Don't Confuse Responsiveness With Speed

I've made the above admonition countless times, whether to my sales teams in the past or to lawyers in my business development training programs presently.  In short, being responsive to the client's needs isn't the same as responding quickly.  In our smart phone enabled world, where we're accessible 24/7 in the most remote corners of the planet (I once successfully joined a conference call from the summit of Machu Picchu!), we tend to believe that because we can be accessible, we should be accessible.  More to the point, we believe that clients should be able to reach us at any time, anywhere.  I beg to differ.

One thing we've lost in a persistent-connection world is the time to contemplate.  Countless times I've heard from in-house counsel and outside lawyers that there is no more time to think.  Legal issues are often complex and require creativity and innovation.  And it takes time to boil down the complex into smaller, more readily digested components.  One of the oft-repeated themes in legal vendor advertising is the harried lawyer who receives an urgent late night call from the client, but with a few clicks of her mouse the lawyer can find exactly the information needed to save the day.  The reality is that we all need time to think.  We need to contemplate the fact pattern, research the underlying issues, frame the response and prepare for anticipated questions.  This can't be done easily from the ski lift or from the taxicab or from the back porch while the clown entertains the children at the birthday party.  Believe me, I've tried!

In my experience, responsiveness is more about setting proper expectations.  Rather than establish a ludicrous requirement that everyone will be accessible at all times in all time zones except while actually in flight (as one Biglaw partner recently decreed in a preposterous missive against the use of out-of-office messages), be crystal clear when setting expectations.  Your phone message and out-of-office message should indicate when you'll return calls or messages, and provide an alternative source for the visitor to address questions.  And then follow through.  Most clients, even those with pressing business issues, want certainty about when they'll have a quality response more than they want an immediate, but potentially inaccurate or not fully-considered, response.  This applies even when the client reaches you directly.  Just because you picked up the phone doesn't mean you must provide an instant response.

In today's ultra-competitive world we aren't eager to broadcast to our clients that we're not clever enough to respond promptly, or that we're not sufficiently aware of their time constraints.  But avoiding the instant response in favor a more reasoned response doesn't have to send these messages.

The potential outcomes are finite.

• Flexible: "Based on these facts, Mr. Client, we'll be prepared to advise you by 4 PM today (or 2 PM tomorrow). Will this time frame work for you?"

• Urgent: "The facts are complex and it will take some time to develop a thorough response. If you need something urgently, then we can triage the issues and provide a directional finding within a few hours, but for a fully-researched response we'll need until 4 PM today (or 10 AM Tuesday)."

More often than not, the client will wait for the right answer rather than settle for the quick answer.  If the client relationship is so tenuous, or, more to the point, if your law firm is regarded as the sort of place one calls when the prevailing need is merely for anyone to answer the phone, then your challenge may be slightly larger than merely responsiveness.  Clients who demand instant responses often don't trust that their deadline will be met, so they build in an "urgency" cushion to ensure that they'll have answer in hand when the real deadline approaches.  They may also need to translate your legal response into a business response, so proving that you can offer business guidance and not merely legal advice saves everyone time.

It's critical to demonstrate client focus at all times.  There's a difference between responsiveness and speed.  Be clear of your intent when establishing your firm's service posture.

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.

Calculating the Cost of Doing Nothing

In any business school finance class you learn capital allocation techniques, whereby you reduce competing projects to a single measure in order to more easily select the capital project with the highest potential to add value to the business. Examples of these measures include NPV (or Net Present Value) which reduces multi-year cash inflows and outflows to a single value in today's dollars; and RI (Residual Income) or EVA (or Economic Value Added) which both reflect the value created from a project after achieving a required rate of return; or the more simple ROI (or Return on Investment) which is the ratio of money gained relative to money invested for a given project.  Inherent in these calculations is the notion that there are alternatives for the investment of the firm's capital.  There is no such thing as a good or bad rate of return in isolation.  Only by comparison to alternative uses of the capital can a business deduce what investment returns the maximum long-term value. In each of these calculations assumptions must be made, particularly with regard to future cash flows.  When a law firm calculates that an hourly rate increase of 10% will lead to a 10% improvement in top line revenue, the partners have assumed that other factors will remain constant, such as demand for their legal services.  And in a price-insensitive (or inelastic) market, this is true.  In other words, when a client is faced with the proverbial "bet the company" litigation, price is far less important than quality in the selection of outside counsel.  Given constant demand, an upward adjustment in hourly fees will increase top line revenue.

Similarly, a prominent legal vendor with which I have some familiarity tends to treat annual price increases as a mechanism for printing money. In one product line it issued annual price increases at about three times the CPI for a very long time, with a continuing assumption that these increases would directly correlate to increased revenues.  As the business innovated to reduce internal costs, the marginal profit on the new revenues was significant, leading to a perpetual assumption that increasing prices will lead to significant increases in profits.

However, each has experienced steep revenue decline and customer attrition, to the consternation of the baffled leaders.  Can you spot the critical mistake made by both the law firm and the legal vendor? It's not rocket science. Obviously each overestimated the price sensitivity of the market. By assuming that buyers will continue to buy at the same pace even as the price increases, each made a fatal miscalculation. Each assumed that its product was of such high quality, was so unique and special, that buyers didn't want and wouldn't seek alternatives. Of course we now know this isn't true. BigLaw partners everywhere are getting a crash course in microeconomics. After a generation of near unlimited demand for legal services -- as close as one gets to the very definition of a mathematical constant -- clients are refusing to pay the high rates, realizing that a good portion of their legal needs are closer to commodity than "bet the company," and they're running, not walking, to find lower-cost alternatives.

The legal vendor is similarly challenged.  Whether it's a backlash to high prices, or the rise of alternatives and substitutes in the marketplace, buyers are pushing back, even canceling their purchases.  The vendor is caught in a vicious spiral.  By baking its perpetually flawed assumptions into its annual profit expectations, every cancellation or significant downward renegotiation creates a gap which it tries to make up by -- surprise! -- increasing prices to other customers or in other product lines.

But law firms and legal vendors aren't unique.  Every industry, even government, has its own flavor of flawed assumptions.  Pharmaceutical manufacturers lobby Congress for trade protection to prevent consumers from buying lower-cost prescription drugs from Canada.  The music industry laments the millions of dollars in lost CD revenue due to unauthorized music file sharing.  Government officials rail about lost tax revenues from individuals and corporations aggressively seeking tax havens.  In each example, buyers are doing nothing more than logically and legally seeking lower-cost alternatives.

Okay, I guess music file sharing is illegal, but the sentiment's the same.  None of us who used to pay $12.99 for a music cassette and who now pays $19.99 (or more!) for a music CD really believes that the cost to produce a CD is higher than than the cost to produce a cassette.  Some would say the music industry created its own demise by positioning CDs as a premium purchase and therefore limiting its potential buying audience, rather than lowering the price and dramatically increasing the addressable market, which is exactly what Apple did with iTunes.  (Personally, I believe music file sharing is a backlash against the typical music CD's inexplicably confounding security wrapper!)

In my years leading a business, my team and I developed the most precise forecasting methodologies and as a result year after year we achieved our revenue goals while others floundered.  Our approach was simple:  we always included a line to reflect expected losses due to rejection of our price increases, and we developed a sophisticated predictive index to identify which buyers were at risk.  Most organizations have a contingency for bad debt but this is reflected on the balance sheet and not at the product level.  We were required to increase our prices by corporate mandate, even though we demonstrated time and again that it impaired our brand equity, resulted in emotional total losses (buyers who would refuse to do business with us again in any product line) and unfairly assessed penalties on good customers who didn't complain (because when the bad customers left, who do you think had to pay an even higher price to make up the difference?).  The leaders were tone deaf, and today that product line has experienced monstrous losses which, in the usual manner of corporations, the present management blames on past mis-management.

Among the many questions law firm leaders and business leaders should be asking is whether or not they have properly considered their customers' alternatives.  Many BigLaw partners are astonished to learn that the pedigree of the firm truly doesn't justify fees that are substantially higher than smaller competitors in most cases.  This isn't a character flaw and their myopia is shared by many others.  However, those that do nothing now to address the change in circumstances should be held accountable.

You don't have to be an experienced economist or financial analyst to lead a large enterprise (though it helps to have some chops).  What you do need is a healthy understanding of the mathematical drivers of your success.  In your revenue calculations, use different assumptions for those products and services which you can charge at any rate and those for which buyers have numerous lower-cost alternatives.  Assume the services you believe to cater to a price-insensitive buyer to be shorter-lived than they used to be.  Look to grow your top line as much by offering an innovative new product or service  as by increasing your prices for your present offerings.  When marginal profit contributions from price increases are elusive, look to achieve your profit objectives by reducing internal costs through outsourcing or business process improvement programs.  But do something.

Seth Godin recently described the calculus of change:

"Do nothing is the choice of people who are afraid. Do nothing is what you do if too many people have to agree. Do nothing is what happens if one person with no upside has to accept downside responsibility for a change. What's in it for them to do anything? So they do nothing."

In the legal marketplace we have relied on assumptions that are no longer true.  We can roll up our sleeves and re-work the underlying math in our assumptions.  Or we can conduct a few layoffs, cancel the annual meeting, put a freeze on hiring and travel, and wait for the old assumptions to revive.  Or we can do nothing.  Your call.

Web 2.0 / Social Media Update

Periodically I take stock of my web 2.0 efforts, to ensure that I continue to derive value from the tools that matter and discard the rest.  Here's my latest appraisal: Blog - I've moved my professional commentary to this blog from my personal blog, which now allows me to maintain two personas.  Frankly, I don't mind mixing business with pleasure, as it were, and many of my readers have mentioned that an occasional family photo or recap of my basketball league provides insights into my personality that might not otherwie shine through.  Nevertheless, I made the split and it's working out well.

LinkedIn - I continue to maintain a robust profile, inviting or accepting invites from those I meet in business settings.  I have instant recall of perhaps 80% of my 463 contacts.  For the remainder I have to consult my notes to recall who they are.  It would be very helpful if LinkedIn allowed personalized annotation of the contact record itself.  Recently I've received several "Please introduce me to someone you know" and "Please introduce me to someone who knows someone I want to meet."  All but one request has come from a trusted source so I have happily complied.  I've met several job seekers who have indicated a desire to troll my contacts and ask for introductions, but not a single one has followed through.  Apparently cold calling still gives one pause, no matter what the form.

Facebook - I've spent significantly less time here since the recent upgrade which, to me at least, made it more difficult to navigate.  But I still drop in a few times a week.  This is mostly reserved for family, close friends, old friends getting back in touch and the occasional  business connection, now totaling 230.  I really wish FB allowed categorization of friends so I could accept invites from distant acquaintances but limit their access to my personal content.

Twitter - I'm a regular tweeter and reader, and careful readers will note the Twitter feed in the right column of this blog.  Twitter leads me to some of the most compelling articles, of both professional and personal interest, that I might not otherwise see.  It's also increased my visibility and allowed me to find others with like interests.  I will regularly tweet from conferences and speeches I attend, and eagerly read others' recaps of conferences I cannot attend.  I tend to amuse myself by posting personal updates alongside professional commentary, a habit which many disavow.  But as with my blog I tend to believe that injecting some of my personality makes things interesting.  Somehow I have attracted 364 followers, and I follow 233.  Twitter Grader ranks me 96.7 out of 100, though I'm still waiting for my gold star!

Google Reader - I monitor a large number of legal and news sources daily in Google's RSS reader.  This can become overwhelming, but I find it necessary to stay on top of what other thought leaders are saying and what trends are influencing our marketplace.  At the end of this post is a partial list of the professional sources I rely on.  I'm a voracious reader but years ago I found that I couldn't keep up with all the books I purchased until I overcame my reluctance to start a book unless I had time to finish it.  I also redefined "finished" to mean when I lost interest and not when I reached the end.  With that burden off my shoulders, I now read books and magazines and skim hundreds of articles and blog posts daily without the obsession of reading every word.  It's faster that way!

Legal OnRamp - This legal community has been around a couple years now and I'm starting to spend more time there.  As an alum of Counsel Connect, the early 90's online legal community launched by American Lawyer, I enjoy re-connecting with the brilliant minds discussing the fundamental changes taking place in the legal marketplace.  Whether it's a debate on the billable hour, the use of technology to automate routine tasks to lower costs for clients, substantive legal issues such as the American Law Institute's (ALI) proposed changes to the law for software contracts -- the point is savvy outside lawyers have an opportunity to demonstrate expertise to a captive audience of in-house counsel.

LMA Connect and the Lawmarketing listserve are two networks where I monitor and contribute commentary to the legal marketing community.  There is overlapping membership but often robust discussions.  Many law firm leaders might be surprised at the level of business expertise already residing within their firms today.

Classmates.com - I maintain a profile here, which is helpful solely to reconnect with school chums.  However my profile points visitors to Facebook and LinkedIn.

Sites I do not use:

Martindale Connected - I am an alum of Martindale and, quite evidently, a regular user of web 2.0 tools, but I have not been allowed to join so I have no opinion.

ABA's Legally Minded - I joined this community but can't find a reason to participate.

Plaxo, Naymz and Spoke - All are similar to LinkedIn, but other than accepting requests from others to connect I don't visit.

MySpace - My profile still exists but not even my young nieces visit any more.  It's all about Facebook.

A partial list of my daily reading:

• Above the Law - David Lat's legal tabloid
• Adam Smith, Esq. - Bruce MacEwen's brilliant commentary on the intersection of law, business and economics. This is a must read
• Are You Writing This Down? - Legal marketing expert Lance Godard's excellent commentary
• The Becker-Posner Blog - Economist Gary Becker and Federal Judge Richard Posner offer commentary on issues of the day from an economist's perspective.  These are rich, deep, thoughtful insights which, admittedly, I often don't have the time or energy to fully absorb
• Bill's Blog - Incisive Media (formerly American Lawyer) CEO Bill Pollak's commentary. While orginally intended for his staff, his insights are applicable to others, and his informative style is one which many CEO's should emulate
• Business Development - Occasional legal marketing commentary by Peter Darling
• The Client Revolution - Jay Shephard is a practicing employment lawyer who promotes his innovative practice which doesn't bill by the hour, ever
• CMO 2.0 - Interviews with leading CMOs from multiple industries
• College of Law Practice Management - As an elected Fellow I like to see what my fellow, um, Fellows are up to. Turns out most of us with something to say do so on our own blogs so not a lot happening here
• The Common Scold - Veteran journalist and editor of Law Technology News, Monica Bay reports on legal technology, legal technologists, the Yankees and her varied other interests
• Cotterman on Compensation - I followed Altman Weil consultant Jim Cotterman's commentary long before I joined the firm.  There are few in the field with more experience on law firm compensation topics than Jim
• Decent Shred - Shy Alter, a Toronto-based law firm information and knowledge management expert, is someone I became aware of via Twitter
• Demand Trigger - Veteran sales coach Mike O'Horo's take on the legal profession
• The Dilbert Blog - Dilbert creator Scott Adam's quirky take on life through the eyes of an economist/humorist/cartoonist. He's also a fascinating writer
• Enlightened Tradition - Another law firm KM expert I've come to "know" via Twitter, Mark Gould hails from the UK and discusses organizational knowledge
• Erik J Heels Blog - My former colleague Erik is an IP lawyer, Internet pioneer and veteran legal technologist.  He's also a very interesting guy with a wide range of interests
• Freakonomics - The authors of the popular book discuss everyday issues through the eyes of economists
• Get Creative - COLPM member Merrilyn Astin Tarlton's take on law firm innovation
• InHouse Rants - An anonymous corporate lawyer discussing his dissatisfaction of outside counsel.  Dormant for quite some time, I guess he has nothing more to say
• In Search of Perfect Client Service - Patrick Lamb, the Chicago co-founder of innovative law firm, Valorem, discusses the disruptions in today's legal markets and how he and his colleagues have adopted a new approach
• Inhouse Access - Commentary from various inhouse counsel hosted by the Association of Corporate Counsel
• Inhouse Blog - News and Jobs for inhouse counsel, edited by Geoff Gussis, a private-practice lawyer in NJ
• Inside Legal - News and commentary on legal service providers and vendors, edited by the good folks at legal PR firm, Envision Agency
• Karasma Media - Legal social media marketer Kara Smith reports and opines on the legal issues of the day
• Larry Bodine Marketing Blog - Longtime legal marketer rants on topics of the day and promotes his services
• Law.com - The must-read site for legal news.  I pay particular attention to the legal technology feed
• Law Department Management - Rees Morrison's fantastic and robust blog for in-house counsel
• Law Firm Competitive Intelligence - CI guru and veteran legal marketer Ann Lee Gibson on topics related to law firm competitive intelligence and business development
• Law21 - Canadian lawyer and journalist Jordan Furlong publishes "dispatches from a legal profession on the brink."  This is a must read
• LawBeat - Veteran legal journalist turned academic, Mark Obbie "watches the journalists who watch the law"
• LawBizBlog - Ed Poll is a longtime lawyer, business development consultant, coach and author. He's been at this so long he coined (and trademarked!) the phrase "The Business of Law."  His award winning commentary is a must read
• Leadership for Lawyers - Veteran legal marketer Mark Beese is now consulting in the areas of law firm business development and law firm leadership development
• Legal 1-to-1 Marketing Blog - Bill Vannerson, a BigLaw KM and information technology expert, discusses the legal issues of the day
• Legal Blog Watch - Lawyers/Journalists Bob Ambrogi and Carolyn Elefant read and analyze legal blogs and websites of interest to the legal profession
• Legal Marketing Blog - Veteran legal marketer Tom Kane discusses legal issues of the day
• Legal Marketing Reader - Amy Campbell compiles and comments on legal marketing news and resources
• Legal Process Outsourcing - A discussion of outsourcing and offshoring news
• Legal Spend Management - TyMetrix, an e-billing provider, discusses topics related to law firm billing
• The Legal Thing - Notes from Mike Dillon, General Counsel of Sun Microsystems
• The Legal Watercooler - Insightful and timely commentary by veteran legal marketers Heather Milligan and Jayne Navarre
• LSSO Raindrops - A presently dormant but periodically rich source of commentary on law firm sales efforts
• Maddock on Marketing - Altman Weil consultant Biff Maddock, a veteran legal marketer, discussing topics relevant to marketing and business development
• Martindale-Hubbell Blog - As an alum I enjoy checking in now and again to celebrate the company's successes, and lament at its missteps... primarily driven not by the clever people at the helm of MH but by the inept navel-gazers at the parent company
• Next Generation Law - Kevin Thompson of Advanced Advocates, a platform for law students, discusses legal issues of the day
• The [non]Billable Hour - Matt Homann, innovational speaker, lawyer and consultant, discusses the changing practice of law
• Progressive Marketing - Mid-size law firm marketer Russell Lawson opines on topics of the day
• Real Lawyers Have Blogs - Kevin O'Keefe, an early adopter of legal technology and now blog evangelist, covers the world of legal blogs
• Rick Klau's Blog - My former colleague Rick is a lawyer, an internet pioneer, a legal technologist, a political activist, an early adopter of everything, and now a Google exec.  He's also a great guy
• Seth's Blog - By law every marketer must read Seth Godin. If you read it, you'll see why
• Set in Style - Mister Thorne (yes, that's his name) discusses legal writing.  A must read for legal writing and marketing
• Strategic Legal Technology - Veteran legal technologist Ron Friedmann discusses the intersection of technology and the business and practice of law.  This is a must read
• Thoughtful Legal Management - David Bilinsky advises the Law Society of British Columbia on practice management topics and edits the Law Practice Management magazine
• Wicker Park Group - Nat Slavin, former publisher of Corporate Legal Times (now Inside Counsel) and veteran legal marketer Laura Meherg and team discuss issues related to client feedback
• Wall Street Journal Law Blog - With all due respect to excellent veteran legal journalist Ashby Jones, this blog has become less cutting edge than it was a couple years ago.  But still a must read for legal news and commentary

The last time I posted my reading list I received several excellent suggestions.  So please, tell me what you read that you find interesting and helpful for staying on top of the changing business of law.

Lockstep Compensation - Fair or Foul?

Today's Above the Law continues its recent theme of suggesting that law firm leaders are doing a disservice by culling associate ranks and rolling back associate compensation.  Further, ATL questions whether there really is a more equitable compensation arrangement than lockstep, which provides equal and increasing compensation to each incoming class of new lawyers.

"It seems to me that moving away from lockstep compensation necessarily leads to more subjective forms of salary advancement. The billable hour might be the bane of a lawyer's existence, but it is at least based on objective criteria. Will putting salary decisions in the hands of intra-firm politics and relationship building really lead to a "kinder and gentler" law firm? Or will it lead to an "eat-what-you-kill" approach that many partners complain about when it comes to their compensation structure?"

In a word, this is madness.  Let's alter our frame of reference, stop navel-gazing, and pretend that we're in the real world for a moment.  No one has a right to the status quo.  It's human nature to advance, and it's necessary to innovate to survive, because an upstart with a better mousetrap will eliminate demand for your offerings eventually. This isn't unfair, it's merely progress. As demand for legal services has plummeted, there is no sustainable financial incentive for law firms to continue paying associates at rates equated with the near-unlimited demand of yesterday.

This isn't about whether these young lawyers deserve such high pay. Who's to say? Sure, the starting salary is huge compared to the entry-level pay in other disciplines, but if demand is greater than the available labor it's a natural outcome. Notwithstanding the many law firm leaders who inflated associate compensation in an arguably misguided attempt to boost recruiting, if we're prepared to accept that graduates of top schools deserve high pay when in demand, we should accept that absent demand that pay will decrease.

As for lockstep compensation, there is nothing equitable at all about this.  Blanchard and Hersey pioneered the principles of situational leadership years ago.  A leader adapts to the circumstances and to the particular skills of each individual.  A person who must be micro-managed on one task may be left alone with confidence for another. A person who is an expert in one area may be a novice in a new area, and so must be managed differently in each instance. The inequity comes when leaders treat all workers equally. Why should an expert, whose contributions are measurably better, be treated and paid the same as a novice?  We may lament the sports superstar who shirks certain duties, but we can't quibble with paying him more than journeymen teammates who contribute substantially less to the Won/Loss column.

Law firm leaders who are able to measure the productivity of their associates should feel no hesitation at paying differential compensation.  Imagine the brilliant 2nd year associate who out-earns the 7th year senior associate based solely on her substantial contribution to a favorable outcome as defined by the client.  Is this measurable in billable hours?  Perhaps.  It's also likely that other subjective criteria will come into play.  Welcome to the real world.

Most businesses pay employees on a differential basis, typically based on performance.  Even employees starting new roles at the same time may receive different pay because one may have more work history or is a better negotiator.  Every so often HR professionals will embark upon a rationalization process but this is usually just a thinly-veiled cost-cutting exercise by management or a job protection exercise by HR.

The fact of the matter is few organizations even try to adhere to a lockstep compensation if they wish to incent innovative, customer-focused, winning behavior by their employees.

Is this done perfectly, where compensation is awarded based solely on measurable performance? Of course not. There are politics and favorites and poor data quality and short-sighted budget constraints which impair any organization's ability to act perfectly. But that's no reason not to try.

None of us can watch the demise of the US automotive industry and not feel compassion for the many displaced workers along the supply chain.  Similarly, there's nothing wrong with lamenting the loss of income and prestige experienced by BigLaw associates who are as capable today as they were yesterday.  The market is a tough teacher.  When demand returns, associate compensation will increase.

However, my suggestion to law firm leaders isn't to merely cut associate compensation and call it a day. It's time to take a good, hard look at the "business" of the firm.  Which practice leaders are in their roles due to longevity, political considerations or rainmaking ability?  These are generally poor indicators of success in a role that requires attention to detail, coaching others to success, long-range thinking, and an all day every day client focus.  Which practices or lawyers are not profitable, not lead generators or not part of the firm's legacy?  Why are they still here?  Does your compensation system not just incent but require cross-selling?  In other words, do lawyers receive a substantial portion of their compensation from generating work for others?  If the compensation system primarily rewards solo efforts, then are you better off as solos?

But before we say goodbye to lockstep compensation, let's remember that it's all about execution. Multiple types of compensation plans can achieve the desired result if implemented properly. So let's move off the red herring of associate compensation, either the amount or the structure, and focus on the real opportunity to thrive in a down economy:  help clients identify their business challenges, quantify the impact of not acting, and customize a solution to help them accomplish their objectives.  Few clients are overly concerned with the state of BigLaw; they have their own problems to deal with.  And they could use your help.

Benchmarking as a Proxy for Intelligence

There was a recent request on the Legal Marketing Association's discussion forum, for benchmarking data for paralegal and legal secretary staff to lawyer ratios. There are a number of good sources for this sort of thing, which savvy readers submitted. However, I was compelled to provide a contrarian response.

I question the validity of benchmarking data like this, particularly in today's economy.

Human nature generally nudges us toward safe choices as defined by how many others have made similar choices. In many law firms, precedence is the dominant method of decision making mostly because it's the method learned by lawyers in the practice of law. But those of us tasked with bringing sound business practices into today's law firms have an opportunity to introduce more rigor into the discussion. This applies to many areas of practice management, but in light of the recent law firm layoffs and downsizings, it seems even more poignant when applied to law firm staffing.

I'd like to hypothesize why staffing ratio benchmarks might be a hot topic lately:

A benchmark for paralegal/secretary to lawyer ratio is undoubtedly of keen interest to law firm leaders entertaining the question, "Which staff positions can we eliminate to reduce our cost base?" The problem is, the ratio is a function of the nature of the practices, the current workload, the culture and productivity levels.

Practices that rely heavily on paraprofessionals, e.g., real estate, litigation, will carry different ratios than other practices. Some practices are busier than others, for example those addressing counter-cyclical client work. Those that aren't busy tend not to delegate work downward, so partners are doing work today that a year ago a mid-level associate might handle. And some cultures better exploit technology and knowledge databases to improve productivity levels, so their ratios will differ from competitors in the exact same practices.

In this light, it’s presumptuous to believe that much value can be derived by examining staffing ratios compiled by surveying dissimilar firms in dissimilar markets comprised of dissimilar practices and targeting dissimilar clients.

Unfortunately, it's hard work for leaders to examine the organization's business processes and culture to determine the appropriate staffing ratios for their firm. But if the objective is to recalibrate capacity so it's aligned with current demand levels, with enough flexibility to adapt as demand returns, then it's sensible to roll up the sleeves. Too often, however, the objective appears to be to find a quick and easy rationale to lower costs by "bringing our staffing ratios in line with industry standards."

Cost cutting in an enterprise impacted by a recession is by definition necessary. Tough decisions have to be made. The law firm leaders who assess their enterprise in light of its long term outlook and make specific adjustments based on sound business rationale will have an easier time ramping up when demand increases than those firms using imprecise benchmarks to simply lower costs today without regard for tomorrow.

Business process re-engineering and improvement programs are more effective in the long run for aligning staff to workloads. These processes generally result in cost savings and are, therefore, often self-funding exercises. And we shouldn't have to repeat the growing theme (but we will) that law firms that find more efficient ways to deliver legal services are better positioned to implement alternative fee arrangements, which in turn lead to increased client retention.

These are not just good ideas for today's law firm leaders. They are essential.

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.