What's More Important -- Business or the Law?

Do you recall the Monster.com television spots from a few years back, with kids expressing their hopes and dreams?  With lines like "I want to claw my way up to middle management" and "I want to be paid less for doing the same job" Monster.com captured the quiet desperation of the American workforce. This blog focuses on the corporate and large law firm legal marketplace where we carry out our own version of this melodrama every day.  Readers of this blog will quickly note that I believe the purpose of a business is to produce a compelling product at a sustainable profit, and the legal function -- encompassing the in-house law department and its outside providers -- serve to support that purpose.  We who spend all day every day in this legal marketplace at times lose focus on this objective.

How many actors have we seen who love the stage but appear to struggle with life in the public eye?  How many professional athletes excel on the playing field but fail spectacularly managing their finances?  This ancillary baggage is not what they signed up for, but it's a necessary component of the path they've chosen.

In the same way, entrepreneuers who wish to build impressive buildings, or develop fuel-efficient vehicles, or design innovative tools for web commerce, or invest funds for charities, or who are engaged in any other business, rarely understand the extent to which they must deal with legal issues.  It's not an indictment of the importance of the legal function for me to suggest that we should strive to minimize the extent to which legal issues distract businesses from their main purpose.

After all, most businesses provide coffee in the break room yet there is far less hand-wringing in the board room over the plight of coffee vendors, or how technology is disrupting the traditional means of production, or whether the coffee producer's billing models appropriately reflect the value of the product, or whether globalization should displace the role of traditional suppliers, and so on.  It would be unfair to equate law with coffee, of course.  But it's also unfair to saddle business with the burden of sustaining an inefficient legal marketplace.

Occasionally I'll get a note from a reader thanking me for some insight, but asking for more or better examples.  So lest I ever sound like the armchair quarterback who's never played the game, or the Sunday morning talking head who's never been elected to office, I am delighted to provide relevant examples from my own experience to help illustrate a point.

Some years ago I worked for a publisher that specialized in printing large reference volumes for businesses to find other business services.  These volumes included both free content and paid advertising (think of the white and yellow pages).  We invested heavily in technology to modernize our production processes, but occasionally mistakes happen.  In one notable example, after shipping we discovered an error that resulted in a paid advertiser's contact information appearing at the end of a multi-column ad rather than at the beginning.  It appeared as if the robust ad copy referred to the prior advertiser while this advertiser published merely his contact information.  The client was not happy.  He threatened to sue and demanded that we reprint and ship replacements to all buyers, after retrieving the erroneous copies.  Our cost for this would be substantial, far exceeding his ad revenue.

We presented the challenge to the CEO and to the General Counsel.  The GC laughed it off, dismissing the threat of a lawsuit as minor, reciting all the reasons why such a suit wouldn't prevail, and suggested that at most our obligation was limited to providing a sticker that all recipients could choose to insert in the right place.  The CEO took the issue more seriously, realizing that not only would the sticker not appease the client, it would call every advertiser's attention to our error.  Furthermore, while the threat of a lawsuit was minimal, the PR impact of our error and our refusal to take ownership superceded the legal concern.  He asked us to negotiate a settlement.  We ended up reprinting the volume, re-shipping it to all buyers (and asking them to destroy the earlier copy due to "product flaws") and in return we signed the client to a long-term contract with substantially better terms than we had previously been able to negotiate one year at a time.

I've managed businesses with a global footprint and regularly hired and managed people overseas, but I know nothing of immigration laws.  In one reorganization my management team and I decided to consolidate territories and asked several salespeople to cover multiple countries.  This wasn't a problem in the EU, but post 9-11 it posed a problem for our salesperson in Toronto to visit the US regularly.  She called us in a panic one day, reporting that she had been detained at the border at Niagara Falls and couldn't proceed or return home until certain paperwork was in order, unless she was willing to accept being officially deported, a designation which would effectively end all future business and pleasure travel to the US.

We quickly consulted our regular outside counsel who suggested they could, within 48 hours, present our options for applying for proper Visa paperwork for the salesperson, and present support for their contention that she was being improperly detained under recently changed immigration laws.  Best case, the salesperson would be allowed to stay overnight in a local hotel with travel restrictions while expedited Visa paperwork worked its way through the system, likely in a matter of weeks.  So we cold-called a small immigration firm in Buffalo, and within an hour a lawyer was en route to the border crossing to negotiate a release.  It turns out that her paperwork was not fatally flawed, but indeed there was a need for additional approvals.  She was able to return home later that day without the dubious distinction of being deported, and within a few days she had the proper paperwork to successfully cross into the US with no hassle.

Let's recap the obvious:  In the first example, the GC didn't properly realize the business implications or opportunities and instead cavalierly dismissed the threat of a client's legal action.  In the second example, the large firm embraced the intellectual challenge of clarifying immigration policies but didn't sufficiently consider the plight of a salesperson detained indefinitely at the border.  Careful readers will also note that my team and I would most likely have prevented this had we consulted counsel before assigning cross-border travel.  (No one ever said business management is infallible!)

Despite the above title, it's not a question of whether the legal function is or is not important.  The legal function is critically important.  The real question we should continue to ask is whether the legal function is supporting the objectives of the business.

How to Make the Complex Simple

I'm a longtime fan of newspaper comics. The ability to succinctly make a point or to set up and deliver a punchline in a few words is an admirable skill. In today's paper, Chip Sansom's The Born Loser riffed on this theme of converting complex data into simple analysis. It calls to mind a skill I've worked on honing for many years, that of distilling a large amount of information into the most relevant, and more bite-sized, pieces for consumption.  This skill is useful whether one is a worker bee reporting to his manager, or a manager reporting to an executive, or an executive reporting to the board, and so on.  With technology we now have access to more data than ever before which we can incorporate into our analysis and decision process, and yet so many of us often overlook the critical step of distillation.

Some years ago my team devised and launched the first conference on the use of competitive intelligence (CI) for law firm planning efforts. In those days the predominant tools seemed to be publisher rankings with accompanying demographics, which serve as catalysts to drive strategy.  For example, a law firm partner may observe that several peer firms have launched an office in London, or in Silicon Valley, and therefore the firm takes steps to follow. Such a process appeals to the risk-averse and precedent-driven mindset of many lawyers -- if others have done it, it must be a good idea.

The anecdote is most likely apocryphal, but is it so hard to imagine the law firm leader who viewed the AmLaw 100 summaries in July of 2000 and immediately set about looking into launching a Y2K practice, which for some reason seemed to be enormously popular with his peer firms the prior year?  Today the situation is very different, with most large law firms using current competitive intelligence databases and techniques to assess their clients and competitors and understand market trends in order to incorporate this information into the strategic plan.

The most common use of CI, it appears, is for routine pitches and lunch meetings. The usual process starts with a call from a partner, indicating that he needs to know all there is to know about a potential client in advance of a pitch meeting. Some combination of a reference librarian and a marketing analyst research the various databases, capture all the relevant information, de-dupe it (remove repetitive information), clean it, add a summary, and deliver a beautifully bound dossier to the partner.  Trouble is, many times the information presented is too voluminous to be useful.

I recall a project where a partner asked for my help preparing for two pitches -- one to a major US automotive manufacturer; the other to a major pharma manufacturer.  We commissioned reports from the CI team and a few days later when we met to review the material, the conference room had two foot-high stacks of binders, one stack for each target. The binders were useless, as they consisted of lengthy printouts of financial statements, annual reports, analyst commentary and news articles. The summary was merely an index to the tabs separating the content.  Needless to say, neither the partner nor I had the several hours it would take to read the material, so we prepared without it.

I later sat down with the reference librarian and the marketing analyst to discuss a better approach. Both felt their respective efforts represent best practices.  The reference librarian felt his role is to access as many of the right databases as possible and present the content essentially unfiltered, except for de-duping.  His credibility depends on him delivering everything, because the worst case scenario is to omit an important fact.  The analyst felt her role in cleaning up the data means organizing it and creating an index.  She can't eliminate much because she can't possibly know what the partner might find relevant.  Each was surprisingly dogmatic and inflexible.

One law firm marketer I know well has a very different approach.  She wields a red pen and uses it liberally, sending CI reports back to the researcher or analyst time and again until the output is concise and impactful.  For example, she allows financial reports only in an optional appendix, and instead demands a trend summary in a line or two. "Revenues and earnings increased 7% and 11%, as a result of the recent acquisition of X Corp and the resulting post-merger pruning.  These results compare with a 5-year CAGR of 4.5% and 9% respectively."

Rather than merely listing all filings found through docket searches, she includes a pie chart showing major categories of litigation. This may also be accompanied with commentary culled from the data: "IP protection in emerging markets has been the greatest challenge in the past, but the trend has recently shifted toward products liability defense. As its products gain wider global distribution, the company faces increased scrutiny from regulators and safety advocates."

She may also provide insights into areas of opportunity:  "There are regular employment-related lawsuits, suggesting an opportunity to present our compliance training which reduces employer exposure" or "The recent JV in Brazil and other IP protection efforts in the area may suggest this is an important growing market.  Perhaps our South American office can help their executives by making introductions to the various commerce officials with whom we have solid relationship."  You get the picture.

In these examples, the CI reports rarely reach a full two pages; they reference the source material if the lawyer wants more background (they rarely do); and the distillation provides the marketing team an in-depth understanding of the potential opportunities so they can begin working on pitch materials that will help highlight the firm's capabilities in these areas.

Competitive Intelligence is the forum for today's example, but the same fundamentals apply to so many other situations.  It's obviously much harder to distill complex information into succinct portions, but doing so flexes analytical muscles and positions the analyst as a value-added resource rather than a paper-shuffling clerk.

You may wonder yourself if I could have delivered these points more succinctly.  Probably.  But then again, I am not a professional cartoonist.

Vendor Perspective of the LMA Annual Conference

Some years ago when I led a company that was a prominent vendor and sponsor to the legal marketing community, I would regularly take the LMA to task for its tone-deaf and heavy-handed approach to vendors.  They listened and today the association, and the legal marketing community, are far more receptive and embrace the involvement of legal vendors and suppliers.  Don't get me started on other legal associations which appear to regard vendors as evildoers whose role is to send money and logos in return for some token table scraps. So other than one comment, this post does not address the effectiveness of the LMA annual conference from the vendor perspective.  Rather, I will comment on vendor participation at the conference... what worked, and what didn't.

First, the one comment directed to LMA:  The hotel was a beautiful venue and well-suited for a business conference. However, the exhibit hall must be closer to the educational session rooms. No ifs, ands or buts about it.  Periodically a conference planning team will underestimate the importance of this single fact.  That's a mistake.  Since I'm confident every vendor made this point in their post-conference evaluations, I won't belabor it here.

I presented on the topic of managing legal directories, lists and rankings along with Nicole Carrubba of Captivate Legal Marketing.  Though we both have considerable expertise in this area, we spent some prep time on the phone interviewing directory publishers and consultants who specialize in this space.  The publishers, without exception, in some way incorporated the following three assumptions in their remarks: everyone hates us; the competitors stink; and our offering is defined by what the competitors are not.

There are certainly some legal marketers who don't like the very notion of directories, rankings and lists, believing them all to be part of some scam based on lawyer vanity.  But there are many who view these tools as standard components of a law firm's marketing mix, plus there is a constant influx of new marketers from outside the legal profession who have no pre-formed bias.  My recommendation, lose the chip on your shoulder.

In every business there are competitors.  There are often head-to-head fight-to-the-last-bullet battles between competitors.  And it's important to know the competition.  But my view has always mirrored legendary UCLA basketball coach John Wooden's (possibly apocryphal) view on  game preparation. He never reviewed film of his opponents, and instead focused his team on flawless execution of the basics.  In other words, it doesn't matter what the other guy is doing; all that matters is that we execute well.  In business, deliver what you promise, deliver what the client needs, and let the other guy worry about what you're doing.

In a similar fashion, find your own unique selling proposition.  Help the legal marketers answer the question, Why is your offering additive to my marketing mix?  It's not effective to use "We're better than the other guy because we don't do X or Y, we do Z."  This assumes I have superior knowledge of the other guy, which immediately diminishes your offering. What do you do well? Figure out how to say it.

Interestingly, as I walked the exhibit floor talking to multiple vendors, this theme reappeared several more times.  In one notable case, the president of a small technology company was barely able to articulate what his offering delivered. He hemmed and hawed waiting for the top sales guy to finish up with another prospect, and while he was waiting he described his product thusly:  "We're sort of a Product N light. We don't do all that they do, but then most people don't need all that anyway."  Product N, in case you hadn't guessed, is a leading product in the category.  My advice (well, beyond "Don't stand in the booth if you have nothing helpful to add") once again is to define your unique selling proposition in a few words.  Surely you must offer something that doesn't require me to know all about the competition first!

At one point I worked the exhibit hall during one of the educational sessions.  I suspect I'm not the only conference attendee who occasionally finds nothing of interest at the offered sessions, or perhaps just wants to talk to vendors without the crowd that amasses during breaks. However, the booths were mostly empty. Obviously I wasn't able to poke my head into every educational session, but since many vendors had exhibit-only passes, I surmised that they weren't attending a session and they weren't in the booth.  Where were they?  I can only hope that they were busy in a demo room or were holding some other private client discussions.  If they were at the hotel but not in the booth when prospects were there, that is a travesty.  Nevertheless, I enjoyed the 15-minute chair massage in the information vendor's booth while no one was around.

The opposite is also true.  In some booths the vendor representatives repelled visitors through one of two techniques:  either they stood in a semi-circle in the front of the booth facing in while talking amongst themselves, making an approach impossible; or they stood in a semi-circle facing outward, making an approach daunting as 4 or 5 sets of eyes stared at every passer-by.  Some sat quietly working on their laptops undoubtedly attending to important client matters while we walked by, glanced at the literature, possibly picked up a giveaway pen, and moved on, never making eye contact.  A few, of course, made visitors feel welcome.  I won't go into detail here how to make that happen because it's more amusing to point out what doesn't work -- and besides, helping vendors better reach clients is part of what I do for a living!

Actually, I will reveal the greatest secret to increasing your ROI at a conference, particularly a close-knit community like the legal marketers.  It's this:  Be part of the community.  It's that simple.  How?  Buy more than exhibit-only badges and spend more time with the clients and prospects, learning alongside them in educational sessions, spreading out and mingling with them at breakfast, lunches and cocktail receptions, and attending all the after-hours events.

My former sales teams knew, enjoyed and heartily participated in this credo of non-stop client interaction.  We reached a point where our conference booth was the least important place for us to interact with clients.  We didn't even post a schedule.  We knew that during the conference, from roughly 7 AM to midnight every day, we were with our clients -- our friends! -- participating and contributing alongside them. When the exhibit hall was open, we'd all be around, though we wouldn't congregate in the booth and scare visitors away.  And we most certainly, and enthusiastically, joined our clients after-hours.  And we didn't always pick up the tab either.  Because we were members, not vendors.

At one point at the LMA's "gala" event, amidst all the dancing and frivolity, I stepped outside to get some air and to drop in to a bar next door to the conference hotel to have a drink with an old colleague.  There, arrayed in a group of 15 or so, was one vendor team.  There wasn't a client in sight, for they were all enjoying themselves back at the conference hotel.  Just the vendors enjoying themselves, by themselves. This is poignant example of what to do as a vendor to the community, rather than as a member of the community.  I'll wager a tall, cold drink at the next conference that the ROI report delivered to this vendor's management team was that the conference was good, but not great.

Legal vendors: what sort of sales team preparation do you undertake before attending a major industry conference?  Does the team memorize clear and concise elevator scripts, unique selling propositions and positioning statements?  Do they know their responsibility at the conference is not equal to their assigned booth times?  Does management in attendance know what to say, or when to be quiet?  Do they know when to join clients, and when to take the team offsite for well-deserved R&R?  This isn't rocket science.  Good products, even great products, don't sell themselves.  It takes work and practice to move along the continuum from vendor to the client community to member of the client community.  Are you there yet?  What are you waiting for?

A Note on Reducing Law Firm Associate Compensation

A recent op-ed in the New York Times stated the obvious point, at least for readers of this blog, that some of the mechanics of the legal profession are in dire need of updating.  The author specifically identifies associate compensation as a leading target for significant revision. The author is right, of course, on several points.  Associates at large firms enjoy generous starting compensation packages that by comparison to entry level legal jobs in the public sector, or in small firms, or frankly to entry level jobs anywhere, appear disproportionately large.  Implicit in the piece is the burden these high fixed costs present to law firms who have experienced a fairly sudden and substantial decrease in demand for legal services.

Not expressed in the article, but known to observers of the legal profession, are two additional challenges:  newly graduated lawyers are by and large not prepared to practice law; and they don't stay long enough to generate sufficient profits to pay for their own learning curve.  So large law firms are paying substantial wages to green recruits, trained to think and act like a lawyer, but not yet ready to lawyer, and then incurring additional expenses for on-the-job training. Some of this learning curve has been subsidized by clients, many of whom are finally asserting that their high legal fees should buy senior lawyers with deep experience rather than a host of trainees inefficiently learning while doing.

The author suggests a drop in associate compensation is needed, from $160,000 in major cities to perhaps $100,000. This suggestion will no doubt rally the snarky set who frequent the legal tabloids:

“YOU feel sorry for THEM? ...the spoiled Ivy grads - who lost their silver spoon overpaid jobs that they never deserved in the first place, because they only billed 1600 hours and half of that was padded time anyway . . . wah wah wah!”

The simple fact of the matter is, when demand for labor declines then labor rates decline.  It's no more nor less justified or "right" than in recent years when demand for labor was high and labor rates for the most desirable new lawyers increased.

But is it enough?  I don't believe reducing associate compensation, or laying off staff members, is even close to approaching the solution.  And I'm not even referring to the crying need to reduce partner compensation, or even to cull the partner rolls -- even though doing so would be in keeping with the declining demand-declining labor rate equilibirum impacting associates.  No, to "solve" the challenges facing the legal profession requires a re-think, as the New York Times writer suggests.  But rather than limit the conversation to compensation and overhead and billing rates, it's time to take a good hard look at how law is practiced.

In any industry, the inexorable encroachment of technology or innovation provide new entrants with advantages that can disintermediate or displace incumbents.  Refer to any grammar school text book for a recap of how Eli Whitney's cotton gin transformed the postwar Southern agricultural industry.  Undoubtedly there were a few cotton pickers whose jobs and wages were disrupted.  Henry Ford's assembly line turned the automobile from a quaint toy for the wealthy into a necessary tool for modern life, shrinking the continent and making suburban life practical... and wreaking havoc on the proverbial buggy whip manufacturer.  The story continues, from the invention of the computer to the Internet to eBay to Amazon's "one-click" business method to global positioning satellites to asset securitization and so on.  In the march of human progress when we find a better, cheaper, more effective alternative, we shed a tear for a nostalgic moment and then we move on.

It's time that the typical law firm of today take a good hard l0ok at modern business practices such as governance structures which improve rather than impair organizational effectiveness; supply chain management techniques to eliminate redundant and unprofitable workflow steps; the application of technology to automate repetitive tasks; the use of alternative fee structures to promote efficiency and reward successful outcomes rather than time.

Some of these topics have been promoted before. Very few law firm leaders haven't heard the drumbeat of alternative fees, for example.  But what has been lacking is specific, actionable, quantifiable information to demonstrate how these business practices will improve the practice of law for both the suppliers -- the law firms -- and the consumers -- the clients.

No more, I say.  Let's move from theory to practice.  We will address these topics in more detail in this blog in the coming weeks.  Stay tuned.

For another perspective, read Ron Friedmann's reaction to the NYT article here.

Tough Times Need To Be Acknowledged

Today's blog post by Dilbert creator Scott Adams brought back fond memories. He mentions a work group that ordered team mugs imprinted with an unintentionally inappropriate acronym. Many of us have been part of these teams at work. A cross-functional team is pulled together to build a new product or tackle a major assignment and as part of the team-building process they order mugs or shirts with a snappy new logo or saying. Fairly harmless, except when the brain power exerted to come up with a slogan exceeds the effort directed to the project itself!

I had a related experience many years ago. The business I ran was a traditional print publisher poised on the precipice -- either retool and remain relevant in the digital age, or hide under the covers and hope for the best. A colleague and I decided to bring together a large group of our employees to share what we saw in the market and what it meant for our business, laying the groundwork for what would likely be years of fundamental change. The troops were not unaware of the market turmoil, but recent management changes and apparent random cost-cutting had left a wake of confusion. Our HR colleagues strongly recommended against sharing facts with employees (a stance to which they continue to adhere, presumably assuming employees left in the dark are productive employees). Since we were insistent on proceeding, HR decided to boycott the session so they wouldn't be held accountable for too much information sharing.

Essentially the message we wanted to send was one of hope. Yes the markets were battering us, and yes the corporate parent was tone deaf to our plight and continued to cut our expenses while increasing our revenue and profit targets, but nevertheless we had a plan to succeed and we needed everyone to pull in the same direction. Due to low morale, we had mugs printed with the slogan "The pride is back" alongside a photo of a majestic lion. Corny symbolism, but it served as one small token of the pride we felt in our history and our future. As with most tokens of this sort, many of the employees embraced the message, a few laughed and few weren't moved at all.

After a nice lunch and more than enough talking heads, we dismissed the employees back to their cubicles to finish out the day. By that evening, HR had convinced one of our new senior leaders that our slogan might be interpreted as a sign of looming trouble for our business. So later that evening they methodically visited each cubicle, taking away the mugs and destroying them. They left no note, no explanation, and refused to discuss the matter with me or my colleague. They would not acknowledge the mug theft program the next day when employees entered their cubes and found the mugs gone. Nothing was ever said. After all, if you don't speak about bad news, it won't happen. The symbolism of confiscating and destroying the mugs so the employees wouldn't lose morale had, as you might imagine, the opposite effect.

Several years of more profit squeezing and a determined failure to invest and I moved on. Since then the company has, naturally, lost tens of millions of revenue and profit, irreparably harmed goodwill with legions of customers, and been deemed irrelevant if not a laughing stock by industry insiders. A senior leader at the parent company predictably blamed prior management, claiming everyone failed to note the market changes.

How many business leaders today are afraid to speak openly about the challenges every industry and every business faces? How many leaders pay more heed to their "mug police" advising them to stay mum because potential legal liability or bad press is far worse than addressing the challenges head on, with conviction and bold action? Too many. Tough times should be addressed. The vast majority of employees are grown ups who manage to get dressed every day, raise their families, send kids to college, make it to work every day without the kindly mother ship directing their every move! Sharing tough times with employees doesn't mean you've somehow created a lifetime employment contract. They know there will be cost-cutting and even layoffs. But I'd much rather foster a work environment where employees know why things happen than one where we purposely keep everything secret out of a misguided sense of fair play.