Legal Business Development

How to improve communication on a small legal team

This guest post was written by Brent Timmons, an associate at Brazeau Seller who completed our Certified Legal Project Manager™ program last week.

The team I working on now has two lawyers, two secretaries and a corporate clerk.  It sounds simple to say, but the problem was that before we started focusing on legal project management, we did not consider ourselves a team.  We were a collection of individuals doing the jobs assigned to us.

But, as Eric Verzuh put it in the assigned reading in his Fast Forward MBA in Project Management we needed to understand that the “team has a whole product or service to produce rather than individual components.”  Unless everything fits together -- documents, reports and deliverables –activities may lead to little to no value for the client. 

Simply put, each team member must see each individual task as part of a whole.  This will create more efficiency and value for the client.

Doing the readings for the program helped me to fully recognize my culpability in this situation.  The readings provided some good advice to be a better leader, specifically:

• Actually spend time building the team


• Clearly and consistently set out the goals and scope of the project


• Start regular and short team meetings to talk about goals and responsibilities.

This reading led me to develop this internal team communication plan, which we have started to use and adapt:

Who	With whom	What	When and How
Responsible Lawyer	Client Lead Lawyer	Routine Status Updates Material Developments on events and negotiations Schedule Updates	Weekly Status Email Copy Lead Lawyer on material correspondence Save correspondence to electronic files
Responsible Lawyer	Entire Team	Weekly Team Meetings Review what has been done and what needs to be done that week Clarify responsibility Post Closing Review meeting	In Person
Junior Lawyer	Responsible Lawyer	Work in progress updates New issues regarding documents and due diligence	Daily verbal report
Law Clerks	Responsible Lawyer and Junior Lawyer	Due Diligence Results Document Drafts	Search reports Draft closing documents
Assistants	Responsible Lawyer	Administrative Oversight Book meetings and meeting rooms	Ensure proper ID Update on budget status

The readings also led me to develop the following client communication planfor the responsible lawyer in a simple purchase transaction:

• Initial communication calls and meetings leading up to the retainer letter;


• During negotiation phase, copy client on key communication;


• Report on delivery of final agreement (phone and email);


• Weekly email reports on status (budget, accomplished, needs to be accomplished);


• Due Diligence Report after completion (email, follow up by phone);


• Confirm in writing waiver of conditions (phone and email);


• Outline closing procedure at least one week in advance of execution of documents, flow of funds, etc.


• Meet with client for closing; and


• Report letter and account within 2 weeks of closing.

The procedures we are developing are continuing to evolve, but some very simple changes have already made a difference in the way we operate, and allowed us to provide greater value to our clients at a lower cost.

 

Twenty ways to use Outlook in legal project management

By Steve Barrett, LegalBizDev Principal

About two years ago, I wrote a piece for this blog entitled “How Should Law Firms ‘Gear Up’ to Manage Projects Better? – A 50,000-foot View” which argued that law firms could derive significant benefits simply by better using the software they already owned.  Since then, in teaching a number of workshops and coaching many individual lawyers, I’ve often heard of the difficulty in creating a master schedule for use with internal teams and clients.  My answer has always been, “You already have the software you need,” in the form of Outlook.  

Most law firms use Microsoft Office as their "wheelhouse" technology for creating and editing documents and use Outlook for e-mail, calendars, and meeting scheduling.  Most lawyers are familiar with basic Outlook features like group e-mails for addressing committees, practice groups, and others.  Likewise, many firms use Outlook calendar features for conference room scheduling, arranging group meetings, or sharing firm management calendars.  Some lawyers also keep dual calendars, one for their business lives and another for their personal lives.  While these features are useful, they only scratch the surface of Outlook’s ability to support the collaborative functions so important to legal project management (LPM).

For example, you can create and share calendars, both with in-house teams (e.g. the “XYZ Corp. Litigation Team” calendar) and with outside organizations (e.g. clients, consultants, and experts).  

One way I have demonstrated this feature to clients who may be sports fans starts by asking them to name their favorite professional team.  For example, when I worked recently with a Miami Heat fan, I asked him to go to the team's web page, open the current schedule, and click on the provided icon to download that schedule to his PC.  (All NBA, NFL, MLB and NHL teams have this calendar download feature.)

He opened the team’s schedule in Outlook on his PC, viewed it as a separate calendar screen, and tiled it next to his Outlook work calendar.  Then we used Outlook’s calendar overlay feature, which merged the sports schedule with his main calendar and displayed them as a single calendar.  The team’s game dates automatically showed up in a different color.  

Once that was done – “presto!” – the lawyer had just learned what it would take to create and share a matter/project calendar with his own internal and external teams.  Sharing can either be done by e-mail attachment or use of shared settings in Outlook for internal teams, just as many already share their calendars with their assistants.

That got us over to assigning tasks and scheduling meetings using Outlook, both processes that closely resemble inviting people to conference calls or conference room meetings, which he already knew how to do.  The whole discussion took about five minutes.

Below is a list of 20 Outlook features our clients have found useful for managing legal matters and streamlining collaboration with internal and external team members, a critical function within LPM.

Calendar features:

• Can create multiple calendars, both shared and unshared
• Can be shared both within the organization (via Exchange server) or outside the organization (via e-mail or Outlook sharing to public or secured websites like icalshare.com or MicrosoftOffice.com)
• Can import any calendars from others in either html or the common .ics file format (e.g. either a private project calendar, or a public calendar, such as a junior soccer league schedule or NFL team schedule)
• Multiple calendars can be easily viewed as tiled frames (vertical or horizontal), separate screens, or in overlay mode, in which two or more calendars are combined and appointments and events appear in different colors on one compiled calendar screen
• Room Finder can be used to schedule conference rooms and, depending on your firm’s configuration, ancillary services such as catering, A/V, etc.
• Planning calendars can be set up and shared for long-term projects, such as annual events, budget planning, or software roll-outs, as well as more transitory projects, such as a major litigation case, regulatory investigation, securities offering, etc.
• Can be used to schedule one-time or recurring meetings for individuals or teams, to send invitations, enclosures (such as agendas), reserve and manage conference rooms, and track group RSVPs
• When distributing and sharing calendars, senders can control permission levels for recipients to view-only, revise, re-circulate, etc.
• Items can be moved or copied between multiple calendars in tiled views simply by dragging and dropping 

Assigning tasks and managing team members is another function in which Outlook can play a critical role, with little or no advanced coursework necessary.  

Tasks and to-do features:

• Can enter and update personal tasks, set deadlines, reminders, and flags, enter time allocation/actual info, and certain mileage and expense categories
• Can delegate/assign tasks to others, along with setting deadlines and priority levels, reminders, and flags, and can enter time allocation/actual info for billable tasks, plus certain mileage and expense categories, and completion check boxes
• When assigning tasks to others, users can retain copies of the tasks on their own calendars in order to set reminders for assignees’ status check-ins
• Notes and documents can be attached to any task
• Daily, weekly and other task lists can readily be set up
• Task lists can be shown in the bottom pane of a calendar view

E-mail features:

• Can establish custom distribution lists for internal distribution (using firm’s global address list), or external (using outside e-mail addresses) or combined usage
• Can establish e-mail group addresses (e.g. the “Jones Company Acquisition” group), to simplify group addressing for communications, meeting scheduling, and task assignments
• Can use “group/case” folders to collect e-mail messages in one location (e.g. “Jones Co. Acq.” e-mail folder)
• Users can post their status for others to see (e.g. busy, available, away, not logged in), to ensure that messages or tasks are sent only to those in a position to respond or undertake the task
• Can set up rules such that any e-mails sent to or received from a particular individual or group can be copied or directed to a specific e-mail folder

Permission and proxy features:

• Users can grant permission for others to view your calendar and schedule and commit you to appointments.  This is typically assigned to one’s assistant or a case paralegal, to ease administration and access.
• “Level of calendar detail” can vary as well, from full details to busy/free only, with no detailed information
• Users can mark personal appointments “private,” so that only their non-availability is visible
• In order for full exploitation of the calendar features within a firm, all users must allow their calendars to be seen over the Exchange server.  Some firms have found it frustrating to commit to using Outlook calendaring for scheduling meetings when even a few key people do not let their calendars be viewed by their colleagues.

Note:  For additional features and more details, see Microsoft Outlook 2010’s help function, guides on the Microsoft web site, or in one of the many books on the topic, such as “Microsoft Outlook 2010 Step by Step” by Joan Lambert and Joyce Cox, which includes an online edition, templates and practice files, and exercises.  The same authors have also published similar guides for Outlook 2003 and Outlook 2007.

 

How to improve legal team meetings (Part 2 of 2)

During the meeting - continued from Part 1

• Whenever possible, start exactly on time

Starting at the announced time would be a novelty at most law firms.  One lawyer I know swears that he was taught in law school to show up ten minutes late for every meeting, because nothing important would ever start on time.

But if you always start and end on time, after a few meetings, the vast majority of lawyers will get with the program.

(A digression:  Perhaps I should admit here that I have been accused of being a time fanatic.  When coaches are certified at LegalBizDev, they are given a digital timer/clock to help ensure that all sessions start and end on schedule.)   

The reason that this piece of advice starts with “whenever possible” is that the client is always right.  If the managing partner or the practice group leader or the visiting general counsel wants to start ten minutes late, do that.

• Follow the agenda.

  If there are 3 topics to be covered, finish #1 before you begin #2.  If the conversation drifts, refer to the agenda and get back on track.

  Drive topics to resolution.  Summarize comments and bring the group to a decision or ask them to confirm that what you’ve said is a fair summary.

• Never end late.

  No matter what time you start, the meeting should end at the announced time.  People have other commitments, and meeting leaders should honor them. Unless of course the boss disagrees.

  If a topic turns out to require more discussion than you expected, table it for an outside meeting or propose a quick action plan on how to resolve it.

  You need a system in place to deal with people who will inevitably be inclined to go beyond any time limit.  The meeting leader must prevent that.

• End early if you can.

  Once you have met the objective of the meeting, declare the end.  Make sure everyone knows that you ended early, the meeting met its objective, and you put a few extra minutes back into everyone’s lives.

• If your meeting objective includes building team efficiency and/or morale, make an effort to get everyone involved
  • Ask team members to report project status.
  
  
  • Ask the team for feedback on discussion points.
  
  
  • Develop buy-in on the issues and solutions.
  
  
  • If one or two people are doing most of the talking, make a point of including others and asking for their input.
  
  
  • Observe the body language of attendees. If necessary, announce a quick break, bring the conversation back to the topic, or make sure someone new speaks.
  
  
• Handle problems promptly but diplomatically:
  • “It looks like we've drifted a bit, can we come back and focus on the agenda item.”
  
  
  • Acknowledge the person's experience with a subject but suggest the issue be raised at a later time.
  
  
  • Say: “We’ve heard from X, does anyone have a different view?”
  
  
  • If the conversation is important, but time is running out, assign a smaller group to either gather more information or move the process along once the meeting is over. Find the owner of the problem and assign it to that person.
  
  
  • If two people are dominating the conversation, send them off to figure it out.


• Record all decisions.

  Keep simple meeting minutes, including all conclusions reached, who is assigned to do what and by when, and any items tabled for later.

  If it would help, assign someone else as the note-taker who will be responsible for keeping the meeting minutes.

  If a followup meeting is needed, ideally the minutes should include the time and place for next meeting and an initial agenda including any outstanding or tabled items.

 

After the meeting

• As soon as possible after the meeting, distribute a written report of what was decided, and any action items.  Like the agenda, this can be a one sentence email or a fancy report, but it must be done.


• Monitor follow-up on action items.


• Give recognition and appreciation to excellent and timely progress.


• If any high-level problems came up, discuss them with decision makers.


• Consider evaluating this meeting to help you improve the next one. What worked and what didn’t? Most important, did the meeting achieve your objective? 

 

 

How to improve legal team meetings (Part 1 of 2)

I don’t think there is a single lawyer on the planet who has not spent many hours sitting through time consuming, wasteful and boring meetings.  

But these days legal clients are demanding greater efficiency, and firms are looking for ways to save time and money while continuing to deliver the same level of quality that their clients have come to expect.  One way that many lawyers can quickly increase efficiency is to improve the way they conduct team meetings.

Before you can hold an effective meeting, you must define a clear and achievable objective.

In most cases, the faster you meet that objective and get back to your office, the better the meeting.  Of course if part of the objective is to build relationships and understanding within a team, the need for speed goes down, and the need to give everyone a chance to contribute to the discussion goes up.  This is especially true if the meeting includes clients.

Inefficient meetings are not just a law firm problem, they are a human problem.   We live in a world filled with books, articles and web posts on how to run better meetings.  But most people don’t have time to read them, because they have too many meetings.

The bullet points below summarize the points that are most likely to help improve legal meetings.  You may want to keep them handy, because different points will apply to different meetings.  

Before the meeting

• Clearly define the meeting objectives.  Exactly what would have to happen for the meeting to be a success?  

  The objectives may or may not be explicitly stated in the agenda, but you need to know what they are before you make any other decisions.

• If you are aiming for a clearly defined work product, keep the meeting as small as possible.


• If you need to build team relationships or consensus, invite everyone who needs to feel involved.


• Assess how long it will take to realistically complete the most important items on the agenda with the people you have invited, and keep the meeting as short as possible.


• Distribute an agenda in advance.  This can be a one sentence email or an impressively formatted document based on one of the many templates in Word help and elsewhere on the web.


• The agenda should include:
  • The start and end time
  • The location
  • Participants
  • The topics or decisions to be made or discussed, in order of importance

During the meeting

• Be crystal clear about who is running the meeting.

  That’s probably you. But maybe it should be someone else if they have skills that will enable them to better meet a particular objective.

  If the meeting goal is simply to communicate decisions that have been made, anyone in authority can do it.

  But if a meeting requires joint decision-making or consensus building, you will need a facilitator with good communication skills who can keep the discussion on track without bruising feelings.  For meetings of this sort, it may be useful to start by reviewing the process and ground rules about how decisions will be made, and how you will deal with items that cannot be resolved in this meeting.

  In any case, the meeting leader must be a good role model:  on time, organized, fully engaged, and focused on the topic and on what people are saying.

  
  Next week, we will conclude this post with a discussion of how to run the meeting, and how to follow up after it ends.

Business development tip of the month: Assess the importance of relationships vs. value

At one time, legal marketing was all about building relationships.  These days, there’s a lot more emphasis on “what have you done for me lately.”  A general counsel may still prefer to emphasize relationships and work with people she’s known and trusted since law school.  But she may not have that choice when management pressures her to obtain more value at a lower cost.  In today’s evolving legal marketplace, every rainmaker must pay more attention than ever to the differences between clients, understand exactly what each individual needs today, and make sure they get it.

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

 

Legal pricing (Part 8 of 8): Predicting the future

In the first seven posts in this series, we have seen that legal pricing is changing as a result of the increasing use of AFAs, and client pressures for efficiency on both hourly and non-hourly matters.

So what does this mean for the future? Nobody knows.  

As Toby Brown recently wrote in his blog entitled Staying Relevant: 

We have reached a point in human history where predicting the future beyond a few years is quite a challenge. A perfect example is that of Facebook, which grew from zero to 100 million users in less than two years. What things will look like in five to ten years is anyone’s guess. So the best we can do now is keep a vigilant eye on the storm and stay prepared to constantly alter course.

While we don’t know exactly how things will turn out, it does seem safe to predict that changes in pricing will be driven by several key trends:

1. Alternative fees will continue to increase. According to Altman Weil’s 2011 Chief Legal Officer survey, 14% of fees are currently non-hourly.  This percentage has gradually been increasing.  Conservative clients often require a long time to take the leap to try non-hourly fees, but this particular change is a one way street.  Tucker Ellis was one of the first mid-sized firms to derive more than half of its revenue from non-hourly fees, and managing partner Joe Morford, has noted that “Once we started working for a client with AFAs, not a single one has ever wanted to go back to hourly.”
 
2. Lawyers will develop new metrics that measure value. Sophisticated clients want to measure what they are paying for, and a sophisticated law firm should be able to measure its own results. Part 6 of this series gave an extended example of the challenge of one past attempt to define value metrics.  For an interesting discussion of why there is resistance to this idea, see Paul Lippe’s blog post entitled What If Someone Could Measure What Lawyers Do?, and the comments written by various lawyers at the end of that piece.   
 
3. Leading firms and clients will place increasing emphasis on aligning their interests. One key to success for AFAs is creating a genuine sense of partnership by aligning interests. As one AmLaw 100 decision maker put it in our LegalBizDev Survey of Alternate Fees (page 47):

   The firm and the client must have a very transparent conversation about the process. [It is important to discuss] how [the fee structure] will be mapped out and who will do what. [It is vital] to look at the delivery of services holistically, and to look at how the team in-house and the team outside can work together to deliver value for your shared client. That’s a real challenge, because it is tricky to transition from a negotiation process to a collaborative process. If you can get into a collaborative discussion, you can get good results that work for both organizations.

   This requires some sharing of risk.  Another participant in our survey put it this way (page 48):

   GCs should be thinking about what kind of risks they are willing to take early on in the life of a particular matter.  Right now , they want firms to take all the risk and they are reluctant to take risks themselves.

 
4. The distinction between bet the company, important and commodity work will be reflected in different pricing strategies.  In The Essential Little Book of Great Lawyering, Jim Durham estimated that about 5% of legal work fell into the “bet the company” category, 65-70% was “important” and 25-30% commodity work.  There is every indication that the percentage of commodity work is going up, and the other two categories are shrinking. To be price competitive, it will be crucial to keep up with the process improvement and outsourcing alternatives for commodity work.  As Toby Brown noted in his blog series Staying Relevant:

   An emerging and compelling reason for lawyers to make different business decisions is coming from new breeds of competitors. One example is the Legal Process Outsourcer (LPO) market. These companies started as off-shore (typically India) based providers for first document review in litigation. They hire English speaking, American law trained candidates in other, lower wage countries. These much lower-costing, well-enough trained lawyers were appropriately suited for this level of work. So well-matched to the tasks, that in very short order, these document reviewers became viable competitors. Most lawyers glossed over this market encroachment, seeing it as commodity level work no longer worthy of their skills. In reality, this meant millions in fees were no longer going to US lawyers.

 
5. Law firm profitability will be squeezed harder than ever before.  According to the 2012 Client Advisory from the Hildebrandt Institute and Citi Private Bank (p. 10):

   Many firms will need to work harder to maintain profitability at levels that meet the expectations of their partners.  Indeed, we expect that 2012 may prove to be even more challenging than 2009 in terms of profitability across the industry, not because revenues will be as depressed in 2009 but rather because of the combination of slow revenue growth and rising expenses.

 
6. Hourly billing and high partner profits will be questioned more and more in the future.  Clients generally do not live in an hourly billing world . They know their actual costs of doing business and plan to make a profit above those costs.  They have pricing risks and plans to manage those risks.  Clients often wonder why their law firms cannot do the same. Many corporate counsel started their careers as associates at large firms, and they know all too well how the profit model works for firms. Many are asking why partner compensation is so high. As Susan Hackett put it:

   …surveys—such as these from Corporate Counsel and Empsight—are coming out. They usually confirm that the average in-house counsel who hires outside firms makes only slightly north of what a bonused first- or second-year associate in a big law firm makes. There are a few hundred large law department top leaders who haul in comparable returns for their work—usually through non-salary comp—but nowhere near the number or percentage of highly compensated partners that we find in the ranks at big firms where entire equity partnerships pull in hundreds of thousands or over $1 million a year in profit per partner.

   The average in-house lawyer is well aware that he shares with those high-profiting partners the same schooling, sophisticated law firm background, and top-flight experience on his resumé. He’s made his choice, but please remember that he will more likely identify with the "99 percent"–and not the partnership–when he’s assessing who’s getting coal this Christmas.

 
7. Competition on price and value will increase. The Hildebrandt/ CitiBank 2012 Client Advisory (page 5) also notes that “[There is] continuing client resistance to fee increases [and]… it is unlikely.. that the demand for legal services will grow robustly for the foreseeable future… The legal industry will be forced to live with uncertainty for some time to come…”.  With some law firms aggressively providing more value at lower prices, the competitive bar is going up. 

   Whatever else may prove to be true, it seems clear that cost will remain a major issue. As Mark Smith put it in a blog post entitled Excuse me, I think your pricing is broken: 

   The common refrain from private practice lawyers…is that in-house lawyers who talk about value based billing really just want to pay less, and are not really interested in concepts like sharing risk. Opening a dialogue about pricing is simply an exercise in getting the law firm to do the same work for less money...

   Of course they want to pay less!

   The fact that the firm hasn't developed a model that really meets their needs… does not turn this into the client's problem. It's the private practice lawyer's problem. It's the firm's problem. It's the profession's problem.

   The market has changed.

   Forever.

    

This post was written by Jim Hassett and Matt Hassett.

Legal pricing (Part 7 of 8): Summing up where firms are today

When law firms begin offering non-hourly alternative fee arrangements (AFAs), they must address two fundamental questions:

1) When bidding for new work, how do I set a price that is high enough to protect profits, but low enough to get the work?  

2) After winning the work, how do I manage the matter so that I make a profit (or at least break even) at that price?

To be honest, when we started writing this series a few months ago we thought that it would be limited to the first question: picking a price in the first place.  This requires external knowledge about your client and the marketplace, and internal knowledge about your own cost structure.

But the more we talked to people and reviewed the literature, the more obvious it became that the two questions are so wrapped up in each other that they are very hard to separate.  Add in the fact that most firms don’t even understand their own costs of doing business (see Part 2) and that price wars are forcing bids down for many practice areas (see Part 3), and you have the makings of a very confusing situation.  

Many lawyers would like to believe that if they could master the art of value pricing (Part 4 and Part 5), they could make more money than ever before.  Maybe some can.  But with competition constantly forcing prices lower, we have not seen much evidence for this yet.  Some believe that pricing will become more sensible when lawyers learn how to develop value metrics (Part 6), but we are not yet convinced.

As we described in our recent Bloomberg Law Reports article entitled “The Rise of the Pricing Director,” the two questions above are so difficult that firms like Baker & McKenzie, Fish & Richardson, Mayer Brown, Reed Smith, Vinson & Elkins, and Winston & Strawn are setting up committees and creating new positions for pricing directors.  Last week, Akin Gump joined that list when they hired Toby Brown as their new Director of Strategic Pricing and Analytics.

Responsibilities and methods varied for the people we interviewed, but none had independent decision-making power. Partners are ultimately responsible for pricing, so they must understand the principles before they will accept help from a pricing director or committee. Some firms are moving to develop policies which limit partners’ power to set prices, depending on their training and experience, but these policies are very much a work in progress.

No matter how a firm is organized, pricing analyses inevitably get pulled into the question of how to manage matters.  To set the right price, you must know what the work requires.  In the good old days when lawyers did not have to worry about how much things cost, that was relatively straightforward.  But now that so many clients are demanding efficiency, the work must be done differently.  That will inevitably change the cost of delivering a quality service, and ultimately its price.

Which takes the pricing discussion right back to a topic we have been talking about for years: legal project management (LPM) and process improvement. 

The best way to implement LPM varies from firm to firm, and even from one practice group to another within a firm, depending on its culture, clients, and goals.

In our experience, the approach that works best most often is to start with just-in-time training for a small group of influential partners who are open to change.  We introduce LPM basics very quickly and then get them to immediately apply key concepts to actual matters. The focus is on changing behavior to produce tangible results.  When these lawyers are successful, they can motivate other partners to embark on the same journey.  Case by case, lawyer by lawyer, the firm begins builds its experience in LPM and AFAs, and gradually changes the way it meets the needs of its clients.  For an example of how this worked in one firm, see our recent post entitled Legal project management in the real world: The case of Williams Mullen.  

One key to profitability is continuing business from a firm’s most important clients. For clients who demand AFAs, it helps to work in an atmosphere of mutual trust on a portfolio of matters. The firm may lose on some matters but with the right strategy and tools it can offset the losses with enough wins to profit overall.  For some real world examples of this, see Rachel Zahorsky’s recent ABA Journal article “Facing the Alternative: How Does a Flat Fee System Really Work?”  

If we needed to summarize where legal pricing stands today in a single phrase, it would be “in transition.”  Next week, in the final part of this series, our predictions for the future.

This post was written by Jim Hassett and Matt Hassett.

Legal pricing (Part 6 of 8): Using metrics to define value

In the legal profession, everybody’s talking about value, but nobody seems to know how to measure it.

In September 2009, the Association of Corporate Counsel announced the creation of the ACC Value Index , a “client satisfaction measurement tool that helps ACC members to share meaningful information about the law firms they engage.”  Clients were asked to rate law firms on a 1 to 5 scale on six key factors

• Understands objectives/expectations
• Efficiency/process management
• Predictable cost/budgeting skills
• Legal expertise
• Responsiveness/communication
• Results delivered/execution

Then they answered a single summary question:  “Would you use this firm again?”

The idea of Zagat-type ratings of law firms was controversial from the start.  Six months ago, ACC announced that the Value Index had been closed because “ACC members voted ‘with their feet’ by continuing to use the eGroups for law firm referrals, instead of the Value Index.”

While the idea of a Zagats of law firms has disappeared for now, the six key factors in its rating system remain a great starting point for defining value.  The key phrase in that sentence is “starting point.”

In a panel discussion at a March 2011 Georgetown Law School Symposium entitled “Value: How do we define it? How do we measure it?”, Susan Hackett, then head of the ACC Value Challenge, noted that “Value is hard to define… The ACC Value Index offered an early set of categories of common interest to examine but it needs to move to the next level of assessment.  The future of value assessment will be data-driven.”

Thought leaders are beginning to discuss exactly what value metrics should look like, and how they should be related to prices.  A few months ago, Paul Lippe listed several value metrics that might be used to evaluate sales contracts:

• “How quickly did the contract get done?
• How favorable are the terms to the company (opportunity gained and risk avoided)?
• How easy are the terms for other parts of the company (finance, manufacturing, sales, etc.) to understand and perform?
• How satisfied were the true business clients?
• How satisfied was the counterparty?
• How much did the contract cost?
• Did the contracting process improve?”

If you want to explore just how complicated this type of measurement can get in the real world, see the series entitled “A Value-based Client-firm Relationship” on the ACC’s web page.  It includes 16 posts in which a client – Ken Grady, General Counsel and Secretary at Wolverine World Wide – and his law firm – Seyfarth Shaw, represented by Lisa Damon – talk through the details of how they defined value metrics and determined cost for work on a trademark portfolio.

Here is one list of possible value metrics from the law firm side early in their negotiation:

• ‘Success’ rate, measured by things like first action allowance, watch hit outcome
• Overall satisfaction
• Timeliness of communication
• Effectiveness of ‘lessons learned’ sessions
• Strategic participation/understanding of Wolverine business
• Proactive issue identification
• Budget variance
• Cost management effectiveness”

Here are a few of the value metrics that the client proposed:

• “Trademark Risk Rate (total dollars spent defending trademarks, divided by total number of trademarks defended)
• Counterfeit Recovery Rate (total dollars spent on anti-counterfeiting actions, divided by total number of units seized)
• Specimen Response Productivity (days from first request for specimen to receipt of acceptable specimen, divided by number of trademarks for which specimens requested).”

On the positive side, if you read all 16 posts about the details of this relationship, it is clear that the two sides developed a very trusting relationship, and that Seyfarth went the extra mile to be a proactive strategic partner that puts its money where its mouth is.  On the negative side, this is uncharted territory, and it took months of discussion to come up with metrics that enabled both sides to stay in control of the process and measure how it was going.

When the time came to tie the metrics to a portfolio price for the year, Grady proposed: 

"One way to set the new fee relationship for year one of the relationship would be to:

Adjust the baseline based on what we know about the business (that is, increase, decrease or the same amount of portfolio activity)

Adjust that amount to account for improvements in the processes to handle the portfolio using lean activities we will undertake with Seyfarth

Adjust that amount to build in whatever cost-sharing is appropriate for Seyfarth to get up-to-speed on our business as reflected in the portfolio

We then could agree on a base price to handle the portfolio work. We can gainshare on additional improvements – we get part of the benefit (lower costs) and Seyfarth gets part of the benefit (we don’t get 100% of the lower costs). We could add a topper fee:  depending on performance against certain other metrics (e.g., increase in average mark value using the equation I showed in the last post), Seyfarth gets an additional payment for helping to drive the increased average mark value.”

Here is one small part of how the payment system actually worked:

To measure Seyfarth’s systemic improvements, we will use two metrics: time to process an application, and time to receive a useable specimen (we have to file specimens in certain countries to show we are still using the mark). We need one score across both metrics to determine Seyfarth’s bonus, so we will combine the results on the two metrics by weighting them 80% on trademark applications and 20% of specimen gathering. We calculate the trademark application improvement metric, multiply it by .8, calculate the process improvement on specimens metric, multiply it by .2, and add the results. For every X% of weighted process improvement, Seyfarth will earn $.75.

This example is much more sophisticated, complicated and demanding than the simple value pricing examples we quoted in Part 4 of this series in which a client simply paid a hefty premium because he felt that he had received value in excess of hourly rates.

There can be little doubt that in the current environment, some clients will continue to look for metrics that allow them to precisely define value and tie it to payment.  But we predict that many lawyers will see the example above as excessively complicated, with a whole lot of arithmetic and price uncertainty.   So it is far less certain how many clients and law firms will ultimately develop and use metrics like this.

This post was written by Jim Hassett and Matt Hassett.

 

Business development tip of the month: Plan advances

Sales professionals consider calls successful only if they get an “advance,” an action that moves the sale forward.  So whether you are meeting with a potential client or sending an email, you should always have a specific goal in mind, such as scheduling a meeting, getting introduced to a decision maker, or understanding the time frame for a decision.  For examples of advances lawyers typically focus on, see my new book the Legal Business Development Quick Reference Guide.

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

 

Bloomberg Law Reports on Pricing Directors (Part 2 of 2)

This post concludes the Bloomberg Law Reports article I wrote with Jonathan Groner on “The Rise of the Pricing Director.”  Part 1 can be found here.  To download a pdf of the complete article, click here.

At Winston & Strawn, the pricing strategy role is shared by the co-leaders of the firm’s AFA initiative: Kathrine Cain, the manager of business intelligence, and Keri Gavin, the controller. Cain reports to the firm’s director of business development, and Gavin reports to the firm’s CFO, but they work closely together to analyze the information that the firm needs for competitive pricing.

 “The partners are encouraged to reach out to us for assistance with requests for alternative fee arrangements and budgets,” Cain says. “Some partners were already very good at defining budgets and pricing strategies, while some were new to the concepts. We coach them through the process of defining a budget and identifying pricing options that align with their client’s needs and expectations. In the two years since starting the formal initiative, we have made significant strides in providing the tools and techniques to support our lawyers and clients.”

Cain says she and Gavin always consider a wide range of options for AFA proposals, based on the client’s expectations and goals as well as the projected internal rate of return, the anticipated level of staffing for the matter, benchmarks based on previous matters, the firm’s history with that particular client, and other factors.

Fish & Richardson uses a somewhat different model. There, the AFA group is led by Kurt Glitzenstein, a firm partner and patent litigator. 

Glitzenstein says that since his firm specializes in intellectual property law, many of his firm’s cases fall into just a few categories, such as patent litigation, Fish & Richardson is able to ask the same questions in nearly every case and obtain useful answers that will help in its pricing.“We prefer to price on an AFA basis,” he says. “To do that, my staff goes through a case and interviews the lead attorney about the details. Is it a judge whom we know well? How many patents are under litigation? What is the technology? How complex is it? As a result of inquiries like this, we can put together a litigation budget and use it as a guide for pricing. By asking the right questions, we can predict which cases will be more challenging to handle.”

“We think that the fixed-fee arrangements that Fish & Richardson often proposes improve aspects of the lawyer-client relationship,” Glitzenstein says. “Fixed fees allow lawyers and clients to focus on the merits of the case so that they can reach the best result, without the same level of concern as in a traditional hourly fee arrangement that changes to the case strategy, or unexpected developments, will significantly increase the cost to the client.”

Of course, in every firm, ultimately the success or failure of this new pricing movement will depend on buy in from the partners.

Mayer Brown’s Byrd says that although it is not required that partners consult him when they need to respond to an RFP or develop an AFA proposal, it is highly recommended, and that his plate has been full. 

Matt Laws, head of the pricing program at Reed Smith, where just about 20 percent of the annual revenue comes from AFAs, says his role “has been very well received . . .. Partners do tend to call every time a potential engagement comes up,” Laws says.

Laws says Reed Smith does not have “any strict guidelines about what we can or cannot do to win a client’s business. Any proactive approach to meeting a client’s needs is likely to be approved.”

In fact, Laws says he sometimes finds himself and his team having direct contact with the clients’ financial officers during the bidding process―something that would have been unthinkable only a few years ago. “In the old relationship, partners would work with corporate general counsel. Now, we see finance people and CFOs from the client companies. The process of online bidding, which has become more and more common, reduces the importance of the historical relationship between the firm and the client.”

Another interesting trend in this area is a growing emphasis on project management. According to Baker & McKenzie’s Dodds: “Over the last 18 months, the biggest change in the legal pricing field is a greater emphasis on project management and how we deliver services. Law firm clients are now looking for demonstrable value and efficiency, and we should not shy away from this challenge” This should not be surprising, given that once a firm is committed to a fixed price or an hourly fee cap, the most important determinant of profitability is being able to meet the client’s needs within a predetermined budget.

That’s why efficiency is on everyone’s minds these days. In the Altman Weil survey quoted at the beginning of this article, managing partners reviewed 15 current trends, and gave their opinions about which were temporary and which were permanent. Price competition was number two on the list, with 90 percent saying it was permanent. The only trend rated higher was the related idea of improving practice efficiency. 94 percent saw that as a permanent change.

The trend of appointing specialized pricing officials and devoting more effort to analyzing pricing is expected to increase. The International Legal Technology Association (ILTA) recently formed a Financial Management Peer Group to support this movement.

“Pricing is both an art and a science,” says Vinson & Elkins’ Brown. “We need to focus on both if we are going to grow our business. There are a host of pricing strategies out there, and lawyers are now just touching the surface. This is a dynamic world and my job is changing on almost a daily basis. The heat is getting turned up on law firms, and the pace of change is accelerating.”