Legal Business Development

Roundtable report: Harvard Law and current trends in the profession

This month’s meeting of the Boston Legal Business Development Roundtable was the first time we invited an outside speaker.   Seven senior business development professionals from Boston’s largest firms talked with Dr. David Nersessian about his work as Executive Director of the Harvard Law School Program on the Legal Profession, and discussed recent trends as viewed from the academy and from the trenches. 

We began with a discussion of associates:  what, if anything, should law schools do to prepare them to develop new business?  And our answer was... well, there was no simple answer.

Law firms have wildly different ideas about how associates should be involved in developing new business, or even whether they should.  At one extreme, some firms see business development as the single most critical skill in any associate’s long term success.  At the other extreme, some firms honestly don’t want associates to think about business development, or anything else that distracts them from generating more revenue.  If an associate is billing 2400 hours, and encouraged to bill more, when exactly is she supposed to be developing new business?

For firms that do want associates developing business, law schools provide poor preparation.  In fact, some at our meeting said law schools don’t prepare associates to do many of the things that matter in their careers.  As one participant put it: “The irony of even a top tier legal education is how little it teaches about real world business issues, or core sales and marketing tools such as networking, asking probing questions that uncover pain, pipeline development, or building a brand--all skills that are arguably important to succeeding in a leading law firm in today's world.  Add that to the increasingly challenging economic model--higher associate salaries and less willingness among many leading clients to pay for their services--and you have some serious questions about the value early associates bring at all...they're highly compensated but ill equipped to develop or serve a market that doesn't want to pay for their services.”  (Note:  Every Roundtable participant reviewed this draft for accuracy before I posted it.  However, as in earlier blog posts about this Roundtable, I am not naming the individuals I quote, to protect confidentiality, and assure a frank and open discussion.)

“Associates have not been trained to understand their clients’ true needs,” said another, “and we lawyers see the world in narrow terms, with shadows everywhere.”  Clients don’t want to spend money preparing for highly improbable risks or theoretical complications.  They want someone who will take a hard headed, cost-effective approach to the most critical risks, and lawyers are not trained to think this way.  If I controlled the way lawyers are trained,” said one person, “I’d teach them how to put themselves in the shoes of the people who hire them.”  (I thought this comment was absolutely on the money, and it inspired me to buy a psychology text on how to train people to increase empathy.  More about that in a future post.)

There was also a discussion of the lowering of trust between partners and associates.  In the good old days, not that many years ago, an associate who started at a large firm had a reasonably good expectation of either staying there for life and being made an equity partner in seven years or so or moving on to a great position with a client or another firm.  These days it can take ten to twelve years to make partner in many firms, and the percentage of people who actually do so is way down. 

Then again, it is human nature to reminisce about the good old days.  The idea that the law used to be more of a profession and less of a business “probably could be traced back, generation by generation, to English practitioners in 15th century Chancery courts."  But as Miles Davis famously put it, “The world has always been about change.”

And there is no question that this is a time of change.  It’s no wonder that partners pay too little attention to associates.  Partners have their own problems.  What once felt like lifetime tenure can now be challenged by de-equitization, layoffs, or even the dissolution of firms with hundreds of lawyers and a century of history.   In a profession that is more mobile than ever, it is hard for anyone to find the time to build relationships

“The business model of many law firms is not aligned with the needs of clients,” said one participant.  Law firms make money by billing more hours.  A large litigation matter can create a feeding frenzy, in which firms create a money tree by throwing every available lawyer at the problem.  In a global market, clients need to cut back on legal costs, and also get more predictability in fees and general counsel are under enormous pressure to manage external firms.  The low trust that exists between associates and partners also exists between clients and their firms. 

One way or another, law firms must find better ways to understand and meet the needs of their clients.  Some data that will help will soon be released by the Harvard Program whose Corporate Purchasing Product, is the first academic study of “the ways in which S&P 500 legal departments assess, procure, and manage outside legal services.” The Program's research team is analyzing the results of “in-depth, 90+ minute interviews” with 45 general counsel in four key industries with significant legal needs (investment banking, commercial banking and savings, pharmaceutical and medical manufacturing, and petroleum), as well as detailed answers to written surveys completed by the chief legal officers of approximately 25% of the S&P 500 companies. 

When the results are released a few months from now, you will be among the first to know.

Roundtable report on business development best practices, Part 2 of 2

Spending

Several participants at the May meeting of the Boston Legal Business Development Roundtable expressed frustration at the types of things that lawyers want to spend marketing funds on, and the things they don’t. 

Lawyers sometimes use marketing department funds to speak at events which charge fees to speak to an audience that includes potential clients.  These “pay to play” presentations, as they are called, can help develop new business – but only if the right people are in the audience, and only if the lawyer is willing to put in some hard work to follow up after the talk.  One roundtable law firm has developed a process that approves expenses like this only if the conference has a good track record of producing business, and the lawyers have a plan to follow up with audience members. 

Another marketing budget issue arises when lawyers want to spend $20,000 or $30,000 or more to “buy a table” at a charitable or bar event.  Surveys have shown that about 70% of law firms buy tables like this and consider the expense a marketing tactic to make new contacts.  In the eyes of roundtable participants, the marketing results usually don’t justify the expense.  As the day of the event approaches, marketing staff often find themselves scrambling to find associates who are willing to sit in those expensive seats.  And even when the table fills quickly, going to the dinner accomplishes nothing by itself.  Participants must meet the right people, and then follow up, follow up, and follow up some more.

Internal coaching

While expensive events often waste scarce marketing resources, several roundtable participants agreed that spending money on one to one coaching is much easier to link directly to new business.  In the current economic environment, budgets are being squeezed and every expense is being scrutinized.  So it is a very good thing to be able to prove that your actions and your job are directly linked to new business.

One roundtable member works as an internal coach.  Almost all of her time goes into helping lawyers to find and cultivate new clients.  She’s been at her current firm for about a year, and now meets regularly with about 40 lawyers (70% of the partners in her office), and occasionally with the rest.  (To date, coaching has been offered only to partners, but lately some associates have begun talking about their need for this kind of help.) 

She conducts three or four coaching sessions on a typical day, and also attends practice group and other meetings.  As she explained her job to our roundtable group, the other business development experts kept probing for details.  Some sounded a bit envious of the way she is able to spend her time, and the results she has been able to achieve.

The sessions have been generating results.  As the word spread within the firm, more and more lawyers have taken advantage of her services.  She attributes much of her success to the relationships she has been able to form, by helping each lawyer to go at their own pace, and to work on the things they care about.  

She focuses on whatever lawyers ask for, from preparing for client meetings to planning how to follow up after a conference, to leaving more effective voice mail messages.  She also tracks each lawyer’s activities and results in a master spreadsheet.  This puts her in a great position to promote communication.  On a number of occasions, two lawyers who don’t work together have talked about their independent efforts with the same client, and the coach has been able to improve coordination simply by telling them to speak to each other.

Most lawyers will be happy to tell you that they are not experts on bringing in new business, and would welcome some help as long as they are convinced that it will be useful.  So once they get over the initial hurdle of asking for marketing advice, they are happy to ask for more, especially when they begin to see the results.  When new business comes in, it raises confidence, and makes lawyers willing to spend more time on marketing.  It’s a great example of a virtuous cycle; the more they do, the more results they will see.

“Our firm may continue to work with outside consultants to provide coaching like this,” she reported, “but the lawyers appreciate having someone in-house.”  There are many reasons for this, from relationships to knowledge to cost, and a number of large law firms are expanding their internal coaching programs.  There will always be situations where external coaches are preferred, but I, for one, think that internal coaches are the wave of the future.

Roundtable report on best practices, Part 1 of 2

A few months ago, I wrote about the first meeting of the Boston Roundtable on Legal Business Development, a group of senior business development professionals from the largest firms in Boston. 

Our second meeting was held a few weeks ago to discuss "How to sell business development internally." This two part report describes several of the key topics we discussed in our 90 minute meeting, which strayed far from its title into a variety of challenges and best practices.

Publicizing success

One great way to promote the business development function within a law firm is to make sure everyone knows when it works.  At two of the five firms at this Roundtable, one person has taken responsibility to track success stories, and to summarize and distribute the information in a consistent format.

One of the firms publicizes success stories at every partners’ meeting, the other does it online.  When each attorney signs on to their computer in the morning, they see a standard intranet screen with a number of news items about the firm.  One section of the screen is consistently devoted to a business development success story, describing how a new engagement came about, and including a picture of the responsible attorney.

This leads to a friendly competition, and promotes communication between practice groups and offices.  On a surprising number of occasions, attorneys first learn that the firm is working for a particular client from these online articles.

Communication

At large firms, it can be embarrassing to admit how often two teams from different offices of the same firm have submitted proposals for the same legal matter.  In essence, the law firm has bid against itself.  This is not only an enormous waste of resources; it makes the firm look incredibly inefficient and foolish.  There are many ways to avoid such gaffes, including client service teams, systematic processes for responding to RFPs, and proper use of CRMs.

But they all come down to the same thing:  communication.  When lawyers learn what their partners are working on, and for whom, it not only avoids embarrassment, it also opens up new opportunities for cross-selling.

One Roundtable firm holds monthly networking meetings for its attorneys in the late afternoon one Thursday per month, including free beer.  Another has a lunch the first Friday of every month, with their own lawyers speaking about new business, plus an occasional outside speaker.  (Full disclosure:  I recently spoke at one of their lunches about “The top five ways to increase your legal marketing results in a down economy.”)

Hiring sales people

The conversation then somehow shifted to a discussion of hiring sales people from other professions for legal business development.  One participant, who has a sales background, said, “When I started working with law firms, I needed a lobotomy to change my personality and adjust to my role.”

In law firms, lawyers do the selling.  Legal business development is a sales support role, and many go-get-‘em sales people find it hard to adapt.  Several at the meeting agreed that when sales people were hired from other fields some turned into stars, but many more did not work out.  “After they have been at a law firm for about month, they think: ‘What in the world have I done?’”

Within a law firm, business development staff must sometimes “perform lots of extraneous tasks to earn the right to coach.”  And they must also become masters of prioritizing.  Soon after they start, they will “find themselves at 150% capacity” and an important part of the job will be “figuring out who to disappoint” because no human can possibly perform all the tasks that will be requested.  In a firm with 300 partners, you will have at least 300 bosses, and most of them will think that their top priority of the day should be your top priority.

Noise in the system

As if the number of bosses were not enough, there is an astonishing amount of “noise in the system... unimportant junk that you can easily spend all day on.”   One example is the ever increasing number of “best lawyer” directories.  When the topic of directories came up, there were many sighs and pained looks.  Most of the directories are seen as a complete waste of marketing time and money and “absolutely awful.”  Said one participant: “I wish they would just go away.” 

If marketing people agree on this, why do legal directories continue to prosper and multiply?  Because marketing people are not the bosses, lawyers are.  And many love to see themselves in such lists, whether it’s the best lawyers in downtown Detroit, or the best lawyers in the world.  The people who sell these directories tell lawyers that they bring in new business, and the lawyers don’t have the time or experience to know that in most cases the only person who makes money is the one who publishes the directory.

A few directories had fans in our group, including PLC Which Lawyer and the Chambers Guides.  But most did not.  I don’t want to get sued, so I will not list the names of the specific directories that elicited the loudest groans.  But in Part 2 of this Roundtable report, coming soon, I will discuss other marketing expenses that, in the eyes of these experts, are a complete waste of money.

The most important trends in legal business development (Part 5 of 5)

Value.  At one level, everything comes back to price.  But at a more fundamental level, the price that clients think is fair is based on their perception of value.

Lawyers typically believe that the quality of their legal work is a competitive differentiator. Clients do not. At the LMA panel, Mary K. Young put it this way:  “Quality of legal work is a given, but truly responsive client service is hard to find.”  It includes:
• “Solutions that achieve business needs, not legalistic responses
• Meeting or exceeding deadlines, and
• Projecting costs and managing the billing process...”

To win in this tougher environment, law firms must change the very way they do business and, according to panelist Leigh Dance it requires firms to:
• “Prepare to be one step ahead: measure and prove your value proactively
• Improve transparency in budgets and estimates and allocation of resources
• Demonstrate and promote efficiencies
• Offer value added services free”

Wait a minute.  Did she say free? Yes she did.  LMA panelist Norm Rubenstein also talked about the competitive benefits of offering “a host of unbilled products and services dedicated to relationship development, including CLEs, intellectual property, and loaned staff.”

Predicting the future.  These are hard pills for law firms to swallow, since what is free for the client comes straight out of the partners’ profits. Why give away something for free, if you don’t have to?

As Nobel prize winner Niels Bohr famously put it, “It is very hard to predict, especially the future.”  It is human nature to deny that there is a need to change.  The experts may be wrong about the future payoff from free services, but you can be 100% certain that you can increase profits per partner in the present by avoiding free giveaways.

Over the next few years, we’ll see who’s right.  I side with the many observers who think that these critical trends will continue to transform the legal profession:

Past	Future
Clients are loyal	Clients look for the best deal
Social relationships are critical	Value relationships are critical
Process can be hidden	Process must be transparent
Price is a given	Price is constantly re-negotiated
Value is assumed	Value must be proven

What about the present?  Where do law firms stand today on these issues?  There is no simple answer, because we are living in a time of transition.  The emphasis varies from client to client, from firm to firm, and from one practice group to another.

Some lawyers will refuse to accept this argument until it is too late.  Who wants to believe that firms should spend much more on client satisfaction?  And maybe spend much less on season tickets, expensive dinners, and golf junkets? 

So some lawyers will continue to operate as they always have, until the day that they lose the large clients who have been paying the rent.  Then there will be weeping, gnashing of teeth, and calls to the business development department.  But it will be too late.  As Steve Barrett, the Chief Marketing Officer at Drinker Biddle put it, “Once you lose the trusted advisor role, it can take five years to get back in.”

This series of posts is an expanded version of an article I published in the March 2008 issue of Marketing the Law Firm, titled "Legal Sales & Service: The Most Important Trend in Legal Business Development."  To download a .pdf file that includes all five parts of this series, go to the Free Resources section of our web page.

The most important trends in legal business development (Part 4 of 5)

Process.  Very simply, general counsel are being held accountable by their management, and their management is being held accountable by shareholders.  In this type of environment, it is professional suicide to award business to people simply because they take you to Giants games.

In the 2007 LMA panel, Norm Rubenstein talked about the pressures inside counsel are feeling for both accountability and transparency.  Among other things, he recommended that law firms help inside counsel “measure and communicate the value that the inhouse legal department provides the rest of the company.”

“[Another] thing that’s different these days,” according to Iris Jones, Chief Business Development and Marketing Officer at Chadbourne & Parke, “is that clients demand to be much more involved in decision making. There was a time when clients expected lawyers to handle matters for them, and were not as involved in the details. The client’s role was simply to pay the bills. Now clients are looking for efficiency, cost savings, and value added.”

Price.  Sooner or later, this discussion must turn to price, since that is so often at the heart of the matter.  In a recent survey of large law firms and their clients, Inside Counsel magazine reported that “Most of the friction between law firms and their in-house clients can be traced back to costs.” Just 7% of lawyers think law firms make too much money, but 43% of clients do. 74% of lawyers say that law firms are actively seeking out ways to reduce legal costs. They’re not doing very well, because only 11% of their clients agree. Worst of all, 42% of clients (and 6% of lawyers) agree with the statement “most law firms pad their bills.”

In its 2008 Client Advisory, Hildebrandt notes that clients are increasingly pushing back on firm rates and billing practices, as seen in “the widespread use of RFPs for legal services, the growing client perception that some types of legal work previously thought to be highly complex (like project finance) have now become routine and should be priced accordingly, the involvement of corporate procurement departments in outside counsel selection, client insistence on multiple year rates or other kinds of rate freezes or discounts, and the ongoing patterns of ‘convergence.’ (page 6).”

What should law firms do to control costs and meet client needs?  One thing is to manage budgets to assure that there are no surprises.  In the 2007 LMA panel, Mary K. Young noted that in-house counsel are increasingly expecting:
• “Projects to be assigned in segments
• Bills that match the projected segments
• Early consultation when circumstances warrant a change from a forecast.”
Then there are the matters of rates, and of hourly billing, which could easily lead to an article many times longer than this one.  In this context, we will limit the discussion to one quote from the DuPont legal model web page:  “DuPont is interested in results, not effort. Our long-range goal is to move away from hourly billing where feasible. We believe hourly billing is a disincentive to efficient service, and we welcome opportunities to structure fee agreements that provide for incentives and that reward results rather than time devoted to a matter.”

To date, there’s been a lot more talk than action along these lines.  However, the Hildebrandt 2008 Client Advisory (p. 17) does note that “project pricing...has become a growing trend in Europe and Asia even for complex transactional matters such as M&A work.”  The billable hour isn’t going away any time soon, but any firm that can offer alternatives is likely to benefit in the long run.

Next week, this series concludes with a discussion of value, and the future of the legal profession.

This series of posts is an expanded version of an article I published in the March 2008 issue of Marketing the Law Firm, titled "Legal Sales & Service: The Most Important Trend in Legal Business Development."  To download a .pdf file that includes all five parts of this series, go to the Free Resources section of our web page.

The most important trends in legal business development (Part 3 of 5)

Loyalty.  For lawyers, the reduced importance of client loyalty first became apparent with the rise of the DuPont legal model. In 1992, DuPont established a “convergence process” to increase efficiency, reduce the number of law firms they used, and to work only with firms who treated DuPont as a strategic partner.  Within a few years, DuPont had reduced the number of law firms it used from 350 to 42.  To put it another way, DuPont stopped working with 308 firms.  If loyalty counted for anything, it wasn't much.

By 2006, Business Week (9/18/06, p. 42) estimated that this approach had saved DuPont “$100 million...through automation, outsourcing, and reducing the number of outside law firms it uses.” 

DuPont has publicized their success, and even set up a web page with everything other companies need to get started on this process, including a 5 page downloadable RFP template (at www.dupontlegalmodel.com).   Variations on the DuPont model have spread widely, and now RFPs and competitive bids have become standard operating procedure at large law firms.

Some competitions have been even tougher than DuPont’s.  A few years ago, when Tyco applied the DuPont model, they started out with 167 law firms handling product liability cases.  By the time they were done, they were using just one firm:  Shook Hardy Bacon.  And we know loyalty was not a factor in the decision, because they had never worked with the winner before.  They won by proposing an approach that Tyco judged as the best price and the best value.   As Edward Schechter, Chief Marketing Officer at Duane Morris, summed it up in a 2005 panel at the New England Legal Marketing Association, very simply “The DuPont model is changing the profession.”

Relationships.  Even in an age of convergence and RFPs, some rainmakers swear by the personal relationships they have been cultivating for many years at baseball, football, basketball and hockey games, not to mention all those steakhouse dinners.  There is no doubt that in the past, social relationships have made a big difference in keeping clients happy and in getting new business.  But there is also no doubt that in the future, the importance of social relationships is headed down. 

In a panel at the 2007 national meeting of the Legal Marketing Association, Mary K. Young and Norm Rubenstein (of the Zeughauser Group), and Leigh Dance (ELD Project Marketing International) described “Ten client buying trends and how to leverage them into wins for your firm.”  Many were related to value and cost. 

In my view, the most interesting trend they discussed was the growing influence of procurement professionals.  Over the last ten years, procurement professionals have substantially increased their influence at large corporations, by becoming extraordinarily skilled at reducing costs throughout the supply chain. The good news for lawyers is that they were among the last to get squeezed. The bad news is that the squeezing has just begun.

“Procurement managers tend to look at legal service purchase like buying widgets,” said Dance. And the way to get the best price on widgets is to force suppliers to compete more directly by issuing RFPs.  Anyone who has worked in legal marketing for the last few years will attest to the radical growth in the number of RFPs, and in their importance.

Are social relationships still relevant to new business?  Of course.  They always will be.  It’s human nature to want to work with people you know and trust, especially in a sensitive and critical profession like the law.  The smaller the client, the more important these social relationships are likely to be.  But every time a client professionalizes the buying process, the value of social relationships goes down just a little bit more. 

Next week, I will have more to say about process and price.

This series of posts is an expanded version of an article I published in the March 2008 issue of Marketing the Law Firm, titled "Legal Sales & Service: The Most Important Trend in Legal Business Development."  To download a .pdf file that includes all five parts of this series, go to the Free Resources section of our web page.

The most important trends in legal business development (Part 2 of 5)

Last week, I introduced the idea that trends in five areas—loyalty, relationships, process, price, and value—are transforming the legal profession.   

The same trends are affecting many other businesses due to the pressures of an increasingly competitive global economy.  Indeed, in the last twenty years most other businesses have already felt these trends far more than lawyers.

Last summer, a reader of a Business Week column (Aug 13, 2007, p 92) by Jack and Suzy Welch (of GE fame) asked, “Is customer loyalty dead?”  Their answer: “Not dead, but different.  Time was you could ‘earn’ a customer’s loyalty with tickets to a big game... [and] a few nice dinners.”  Those days are over, according to the Welches.  In “today’s fierce economy” there is a greater emphasis on price and on a “two-way approach” in which sellers are “fervently committed...to making your customers win big in the long haul, rather than just meeting their immediate demands.”

Sales gurus have been preaching the benefits of these types of client partnerships for more than 20 years, starting with two classic books:  Robert Miller and Stephen Heiman’s Strategic Selling (1985), and Neil Rackham’s SPIN Selling (1988) which summarizes his twelve years of systematic research on over 35,000 sales calls.  (For details, see my post “What lawyers need to know about SPIN Selling.”)

In 1994, when Larry Wilson published another book along these lines (Stop Selling, Start Partnering), he compared the changes in the business climate to “churning white water,” which is harder and harder to navigate due to globalization and the growing client perception that everything is a commodity. He began that book by arguing that all companies need to think differently about service and create “powerful relationships with your best clients (p. 1).” Selling is not about pushing services onto clients, Wilson said, but about “trying to understand and help clients solve their problems.”  Value is in the eye of the beholder, so the only way to provide it is to genuinely understand what clients want and need, by asking good questions, and acting on their answers.

And that challenge just keeps getting harder.  Last year, Tom Snyder and Kevin Kearns wrote in Escaping the Price Driven Sale that “Brand allegiance is virtually nonexistent in today’s hypercompetitive market.”  They argue that to succeed in this environment, sellers must learn how to have a positive impact on one or more of five crucial financial measures: revenue, cost of sales, margin, expense, and/or profit.  In essence, the seller must learn so much about the buyer’s industry that he can demonstrate problems, solutions, and opportunities before the buyer becomes aware of them.  There’s nothing easy about it, but this approach will allow sellers to resist commoditization and charge a premium price.  Indeed, this is the only way, as the title of the book puts it, to “escape the price driven sale.”

Are the harsh trends which have been transforming other businesses for the last 20 years really coming to law firms?  Next week, I’ll begin to review the evidence for the first two areas:  loyalty and relationships.

This series of posts is an expanded version of an article I published in the March 2008 issue of Marketing the Law Firm, titled "Legal Sales & Service: The Most Important Trend in Legal Business Development."  To download a .pdf file that includes all five parts of this series, go to the Free Resources section of our web page.

The most important trends in legal business development (Part 1 of 5)

A few weeks ago, I had lunch with the general counsel at a Fortune 500 firm, and we got talking about some of his best, and worst, experiences with law firms.  Maybe it was just the questions I asked, but he seemed to have a lot more experiences in the worst category. 

His central message was that “Social events and personal relationships just don’t matter like they used to.  These days, if a firm wants a steady flow of new business, they must deliver value.” 

In a transparent world where every GC is held accountable for results, and you’re only as good as what you accomplished last week, golf outings and tickets to Yankees games just don’t have the power they used to.  This GC’s best relationships were with firms that delivered value, that were open and honest about anticipating cost, and that sought his advice on tactics, so that he could choose the best course based not just on legal strategy but also on their financial implications.

For each new matter, his company selects a law firm based on their expertise, their history working together, the amount at risk, and their billing rates.  Several times, he returned to the idea that there are a number of firms that do excellent work, but their prices are too high for routine work.  So he relies on the high priced firms strictly for cases with a great deal at risk, and “bet the company” matters.

I was not surprised that his stories kept coming back to money, and discussions of the potential return on investment.  But I was surprised at how many firms he had worked with who did not seem to understand this very fundamental point.  They just wanted to maximize revenue in the short term, and did not consider how much better they could do in the long term if they paid more attention to giving clients what they want and need.

Some of the firms he talked about always wanted to win the case.  They couldn’t care less how much it cost, as long as they won. “It’s easy to get carried up in the moment with the need to win,” he said.  “But sometimes we’d be a lot better off if we settled sooner.” 

Other firms have a reputation for producing a blizzard of paperwork, to overwhelm the other side with the cost and difficulty of pursuing a case.  This can be a very effective strategy if you just want to win, but in many cases “it works better for the law firm than for the client, because we have to pay for them to produce all that paper.”

A few firms are notorious for spending weeks, months or years preparing for a case, and then routinely “suggesting settlements on the courtroom steps.”  In many cases, it seems they could have settled much sooner and avoided much of the preparation cost. 

This GC’s comments reflect some significant changes, which are still developing momentum.   Over the next few weeks, I will write about trends in five overlapping areas that are changing the way lawyers do business:  loyalty, relationships, process, price, and value.

This series of posts is an expanded version of an article I published in the March 2008 issue of Marketing the Law Firm, titled "Legal Sales & Service: The Most Important Trend in Legal Business Development."  To download a .pdf file that includes all five parts of this series, go to the Free Resources section of our web page.

For managing partners only

Do you think managing partners will use the internet to seek advice from their peers?  Managing Partner magazine is about to find out, through their new Leadership Advisory Board, announced today Download leadership_advisory_board.pdf .  If you are a managing partner and would like input from leaders at Alston & Bird, Baker & Daniels, Dickstein Shapiro, McGuire Woods, Nixon Peabody and other firms, contact Patrick McKenna.  (Full disclosure:  I have nothing to disclose here, and no relation to this program.  I just think it’s interesting and valuable.)

Have lawyers been seduced by success?

You may be so busy billing hours that you won't have time to read Robert Herbold's new book Seduced by Success. That's too bad, because it's probably a sign that you need to spend fewer hours billing and more hours planning for the future.

If you like money, it's a great time to be a lawyer. In Citigroup's Law Watch survey of "153 US law firms broadly representative of the industry," law firm revenue has gone up 9.8% per year since 2001. But as Bill Gates put it: "Success is a lousy teacher. It seduces smart people into thinking they can't lose." We know lawyers are smart people. Do some think they can't lose?

Herbold's book starts with the history of General Motors, the leading auto manufacturer in the world for nearly half a century. GM was the first company to hit $1 billion in sales, and they did it back in the 1950s, when a billion dollars was a lot of money. As late as the 1970s, nearly half the cars sold in the US were made by GM. Then the world changed and GM didn't. High gas prices, foreign imports, escalating labor costs, globalization and other factors started them sliding downhill through a series of losses. These days, GM's share of the US market is closer to 20% than to 50%, and its future is uncertain.

The book does not predict whether GM will bounce back or go the way of Britney Spears. But it does explain why GM and other large companies have declined in terms of "three destructive behaviors that are created and nurtured by success."

The first destructive behavior is "lack of urgency." As a business development consultant, I spend a lot of time talking to lawyers about the threats from other firms. Some law firms are aggressively increasing efforts to satsify current clients and find new ones. They are taking business away from the conservative firms that are acting as if the world has not changed since Nixon left office. But in the firms that most need to deal with competitors, the reaction is often exactly what Herbold described: lack of urgency.

I am reminded of a conversation a few months ago with the Chief Marketing Officer at an Am Law 100 firm that is currently flying high. She was complaining about her lawyers' lack of support for marketing. They simply would not take the time to do some very basic things to protect their position, even with the one big client who accounted for a sizeable percentage of their revenue. She kept telling lawyers that if they ever lost that client, the whole house of cards could start to tumble. But most lawyers were too busy doing today's work to spend time planning for tomorrow. They had a lack of urgency.

The other two destructive behaviors Herbold describes are are "a defensive attitude toward any kind of new thinking" and an "entitlement mentality." Do those sound familiar?

Most of Herbold's book describes the details of nine "success-induced traps" and how to avoid them. The first trap is "Neglect: Sticking with yesterday's business model." As Herbold says: "You believe that what enabled you to become successful will enable you to be successful forever." Anyone who believes that will be wrong. The only question is when.

As jazz great Miles Davis said in his autobiography: "The world has always been about change." And each time the economy shifts, there are winners and losers. The winners are the ones who were shrewd enough to plan for the future, and lucky enough to be right.

When will the law firm business model change? Many experts believe the answer is quite soon.

According to the 2007 Hildebrandt/ Citigroup Client Advisory (p. 11), a number of factors "clearly suggest that many aspects of the traditional model for structuring and operating law firms may be changing." These factors include more systematic approaches to client relationships and business development, two tier partnerships, the use of contract lawyers and other types of outsourcing, and a new emphasis on "people issues" to retain the most talented lawyers. Put them all together, and as Business Week (9/18/06, p. 43) said last fall, "Few industries seem more ripe for radical restructuring than legal services."

Admittedly, Herbold's book does not discuss how his ideas apply to law firms, and some of his nine factors don't seem particularly relevant to lawyers. If you buy the book, you may tire, as I did, when the details mount in his corporate histories of Microsoft, Fidelity, Sony, DEC, Kodak, Nissan, IBM, Southwest Airlines, and many others.

But I believe that every lawyer should invest in this book and review Herbold's fundamental argument. If you're one of the Am Law 100 partners that earned an average bonus last year ($1.2 million, according to The American Lawyer, May 2007), the book's $27.95 price shouldn't bother you. The critical concepts can be skimmed in less than an hour. Is it worth an hour to consider how to protect your future?