The Good, The Bad and the Ugly (RFP Responses)

30 11 2010

Having just completed another RFP (request for proposal) process for legal services for a BPO company, and closed out the subsequent feedback process, it seems an appropriate time to consider the many type of responses I’ve seen when running these exercises.

Trevor from procurement was not impressed by Goldman & Partners' RFP response

Firstly a word about my approach. I’ve run RFPs covering legal support for outsourcing, commercial, employment, financial services, property and one-off projects in my time. My approach is generally to try and make the process as painless as possible both for my internal clients and for the law firms.

Let’s be honest, if the law firm is sweating over a 50 page response, and the potential client has six of these to read, evaluate and discuss, how many of the client senior management team will REALLY read and digest all that material? You may have your own view, but for those who think that execs have the time and inclination to plough through this stuff in a meaningful way, I’d respectfully suggest you read Davenport’s book “The Attention Economy“!

So, starting with the bit lawyers usually enjoy to hear about (when it’s not their firm) – the ugly;  the horror stories; the car crashes.

Names and other identifying details have of course been omitted to protect the guilty.

Perhaps my favourite was the international law firm, that tendering for a large scale, one-off project, set out in some detail how the project management function would be performed by a well qualified, senior associate. No problem with this so far. Methodology seemed sound, experience of the individual looked relevant and the cost of this person was transparent.

So where’s the beef?

Well, the fees section included a £75,000 project management fee. When I phoned up to enquire what this was for (when the cost of the associate performing the project management role was already baked in to the fees) I was met with an uncomfortable silence then a promise to “get back to you”. The resulting explanation was no less unimpressive.

Fail.

Another project management blunder was the law firm that on a project with the potential for high-six-figure legal fees put forward as a project manager a junior lawyer who despite being both (a) a very competent lawyer; and (b) a genuinely nice guy, was utterly unqualified for large scale project management.

This was evidenced at firm interview stage, when he described the firm’s project management methodology as “Lists. Lots of lists”. Sorry……

Inflexibility around fees is another bugbear. One project saw the company I was working with give sufficient information to price the work with a variety of fee structures, and specifically stated that hourly rate charging would not be considered. Five of the six firms bidding managed to put together compelling charging models, the other explained “We charge the following hourly rates”.

Not to us you won’t be!

Another project, which went out to tender late one summer, explained that for budget reasons it would be helpful for the company to delay payment until the next calendar year. The company explicitly acknowledged that it understood that this may incur an additional fee to cover the cost of the capital, and simply asked firms to make that fee transparent if there would be a charge.

All but one firms came back with an appropriate solution (some of which were quite creative). One came back, helpfully explaining “we bill monthly in arrears”. Thanks.

Ironically, the budget picture internally changed, and a large part of the fee was paid early in the project, providing the successful firm with an unexpected cash flow boost.

Finally, it’s a thin line between an ugly RFP response and simply a bad one (which I’ll look at next week), but this is a tale of a firm walking down that tightrope.

A recent tender that spanned multiple work types asked responding firms for each work type to set out their competitive advantage. One firm responding was an incumbent, and their assessment of their competitive advantage (for each work type) was simply “we work with you, we know your business”.

Now while that is undoubtedly true, I suspect that’s an implicit barrier to entry that all existing advisors enjoy, and to be honest it’s not an insurmountable barrier. To me, the fact that the work is going out to tender suggests that the prospect is considering a number of possible solutions to their need and complacency is not a good idea. If the incumbent firm were bidding for work with a new client, presumably they believe they have some competitive advantage? Assuming that’s the case, I would have thought it best to mention this to build a compelling picture of why they should be selected, rather than rely on the fact that inertia might make keeping the status quo easier than changing.

Let me finish on a less depressing note by saying I’ve seen some stunning responses to RFPs in my time, and while the good and bad are often fairly evenly matched, the ugly ones are relatively few and far between.

But… if you’ve got a response to an RFP going out this week, just have a final look through…..





The Profession’s Top Model?

23 11 2010

There have been a couple of interesting news items over the last few days that have got me thinking about business models in the legal profession. First, an article in the Law Society Gazette about client experience with the network of solicitors called “Quality Solicitors”, an attempt by a range of smaller law firms to pre-empt new market entrants when the market more fully deregulates in the UK next year.

The business model pondered the firm's business model

The article is here and the comments are perhaps more intriguing than the article itself.

The second development of note was the acquisition of Pangea3 by Thomson Reuters, of which there is an interesting discussion here:

To my mind, the second represents a far more fundamental challenge to the classic legal business model than the first, but I think the really interesting point is that it shows how no part of the profession is immune from the winds of change that are now blowing harder and harder through the market place.

For smaller firms in the High Street, there is no shortage of debate around whether “Tesco Law” will see the corporate behemoths enter the market for personal legal services, and clean up with a combination of powerful, trusted brands, efficient process, scale and automation.

Similarly, looking at the higher end, while the market for LPO services remains a relatively tiny proportion of the overall market for legal spend, few would doubt that there is a category of commercial legal work that can and will be commoditised, and that a significant chunk of this is likely to go to the LPOs.

So how to respond?

Well, there are of course many ways to approach this question, and the most appropriate will depend on a number of factors such as a firm’s size, service offerings, current market position, capitalisation and cash flow and the aims and aspirations of the partners and staff.

However, what I want to do today is get people thinking about their underlying business model. Many of the new market entrants will have a blank sheet of paper, and can design an organisation free of the history, politics, structure and financial constraints that burden many law firms.

While not disregarding those challenges, thinking afresh about a firm’s business model can open up new possibilities and avenues for competing effectively in the future.

A great, great read on this subject is a book called “Business Model Generation” by Osterwalder and Pigneur. The book gives readers a visual template for assessing and re-engineering business models.

A good place to start is key suppliers and partners. What are the key inputs into the business? These could be anything from recruitment agents who help identify and supply talent, to IT suppliers. Are these suppliers sufficient? How could the relationships be strengthened? If you were building a firm from scratch, would these be the suppliers you would select?

Next are key resources and activities. Resources covers physical,  human, financial and intellectual. How does the firm stack up in these areas? Are the premises fit for purpose? Do changing working patterns change the need for space? Do you have the right people in terms of quality and numbers? If not, what can you do about it? Do you have enough working capital? Is the business financed in the most efficient way?

Looking at activities, knowledge management remains a key question for law firms, and one that I’m not sure many firms have really cracked. What about training and supervision? Quality control? How is service delivery managed? Client care? Compliance? There are so many day to day activities that just continue ad infinitum, simply because “that’s the way we’ve always done it”. The turbulent environment facing law firms can provide the perfect opportunity to revisit them.

Looking then at the outward facing parts of the business model, what are the key client segments and what is the value proposition that the firm offers to them? Do you know which are the most profitable clients? Are target clients clearly identified? Can all lawyers articulate their team’s value proposition to those clients and prospects? is the source of competitive advantage clear?

What about channels to market? Do you have any? Strategic partnerships with businesses selling complimentary services? What is the future of these in the world of Alternative Business Structures? Referral relationships? Are these working? Who are the partners you would select if you were starting afresh?

There are so many questions and also so many opportunities to do things differently and better.

Much of the debate in the UK at the moment centres around whether the deregulation offers a threat or an opportunity to the profession.  Ultimately I believe that question is academic – the market “is what it is” – it is for firms to choose how they respond, and the strategic challenge is to use the market changes to your advantage.





The insidious side of hourly rate billing

15 11 2010

Much has been written about the demise of hourly rate billing by some excellent writers, and rightly so, much of the focus is on why hourly rate billing doesn’t work for clients. Encourages inefficiency, doesn’t relate to value delivered or market rate for work, makes bill auditing onerous etc etc.

These criticisms are absolutely valid and it is undoubtedly clients who are driving the nails into the coffin of the hourly rate.

Time's up for chargeable time

But I want to look at hourly rate from another angle, and investigate some of the problems it causes within law firms.

Starting with the most obvious, chargeable hours targets for lawyers. Still the numero uno metric for measuring law firm performance, and still causing associates heartache in so many ways.

The number (be it 1,400 p/a 1,800 p/a or if you’re at a US firm maybe 2,400 p/a) it’s still the main criteria that lawyers are judged in the performance management cycle. Many law firms talk a good game about recognising non-chargeable work and rewarding high performance outside of pure client work, but speaking to associates at some of these firms, this type of recognition only occurs once the chargeable hours box has been ticked.

  • Want to have your business development truly recognised? Just make sure you hit your chargeable target.
  • Want to spend some time studying an emerging area of law? Fine, as long as you hit your target.
  • Like to spend some more time with clients, learning about their business? No problem, as long as it’s chargeable.
  • Up for partnership? Better knock your hours target out of the park this year.
  • Want to devote some time on pro-bono or other CSR initiatives? That’s great, do it at the end of the day when the timesheet is full.

There are so many activities that create value in law firms, yet so few of them get real recognition in comparison to chargeable hours targets.

Note also that many of these activities above represent an investment in the future health of the firm (you may remember David Maister talked about the tension between short term firm hygiene and longer term health) as opposed to the short term focus on current revenue.

One of the consequences of this is that lawyers fit in all the additional work over and above what are sometimes very onerous chargeable hours targets, leading to the inevitable work/life issues which are a hot topic over at the Careerist right now (http://thecareerist.typepad.com/).

And yet more frustratingly still, chargeable hours as a key metric has so many flaws

  • Do chargeable hours reflect the quality of work produced or client satisfaction? Nope
  • Do chargeable hours demonstrate profitable work or good financial management? Afraid not.
  • Do chargeable hours promote effective delegation and encourage senior lawyers to mentor train junior lawyers? Absolutely. Sorry, only joking.

I’m not necessarily suggesting the total abandonment of time recoirding. Indeed Peter Drucker, one of my favourite authors, talks about the importance of understanding where you spend your time in his brilliant book “The effective executive” which is one of the reasons I spent over three months as an inhouse lawyer recording my time. Also, capturing time utilised on client projects is important for calculating cost and determining profitability, and can also highlight development needs (if for example one lawyer takes 30% longer on a task than his or her peers).

But for as long as hourly rate billing and chargeable hours as the key metric continue staggering round like a zombie that just won’t die, I’ll continue wielding my personal chainsaw to send them to the grave!





When good people leave

8 11 2010

Talking to a legal recruitment consultant recently (and no, before you ask I’m not looking to return to lawyering!) he mentioned that while there are undoubtedly a high number of candidates on the market at the moment, they are not always what the recruiting firms are looking for. The sharper firms have opted to retain their top talent and protect their investment in the best people.

The staff door out of Briggins & Partners was less inviting than the client entrance lobby

This got me thinking about why people do choose to leave firms, and why when they do, so many law firms manage departures very badly (particularly when they have a large chunk of the office is occupied by specialist employment lawyers!).

One of the really interesting projects I did as part of my MBA was to look at attrition in a specific part of a multi-national business. The senior management team had identified attrition as a problem and wanted to understand it and fix it. I started with a mixture of primary research (talking to staff, line managers, senior managers, the HR team etc) and secondary research (reading exit interview forms, looking at internal data and industry stats and then ploughing through published literature on the subject).

There were two things that I really took away from the project. The first was that despite management perception, while staff attrition had definitely increased within the part of the company I was examining, it wasn’t particularly high when compared to the industry at large. Given the internal focus on many firms, this highlights the benefit of challenging internal perceptions, particularly on sensitive issues when partners may want to keep a discussion within a closed group.

By comparison I also found some parts of the business where attrition was so low, that itself was a problem. Typified by a number of long term employees (“lifers”), this team lacked new blood and the ideas and enthusiasm that new joiners can bring. Characterised by a resistance to change and the management challenges that come with that attitude, while it wasn’t the subject of my investigation, it was clear that this was actually a larger problem for the organisation than managing attrition in the other part of the business.

How many law firms or in-house legal teams might this be true of? For example, while it might be the high turnover corporate team that get the attention of management, and the support of the HR teams, could it be “steady Eddie” in the property team, with his or her long term band of supporters, who resists change and frustrates management initiatives, who actually is more problematic.

The second interesting conclusion I drew from the project was that the root of the attrition in this case actually lay in the company’s recruitment practices. The company was typically recruiting at short notice to meet pressing, short-term capacity problems. As a result, it was short-cutting the standard competency-based recruitment processes and getting candidates that were not well matched for the company’s long-term needs. It seemed counter-intuitive to me for recruitment to be causing attrition problems, but the evidence was pretty conclusive.

Now in my experience law firms but quite a bit of time and effort into recruitment, but this is often focussed on getting the right fit for the current need. I wonder how many associates subsequently move on because it becomes apparent that their medium term prospects are compromised for some reason (team structure or partnership prospects for example) that could have been foreseen and addressed at the point of recruitment. Creating different career paths within law firms is a subject that has got considerable attention within the last five years or so, but firstly I’m not sure how transparent these schemes really are to existing assistants, let alone to potential recruits.

I don’t have any magic solutions in this area, but  wanted to stimulate thinking about the link between people joining and leaving.

Finally, before I depart, a quick word on law firm departures. One of the things that struck me about the different between life inhouse and life in a law firm is how many more acrimonious departures there seem to be in law firms. Perhaps some of it is tied up with the consensual and to some degree more personal nature of partnerships as a business structure. Maybe some of it is that lawyers in practice invariably move to a competitor. Possibly some of it could be put down to the competitive (combative?) nature of many lawyers.

But really, is it in anyone’s interest to part on bad terms? Both parties have a reputation in the marketplace and will likely cross paths again in the future. Time and time again organisations like the big four accountancy practices and the top tier management consultancies show the value in their alumni network. Would this be possible if a huge percentage of leavers left under a cloud?

While corporate departures may not be a bed of roses, I’ve certainly seen much less animosity, and also much better communication (both internally and externally) than with some law firms. I remember one conversation when I was in-house counsel, when a partner I’d never met before called to tell me that one of the key lawyers I instructed had left the firm, and that he had covenants in his contract that meant he would not be able to act for me for the next six months, but of course that the current firm would be happy to help me out if I needed assistance. Needless to say I didn’t use them again…..

So if good people are leaving, my suggestions are firstly to take the time to find out why they are going (by which I mean have a REAl conversation with them, don’t just read the notes of their exit interview) and try and manage their departure sensibly. On the other hand if nobody is leaving, perhaps you should ask yourself if this is causing any hidden problems.





Strategy without creativity?

1 11 2010

Walking towards Holborn yesterday I looked up at a building to see the statement “strategy is nothing without creativity” plastered across the window. My instinct was to file it away in the “I agree” compartment of my head, and, as the song says, “walk on by”. The more I thought about it however, the less easy I found it to compartmentalise my response in that way.

The energy team's market strategy was lacking detail

Perhaps betraying my origins as a lawyer, I thought the best place to start the discussion was by getting clear on what I’m talking about when discussing strategy. A key distinction is between “corporate strategy” and “market strategy”.

By corporate strategy I think about the high level decisions of what markets a business will compete in, and possibly (depending on factors such as how disparate those markets are), a broad set of principles on how the business will compete.

By market strategy I mean how the business will compete in its chosen markets.

It is in this arena I want to examine the role of creativity,  however in my experience, there are more fundamental questions that many law firms need to ask themselves about their market strategies before creativity comes in to play.

The first is whether market strategy actually exists. Often firm strategy (essentially the corporate strategy mentioned above)  is set by the management and then “rolled out” to the partnership, practice areas, industry sectors etc. At the market level, often the business planning that happens is purely financial in nature; usually as part of the budgeting process. Targets are set, and teams then work out how they are going to deliver those numbers. This then leads into a very tactical discussion; perhaps looking at how to grow major accounts or penetrate particular prospects.

The market strategy layer is, not always, but often, completely missed. And as a result, firms often struggle to articulate their positioning in the market (one of the key outputs of market strategy) and when asked about their strategy for a particular market often end up talking about their experience or resources, which may well be relevant, but means the lawyers often lack the clarity of a well defined strategy that they can articulate.

Another benefit of having a market strategy, is a deeper understanding of what the competition are doing. When the day-to-day pace of life is so fast, it’s easy to get by with a cursory understanding of what other firms are doing in the market, relying on what’s in the legal press, and what you hear from clients and contacts. However, the benefits of actually analysing competitors, working out how they are different from you and your practice, what they do well, are significant and can shape the way you think about your own practice (and crucially how you present it to clients and prospects).

So, in a roundabout way, this brings me onto creativity. There’s no doubt in my mind, that at the market strategy level creativity can bring tremendous benefits, and create the sort of breakthrough strategies that could help a firm really win in the marketplace. However, if many firms don’t really have a market strategy, then I think there are opportunities for those firms who do have one to reap significant benefits simply from implementing their strategy well and communicating it clearly (both within the firm and to the market place).

Implementing and communicating strategy are both huge topics worthy of their own posts, so I’ll leave those for another day. However, the point I’ll finish on is just to mention that creating a winning market strategy doesn’t have to be a laborious, bureaucratic process – in Strategy SafariMintzberg lists a whole host of ways in which strategy can be formed (from emergent and entrepreneurial strategy through to more formal planning and design processes).

My bet is that if market strategy is something your team has done before, a small time investment would pay big rewards.

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