Corcoran's Business of Law Blog

My Cool Kids Are Better Than Your Cool Kids

January 14, 2010 · 1 Comment

Author and NPR commentator David Sedaris discussing the startling realization that the popular kids in his school were not universally popular:

“Call me naive, but it had simply never occurred to me that other schools might have their own celebrity circles. At the age of twelve, I thought the group at E.C. Brooks was, if not nationally known, then at least its own private phenomenon. Why else would our lives revolve around it so completely? … But what if I was wrong? What if I’d wasted my entire life comparing myself to people who didn’t really matter? Try as I might, I still can’t wrap my mind around it.”

When You Are Engulfed in Flames; Little, Brown & Company; Copyright 2008

A law firm managing partner recently asked me to meet and calm down a senior partner after his latest outburst over what he considered poor marketing practices. Apparently the partner is a BIG DEAL. Everyone knows him. Presumably his presence is one of the factors laterals and incoming associates consider when choosing whether to come on board. He’s one of the top rainmakers. He’s well known to both political parties and has been considered for high office several times.

Or so I was told by the marketer as we prepared for the meeting. I had never heard of him. I’m fairly knowledgeable about the legal marketplace, and his name meant nothing to me. Nothing at all.

The senior partner was as articulate and bright as I had been led to believe. He had a sincere desire to grow his practice. He believed that if the firm overall and the marketing minions in particular would simply act as he directed, his practice would thrive. The practice was doing well by any measure, except that in his view inferior firms with inferior talent were winning engagements that should come to him. Not only was this senior partner more accomplished than the competition (and arguably he was as good as he claimed to be) but the various General Counsel who had been hiring the competition were often his personal friends.

We quickly learned that the senior partner did not regularly reach out to his personal network. Many of his friends didn’t explicitly know about his practice. Much of his practice consisted of referrals from past clients. And they appeared to be pleased with his work product. But he didn’t land many of the noteworthy clients in the news who needed exactly what he offered.

To me, the challenge was simple. We needed to raise his profile. I was strongly encouraged not to express this opinion, because it would set the senior partner off on a rant. Furthermore, it was wrong. Everyone knows who he is! It would be an insult to suggest otherwise.

In troubled times like these, we need to really question our own rhetoric. It’s perfectly fine for a senior partner at a large law firm to believe he’s well known and popular, so long as he understands the practical reality that his popularity often extends only to the boundaries of his own “school.” There are plenty of other schools and they have their own cool kids. So as the man once said, get over your bad self.

My advice to the senior partner: Work the phones. Reach out to your network. Author a blog. Write an article. Give a webinar. Deliver a speech to a trade association. Take specific, tactical action to inform your network about the work you do. Don’t assume your prominence and popularity will automatically lead to new business.  To his credit, he turned out to be gracious in the face of my startling revelation that he wasn’t universally recognized. He seemed to embrace my contention that the sheer weight of his impressive credentials won’t, on its own, result in a deluge of work, but that by working his extensive network he could easily produce results.

Winning business isn’t a high school popularity contest. And even if it were, it’s safe to assume no one’s ever heard of your high school. So go make some new friends.

A portion of this post previously appeared on my personal blog.

→ 1 CommentCategories: Law Practice Management

Procurement for controlling cost – the cure or the affliction?

December 14, 2009 · 1 Comment

There are few topics that generate universal outcry in mixed company, but among these are the number of poor drivers clogging our roadways and the vexing role of the procurement function in modern business.  Curiously, another trait these two share is that each of us, at one time or another, is the object of anothers’ ire when we’re the poor driver or the buyer, but we tend not to notice.

Wikipedia offers a sound albeit unsourced definition of procurement:

Procurement is the acquisition of goods and/or services at the best possible total cost of ownership, in the right quality and quantity, at the right time, in the right place and from the right source for the direct benefit or use of corporations, individuals, or even governments.

Taken in this light, who could argue that procurement doesn’t serve a vital role in the conduct of business?  Too often, alas, procurement draws fair criticism as the business function that values cost savings over long-term relationships; that reduces all goods and services, no matter how value-added, to commodities which can be differentiated on price alone; and that relies on negotiating tactics one can imagine being employed by Attila the Hun when dealing with vanquished foes.

But these are epithets we typically direct toward the procurement managers negotiating the value of the services we offer.  How dare our client’s procurement manager not recognize the clear distinction between what we offer and the sub-standard offering of our inferior competitors.  On the other hand, when we’re negotiating with our suppliers, those charlatans who try to drain away our hard-earned profits, then by all means our own procurement manager needs to take an aggressive negotiating stance to protect our business.

Can’t we all just get along?!

Procurement is a necessary and important function in the conduct of business.  But there is an inherent tension in carrying out this mission.  The Institute of Supply Management, an association of procurement professionals, asserts that its members must promote positive supplier and customer relationships while upholding one’s fiduciary responsibilities and deliver value to one’s employer, but do so without the appearance of unethical or compromising conduct.

Spend enough time in business and you’ll encounter an evil procurement manager.  I have fond memories of the procurement manager who was hired several months after my team negotiated a mutually successful long-term agreement with our client.  She called our accounts receivables clerk to demand assurances that the contract would be abandoned in lieu of one more favorable to her employer, then threatened a lawsuit when the frightened clerk squeaked that she needed to speak to someone higher up the food chain.  By the time I was engaged, the procurement manager was practically frothing at the mouth, spouting sobriquets like “But you have to do what I say, I’m the customer!”  We were sure to carefully document our conversations for future use when, as sure as night follows day, she proudly announced to her superiors that she had won concessions that we hadn’t even discussed let alone agreed to.  “I’m not singling you out, you understand” was her explanation, “My job is to reduce our vendor costs no matter what it takes.”

Therein lies the challenge.  This procurement manager did not have a full understanding of the total cost of ownership.  As we’ve written in this space previously, the cost to an organization for any product or service is more than merely the price tag.  Selecting Product A because it has a lower sticker price than Product B is hardly a wise choice if Product A is incompatible with our existing systems and therefore incurs significant customization to function effectively.  Likewise, a lawyer charging $425 per hour but who has a terrible track record of staying on budget may be a worse bargain than the lawyer charging $650 per hour but whose budgeting capabilities are precise.

And one must consider switching costs too.  If I hire a plumber to fix a major leak from my hot water heater, and in a fit of pique over high costs I fire the plumber while the parts are scattered across the floor, the leak will continue to generate costs in the form of water damage while I seek a replacement plumber at a fraction of the cost.  Changing lawyers mid-trial, relocating your office across town to save a few dollars per square foot and scrapping a software implementation after a significant investment in training in order to find a lower per seat license cost are examples of business decisions that run the risk of emphasizing price tag shopping over the total cost of ownership, if we don’t fully think through the implications and downstream impacts of our decisions.  In our above anecdote, the procurement manager demonstrated no understanding of the concept and therefore damaged valuable business relationships in her quest to save a few dollars.  If your supplier is fungible, damage away.  If you may need that supplier again, take a long-term view.

Those who sell services which aren’t commodities, or at least those who aren’t willing to admit they sell commodities, fear the procurement manager who reduces all potential suppliers to the lowest common denominator — namely price — without understanding the context.  But many service providers are lazy and unhelpful in demonstrating why their services are different and therefore more costly than the alternatives.

A well-trained procurement manager will seek to unpack the value in an offering.  For most products and services offered in a moderately efficient market, there will be a base cost to deliver services below which no supplier can reasonably sell its product and still make a sustainable profit.  And in most competitive markets, there isn’t wide disparity in profit margins between competitors.  So if we can assume that within reason everyone can make and sell the same product for roughly the same cost, then why are there differences in price?  This is the procurement manager’s quest — to understand and quantify these differences without the undue influence of past relationships or conventional wisdom.  Just the facts, ma’am.

In this visual, we see the base cost.  A good procurement manager can even identify the increased cost of a comfort brand.  In many lines of business there’s that one reference point, a supplier at the high end of the food chain, one whose prices are higher but whose reputation is impeccable, so that if I purchase from them, I’m immune from criticism for making a poor choice of suppliers.  Let’s call that the “brand safety” factor.  There’s no shame in acknowledging that sometimes we make safe purchases and that we pay extra for that safety.

What remains is an “X” factor, or an unexplained difference between the costs of two apparent substitutes.  A good procurement manager will seek to explain and potentially reduce this difference, first by ensuring that the product offers what is needed and not more, nor less.  This is the true function of an RFP (a request for proposal), to ensure an apples to apples comparison of alternatives.  Absent clear guidance on what is needed, it’s a challenge to compare alternatives.  A favorite tactic of some former colleagues of mine who should be elected to the Sales Hall of Shame is to “throw in” as many unnecessary items as possible, allowing them to reflect a much higher starting cost and then apply discount after discount to achieve what appears to be a compelling and substantial “effective discount” off list price.  In the end the customer may get what he wants but at a higher price, and by the way he wins a lot of crap he doesn’t need.

A law firm that can demonstrate its prowess in managing to a budget through effective project management, that keeps the client fully informed of any changes to expectations, that staffs appropriately and doesn’t “overwork” matters or expect clients to subsidize young associate training, is in a better position to present clear, quantifiable evidence of its higher rates.  A software vendor that has documented compatibilitywith existing legacy systems, thereby keeping integration costs down, may have a strong case for higher license fees.  In each case, the approach reduces total cost of ownership.

Those sellers who have the most to fear are those whose price points cannot be reasonably be justified, or quantified by an independent outsider.  It’s not enough that my CEO and your managing partner are golf buddies.  It’s not enough that we’ve done business for a long time.  If I cannot unpack why your rates are significantly higher than some apparent substitutes, and you can’t articulate it either, then I’m compelled to explore alternatives.

But let’s not kid ourselves.  We sometimes forget these principles when looking at our own cost structures.  It’s a sad but not uncommon situation that large buyers will squeeze their defenseless suppliers.  Some years ago I hired a consultant to handle a project when the internal resource dedicated to the task resigned abruptly.  I had moved on by the time the project was complete, but I learned that my former law firm employer gave the consultant a 60 cents on the dollar take-it-or-leave-it offer to settle the final invoice.  The law firm’s procurement manager reportedly dimissed the injustice: ”We’re a global law firm.  What are you going to do, sue us?”  The sad irony is that the law firm took this action as part of a massive cost-reduction effort, initiated in part because its own corporate clients were spending less, at the recommendation of the corporate procurement managers.  Justice served?  Or just a sad cycle of frustration?

When your organization comes up against a procurement manager, this is a good opportunity for some self-examination.  Are we able to articulate why our costs are higher than our competitors?  If not, why not?  Rather than assume our competitors are using predatory or lowball pricing to steal work away, is it possible that we’ve failed to recognize the inexorable march to commoditization of our products and services?  Do we assume our brand carries with it more prestige and “safety” than the market?  Maybe our competitors have devised some innovative ways to deliver more for less.  Their lower pricing may reflect this innovation, suggesting they can remain profitable at a lower price point.  And yet we assume they’re losing money because we can’t offer similar savings.

When hiring a procurement manager, focus them on total cost of ownership.  Saving pennies on discrete costs is fine, so long as the impact of these choices doesn’t result in higher fees over the long run.  In organizations with many silos, a procurement manager may be in a unique position to recognize opportunities to consolidate services, to seek lower-cost alternatives, to adjust business practices to save money.  This means they put a spotlight on us as well, and not just on our pencil vendor.  If we’re serious about controlling costs, it has to start with us.

If you’re a procurement manager, please stop issuing RFPs asking 127 questions for which you have not a clue what you’ll do with the responses to 120 of them.  Be clear that your role is to maintain positive business relationships with valued suppliers, but help identify those whose costs are not aligned with the value delivered.  Times change, prices increase, needs fall out of synch with what’s sold, but except in a few cases the sellers aren’t charlatans and the buyers aren’t ignorant weasels trying to extort kickbacks.  Shine the light of day on the commerce of your business and start with those areas which are most easily recognizable as commodities.  As your colleagues begin to trust your process, you can then move on to the more sensitive areas, where we business managers tend to protect our turf.

Let’s all be prepared to take our medicine.  For some of us, the increased use of procurement managers may be a miracle cure leading to lower costs and new business opportunities.  For others, well, the cure may end up killing us.

→ 1 CommentCategories: Business · Finance · Law Department Management · Law Practice Management · Legal Vendors · Outsourcing

Farming the Green Space

December 10, 2009 · 1 Comment

Many organizations invest valuable resources pursuing the wrong targets, and waste time and energy nurturing the wrong clients.  This is a variation on the oft-repeated and oft-wrong maxim that “all revenue is good revenue.”  In fact, even in recessionary times when top line revenue is hard to find, it pays to pursue the right targets and nurture the right clients.  But who are they?  How can one distinguish the poor targets from the rich targets?

Many years ago as I was beginning my sales career, I struggled with time management.  More specifically, I didn’t have enough time in my day to pay equal attention to all of my clients and prospects, and without a system to prioritize my time it seemed I was always in the wrong place at the wrong time.  This was compounded by the fact that I couldn’t easily recall which client had already purchased or rejected our many products, so I wasted a lot of time re-selling.

A helpful sales manager explained to me the concept of a “white space” analysis.  In short, she explained, list your clients on one axis and your products on the other axis to create a simple grid.  Where a client has already purchased (or rejected) a product, put an “X” in the intersecting box.  Do this for all clients and all products.  The open boxes, the “white space,” reflect your opportunity focus.

Preparing a white space analysis is a simple but effective tool to allocate your limited time and energy to those opportunities that matter.  When I conduct law firm business development workshops, if there isn’t a white space analysis in place already (and there typically isn’t) then we prepare one.  And many organizations stop there.  But savvy marketers know this isn’t enough, not nearly enough, to truly identify the appropriate targets.

The greatest challenge with the white space analysis is its lack of context.  Sure, Client 4 lacks Products A and D, but this says nothing about whether or not Client 4 needs them.  The car salesperson who exerts a lot of energy trying to sell the off-road package to the 75-year old grandmother purchasing an SUV may not generate a good return on his investment of time.  The law firm trying to cross-sell its IP practice to its mutual fund clients may find a less than receptive audience.  The legal vendor trying to sell complex litigation case management tools to a law firm engaged primarily in estate planning may end up buying a lot of free lunches for uninterested buyers.

Similarly, no organization should promote every product equally.  Some generate higher profits, some create long-term switching costs, some products are new and need traction whereas others are fading in prominence.  Many law firms, in part because of a lack of marketing sophistication and in part due to politics, will pay lip service to providing marketing and business development support equally across all practices and partners.  This is folly.  Why invest equal time and energy promoting the practice that has the greatest price pressure, the one in which clients are fleeing to the low-cost providers, while another more lucrative and in-demand practice struggles to stay on top of its RFP responses or to manage its networking functions?

The more advanced approach is to incorporate internal and external data points to generate a more robust footprint of the ideal target or client.  In most organizations, a great deal of attention is directed toward the highest-revenue producing clients.  But a large purchase could vault a client onto this list in a given year, while next year it fades back into oblivion.  A better metric is lifetime value.  In a law firm this may be the client that generates above-average fees for 5 or more years, ideally across multiple practices.  For targeting purposes, perhaps the company within a specific SIC code in which the firm has unique expertise, that has a geographic footprint similar to the law firm’s, and with needs spanning several practice areas, is a more appealing prospect than the Fortune 50 or FTSE 100 corporation which just happens to have a large facility nearby.

The incorporation of these other data points is what I call a “green space” analysis.  We start with the white space grid and then we continue to narrow our focus.  Of the clients and targets identified, which best fit the model of the ideal client?  Furthermore, which of these clients are in growth industries and are on a solid financial footing?  Internally, which practices generate — at the moment — a proportionally greater return than the others?  Which practices have a true competitive advantage (something more definable than “our lawyers are better”)?  Which practices have the bench strength to mobilize quickly if our efforts generate new leads?

The data points one selects will vary by firm.  And they’ll vary from year to year.  The “ideal” client is a moving target, of course, but it’s far more beneficial to pursue ideal clients and targets than to assume the highest revenue producing clients from last year, or the biggest companies in town with whom we don’t already have a working relationship, are the best opportunities for us.

Several vendors provide assistance in defining the ideal client.  I’ve been successful in incorporating Dun & Bradstreet information into a firm’s targeting efforts.  The D&B data points such as SIC codes, geography, size, as well as their comprehensive corporate tree information, can provide some interesting insights when coupled with a firm’s own client data, e.g., from its time & billing or customer relationship (CRM) databases.  Thomson Elite, the leading time & billing enterprise suite for large law firms, offers similar capabilities.  I’ve long been a fan of Redwood Analytics, now a LexisNexis company, which provides deep marketing and operational insights for financial and matter management.  I recently had the occasion to review a new “client profiler” tool which combines data from Redwood, LexisNexis, Martindale-Hubbell and AtVantage — all products in the LexisNexis client development suite — to offer up much of what I describe above in the green space analysis.

The tools one uses are immaterial if the underlying concepts are forgotten.  In fact, I submit that the first attempt at establishing a green space analysis should start with a flip chart or whiteboard, and the opening exercise is establishing which internal and external drivers we value most.  Long-term retention or short-term growth?  Enjoyment and intellectual challenge or less exciting but repeatable work?  Big clients with many needs or small clients with limited needs?  Complex businesses with ongoing needs and significant negotiating leverage or businesses with isolated, one-time but substantial and potentially price-insensitive needs?  And so on.  Once we establish the parameters, we now know the queries to enter into our existing systems, or at least we’ll have an understanding of the types of tools we need to acquire to conduct this analysis.

When farming your internal and external data to narrow your focus, there’s no perfect planting or harvesting season, though it makes sense to start early in the year when budgets are available to deploy against the greatest opportunities we identify.  But don’t wait too long, because every day you wait another X is added to the grid by your competition.

→ 1 CommentCategories: Business · Law Firm Marketing · Law Practice Management · Marketing

Attorney Speak – How to Present Ideas and Win Approval

November 30, 2009 · 3 Comments

I had the good fortune to moderate a panel discussion in New York recently in which several legal marketers and I discussed the common disconnect in law firms between lawyers and marketers.  The usual version of this discussion includes a review of Myers-Briggs or Neuro-linguistic programming concepts to help clarify the differences in how lawyers and marketers think, process information, make decisions and communicate.  This is an important step in the learning process and if you haven’t spent time understanding that the way you think and act isn’t necessarily how your colleagues or clients think and act, it’s time well spent.  This classic Far Side comic artfully explains how at times lawyers and marketers simply cannot understand each other.

Our panel, led by our energetic organizer Christa Crane of Freshfields, chose to take a slightly different approach.  We highlighted specific examples where marketers used data to drive decisions, obtain approval for solid marketing ideas or even gently reject a lawyer’s pet project (like sponsoring that 5k run in the lawyer’s hometown!).  We felt the case studies would serve a dual purpose:  provide specific techniques that other marketers can employ –  events planners would learn some tips on event planning, for example — and also provide an approach that could be adapted in other functions – maybe a CRM technologist could translate some techniques that worked in the launch of a website.

My fellow panelists are accomplished legal marketers, and each has had plenty of experiences from which to draw in order to illustrate their points.  Sandi Sonnenfeld of Pillsbury discussed the interpretive skills needed when engaging a lawyer in a discussion of Public Relations.  “The client won’t want us to publicize this” often means “I’m not comfortable asking” for example.  Alison Gordon of Bryan Cave discussed the firm’s financial dashboard which provides helpful insights into a lawyer’s new business production, data that can be very helpful in identifying which marketing efforts may be most impactful for a specific lawyer.  Ginger Donnan of Ginger Donnan Events provided a detailed events planning blueprint with accompanying procedures and guidelines to ensure that marketing events generate a definable return on investment.  Linda Sparn of Schulte Roth provided a roadmap to securing technology investment by quantifying the impact of efficiency.  In one example, she presented how electronic media tracking tools from Concep can identify which publications and newsletters generate the greatest reader interest.

Many of the techniques boiled down to these simple headlines:

Rely on facts, not beliefs or aspirations. As marketers we tend to chafe when faced with what appears to be a poor idea.  “Let’s launch a new monthly newsletter to provide updates on recent trends in this industry.” We may have tried this 12 times previously, only to learn that only once out of twelve times did we actually publish more than 10 issues; in only 5 of the 12 attempts did we reach more than 500 readers; and the total of all click-throughs to our website from all published articles on this topic was 14.  But simply stating, “That’s a bad idea” isn’t enough.  Lawyers will more readily adjust their expectations when faced with data that supports, or fails to support, their ideas.

When selling an idea, assume no prior knowledge. If we’re proposing an idea to the firm’s lawyers, it’s helpful to assume they aren’t as well-versed in the details as we are.  Professional salespeople make this mistake all the time by assuming their audience has a similar knowledge base:  “You know product X from BigCo?  Well, our product is like that but it offers many more features.” Rather than assume the lawyer knows the details, gracefully and quickly refresh the details for him.

When buying an idea, assume no prior knowledge. As marketers, we fail to heed our own counsel at times.  When the lawyer suggests an idea we’ve tried before, we often leap to the conclusion that it won’t work the next time.  However, our decisions should be based on sound analysis of the current data.  Sometimes the circumstances that led an event failure last time may be different this time.  Or maybe the directory that was a lousy investment last year shouldn’t prevent us from investing in a more targeted one this year.

Offer alternative approaches, not just yes or no. We are all passionate about our ideas, but if we present only a single option because we can’t possibly reduce the scope, we may receive a flat-out rejection.  Much like the aggrieved author who endures the editor’s redlining, we should be prepared to offer alternatives rather than simply walk away defeated.  Maybe we can start with a pilot of the new software before investing in a firm-wide license.  Maybe we can test the new initiative with one practice group or office before rolling it out across the firm.

Success breeds success, and credibility. In a law firm setting, nothing generates attention more than success.  If we’ve been successful in investing the firm’s capital and achieving a notable return, let’s share that success story.  Tally up a few successes, and the next time we present an idea that may not be fully formed, we may get the benefit of the doubt that we know what we’re talking about, and that we’re good stewards of the partners’ capital.

Publicize successes and how you got there. But it’s not enough to merely broadcast the success.  Show how the sausage was made!  It can be very impactful to point out that the success of our beauty contest was due not to fairy dust and our fine pedigree, but to proper planning, the input of several practices, up-front research into client needs and several rehearsals before our presentation.  We want to reinforce the message that replicating the success requires replicating the process.

There were many other fine ideas presented.  We’ve been invited to add to these, incorporate a multitude of new suggestions, and deliver an encore presentation of the program for an upcoming webinar for the legal marketing community.  Stay tuned!

→ 3 CommentsCategories: Law Firm Marketing · Law Practice Management

Valuing Black Sheep – A Note on Organizational Behavior and Innovation

November 18, 2009 · 2 Comments

I recently read an excellent article by Marc Scibelli regarding the utility of “black sheep” as disruptive innovators in an organization. (Hat tip to Bill Pollak for pointing me to it.) McKinsey reports that the black sheep at Pixar (the cutting edge animation movie studio) are defined as:

“…artists who are frustrated. I want the ones who have another way of doing things that nobody’s listening to… all the guys who are probably headed out the door.”

I’ve been a black sheep. I’ve recruited, trained and fostered black sheep. I’ve also recruited, trained and fostered, um, white sheep? You know — company men or women who toe the line, do what they’re told, and do it very, very well. No organization can survive without both.

Too many drones who do what they’re told without disruption or complaint and you have a profitable six sigma-certified business that runs smoothly until it’s obliterated by the competition. Too many black sheep with unbridled innovation and you have anarchy, like 1998 in Silicon Valley where any Stanford dropout could receive $100 million in seed money, a ping pong table and zero expectations for providing a sustainable, profitable business model! But in the real world, there needs to be a tension between keeping the trains running on time, and, if I may belabor the metaphor, developing new transportation systems.

This is not easy to do. Black sheep excel as individual contributors, and they thrive on breaking rules and flouting convention. Not only are they repelled by the typical staid corporate environment, most corporate environments reject them like mismatched organ transplants. Managers and leaders, even those with a little bit of black sheep in their own DNA, often lose these disruptor instincts as they become more adept at navigating the boardroom where, as often as not, you’ll find even senior executives who value collaboration and fostering a sense of unity over achieving the optimal business outcome.

One classic American dream is the innovator who’s rejected time and again by the establishment but in the end makes it big doing it his way. But there are more Tuckers than Michael Dells — Tucker’s automobile innovations were ahead of their time; Dell founded the eponymous computer firm in his college dorm room.  Not every black sheep generates innovation on the scale of Steve Jobs.  Also, innovation happens more often on a small scale than on a large scale.  Of course dramatic breakthroughs happen, but sometimes successful innovation occurs incrementally (so sayeth Seth Godin).  Every business on the planet needs to find ways to improve its widgets, which isn’t the sexy stuff of movies.

For black sheep who wish to lead, the challenge lies in adapting, but without losing the desire and instinct to confront the status quo. It’s hard to know when you’ve arrived. There are many good resources discussing the challenge of adapting one’s style, including Myers-Briggs Type Indicator, or Goleman’s work on Emotional Intelligence, or DuBrin’s Your Own Worst Enemy, or HBR’s The Young and the Clueless. They all speak to the need to evolve, to play the game, to develop a more collaborative style, because you can’t drive change from within if you can’t get in.

Some of us have a style which allows, even encourages, confrontation because it’s often an effective path to getting multiple views on the table, from which the optimal business outcome can be determined, regardless of who originated the ideas.  It’s not the confrontation per se that’s desirable, but the good ideas that flow when colleagues have the freedom to speak openly.  You may not like my idea, and you’ll illustrate all the reasons why your idea is better, but I understand this doesn’t mean you don’t like me.  And once the debate concludes, we head to the bar to celebrate with our colleagues after a hard day’s work.  But some don’t.

In many corporate boardrooms, and in many law firm boardrooms, there is a strong aversion to disruption, to confrontation, so after a tough session some will feel bruised, upset and confounded by the team’s inability to get along — forgetting that the team may have actually achieved the desired optimal business outcome.  Could the same outcome have been achieved by less confrontational means?  Undoubtedly. Would it have taken longer?  Who knows.  But there are different styles and without intensive regression testing in parallel universes, I’m not sure we’ll ever determine if there is a best style.

Black sheep should be cherished, when they have the ability to constructively disrupt and innovate. Never-deviate-from-the-norm types should be cherished for their ability to execute today. The best organizations, and the best leaders, embrace multiple styles and encourage different approaches to achieve optimal business outcomes.

Portions of this post appeared previously on my personal blog.

→ 2 CommentsCategories: Business

Ethical Choices of Leaders

November 6, 2009 · 2 Comments

When I was a young sales manager, I attended a training session delivered by a fantastic veteran sales leader, Jim Hackett of the Bunker Hill Consulting Group, now deceased. Among several great lessons he imparted, one that resonated deeply with me was his advice on how to act once I reached the corner office.

Jim advised the class that many leaders don’t share the same quotas as their sales team. Instead, many leaders set the sales goal higher than their own personal goal or the organization’s goal. So, for example, the sales team may carry a $100M target while the organization’s goal is $95M. What happens is that leaders place a bit of a cushion between the actual goal and the goal assigned to the sales team, ensuring that even if sales are slightly off the organization will still meet plan, and the leader earns his bonus. As each successive layer of management adds a little cushion, the goal carried by the sales team becomes even more disconnected from the reality of the organization’s goals. You can imagine what happens. Sales reaches $97M, or falls short of plan, yet leaders up the chain enjoy increasing rewards for over-achieving plan. Unsurprisingly, salesperson compensation and advancement are adversely impacted.

When I heard of this practice I didn’t believe it was that widespread. I was supremely naïve. I’ve since learned that nearly every organization where I’ve worked does this regularly. The practice is driven by a few factors, in my observation: Many leaders don’t trust their teams to submit accurate forecasts, which is of course a reflection on their own ability to attract and retain the right people; many leaders are too disconnected from the customer to truly understand the market forces, and thus they pad their forecasts to cover their own uncertainty; and too many leaders believe the rules are different in the corner office. There may be nothing illegal about such a practice, but my own moral compass finds it reprehensible.

However tempting it has been, however much we leaders can justify being rewarded for our hard work and tough decisions despite the organization’s performance, I believe ethical leaders should steadfastly refuse to take on a goal that’s more achievable than the goal assigned to the troops. During my many years leading sales teams and during my two stints leading organizations, I always carried the exact same revenue goals as my team. I don’t know that anyone knew or cared, and I don’t believe I should be rewarded for such a “selfless” act.  George Bernard Shaw is credited with saying “Ethics is what you do when no one is looking.”  Imagine the hubris of taking these actions even while everyone is looking.

This lesson can apply in other ways as well.  Stefan Stern, the Financial Times management columnist, whose writing I enjoy and with whom I had the pleasure to share a podium recently, shares an observation that even stalwart pro-market fans in London are concerned with the optics of paying excessive bonuses to investment bankers while many others visibly suffer.  The same challenge exists in the legal marketplace.  Should optics or ethics enter into a bonus discussion?

As the year winds to a close, some law firm leaders will boast of making tough decisions, then issue a healthy bonus and declare victory over the tough economy, hoping that these actions will send a message of strength and stability to clients and prospective clients.  But what message does this send to the many out-of-work lawyers and staff?  And will clients really be blind to the reality that profitability for many firms this year is primarily a function of cost-cutting, not brilliant business strategy?

Similarly, corporate executives will tally up the sales figures.  Few, if any, will meet the original revenue plan.  Most will not even meet the revised plan established in Q1 or Q2.  But many will meet the revised Q3 revenue plan.  And quite a few will still meet the original profit target because of deep cost-cutting.  In some of these cases, the executive bonuses were adjusted in tandem with the revised plans, allowing the executives to receive a full bonus payout by achieving the lower targets.  After all, if we don’t reward the executives for making the tough decisions, they might take their potted plants and high-backed leather chairs and go elsewhere, leaving no one capable of making the tough decisions!  (Retention is the primary justification for the bonuses paid to executives at the TARP-enriched businesses.)

Those who have been sidelined by the economic downturn plea for equity and fairness, almost to the point of expecting businesses to embrace socialism.  We don’t have to discard our business school training and capitalist mindset, however, to understand that sometimes our actions send messages that do not serve the long-term interests of the firm.  A clients who observes its supplier throwing employees under the bus may assume that his needs will be treated similarly if they somehow conflict with the executives’ (or partners!) needs.  Employees, and future employees (yes, hiring will return), will take note of how firms value their employees through their actions, not via their recruiting brochures, and direct their efforts accordingly.

Here’s hoping that some combination of ethics, compassion and long-term business interest will inform the decisions that law firm and business leaders will make in the coming months.

Portions of this post appeared previously on my personal blog.

→ 2 CommentsCategories: Business · Finance · Law Practice Management · Legal Vendors

The ACC Value Index – We’re Not Worthy!

October 28, 2009 · 3 Comments

The Association of Corporate Counsel held its annual meeting recently in chilly Boston, and the next phase of the ACC Value Challenge was released:  make way for the ACC Value Index, a “client satisfaction measurement tool that helps ACC members share meaningful information about the value they get from their outside counsel.”  I applaud the continuing effort to not just admonish law firms for not fully meeting client needs, but for providing practical tools and techniques to guide law firms in their efforts to deliver more value.

We could go on for days discussing the need for yet another law firm rating system, and the pros and cons of closed vs. open systems, the merit of subjective vs. objective rating criteria, which criteria really matter, and so on.  In fact, that debate is already underway (here and here) and will likely continue — in part because debating lawyer ratings is as prolific and inevitable as the ratings systems themselves!  ACC would probably be even more effective were it to, shall we say, align more with others singing the same tune in order to amplify the efforts. But this isn’t a critique of ACC; they should be commended for helping to put a voice and a framework around issues many have been discussing for years.

What exactly is the value index?  Essentially, it’s a scoring system that measures a law firm’s efforts in six specific categories, plus an opportunity for unfiltered commentary, and ultimately the question at the heart of a client’s level of satisfaction:  Would you use this firm again?  For the six primary questions, the rating scales from 1 to 5, with 5 representing excellent.  Others may raise the oft-repeated criticisms that 5-point scales tend to regress to the mean, and that ratings systems often reflect selection bias because dissatisfied customers make their view known in greater numbers than satisfied customers.  I’ll merely say that simple is better if one seeks rapid adoption, and ACC’s approach appears to meet that challenge.

What are the six rated categories?

  • Understands Objectives/Expectations
  • Legal Expertise
  • Efficiency/Process Management
  • Responsiveness/Communication
  • Predictable Cost/Budgeting Skills
  • Results Delivered/Execution

I have yet to see clear and consistent definitions of these categories, so it’s likely there will be some ambiguity and disparity in how law firms and in-house counsel define and therefore rate law firm efforts.  But the entire rating process is subjective, so there will always be variability.  Nevertheless, I’ll give my two cents for what each category entails, with references to my earlier blog postings reflecting the same themes. (As I said, there are multiple voices discussing these issues!)

Understands Objectives/Expectations – I don’t know whether ACC has listed these categories in order of priority, but if so then this is an apt place to start.  So many engagements falter, and costs exceed expectations, because the outside counsel and in-house counsel don’t have the same understanding of the desired outcome and the path to get there.  In business, surprise can be a fatal mistake, so setting proper expectations is critical.  In-house counsel share responsibility in not just explaining the issue, but if they have ideas on the optimal process to achieve the desired outcome they had best reveal it.  This doesn’t mean the law firm must adhere to the approach — after all the in-house counsel is often paying for the outcome — but this should generate a dialogue regarding what’s expected, and what level of risk the client is willing to take.

Legal Expertise – Many lawyers believe this is the primary asset the client is buying.  But in many cases, it’s really just the table stakes to get in the game.  The firm wouldn’t even be considered for the work if there wasn’t already a belief that their legal chops are superior.  So it’s not enough to do the work, but demonstrating innovation and an in-depth understanding of the relevant guiding authorities, based on prior experience, is critical.  This isn’t done by producing a deal list, substituting quantity for quality, but by regularly discussing strategy with the client, identifying alternatives, and calculating the costs of different approaches, including doing nothing.

Efficiency/Process Management – This may be the single greatest growth area in law firm management discipline in the coming years.  General contractors build tall buildings incorporating tens of thousands of raw materials and pre-fabricated parts and relying on hundreds of sub-contractors and vendors over multi-year construction horizons.  Yet lawyers often insist that managing a deal or complex litigation is a unique experience requiring a new approach each and every time.  “No more!” demand the clients and, more to the point, the clients’ clients.  The challenge is that billable hours drive hourly-based compensation but do not encourage efficiency, to say the least.  As more clients insist on alternative fee arrangements, lawyers must become better project managers, wringing efficiency from processes they’ve performed or led hundreds of times in the past.  Only now the price of inefficiency is borne by the firm.  And if the client is dissatisfied, then there are growing alternatives, and these organizations are all about efficiency.  (Interestingly, this post places some of the blame on law school training, which teaches lawyers how to pull an all-nighter but not how to manage a long-term project!)

Responsiveness/Communication – Many lawyers read this as speedy response times and 24/7 accessibility.  Of course there are clients who define responsiveness in this manner, but as often, probably more often, the better definition would be keeping me apprised of progress so there are no surprises, and so I can develop contingency plans when the unexpected occurs. This also means providing clear updates rather than confusing obfuscation.  Relying on the all-too-often inscrutable notes entered by each lawyer at time entry to inform the client of the project’s status is insufficient.  Reduce the noise to a simple dashboard report, reflecting progress on key deliverables and highlighting questions and potential challenges.

Predictable Cost/Budgeting Skills – Hand in hand with project management skills are budgeting skills.  Imagine in our construction scenario above that two general contractors are competing to win the project.  One relies on long experience to provide forecasts and budgets within certain ranges and expectations, while the other claims similar experience but suggests that complex construction projects are too variable to pin down a forecast or adhere to a budget.  Who wins the work?  It’s that simple.  Law firms that develop some rigor in providing forecasts and budgets will have a competitive advantage over the firms clinging to the “it’s too uncertain to know” school, and they will have a greater opportunity to employ profitable alternative fee arrangements.  Sound financial management isn’t the same as trying to win new work by lowering rates.  As many law firms have learned, at times the client is as concerned about predictability as total cost, so those firms that reduce rates when what’s really needed is more predictability are leaving revenue on the table.

Results Delivered/Execution – Many lawyers read this as achieving a certain outcome, such as winning in litigation or closing the deal.  Business people often define the outcomes differently, based on their tolerance for risk and their business objectives.  Is the goal to launch the new product in a timely manner and generate new revenue streams, or is it better to delay the launch until every potential avenue for loss of IP protection can be identified and addressed?  Is the goal to win the suit, or to balance litigation and public relations costs with winning?  It’s critical that law firms know explicitly what outcome is desired, and orient their actions to that outcome.  Sometimes the best choice is to do nothing.  Sometimes business people knowingly choose paths that expose them to legal risk, but they accept risk in every decision.  The role of the lawyer is to inform these decisions, to help quantify the costs to the business of the various viable approaches.

There are some understandable concerns with the ACC Value Index.  For example, at present, law firms do not have the opportunity to view any client feedback, though that ability will come in due course — else the exercise would be somewhat ineffective in changing the behavior of those law firms rated poorly.  The anonymity of the program may lead some law firms to dismiss negative feedback.  And there will be some uncertainty as to what constitutes excellent rather than mediocre performance.  The age old questions ”What are we doing well?” and “What can we improve?” have found a new locale but the fundamentals remain the same.  It’s now more important than ever before to implement a structured and permanent client feedback program that starts by asking the questions relevant to the ACC Value Index, but delves more deeply into areas of particular strategic importance to the firm.  Only by knowing how clients feel can we improve.  And the best way to learn is to ask, something too few firms do according to numerous studies.  If simply asking can be a differentiator, just imagine the loyalty a law firm can engender by actually acting upon client feedback!  So why wait?

For additional insights into the Value Index, see this post by Fred Krebs, ACC President.

→ 3 CommentsCategories: Law Department Management · Law Firm Marketing · Law Practice Management

Is Pro Bono At Risk?

October 21, 2009 · 4 Comments

I recently had the good fortune to spend time with the Association of Pro Bono Counsel (APBCo), the organization whose members are charged with organizing and promoting pro bono efforts, primarily in large law firms.  At their day-long annual conference, my colleague Pam Woldow and I discussed the recent teeth-rattling changes taking place in the legal marketplace, and more specifically, what it means for pro bono efforts.

First, let me say that after having spent countless hours over the years with legal marketers — by and large a sunny, lively, high-energy and positive demographic — I was pleasantly surprised to find pro bono counsel to be as lively and engaging, with a deep passion for pro bono and a deep belief that large law firms can be leaders of change.  I very much enjoyed the positive interaction and the focus on improvement during a time when sessions like this run the risk of turning to melancholy and frustration.

Speaking of risk, the fundamental question presented is whether pro bono is at risk.  Pro bono efforts, or offering free legal advice to those unable to pay, is an honorable practice well-suited to the community-minded attitude taken by so many large law firms.  But as recent events have unquestionably demonstrated, large law firms are businesses too.  And thus isn’t the notion of deploying valuable and now limited resources, e.g., associates, to non-billable work a quaint notion at best, and irresponsible or even willful negligence?

In a word, no.

The traditional obstacles to promoting pro bono within a large law firm environment have usually focused more on practical matters rather than desire.  No matter how many words I write about the need to embrace better business practices, I hope I never see the day when lawyers stop acting out of a sense of duty to their community and profession and cease pro bono activities because it’s not profitable.  Thankfully, large law firms by and large haven’t taken this tone in the past, and I think with proper expectation setting, it won’t be a problem in the future.

Associates on the partner track, or at least those hoping to maximize bonuses, struggle to maintain the proper balance between billable hours and other duties, such as professional development, pro bono and client development.  Through long effort, pro bono coordinators have succeeded in achieving parity between an hour spent on pro bono activities and an hour of billable client work.  In other words, within reason spending time on a pro bono case counts toward billable hour quotas.

The challenges now come from many fronts:  with a substantial increase in alternative fee arrangements, reward and recognition systems based on billable hours will need updating, and the pro bono lobby may not have as strong a voice as they did when times were flush.  The occasional partner who railed against the opportunity cost of diverting a valued associate away from client work may have an audience now, when associates are in shorter supply.

But these challenges also present opportunities.  Partners who have raised the opportunity cost argument tend to ignore the fact that defining a law firm’s revenue potential under a billable hour model, e.g., the number of timekeepers multiplied by the billable hour rate multiplied by working hours available, imposes a greater opportunity cost than a law firm offering alternative fee arrangements.  Simple math suggests that if I can negotiate sufficient simultaneous alternative fee projects which generate fees regardless of the time invested, I have the potential to generate greater revenues than those with a self-imposed ceiling.  Furthermore, adopting tactics to improve efficiency so we can take on more alternative fee projects will lower our costs and improve profitability.  This isn’t a rant against the billable hour (others are more eloquent on the topic than I) but an observation that a movement away from the billable hour doesn’t necessarily lead to lower revenues and profits.

In fact, in light of the ACC/Serengeti survey released at the Association of Corporate Counsel’s annual meeting, which declared that controlling outside counsel spend is the primary concern of in-house counsel, the reality is that moving away from the billable hour and toward more efficient operating models is now a requirement for all but a handful of firms.  And no, odds are that despite your innate pride in your firm, yours is not in that handful.

As clients demand efficiency, there are other downstream impacts.  For example, partners can’t overstaff projects with associates-in-training, simultaneously delivering an education and generating fee income, compliments of the client.  This has led to an unprecedented number of associate layoffs, and a reversal of the impressive pay packages offered to Biglaw associates.  Equally impacted, but less newsworthy, is the loss of training opportnity for the associates who remain.  Will large law firms adopt the UK model, where an investment in PSLs (professional support lawyers) is far more common?  Will they return to the guild approach of apprenticeship?  Most firms will not make such revolutionary changes, at least not right away.

Cue pro bono, entering stage left.

In what other venue might an associate obtain an opportunity to cross-examine a hostile witness, learn how to navigate the endless bureauracy of a government agency, make decisions on the fly that, in some cases, have real life or death consequences?  The answer is, of course, pro bono.  To be clear, most pro bono work is less than glamorous, and you can only derive so much experience from helping a senior citizen file a social security disability claim.  But such as it is, this experience now has to come from somewhere.

As the business challenges of large law make headlines, some have predicted the end to the quality of life concern, or to the need for law firm diversity, or to the need for pro bono.  After all, with fewer associates we can only rely on those who are willing to pull all-nighters and stay on the treadmill that leads to the partner track, even if only a fraction will actually make partner.  And with clients focused on cost, won’t the client be more interested in our fee than in how many women partners we have, or how many hours we devoted to pro bono last year?  Perhaps.  But I doubt it.  The lesson of recent events is that corporate counsel must accept that the legal function is like any other, and must adopt the practices of the other functions.  So if the corporation has a requirement for diversity in its suppliers, then despite the complications such a constraint imposes on the selection of outside counsel, the GC must find an outside law firm that has both the proper diversity footprint and an acceptable fee range.  Managing multiple and often competing constraints is what leaders of businesses do all day, every day.

So if pro bono, like diversity, will persist as a requirement in coming RFPs, why do so few law firms take the time to establish a well-oiled process for maintaining a record of pro bono achievement?  It’s not an uncommon occurrence in law firms for the various functions to, shall we say, not get along famously.  Far too often, for example, the IT organization doesn’t appreciate the marketing department acquiring new technology.  The Marketing department doesn’t appreciate being asked to run events for the Diversity team.  The pro bono team promotes the firm’s efforts without the assistance of the firm’s public relations specialists, and so on.  This must end.  A holistic approach is needed.

My advice to pro bono counsel is to embrace the opportunity to help inform the conversation as compensation systems come under review in this alternative fee world.  Ensure that all marketers involved in responding to an RFP or otherwise promoting the firm’s accomplishments have an up-to-the-minute scorecard of the firm’s pro bono activities.  Ensure that the professional development team, what’s left of them, has full insight into the sorts of experiences the associates are gaining in their pro bono efforts, which could perhaps become certified for professional development credit.  Engage the CFO in terms that she or he can understand about the quantitative impact of pro bono:  How many RFPs required a pro bono scorecard?  What was the value of these projects?  How well do pro bono-experienced associates perform in client satisfaction interviews (you do these, right?) as compared to associates who have no pro bono experience?  Which clients and targets, specifically, have a pro bono policy for their outside counsel suppliers, and which really mean it? If you’re not sure, ask them.

I am a fan of pro bono and find it to be one of the most appealing aspects of the legal profession, and even as I counsel law firm leaders to become better business people, I do not want to see efforts like this fall to the wayside in a quest for profits.  I am now a fan of pro bono counsel, who have the passion, energy and desire to accomplish their mission in these challenging times.  If you don’t know your pro bono coordinator in your firm, drop in and say hello.  I assure you, you’ll be pleasantly surprised by how capable and willing they are to engage in the improvement of this profession.

Update: I just learned that this is National Pro Bono Celebration week.  Who knew?!  Several notable names in the legal community have spoken up in support of pro bono, even during these trying times.

→ 4 CommentsCategories: Law Practice Management · Pro Bono