New Group to Address Client Value - Pricing, Project Management, Process Improvement

Those of us who have spent years in the trenches helping law departments obtain more value from outside counsel, and helping law firms better profit while delivering more value to their clients, have long lamented the lack of an organized effort to share best practices with others facing the same challenges, particularly with regard to best practices in pricing, project management and process improvement.  Our wait is over:  the international Legal Marketing Association (LMA) announced the formation of a new "Client Value" Special Interest Group (SIG) with a charter to network, educate and share best practices among law firm, law department and service provider professionals who focus on pricing, project management and process improvement.  The SIG is one of several offered by LMA; the others focus on Competitive Intelligence, Small Firm/Solo Marketing, Service Providers, Social Media and Chief Marketing Officers. I've faced these issues from all angles -- in my role leading business development for a global law firm, I was constantly faced with drafting RFPs that were client-focused and priced to win while also maintaining law firm profitability; as a CEO and senior corporate executive, I was regularly battling the in-house legal department for more transparency on budgets and risk management, and hiring outside counsel who took a "you need us more than we need you" approach to client interaction; as an executive with several service providers, I've brought to market products and services designed to help law departments and law firms forge stronger and more collaborative relationships; as a management consultant, writer and frequent keynote speaker, I am constantly addressing audiences of in-house lawyers or private practice lawyers struggling with adapting to the enormous changes taking place in the legal profession.  One thread has been constant in every one of these interactions:  no one can do it alone!  It's critical for clients and providers to get and stay on the same page to ensure that both parties enjoy a mutual and financially lucrative relationship.

This issue of mutual advantage, in my opinion, has been lacking from many of the existing perspectives:  whether it's the standard client panel filled with self-important General Counsel providing endless anecdotes of law firm foibles, while simultaneously ignoring the fact that the their own internal corporate clients are just as unhappy with the law department; or the various caucuses of in-house counsel defining the new normal as "law firms made enough money, now it's our turn" as if their collaboration was somehow an ever-shifting zero-sum game; or law firm leaders who refuse to acknowledge the very real impact of economic forces on their practice; or my fellow consultants who have great depth of expertise to advise either law firms or law departments, but not both -- because they've never worked with "the other side" except in an adversarial capacity.  This era is ending.

My expectation is that the new SIG will is represent all stakeholders - lawyers from law firms and law departments, of course, but also business professionals managing corporate budgets, e.g., procurement; pricing experts retained by law firms to better link price, cost and value; vendors building tools to analyze and manage complex matters; business development and marketing professionals who are increasingly asked to differentiate law firms on factors such as budget predictability, use of alternative fees and project management rather than just size and practice mix.  What these professionals can do together is establish an ongoing dialog, define and improve industry metrics, better define for vendors what to build and why, and provide a roadmap and best practices for those who have been heretofore reluctant to join the fray.  Just as other industries have settled on standard technology formats, a common vocabulary, licensing protocols and educational tracks for newcomers, the legal marketplace can greatly benefit from such interaction.  (And for the occasional detractor who assumes any interaction between buyers and sellers or among competitors inevitably leads to collusion or anti-trust concerns, I say "You are more than welcome to remain on the sidelines and keep out of our way!"

So join me in congratulating the Legal Marketing Association for proactively embracing one of the critical four P's of Marketing (product, place, promotion, price) and launching the new SIG.  And join me in thanking the many busy professionals who have, informally and formally, collectively and individually, led these efforts prior to the formation of the SIG, most notably Toby Brown, Director of Pricing & Strategic Analysis at Akin Gump, who will head the new SIG.  Also, thanks to Aleisha Gravit, President of LMA, and Betsi Roach, Executive Director of LMA, for making this happen.  I look forward to a new chapter in the growing book about the business of law.

Full Disclosure: I am a member of the Board of Directors of the Legal Marketing Association and contributed to the effort to form the new SIG.
 
 
Timothy B. Corcoran delivers keynote presentations and conducts workshops to help lawyers, in-house counsel and legal service providers profit in a time of great change.  To inquire about his services, click here or contact him at +1.609.557.7311 or at tim@corcoranconsultinggroup.com.

 

Better Rainmaking Through Relationships and Data

I was recently interviewed by Bloomberg Law for its Behind the Headlines series.  In the interview (click here to view), host Lee Pacchia and I discuss the evolution of rainmaking -- otherwise known as business development or sales -- in law firms.  In the heady days of yesteryear, rainmaking involved networking, establishing and nurturing relationships, ensuring that when clients and prospective clients encountered a legal issue, the rainmaker was top of mind and received a call.  Of course it's slightly more complex than that, as good rainmakers will say that you also have to be credible and competent in your field.  Others will say that working the cocktail circuit isn't enough, particularly with sophisticated buyers, so coming to the table with industry knowledge and solutions in mind is important.  All of this is true.  It's also true that, for the most part, successful rainmakers are a relatively small segment of the Biglaw population.  Most successful partners have had some success in bringing in work, and while many can cover their own compensation and overhead, quite a few don't generate enough business to make a dent in the typical large firm's overhead.  A disproportionately high percentage of revenues are concentrated in a relatively small number of business generators.  And these rainmakers know it, hence the heavy courting of laterals with portable books of business. The essence of the interview is describing how rainmaking has become more challenging in the tougher economy.  Clients are severing long-standing relationships to seek lower-cost providers.  Others are putting immense price pressure on traditionally premium practices.  Still others are demanding budgets and certainty and project management expertise in order to minimize surprise and manage change.  The stereotypical gregarious rainmaker with a winning smile and a firm handshake who can work a room like nobody's business is giving some ground to a more sophisticated, data-driven approach.  This is good news, because as rainmaking evolves more partners have a greater chance to succeed.  Here are five additional thoughts to the points I made in the interview:

Don't chase every dollar.  Revenue is not the same as profit.  In the traditional law firm financial model, the way to generate profit is to bill hours.  The more hours billed, the more profits generated.  This works... to a point.  Most firms track their top clients by revenue.  This is a nice starting point but as a data point to guide future business decisions it's incomplete. Without understanding the corresponding profit for the matters, we might be celebrating dollars that are dilutive rather than additive to the firm's PPP.  So many firms have some version of the top rainmaker handsomely rewarded for bringing in a $5 million client... that costs the firm $5.5 million to service.  When we look at lifetime value of a client, which incorporates repeat business, cost to acquire new engagements, depth of practices engaged by the client, and more, we find that some business is not worth pursuing. It's critical to analyze which work is profitable, which clients are profitable, and devote greater resources to winning and keeping work that is lucrative.

Relationships always matter. But not all relationships are equal.  When I work with practice groups to understand what process they have in place to identify and pursue new business opportunities, the first discovery is that few have any process whatsoever.  However, those firms that reward, and fund, business development activities (not results) will generate an exhaustive list of client lunches, event sponsorships, association dues and game tickets.  By putting in place a simple opportunity pipeline populated with a few key data points, it becomes much easier to distinguish between the lunch with Mary, the chief legal officer of a Fortune 100 company on the outskirts of town, whose company has entrenched legal providers handling most of her premium work, and very rarely encounters "bet the company" issues, and who has dined on the firm's dime 23 times in the last five years without sending a single piece of business, and lunch with Ted, the deputy GC of a small subsidiary of a mid-size manufacturer of aircraft components, who has hired the firm 4 times in the last 3 years for increasingly complex matters and whose company has been named a co-defendant in a high-profile products liability case filed after an airplane crash in Singapore... which just so happens to be where we've recently opened an office.  We may also discover that game tickets have generated, or at least been a factor in, $125,000 in new business in the last year, but our monthly breakfast briefings that cost, in total, $23,000 to produce have generated $432,000 in new engagements, 50% of which are with new clients.

Relationships can't overcome bad economics.  Every partner reading these words has had a longtime client sever ties in recent years.  These are golf partners, law school pals, people we've joined on vacations, even people whose kids' weddings we've attended.  And yet, when push comes to shove and their CFO is breathing down their neck, they change law firms in order to maintain their budget and keep their jobs.  Wouldn't it be helpful to know which clients are changing outside counsel more frequently now than they have in the past?  Wouldn't it be helpful to know if the economics of certain  industries are creating budgetary pressure on legal budgets across all competitors in the space, giving us time to prepare for the tough call?  Wouldn't it be helpful to know which practices, or even which tasks within given practices, our clients feel are declining in value and for which they will refuse to pay premium rates in the future?  This information is out there for anyone looking for it.

Don't confuse strategic pricing with suicide pricing.  It's important to understand the recent remarks made by my friend and colleague, Bruce MacEwen, who is one of the brightest minds I know.  In an earlier Bloomberg Law interview he described the suicide pricing taking place as firms offer substantial discounts to win business.  This is absolutely happening, and in time these firms will become known because they simply can't sustain their infrastructure for very long with non-profitable revenue streams.  But I am also aware of some savvy practice group chairs in other firms who are offering favorable pricing that, to an casual observer, looks like suicide pricing but in fact may be strategic pricing.  Simply put, if I can lower my cost of legal service delivery by eliminating wasteful steps through process improvement, then I can maintain profitability even at a lower price point.  Every firm has wasteful steps, as defined by the client, and this is reflected in the firm's realization rates.  Whether through undisciplined write-downs that partners take before invoicing, or negotiated write-downs after invoicing, the firm's realization rates reflect the difference between price and value from the client's perspective. And here's a scary thought - as more clients embrace billing analysis and benchmarking, it's going to get even tougher.  We're still at the nascent stages of downward price pressure in this market.

Stop smirking, mid-size law firms. You're next.  I have a number of mid-size law firm clients and they are experiencing, in general and in aggregate, one of the busiest stretches ever. As one partner said to me, "Recession? What recession? I've never been busier and I'm getting very little pushback on rates."  True.  One thing the recession proved is that there are fantastic lawyers in mid-size firms whose expertise rivals that of Biglaw. And because these mid-size firms in mid-size cities offer mid-size rates, clients are calling.  The trouble is, if there is no differential value offered by these mid-size firms other than slightly lower rates -- no project management, no alternative fees, no predictable budgets -- then the clients will eventually press forward with fee arbitrage and select firms in the next lower tranche, offering similar quality at slightly lower rates.  And the mid-size firm partners, particularly those who staffed up quickly to meet rising demand, will be left with high overhead and rapidly declining revenues.  Rinse and repeat.  And when the bigger firms start embracing process improvement to lower their cost of delivery and can thrive at lower rates, then the pressure on the mid-size firms will come from above and below.

If you aren't having these discussions in your board rooms and practice group retreats, then you had better get started.  Despite what you may have heard or assumed from the prognosticators of doom, the crisis facing the modern law firm is eminently solvable and law firms can and will thrive.  The question is, will you be on board the bus or under it?

 

Timothy B. Corcoran delivers keynote presentations and conducts workshops to help lawyers, in-house counsel and legal service providers profit in a time of great change.  To inquire about his services, click here or contact him at +1.609.557.7311 or at tim@corcoranconsultinggroup.com.

The Role of Procurement in the Selection of Outside Counsel

My friend Dr. Silvia Hodges recently asked me to contribute to a book she was compiling and editing, Buying Legal: Procurement Insights and Practice, published by the Ark Group in association with Managing Partner.  The book is a collection of articles from 32 leading authorities discussing the increasing partnership between the corporate legal department and the corporate procurement function to select and manage legal expenses, including outside counsel.  The book is divided into two parts, Section A is designed to benefit outside counsel and Section B is for in-house counsel and procurement professionals.  However, I recommend that anyone involved in the buying or selling of legal services would do well to read the entire book. The involvement of procurement in the purchasing of legal services is swiftly becoming the ‘new normal.’ And not just for sourcing low-end, routine or commoditized legal services – but increasingly for higher-stakes legal work too! This critical new report will equip law firms and in-house legal and procurement teams with the necessary tools to make these new relationships successful.

It’s packed with original research, case studies, opinion pieces, practical approaches, and checklists that address the key challenges and opportunities that buying and selling legal services creates – from relationship building and management, to financial and strategic decision-making. Industry leaders, Riverview Law, Wragge & Co LLP, PwC, Dechert LLP, Kennedys Law LLP, Corporate Executive Board, Institute for Supply Management, Akin Gump Strauss Hauer & Feld LLP, Validatum, Vantage Partners LLC, Trusted Advisor Associates and many more provide insightful case studies and advice on key topics, including:

  • Benchmarking the procurement of legal services
  • Pricing and negotiation strategies
  • Bulk buying of legal services
  • Understanding the requirements of the procurement department
  • Successful complex tendering
  • Current trends in the procurement of international legal services
  • Procurement departments’ sourcing strategies
  • Building relationships with the CPO
  • The role of procurement in purchasing legal services
  • The positive and negative effects of discounts
  • Top tips for successfully procuring legal services
  • Trusted tactics to get the most from spending on outside services
  • Demonstrating law department value through analytics
  • Using technology to source legal services; and much more

The chapter I submitted is titled "Why CEOs Love Procurement" and discusses how corporations continually seek a competitive cost advantage.  This is particularly critical in challenging economies or markets when revenues are flat or declining.  A modern CEO doesn't just look at growing revenue or decreasing overhead, but looks to lower the cost of goods sold and service delivery.  For law firm leaders faced with declining demand, increasing price pressure and competition from above and below, it's critical to understand the role of procurement in managing a corporation's expenses.  Lawyers who believe procurement is a euphemism for "selecting the lowest cost provider" are misguided.  Differentiation on factors other than price are critical, yet most lawyers and most law firms market in ways that are indistinguishable from the competition.  As I wrote a few years ago when I first tackled the role of procurement:  "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."

For a brief excerpt, visit here.  To purchase the book online, visit here or here.

 

Timothy B. Corcoran delivers keynote presentations and conducts workshops to help lawyers, in-house counsel and legal service providers profit in a time of great change.  To inquire about his services, click here or contact him at +1.609.557.7311 or at tim@corcoranconsultinggroup.com.

What Looks Good for the Future?

In today's Attorney at Work ezine ("One really good idea every day"), I follow up on my earlier posts (here, here and here) about the College of Law Practice Management's recent Futures conference.  I write about the evolving structure of law firms and law firm pricing from both a law firm leader and law firm client perspective; I discuss some of the positive changes resulting from the UK Legal Services Act; and I heap more praise on two innovative law firms who have fully embraced efficiency and process improvement to boost client satisfaction.  See the article here at Attorney at Work. For additional feedback on the Futures conference, see live blogs and recaps from Ron Friedmann (here and here and here) and Carolyn Elefant (here and here) and Inside Legal (here) and Toby Brown (here).  Click here for a full recap of the robust Twitter stream, capturing multiple perspectives from a wide variety of thought leaders in attendance.

 

Timothy B. Corcoran delivers keynote presentations and conducts workshops to help lawyers, in-house counsel and legal service providers profit in a time of great change.  To inquire about his services, click here or contact him at +1.609.557.7311 or at tim@corcoranconsultinggroup.com.

Language Viruses - Improving Results Through Language

I recently attended a leadership workshop hosted by the Legal Marketing Association on behalf of its current and incoming chapter and international volunteer board leaders.  Beth Ruske, managing partner of Tiara International LLC and co-founder of ClearSpace LLC, spoke to the group about producing results as a True Leader, with particular emphasis on improving results through language.  Beth’s remarks were adapted from the work of Fernando Flores’ “The Effect of Communication.”  I found Beth's presentation fascinating.  I searched for more background afterward and discovered some excellent insights about Flores’ work from Matthew Budd and Larry Rothstein in their “You Are What You Say.”  I’ve summarized some key takeaways here. Flores believes there’s a fundamental connection between language and actions, and what we say strongly influences how we feel and how others around us feel.  Language used effectively can overcome challenges and biases, change moods and physiology, create positive outlooks and ambition.  Used poorly, language can have long-reaching and long-lasting negative effects, to ourselves and others.  Without delving into the psychological aspects of Flores’ work, it’s safe to say that many of us fall short of effective communication because our language is imprecise – what we say is not what others hear, and vice versa.

Flores identified several “linguistic viruses” that infiltrate our daily speech, creating confusion rather than clarity, impeding collaboration and causing frustration.  By better understanding the common mistakes we make when communicating with others, leaders can improve their effectiveness in establishing a vision and creating momentum toward achieving the vision.

Here then, are the top 10 language viruses.  Some refer to more precise language; others refer to better communication in sticky but predictable situations.

1.      NOT MAKING REQUESTS

We want or need something from someone else, but we don't ask for it. Why? For some of us, this fear of asking is to avoid feeling rejected. In sales training parlance, overcoming “call reluctance” involves understanding that a no to a request is just that  -- a ­no to the requested action, not a rejection of the person.

Others fail to ask for fear that others will deem them incompetent. Anyone who has presented to a group of lawyers on a topic out of the lawyers' comfort zone knows that they will generally not ask questions if subordinates are in the room, or if the answer might be so obvious as simply asking might make the lawyers look silly.  In reality, those with true comfort in their position often have no fear of asking questions.

And others fail to make requests because they fear imposing on others.  In fact, many people thrive on helping others and being asked to contribute is a high form of flattery as it acknowledges another’s capabilities.

 2.    LIVING WITH UNCOMMUNICATED EXPECTATIONS

Countless cartoons have played out this theme, where one spouse has an entire two-sided argument in his or her head while the other spouse is blissfully unaware. Whether at home or at the office, sooner or later we all feel that someone else “should have known” what we wanted, or we’re faced with someone taking us to task for not taking some action that was obviously needed.

This variation of "not requesting" happens when someone has a vision for what others should do, but doesn’t express this thought as a request.  Inevitably, when others don't do what we expect, we're disappointed, resentful and angry.

3.    MAKING UNCLEAR REQUESTS

Imagine the basketball coach exhorting his players to “help out on defense” when facing a superior team. Does this mean I should leave my opponent open while I double-team another opponent? Does this mean I should guard the opponent closest to me, expecting one of my teammates to switch and cover my assigned opponent?  Coaches know that vague advice leads to poor play, so good coaches give specific guidelines on playing help defense.

Many requests at home or at the office rely on vague language.  There’s as much wiggle room when asking a teen to “be home at a reasonable hour” as there is when asking a colleague to “take a look at this and let me know what you think.”

Asking very specific questions is not insulting because it allows both to have a shared vision of the expected outcome.  It’s not enough to have the desired outcome in our own minds; we must express this outcome to others so they share the vision.  Beth offered some excellent advice to guide us: Every request should include some form of “will you…” and “by when” to ensure clarity on what is requested and when it’s due.

4.      NOT OBSERVING THE MOOD OF YOUR REQUESTS

Our demeanor when asking questions shapes the outcome.  If every request is a command, subordinates will be compelled to complete the request but they are unlikely to go the extra mile.  Others who are not required to act may choose not to when faced with a demanding and commanding request style.

By contrast, pleading desperately for help is unlikely to foster the desired outcome long-term.  Many will help you once, even twice, but obtaining help from others out of a sense of guilt is not sustainable.  This is, incidentally, why charities see a steep drop off from contributors who become weary of incessant solicitations.

Be aware of your demeanor, and the recipient’s, when asking.  The old adage still applies: you will catch more flies with honey than with vinegar.

5.      PROMISING EVEN WHEN YOU AREN'T CLEAR WHAT WAS REQUESTED

In the hierarchical structure of a law firm, when a partner requests something of an associate or staff member, there is little room for saying no.  Unfortunately, at times there is also little room for requesting clarification.  It’s the responsibility of the receiving party to clarify when the request is vague.  Clarifying an outcome that is unclear is not a sign of weakness.  In fact, it’s a sign of thoroughness and attention to detail.

6.      NOT DECLINING REQUESTS

This is easy to explain.  We can’t accept every request lest we become overburdened and ineffective.  Many say yes for fear that saying no will disappoint the requester.  But imagine the requester who is disappointed with an insufficient outcome, or an outcome that comes too late to be helpful.  Avoid this disappointment by not over-promising and under-delivering.

7.      BREAKING PROMISES WITHOUT TAKING CARE: UNDERMINING TRUST

It’s unfortunately not uncommon for some who are extraordinarily overburdened to put their heads in the sand and hope deadlines go away.  Not surprisingly this rarely works!  But hiding from responsibility takes many forms, it’s not always as obvious as shirking responsibility.

A common complaint from in-house counsel is that outside counsel aren’t responsive.  Outside counsel may feel this is unjust, as they are working dutifully on the client’s matter but don’t yet have “the answer.”  To clients, managing expectations is about communicating progress, confirming that we’re on track for established deadlines and providing early warning when something goes awry.  What frustrates clients more than anything is surprise.  If lawyers were to give advance warning when the matter is trending over budget or some new uncertainty has occurred, the client can adjust plans beforehand.  Adjusting after the fact is always much more challenging.

When commitments need to be broken, it’s critical to be up front and open, apologize for the impact, offer a new commitment and help fix any mess that results.  It is fairly uncommon for those who break commitments to do so elegantly, so handling the situation with care can still be a positive differentiator.

8.       TREATING OPINIONS OR ASSESSMENTS AS FACTS

As I write this during a presidential election season, my voice mail and email inbox and Facebook wall are full of political ads, commentary, solicitations and diatribes.  In politics and in religion, many have an absolute conviction in their beliefs but are unable to objectively quantify and prove to others the merits of their position.  This is a desirable outcome of a free society, notwithstanding the noise pollution in election years.

However, imagine the same mindset applied to more mundane business or family issues.  When one is convinced an opinion is fact, it can create dissension.  “We must double down and invest more in this product if we want to win in the market” and “What we need more than anything else is more rainmakers” and “I believe we spend too much already so I’m going to vote no on this funding proposal” and “Our clients want more of X, not Y” and countless other conversations take place every day in businesses and law firms.  When held up to scrutiny, many assertions lack a factual basis, but strength of will or organizational authority can often overcome lack of facts.

But that doesn’t make it right.  As we’ve learned in politics, you may not be able to convince others they’re wrong.  But we can do a better job of ensuring that our views are grounded in fact, not opinion.

9.       MAKING ASSESSMENTS WITHOUT RIGOROUS GROUNDING

Not all judgments can be supported by incontrovertible facts.  Still, there should be a certain rigor applied in making a case even when some of the facts are missing or in dispute.  Evidence and supporting documentation are always more helpful than mere opinion.

I recall a new CEO sitting through a review of our company’s technology spending.  We had spent five years investing in significant technology upgrades that automated multiple manual systems, improved quality and increased logistical supply chain throughput.  We had substantially reduced overall operating expenses and improved profits through strategic technology investments.  The new CEO spent just a few minutes reviewing the coming year budget submission before opining, “It feels like we spend too much on technology. I think companies this size should spend less. Please take another pass at the budget and reduce the spend considerably.”

We would have welcomed benchmark studies that put our technology spending in context.  We would have welcomed a healthy debate on the substantial improvements we had made, which perhaps to a more seasoned eye should have resulted in even greater profits.  What we didn’t welcome was a poorly supported argument that impaired the new CEO’s credibility.  And once credibility is lost, it’s hard to regain.

10.    MAKING FANTASY AFFIRMATIONS AND DECLARATIONS

I’ve spent a lot of time in law firm practice group retreats discussing business development strategy.  I’ve never characterized them as fantasy, but I’m quite familiar with the unreasonable, unsupported and improbable declarations that mark such occasions:  “We will grow the practice by 25% next year by bringing in new clients and getting more work with existing clients.”  Flores treats such assertions as fantasies when the goal itself is unreasonable and there is not even a vague plan to achieve it.  The outcome won’t produce itself.

Contrast the fantasy with a realistic declaration, perhaps a reality that doesn’t yet exist but is attainable through a series of reasonable steps.  It’s a bit distant now, but the assertion in 1962 by President John F. Kennedy that the US would put a man on the moon by the end of the decade was grounded in the country’s then-current science and technological capabilities, even though to the average observer it seemed outlandish.  As such, it may have been a stretch goal but it certainly wasn’t fantasy.

 

Timothy B. Corcoran delivers keynote presentations and conducts workshops to help lawyers, in-house counsel and legal service providers profit in a time of great change.  To inquire about his services, contact him at +1.609.557.7311 or at tim@corcoranconsultinggroup.com.