projects, so I can reuse this outline for other clients and efficiently tailor it to fit their needs.”

 This post was written by Jim Hassett and Jonathan Groner.

 

July 23, 2014

Business development best practices: Plan Advances

This is one of a series of occasional posts summarizing the most important best practices from my book the Legal Business Development Quick Reference Guide which is now also available in a Kindle edition.

The concept of a sales “advance” comes from Neil Rackham’s book SPIN® Selling, which is based on the most systematic research ever conducted on the sales process, and one of the most widely accepted approaches to sales in other professions. According to Rackham’s website, “More than half the Fortune 500 train their salespeople using sales models derived from his research.”

When Rackham analyzed 35,000 sales calls over 12 years, he found that “In major account sales, fewer than 10% of calls actually result in an Order or a No-sale.” The other 90% of sales calls should be classified as successful only if the salesperson gets an advance: “A specific action taken by either party that moves the sale forward,” such as scheduling another meeting, getting introduced to someone new, or providing a list of references.

When a client says we should talk again, but does not specify a date or time, that is not an advance, because there is no specific action. Rackham calls this a “continuation” and considers the meeting unsuccessful. It does not mean that the sale is dead, but it does mean that you are not making progress.

Great salespeople succeed because they plan every sales call, and strategize how to get the largest possible advance. Rackham’s book The SPIN® Selling Fieldbook: Practical Tools, Methods, Exercises, and Resources provides 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 consistently get advances is often the difference between success and failure. 

In Rainmaking Made Simple, Mark Maraia provided a slightly different definition of an advance, rewritten for lawyers: “An advance has three elements: (1) a commitment (2) to take action (3) in a definite time period.” For complex legal matters, the advance often involves getting a meeting with others who may be involved in making the decision.

Any lawyer who feels that she has enough meetings with potential clients, but that they are not getting far enough, would be well advised to read Maraia’s chapter on how to “Avoid Random Acts of Lunch.” It explains how to prepare for every business development meeting by writing down the needs of the person you will meet, a few questions to ask, and the advance you would like to achieve.

As Rackham summed it up (on p. 171 of the SPIN Selling Fieldbook):

If there was just one piece of advice we could give to people to improve their selling, it would be this: Plan your calls…Do you know exactly what outcome you hope to achieve? […] Plan what to ask, not what to tell.

 

 
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