Advice for a new CEO

In a recent column, the well-respected Financial Times business journalist Stefan Stern discussed research findings suggesting that "CEOs who carry out a big deal in their first year outperform their peers in the long run."  Stern quotes research from the Mergers and Acquisitions Research Centre (Marc) at Cass Business School in London, which studied the relative performance of 276 CEOs in 171 European companies. I thought of this when a business colleague informed me that he was taking on his first Chief Executive Officer role, after years of climbing the corporate ladder.  Having already made this leap some years ago, it occurred to me that few of the many business books I own and little of the friendly advice I received from peers were very helpful when I finally sat in the chair.  "Now what?" I recall thinking.  With that in mind, here are 15 practical lessons I've learned along the way that new CEOs might find helpful.

Bold actions speak loudly to the market. Just as Stern reports, many business leaders become constrained by their environment, burdened by the many internal forces striving to maintain the status quo.  Often a new leader can walk in the door and see an obvious course of action over which the previous leader endlessly hemmed and hawed.  Just as often, the metrics by which the new leader are measured offer greater flexibility than those constraining the previous leader.  In my own experience, my team and I pitched our corporate parent for years to obtain capital investment for our slowly dying business, but as the cash cow we were required to fund every other risky investment.  Years later the business received its capital investment, but only after losing tens of millions in revenue (essentially reducing the business by half), and even then it required a bold new CEO to drive through the necessary changes.  New CEOs have the ability to make bold moves, so instead of wasting time in analysis paralysis, study the data already available and make a move.

Small actions speak loudly internally. Global strategy is important to analysts and shareholders.  Having a clean restroom and a snow-free parking lot mean far more to the staff.  A CEO must consider these as priorities too, despite the temptation to delegate all minutiea.  You'd be surprised what one can learn when interacting directly with staff on issues that matter to them.

One of the first company-wide edicts I made as a new CEO was to eliminate our "no blue jeans" policy.  Our main facility was part production plant, with big whirring machines and forklifts and trucks coming and going at all hours, and part cubicle farm.  While clients and potential clients regularly toured our facility, I felt my staff was quite capable of judging when to dress up and when to dress comfortably, so I removed a rule I felt was paternalistic and unnecessary.  In another example, a telephone agent cautiously approached me on behalf of a wheelchair-bound colleague who had difficulty accessing a shared fax machine.  The worker's teammates had designed a lower shelf configuration using existing interchangeable cubicle materials and identified a new fax machine with controls on the side rather than on top. But since it would cost a few hundred dollars and require several levels of management approval, the proposal languished for months. I approved the plan on the spot. In a final example, I took over a team that spent all day every day marking up documents, yet the manager would allow only two new pens or pencils each week, the distribution of which was tightly controlled.  If you needed another pen during the week, you had to bring one from home!  When my new team told me this I laughed, thinking they were being facetious.  They weren't.  So we dispatched some folks to Staples and they returned with a huge box of pencils and pens and notepads and sticky notes and staple removers and other odds and ends.  Total cost was maybe $500, but the loyalty it created was priceless.

Care about everything. All CEOs rise through the ranks with expertise in some business functions and blind spots in others.  But a CEO has to be fluent in everything, even when there are good lieutenants responsible for the various business functions.  In fact, the greatest risk for a new CEO is to trust too much that the lieutenants have everything under control.  As a new CEO I cared about all that I could manage until I felt comfortable with how things were progressing and with the person in charge.  Until then, despite the hurt feelings and nasty looks I received from my senior managers, I cared about the menu for the holiday party, I cared about the high turnover in the call center, I cared about the aging machinery that frequently led to 3rd shift downtime, I cared about the building sign with the perpetually burned out lights, I cared about the low activity exhibited by our newest salesperson, I cared who was selected to throw out the first pitch on employee night at the local baseball field, I cared to inquire why the vending machine guy had his own key for our supposedly secure facility, and on and on.  Care about too much at first, rather than too little.

Finance is your friend. And your enemy. Without question your CFO or head of finance will be one of your most important allies. You don't have to be best friends, but you do have to have mutual trust. Sooner or later your CFO will gloss over a detail or two, explaining that the result is what matters not the underlying calculation. Or maybe she'll present a forecast with several nested assumptions that can't be readily explained.  Stop her right there and don't proceed until there is full transparency. Corporate finance is challenging. Even with an MBA and a lifetime in business, few new CEOs are readily conversant in every nuance. But you must be a master of your P&L, especially the numbers reported to the parent company, to the board or to the market.  In my own experience, a long-standing President who reported to me took it upon himself to protect me from the messy calculations necessary to produce our monthly financial dashboard, and my repeated attempts to learn more were thwarted. Only during his vacation was I able to scare the finance staff into revealing all of the complicated machinations, only to learn that (a) it wasn't rocket science, and (b) many of the assumptions were flawed.  Yet as CEO my signature and my signature alone was on the SEC filings. Don't leave a stone unturned when it comes to understanding the numbers that matter most.

Manage by sitting down. We all recall the management philosophy "management by walking around," which I quite obviously believe in.  But walking around isn't enough.  Sit down too.  Have lunch in the cafeteria occasionally with people you don't know.  Arrange for periodic informal breakfast sessions with random employees.  Go to the company-sponsored softball game and buy a round of drinks after.  If you have the skills (and whether I do is questionable), don a jersey and play in a game or two -- just don't wait until the playoffs.  Don't worry, few will be bold enough to criticize your performance!  (But if someone does, call on them for honest opinions on other matters too.)  I used to regularly don a headset and listen in on calls in my company's call center. And not the escalated calls that required a senior manager.  Just everyday calls from everyday customers with everyday issues. A half hour now and again is quite an education, and it sends quite a strong message to your staff.  (Incidentally, the TV show "Undercover Boss" effectively demonstrates this philosophy.)

You are not the top salesperson. This might be surprising coming from me, since my background is in sales. I pride myself on being the top salesperson in the room, knowing not only how to understand the client's needs but how to tie these to the benefits of my company's offerings, or knowing when there isn't a tie-in.  I'm good at it.  But there's nothing more disappointing to me than learning I have to be the best salesperson because no one else gets it done.  CEOs should be in the field regularly, far more often than most are.  In some cases it's ceremonial -- trot out the big cheese so the customer will see how important they are.  In many cases it's for someone else's benefit -- such as a sales manager or salesperson who stages a performance with you as the audience.  But as good as you may be, learn how to hire top sales leaders and salespeople and then work to support them from your position as CEO, not as top salesperson-in-chief.

Find a common enemy. One of my former CEOs taught me this lesson.  I was his first appointment on his first day, hours before anyone else arrived at the office.  My division was in trouble and I had made it abundantly clear to him during the interview process and to the corporate parent's CEO who was doing the hiring that my division needed attention.  He listened and within weeks we had a common enemy.  Ours had to do with some internal supply chain issues which were causing significant strife with our key customers, issues I had been railing about to deaf ears internally for some time.  Within weeks our new CEO created a company-wide slogan and an aggressive timetable to fix the issues, along with a public progress meter.  Then he did what I could not do with my peers -- he based a large chunk of the executive team bonus on solving the problems.  I won't go into details, but suffice it to say our battleship was spinning pirouettes in very short order, even though the management team had previously said it couldn't be done.  Your particular enemy may be a competitor, a technology challenge, a new product launch.  Anything that can be made tangible is fair game. Too many CEOs waste this tool on a too-common problem: they want more revenue or they want lower costs, so they try to pull out all the stops to work harder or to do more with less.  This isn't inspiring.  Of course some companies need a kick in the tail.  But if your main contribution as CEO is to suggest everyone work harder, then perhaps you too can work harder to identify something to rally around.

Good ideas may be right in front of you. Years ago our corporate parent hired a consulting firm to drive innovation among the various divisions.  They toured the world asking us for ideas we hadn't thought of, using a formulaic approach to "ideation" (consultant speak for brainstorming).  The main rule was one could not suggest an idea that in some form or another had been suggested previously.  The assumption was that our wise leaders had already discarded these old ideas after careful consideration, and as if to prove the point Exhibit A was the absence of the idea in action.  Trouble is, many of our good ideas had never seen the light of day in the normal course of business, whether due to politics or inept management or distractions.  So these consultants spent millions of our money to collect new ideas when there were thousands of solid ideas readily available if only the right level of management could see them.  As a new CEO, you will be approached by many people with agendas.  Learn how to filter out the noise and the self-promotion and you will absolutely find game-changing ideas already well-formed in the minds of your people who live and breathe these issues all day long.

CEOs learn to eat alone. If you believe in management by walking around (or sitting down) then you really shouldn't eat alone very often.  But you will find that nearly everyone you meet has an agenda for self-promotion.  They nearly always start the same way, praising everyone and everything and then slowly they begin to criticize everyone and everything.  Some are blatant, some are more subtle, but nearly everyone hopes that you'll intervene in their particular problem.  And this is not directed solely at junior staffers -- I'm referring to the executive management team!  If we could harness the energy of the animosity typically found between fellow executives, then we could provide sufficient electricity for the eastern seaboard for several months.  If you befriend one, you make an enemy of another.  If you befriend one of their staff, they begin to harass their staffer. If you let slip some gossip or a dig at a colleague, it will be shared before the day's out.  Sadly, you can be great acquaintances with your staff.  But you can't truly be friends.  For me, playing pickup basketball after hours with the inside sales and mailroom guys was a way to interact as "just one of the guys," once the guys learned I didn't expect to be passed the ball when I didn't deserve it, and it was okay to call fouls on me when I did deserve it.  But for many CEOs, they find companionship in peers at other businesses because as CEO you can never really let down your guard.

You are the CEO of Human Resources. If you haven't read Robert Fulghum's fantastic book "All I Really Need to Know I Learned in Kindergarten" then run, don't walk, to buy a copy.  If you've reached CEO status, then you've spent years in executive management where you learned that much of your day is spent addressing petty squabbles among your staff, including even senior (in rank and age) people.  As CEO, you may be surprised to learn that the only thing that's changed is the titles of the combatants include "Vice" and "Executive" and there is no higher court than you.  Much of your time is spent dealing with H.R. issues that will distract you from the real business at hand, but if left unattended will get out of hand.  But H.R. issues are not all bad.  One primary role of CEO is to find quality talent.  I recall hearing that Jack Welch, the famous (former) head of GE, spent half his time on people management.  As a young manager I found this preposterous.  But as CEO I realized there was almost no action I could take that would have as lasting an effect as finding the right people and eliminating the wrong people.  So as much as you like strategy or operations or sales or finance or IT, get used to H.R.

Value your secretary... from a distance. A good assistant is hard to find.  They combine a talent for time management, logistics, politics, scout leader and mother. Some secretaries come with the office, and they have the advantage of knowing the ins and outs of the organization and how to get things done. Some you bring with you, and they have the advantage of knowing how you operate. Most are quite capable of acting on your behalf, though some go too far and act as if they're second-in-command.  I grew up watching television secretaries like Betty, at Bewitched's McMann & Tate, and I recall thinking that asking your secretary to handle anything but work-related tasks is demeaning, until I met Arleen, my capable assistant of several years, who went out of her way to handle small errands and other minor personal business for me so I could focus on the job at hand. With time being a CEO's most precious commodity, I learned that it's okay on occasion to ask your secretary to handle some personal business, so long as she (or he) is okay with it.  Needless to say, when you spend a lot of time with someone in a work setting it's necessary to maintain certain boundaries. An assistant is a valued employee, not a serf, and not a "companion" in every sense of the word. One of my prior executive secretaries was a paid informant for the parent company's leaders, which was helpful when I needed to "send a message" through back channels but challenging when my every move was recorded and reported. Find what works for you, find someone you can trust and delegate to in verbal and non-verbal ways, and then treat him or her very very well.

Everyone is someone's Assistant Brand Manager. I learned this maxim from a former CEO who rose through the ranks of Proctor & Gamble's well-known executive development program.  In consumer products parlance, an assistant brand manager (or ABM) is the grunt who does all the work while the brand manager gets the glory, the worker bee who keeps things moving behind the scenes. However, even when you reach the CEO suite, the one with the kitchen and the private bathroom and shower (I've had this and it's as cool as it sounds!) and you believe you've finally arrived, it's helpful to remember that you are still answerable to someone. There will come a time when you can't delegate some menial task, when the Board or the parent company CFO comes calling, and you have no choice but to roll up your sleeves, edit that acquisition justification memo, tweak the quarterly earnings PowerPoint, add up the proposed savings in the departmental budget submissions, and so on. No matter how important you are, or how important you think you are, someone will always consider you their go-to person, their assistant brand manager. And you had better be ready to answer the call.

Embrace the We. At times a new CEO, particularly one joining from outside the organization, will slowly ease into using terms like "our business" and "our markets" so as not to offend the insiders. I'm sure we can all dig into our past to recall hearing a new leader use a phrase like "our products" and finding it odd, even offensive, that this person claimed ownership of our output on day one. The reality is that it's healthy to take ownership right away -- of the failures and the successes, of the future and the past, of the team and the offerings. Like a star athlete who joins a new team, displacing the existing captain and becoming the new face of the franchise, a new CEO must take charge because he is in charge. There is no time to waste on blaming the last guy or whine about fixing the last guy's mess. There's only time to focus on our problems, the ones we're facing right now.

Act. When you're in the CEO seat, there's no time to gently ease into anything. Whether you're in a position to strike a sizable deal or a substantial acquisition as Stefan Stern reports, or merely take ownership of existing work streams, Stern is absolutely right:  CEOs who take immediate action are more likely to succeed than those who take their time getting up to speed. It's easy to select a CEO from the existing executive ranks, one who knows the culture, the markets, the products, one who won't disrupt too much while perhaps incrementally improving the business. But CEOs are expected to drive change, and you can't drive substantive, sustainable change if you don't act quickly and boldly.

Focus beyond the bonus. I grew up in Rochester, New York, the headquarters of Eastman Kodak.  My father spent 28 years toiling for the once mighty film manufacturer, which has struggled to adapt in the digital age, and my formative years were spent observing CEO after CEO miss opportunities to drive change.  I firmly believe this resulted from misaligned incentives. How can a CEO make decisions and allocate resources to build a company for the long run when bonuses are meted out based on short-term results? Many CEOs have significant compensation triggers at 3-year intervals, so they focus on short-term performance metrics and too often this omits consideration of long-term, more lucrative investments. It seemed as if no Kodak CEO would choose the long-term health of the business over short-term wealth creation and as a result the business floundered, until finally it lost enough market share and profits that there was no choice but to rebuild for the long-term.

I have similar observations about a former legal technology employer of mine. The CEO has had an unusually long 10-year reign, but he has no 10-year vision. Rather, he's had a series of short-term plans where acquisitions grow the top line and reorganizations improve the bottom line, while the business slowly but inexorably declines.  You can blame the worker bees for only so long, but I find it unconscionable that he's earned millions while the main export of the business is quality alumni.

I have absolutely lost compensation from decisions that helped my organizations in the long-run because it was the right thing to do, when I could just as easily have made a decision that earned me money and helped the business in the short term, but I shouldn't be lauded for that.  As CEO, we're expected to think long-term and it's partially the fault of boards and flawed senior management for creating incentives that emphasize the short-term.  As you ponder your strategy and investment options, try to limit the amount of influence your personal compensation will have on your decisions, and instead focus on whether your decisions will leave a healthy company 5 and 10 and 20 years out.  Obviously you can't ignore the short-term, but trust me, there are plenty of people on your team whose incentives will drive short-term performance.  Try to be the one who thinks differently.

Good luck in your new CEO role, my friend.

Timothy B. Corcoran is principal of Corcoran Consulting Group, with offices in New York, Charlottesville, and Sydney, and a global client base. He’s a Trustee and Fellow of the College of Law Practice Management, an American Lawyer Fellow, and a member of the Hall of Fame and past president of the Legal Marketing Association. A former CEO, Tim guides law firm and law department leaders through the profitable disruption of outdated business models. A sought-after speaker and writer, he also authors Corcoran’s Business of Law blog. Tim can be reached at Tim@BringInTim.com and +1.609.557.7311.

Corcoran's Greatest Hits, Volume 1

A long time ago when I was a radio and club DJ, I owned a lot of Greatest Hits albums and CDs so I could fulfill listener requests for popular songs. Some of these collections were hastily compiled by an artist's record company in order to fulfill a contractual obligation. But sometimes the collections were compiled with care and enthusiasm and included never-before-released songs from the vault, liner notes from the artist and other material to appeal to the true fan. With that in mind, I present the top five posts from this blog over the past year along with additional insights of my own and public and private reader reactions. Legal Project Management Q&A - For quite some time I've been writing about the need for law firms to embrace business concepts to improve operations.  Last year I adapted some of the concepts and techniques I learned in my corporate life and developed a curriculum for educating lawyers about project management.  Turns out there's a whole discipline growing on this topic, now dubbed Legal Project Management, and there are some quality trainers offering insights.  But there are also a number of folks hopping on the bandwagon.  In my view, one can obtain certification in a discipline, one can even teach the concepts, but one doesn't really know the topic until one applies these techniques in a commercial enterprise to make money.  Ask your project management consultant for real commercial examples of these concepts in action.

In addition to imbuing my approach with real-life experience, I also focus on the big picture and keep away, at least initially, from the statistical and quantitative basis that others believe is necessary to commence a project management process.  One Six Sigma Black Belt criticized my approach, exclaiming in disbelief that no program that addresses project management and process improvement could possibly succeed without a heavy dose of analysis and math.  I disagree.  Well, at least I disagree insofar as I'm confident few law firm partners will sign up for a course that's heavy on math and analysis.  But many will sign up for a workshop such as mine (and hundreds have!) where we cover the basics, whet participants' appetites for how project management skills can be applied to a law practice and generate sufficient interest to go to the next level where -- surprise! -- we get deeper into the underlying math and analysis needed to truly benchmark and track performance.  On a few occasions my colleagues and I have replaced a consultancy that specializes in engineering firms, or that applies a standard Six Sigma methodology to any business process with little customization.  I've learned that the practice of law, while not as unique as some lawyers would have us believe, does require customization and care to ensure that the concepts are properly applied.

If you lead a law firm and you're convinced that with an improving economy everything will go back to the way it was, and this is a good thing because it's right that lawyers should demonstrate value primarily by billing time, and it's right that lawyers should treat each new engagement as if it's the first of its kind because this is the only way to ensure the client receives the most thorough work product, then you don't need project management.  But write down these beliefs and note how firmly you believe in them, and then let's talk again in a couple years.  I'm certain your views will have changed, because once everyone else has adapted you will too.

A Note on Reducing Law Firm Compensation - This post generated a number of emotional responses.  It's also one of the most commonly searched topics on the blog, suggesting that it's a hot topic elsewhere.  When I wrote this post, quite a few large law firms were conducting public and stealth layoffs of staff, associates and even non-equity partners, and just as many were reducing compensation of these same groups.  Popular legal gossip blog Above the Law teamed with Law Shucks to track these layoffs, and according to their research as of today's writing there have been nearly 15,000 job losses in the legal sector.  This is an unprecedented statistic in a business segment that is typically known to perform well in good times and bad.

It's challenging to write academically on such an emotional topic while the lives of real people are so significantly impacted, but the original intent of this post was to provide some context for why the same market dynamics of supply and demand that influence other industries are certainly factors in the legal profession.  In short, when demand for a product or service declines, there tends to be an oversupply of the product or service, and this drives prices down.  When product or service producers experience lower revenues from lower prices, they look to reduce costs in order to maintain profitability.  It should have come as no surprise that associates and staff, the lowest members on the Biglaw totem pole, would experience the greatest pain when demand dropped and law firms cut costs.  But as I said then, when demand returns, hiring and compensation will increase.  And it is, and they are.

That's the thing about markets -- they tend to operate efficiently when you look at the big picture.  Unfortunately, real people and their livelihoods were sorely impacted, often through no action or inaction of their own.  Which is why this blog is intended to help business leaders make smarter choices, to run more efficient and effective businesses, so we can enjoy profitability while also delighting customers and attracting quality employees.

Law Firm Leaders: Save Money Now By Cutting Marketing - The title is ironic.  I would not counsel any business leader, especially a law firm leader, to limit the organization's visibility to its target audience, particularly when there's a good possibility that buyers are actively seeking new providers.  But I figured the title would catch the eye of leaders looking to do just that, because after all, isn't marketing a nice-to-have, not a must-have?

There were a few different points in this post.  First, every marketer will claim that one should spend more on Marketing during a downturn, but like a politician who's developed a nice ten-word sound bite but doesn't know the next ten words, i.e., the substance behind the rhetoric, many marketers repeat this mantra without offering salient details such as when, where and how to increase marketing in a downturn.  As marketers, we can't just try to protect our jobs without regard for the consequences, like auto workers refusing to negotiate labor rates even if it means the plant must close.  We should be thoughtful and prudent in our spending during a downturn, because while surely there are opportunities to be had, there are also a lot of people willing to take our money in return for a lot of empty promises because they too are suffering.

I also wanted to take on the lazy business leader who applies cuts across the board without regard to growth potential or profit contribution.  In tough times we all need to tighten our belts.  But if Mom loses her job, do we sell the car to save money, and now Dad can't get to work and he loses his job too?  A corny analogy, but in effect many business leaders our of some misguided sense of fairness try to spread the pain evenly.  Hogwash.  The current and potential growth engines might need relatively greater investment in tough times, and the slow growth or cash cows might deserve nothing, so long as we're willing to acknowledge that this will effectively kill them.

The other point was to distinguish between marketing as defined by many lawyers and marketing as defined by experts.  Just the other day I was reminded that this is a long-term battle.  A Biglaw partner asked me if I could help the firm get its RFP response approach "right."  I suggested we might have very different views for what is "right."  An elegantly bound booklet full of deal lists, league tables and lawyer bios, accompanied by boilerplate responses to an RFP's standard questions is very often a waste of everyone's time.  An RFP that addresses the client's business challenges and offers potential solutions along with a project plan and a budget is very often a winner, even if it's a tenth of the size and weight of the alternative!  But lawyers want the former (and so do many marketers).  If a law firm leader wants to cut marketing costs, my suggestion is that in addition to reviewing the marketing budgets and org chart, he should look in the mirror and identify the silly things lawyers do under the guise of Marketing.  And the marketers can help.  After all, we're in this together.

Addressing the Martindale-Hubbell Question - I receive calls nearly every week from law firms big and small asking if I'll help them negotiate their Martindale-Hubbell contract.  Many, but perhaps not all, readers of this blog may know that for a period of time I led the large law, international and corporate business for Martindale-Hubbell.  Obviously I know where the bodies are buried and how to negotiate against my old team (actually, now that LexisNexis manages the business, nearly everyone I knew is gone).  But I have no interest in doing so.  Despite the unethical, short-sighted, juvenile and profoundly incompentent manner in which I was treated when I left the organization, I spent too many years building its brand to take any joy in knocking it down.  Besides, the leaders of the parent company need no help from me or other alumni to harm the franchise.

Of more interest is that when it comes to directories, everyone continually asks the wrong questions!  There is no list of "good" directories and "bad" directories.  Even comparing Martindale to Ted's List of Blond-Haired Left-Handed Lawyers of Southern North Dakota is a misnomer, because one is a multimedia network connecting buyers and sellers, and the other is a vanity listing which lawyers buy to feel good.  But I'll leave it to the Martindale marketers to tell their story.  Despite the title, the post is about how one measures the impact of any legal directory to influence your prospect's buying decision.  After all, isn't that what it's about? 

The calculus is fairly simple: define your target market, identify the ways to reach this market, identify the manner in which they make buying decisions, and then be in those places and do those things.  If the cost to do this effectively is too high, seek out proxies.  If a legal directory has access to the target market and influences a buying decision --and it can prove it -- then perhaps an investment of a dollar there gets you ten dollars of return.  If not, move on to the next tactic.

Marketers are just as bad as lawyers when it comes to judging legal directories, just on the opposing side of the argument.  Typical legal marketer discussion of directories:  "Does anyone use the Tall Lawyers of Montana directory?  One of my delusional lawyers thinks it's an important investment.  I've tried to tell him that all directories are a waste, and he should spend time developing a Facebook fan page instead because I think it's a better investment."  In Biglaw land, few buyers will identify, evaluate or select a law firm based solely on its representation in a legal directory (or network), but sometimes it can be a differentiator when all other factors look the same.  It's important to know when this is the case and when you're throwing your money away.

Web 2.0 / Social Media Update - I've long been active in social media, before we even used those terms.  I had the good fortune of joining Steve Brill's team in the early '90s when Counsel Connect was launched as a sort of AOL for lawyers, which was several years after I joined AOL and participated in its chat groups, which was a year or two after I joined Compuserve.  For many of you, these names mean nothing.  That's okay.  Suffice it to say, I've long been a fan of learning from experts wherever they hang out, and occasionally I'll have something to say that I think others might find useful.  The venues change, but the concept still applies.  In this post I shared the many legal and non-legal blogs I read daily, and the legal and non-legal social networks where I spend time, as part of my effort to stay connected and stay informed about the changes in my chosen field.

This was an enormously popular post a year ago, and while untold millions of users have joined the social networking bandwagon since then, I suspect many are still looking for a roadmap of what's good and what's a waste of time, from the point of view of someone who's been there.  Rather than point people to the year-old summary, I'm updating the post and I'll publish that shortly (Update here).  My daily reading list has expanded yet the frequency of my commenting (on this blog and elsewhere) has declined somewhat as I try to strike the right balance between studying my field and working in my field.  I know that I'm not alone in seeking this balance.

So there you have it.  The top 5 posts from this blog in the past year.  I hope you enjoyed them the first time, perhaps enjoyed reading them a second time, and I hope these liner notes were helpful additions.  Feedback is always welcome.

Are Your Conference Speakers Teaching or Selling?

Raise your hand if you've attended a panel discussion at a conference and one of the speakers sounds suspiciously like he's selling a product or service rather than educating the audience about the panel topic.  Judging by all the raised hands, it's nearly unanimous that we've all been insulted (or is it assaulted?!) in this way.  This is a topic with which I have close  familiarity from a variety of perspectives and so I was interested to read the post at Sharon Nelson's "Ride the Lightning" electronic evidence blog (HT to @ronfriedmann for pointing it out) debating the pros and cons of allowing vendors to purchase conference speaking slots. The debate is a familiar one:  should legal conference panels be comprised solely of neutral parties such as academic types and buyers and users of legal services?  And if we allow vendors and sponsors and consultants to participate, parties who may have some commercial interest in promoting their products (or themselves), will this erode the quality of the content and turn the panel into a one-sided affair, or worse, a long infomercial?  Does the risk of commercialization increase when the vendors are also financial sponsors of the conference?

I've spent years managing sales teams or leading businesses that invested heavily in consumer education as part of the process of selling our products and services.  This meant that my team sponsored conferences or conference sessions and, yes, I've spoken on many panels which I had also sponsored.  I also led the business development function at a global law firm where I was considered a trusted insider and so I was asked to join conference panels to provide the buyer's or user's perspective on numerous topics.  I'm now a legal management consultant who's asked to speak regularly on conference panels as an independent observer debating issues of the day in our beloved legal profession.  Amusingly, on more than a few occasions, statements I've uttered as a consultant or as a law firm insider were deemed more credible and unbiased than the exact same statements I've made as a vendor.  Perhaps some audience members hear what they want to hear?

In fairness, I've had vendor colleagues who perceived any opportunity speak on a panel as an opportunity to pitch their product.  This type of behavior ruins it for the rest of us, and it usually stems from one of two sources:  the vendor representative is just that, a vendor rep, who knows little about the market dynamics beyond the features and functions of her particular product and therefore is in no position to offer consumer education on broader issues; or the vendor does such a poor job of consultative (a.k.a. "needs based") selling that he believes he gets one chance to pitch his wares, and as a result behaves in such a way as to make this a self-fulfilling belief.  I've written about the need for vendors to become part of the market they serve, to participate in the community alongside their clients, competitors and colleagues.  Sadly, many view their vendor role as a day job and when their sales call or booth shift is over, they want to do anything but spend time in their marketplace.

In Sharon's post she shares the inside scoop from a conference organizer who is incensed at the arrogance of vendors who try to buy selling time at the podium.  But conference organizers aren't without sin in this debate either.  One challenge with conference committees is that there is often little continuity from year to year.  On two separate occasions in my career my panel was rated the highest of all panels at the conference.  The following year, neither conference committee would take the time to even consider a follow-up session, a 201-level course, if you will.  In a more recent example, the new conference planners retained by a national legal organization specifically prohibited all but the most prominent consultants and vendors from participation in the educational panels, out of some apparent misguided sense that users and buyers are the only credible sources for peer education.  Does anyone really think that a neutral consultant, or an objective, education-oriented vendor, either of whom has spent time in dozens or even hundreds of firms, can't shed additional light on a topic as compared to a user who, almost by definition, has experience at just one firm?  Conference organizers, and in particular conference programming committees, tend to want to leave their mark, which often manifests itself in finding new speakers and not relying on prior speakers... regardless of how well they were received.  Eliminating all past speakers, and eliminating all but the buyers, are dumb ideas, but no more dumb than lazily inviting the same speakers year after year.

The moral of the story is that there are few hard and fast rules which apply when organizing conferences.  I should know, I've been the conference chair of a national legal industry conference, and I and my teams have organized (not sponsored, but ran) many dozens of conferences.  We often invited industry experts, some of them vendors, sometimes even competitors, to participate on panel discussions in order to present compelling educational programming.  However, we checked references of potential speakers -- starting with evaluations from prior speaking engagements and on multiple occasions polling past attendees to assess a speaker's propensity to sell from the podium.  The vendors who sell rather than educate are usually well-known.  Those who offer new, insightful, relevant contributions year after year should not be constrained because some poorly-trained hack in the same field conducted a product demo in lieu of a didactic approach.

I understand the emotion behind the pay to play debate.  But it's not the fact that a vendor sponsors a panel, or the fact that a panelist derives an income from selling products or services to audience members, that causes the problem.  After all, I've wasted as much time listening to biased users who, for example, resolutely believe their firm's technology implementation is perfect for everyone else on the planet, as I have listening to vendors pitch their wares.  The key is to discard prejudices and evaluate each speaker on his or her own merits.  And let's not be afraid to discard a panelist -- even after the program guide is published -- if during the rehearsals a panelist is incapable of educating rather than selling.  Do this a few times and the word will get around to the community:  send your best or don't send anyone at all.

As for me, my past teams often accused me of not once mentioning my company or my products. One colleague remarked dryly, "Tim, I don't think anyone would be offended if you thought to mention our company name, or mentioned that our company offers products that help users address the business issues you were discussing."  Of course, at one conference, immediately after the panel chair introduced me, an audience member stood up and  exclaimed, "I'll learn nothing from a vendor trying to sell me something!" and then he stormed out... before I had even said a word.  And I'm the one accused of having a bias?

Addressing the Martindale-Hubbell Question

One of the most common questions I'm asked as a legal management consultant specializing in law firm marketing and business development is whether there's any remaining benefit to participating in the Martindale-Hubbell Law Directory.  It's also one of the most common queries on the various law firm marketing discussion groups (here and here) and a common topic for legal bloggers (here and here) and journalists (here and here).  My expertise in the category comes from having led the Martindale-Hubbell large law and corporate business some years ago.  However, I typically remain quiet on the topic.  I'm told that, as an alum, critical commentary may be discarded as some sort of sour grapes and any positive commentary may be mistaken for misplaced loyalty.  The reality is, I may bring the most objective perspective of any pundit.  And it's from this perpective that I suggest that we're all asking the wrong question. Law firm leaders have an unusual reliance on precedent for decision support.  Invariably when assessing whether to launch or cease an activity, they will look to what other law firms are doing, particularly firms considered to be competitors or in their peer group.  There's strength in numbers, so if other firms are doing X, or discontinuing Y, this provides context and cover for us to do the same.  The problem with such thinking is that benchmarking works best in comparisons between similar entities, and law firms are as different as other businesses, even those in the same space.  (Do you think Mercedes-Benz closely follows what Kia is up to?)  Also, and not to put too fine a point on it, just because a respected competitor is doing something, or stops doing something, doesn't mean it's a smart decision.  The object lesson is that mimicking dissimilar organizations in dissimilar markets and in perhaps dissimilar geographies that offer dissimilar services to dissimilar clients, is hardly an exercise in sound business management.

Whether it's Martindale-Hubbell or any other directory, and there are many players in the space (here and here and here and here and here, to name just a few), the question for law firm leaders isn't whether other firms are participating or not, the question is whether our participation is an effective use of our law firm's capital.

A legal directory is but one component of a law firm's marketing mix, in the same way that a bowl of sugar-coated chocolate lumps (or is it chocolate-covered sugar lumps?) is part of a balanced and nutritious breakfast.  Rely on one component alone and your results may be less than desirable.  In a bygone era a legal directory may have been the only marketing tactic a law firm employed outside its own native market.  But today, there are countless marketing tools available, and the Internet provides potential access to countless buyers.  But access to such tools doesn't always mean they're used effectively.

Recall the appearance in the late '80s and early '90s of word processing and desktop publishing software programs, which provided average computer users with sophisticated tools to rival those of professional publishers.  What resulted was primarily an increase in poorly-designed, barely-readable newsletters produced by anyone with typing skills.  Want an example closer to home?  How many law firm leaders believe that ready access to self-help legal tools has eliminated the need for estate, bankruptcy and real estate lawyers?  Merely having the tools doesn't confer expertise.

This result also occurred when tools for web publishing became more accessible.  Recall the endlessly scrolling HTML pages of yesteryear, complete with blinking icons and spinning globes.  While both the tools and the professionals using them have improved over time, quite a few law firms continue to waste time and money because they deploy their marketing tools ineffectively.  Publishing a website but doing little to drive traffic from qualified buyers is much like printing a pretty, glossy brochure and advising potential clients to visit your office lobby if they want to read it.

Many law firm marketers and leaders focus on the design or even the usability of their firm's website, yet ignore the confusing area of search engine optimization (SEO).  Even many who invest in SEO efforts do so with the underlying assumption that their targeted buyers rely on the popular search engines to inform their buying decisions... it sounds logical, but is it actually true?  But it's not just about websites.  It's not too hard to identify the many associations and events populated by target clients.  Still, knowing this and actually sending lawyers to these events to participate are two very different things.

And this is where legal directories come in.  While law firms can do a lot of outbound promotion of their credentials, it's challenging and expensive to attract a lot of quality, and qualified, inbound traffic on a website.  Similarly, while law firms can send lawyers to mingle with potential clients, they can't send lawyers everywhere.

A sophisticated law firm marketing strategy plan will identify the ideal targets for the firm's offerings.  The subsequent tactical plan will outline specific actions to increase visibility with these targets, to demonstrate expertise and to convert targets to clients.  Reaching the target audience requires being visible in the places they visit, prominent in the publications they read and, of critical importance, being part of the consideration set when the buyer is ready to buy.  Some marketing tools are effective at generating awareness, e.g., advertising, sponsorships.  Others are effective at demonstrating expertise, e.g., speaking engagements, articles.  Some offer a little of both, e.g., websites.

Now let's play this out.  We've identified a target market, consisting of potential clients in a specific industry located in multiple jurisdictions globally.  We've purchased some search engine keywords to drive traffic to our website, we've secured a speaking engagement for one partner on a panel at a leading industry conference, another partner has been invited to contribute a monthly column in a trade publication, we publish a blog of legislative and regulatory changes impacting this industry, we send several lawyers to various industry association meetings, we advertise in multiple trade publications and we sponsor quite a few industry events.  The aggregate cost of these tactics is $250,000 -- assuming our search engine key words aren't in high demand, or the cost could easily reach ten times this amount.  And lest we quibble over the amount of this imaginary investment, trust me when I suggest this is a very conservative estimate.

Now imagine there's a legal directory that also targets this industry.  It offers a monthly e-newsletter containing lawyer-authored articles to thousands of opt-in industry decision influencers and decision makers.  A section of the legal directory website is dedicated to showcasing the unique talents of the law firms serving this industry.  The legal directory search engine allows industry insiders to research law firms claiming industry expertise, and provides users with quantifiable evidence of expertise to help differentiate from those law firms merely aspiring to enter this market.  Imagine that visitors to the legal directory website can click through to the member law firm's own website, and this traffic represents a meaningful portion of overall traffic to the firm's website, with the added bonus that these inbound referrals clearly represent qualified and quality traffic, and not, say, law students trolling for employment opportunities.  And don't forget about the legal directory's ranking of law firms specializing in this industry, compiled by editors who conducted independent and objective research.  In addition, perhaps the legal directory allows clients to provide commentary about the capabilities and service posture of the law firm, so that other interested buyers can make more informed decisions.  And maybe the legal directory forms an alliance with the leading industry association to embed a lawyer search engine on the association website.  Perhaps the legal directory offers online discussion forums where lawyers can contribute to substantive discussions in their practice area and engage potential clients in a running dialog.  And finally, what if the legal directory can provide statistical evidence that the sum total of its efforts influence buying decisions?  Can you quantify the influence that your other marketing activities have on your target clients' buying decisions?

There may not be a legal directory that does all of these things, or at least all of these things for all practice areas and industries.  But some may provide a host of meaningful opportunities to increase visibility and demonstrate credibility to a targeted market.  And that's the whole point.  All legal directories aren't created equal, and just because one doesn't suit your firm's needs doesn't mean another won't.  To be clear, in some cases there may not be any legal directory that meets your needs.

None of the above are unique tactics that a law firm itself couldn't adopt.  However, the scale of the investment to replicate the volume and quality of the traffic generated, to reach such a high number of qualified potential targets, and to sustain this visibility and demonstrate this expertise over an extended period of  time, will generally cost substantially more than the modest investment above.  Imagine if a law firm could obtain access to these benefits by participating in a legal directory for $10,000.  Or $50,000.  Or maybe it's $150,000.  Perhaps it's $250,000.  This price may seem high as a single point statistic on an invoice, but is it?

The point is, the value of such an investment can be effectively measured only by comparison to the alternatives.  If the firm can find a way to reach the target audience in a similarly effective manner at a lower cost, it should run, not walk, to do so.  There's no rule that says a law firm should invest in any legal directory, any more than it should invest in a website or in publishing client alerts or printing glossy brochures.  It's merely a function of how buying decisions are made with the target market, and what tactics influence buyers and buying decisions.  Some firms -- though thankfully fewer than in previous years -- still believe that marketing is about answering the phone in a timely manner.  And for some firms, this may be so.  For the rest, marketing is about investing thoughtfully in tactics that will provide a return.

So what does this mean for the "Martindale question?"  The analysis should contain a disciplined approach to weighing alternatives, comparing the costs of reaching targeted buyers through various means.  If a law firm leader is convinced that the firm's particular target audience can be delivered without investing in Martindale-Hubbell's legal directory, then this is an easy decision.  If the analysis suggests that Martindale-Hubbell can be a multiplier to the firm's own marketing efforts, and through careful negotiations the cost to participate is tolerable, then this is also an easy decision.

Likewise, it's okay to opt out simply because you want to save money and since others are doing so it's seems like a safe decision.  But let's not pretend it's a rational marketing decision when it's merely cost cutting.  It's also okay to invest time and energy in directories that provide little access to clients, but that allow the partners to boast of obtaining a top ranking in their practice category.  But again, let's not pretend we're making a rational marketing decision.

Many pundits will talk about the scourge of legal directories, or the demise of Martindale-Hubbell in particular.  My approach is more circumspect when advising my law firm clients.  Such investments are derived from analysis, not hysteria or conventional wisdom.  Even we supposed experts should be ignored if we enter the discussion with a pre-formed opinion.  I certainly don't feel qualified to advise a law firm leader of the effectiveness of his or her marketing investments until I study what he or she is trying to accomplish and what alternatives are available to achieve these objectives.

Some years ago a law firm hired a chief marketing officer from outside the legal profession, and she had no prior knowledge or pre-conceived notion of the effectiveness, or lack thereof, of legal directories.  At first she was a client but over time we've become friends.  When we first met she relayed that many of her partners and staff encouraged her to drop all directories outright.  Instead, she commenced an exercise to analyze the reach and effectiveness of each of the firm's existing legal directories, and invited representatives of other legal directories to provide quantifiable evidence of their product's reach and effectiveness.  In the end she canceled many, added a couple, scaled back a few, and augmented some, without regard to internal politics or favorites.  She even declined a fully-paid trip to speak at an industry conference, sponsored by one legal directory provider desperate to influence her decision.  Her announcement memo to the partners overseeing her analysis was detailed and disciplined and effectively eliminated any arguments, so everyone could go back to work.

I recently had coffee with my old friend and I asked her how it all worked out, with several years of history to analyze results.  She laughed and said that not every decision has worked out in the long run, but she feels confident that her analysis is as sound as it can be, and certainly more effective than her firm's competition.  She's now earned the credibility to act quickly and without onerous committee oversight, so each time one of her major competitors makes a hasty decision to reduce its spending on sponsorships or advertising or directories in areas her firm targets, she tends to increase her investment in order to capture the traffic the competition has given away.  This works for her, and though it may not work for the rest of us, how many of us are prepared to submit our decision criteria against hers to justify our marketing decisions?  I didn't think so.

One final note: the Martindale-Hubbell discussion isn't complete without acknowledging that the organization and the product offering has changed dramatically in recent years.  Countless wannabe pundits have concluded that "no one looks for lawyers in books any longer!" as if they're the first to offer this startling revelation.  If your analysis of legal directories, whether Martindale or any other, fails to consider the online and in-person components of the value they deliver (or claim to deliver) then your analysis is outdated.

Update:  Based on the many comments this post has generated over time, I'll make two additional points:

(1) Some directories are vanity publications, with no redeeming feature other than the ability for a lawyer to say he or she has achieved some professional distinction, albeit of dubious value.  The various state bar associations have started to look more closely at legal directories in an effort to help consumers distinguish between those that provide a valuable service and those that are mere puffery.  Not all legal directories can withstand such scrutiny.  Sooner or later, every legal marketer is asked to support a lawyer's "nomination" to the "Tall, Blond-Haired, Left-Handed Lawyers of the Upper Midwest" directory.  Nothing wrong with a little vanity press for a needy lawyer, but once again it's important to distinguish between such actions and actual strategic marketing.

(2) A common objection to participating in a directory is what I call the "mall rebuttal" which is usually some version of "We prefer not to advertise or promote our firm any place that our competitors are doing so."  The logic, presumably, is that if we promote ourselves in close proximity to competitors, we risk driving our potential clients to the competition.  If this were actually true, then there would be no malls, or shopping centers, or auto dealer supercomplexes.  In other words, if you can identify a venue where qualified potential buyers in a buying mode are routinely visiting, why would you reject this venue in favor of a isolated outpost on the edge of town than can only be visited by special arrangement?

As I stated above, I'm stridently neutral on whether a legal directory is an effective marketing tactic for a law firm.  I can't positively declare that a given directory is a terrible idea, or a wonderful idea, unless I know what your firm is trying to accomplish with its marketing strategy, and the cost of the alternatives available to do so.  If you conduct this analysis, you may be surprised to learn that some directories will survive the scrutiny, and others will fail the test.  You may also find that quite a few other common marketing tactics, when held to a standard of proving ROI, are not productive investments.  But measuring ROI is a topic for another day...

Procurement for controlling cost - the cure or the affliction?

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.