Tag Archives: Law firm

Partner Smackdown!

Admit it. All of you who have worked in law firms have met one.

The head of Squiman's corporate team was not to be messed with

The partner you want to avoid in the lift. Perhaps she’s the one with the really (really) bad temper. The table thumper. Maybe he’s the one who makes trainees cry. Is it the one who seems to have avoided any sort of diversity training at all?

Lots of law firms have at least one of these stereotypes. Hell, maybe you’re one yourself!

What I’m investigating today is bad partner behaviour. I don’t think the behaviour really needs much in the way of explanation beyond that in the paragraph above – let’s just define it as behaviour which is inconsistent with the firm’s values and which most people would view as unacceptable.

But this isn’t unique.  This behaviour happens in corporate life too, and the public sector, so why focus on law firm partners?

I believe there are a number of factors that make this type of behaviour harder to stamp out in law firms than in other organisations, and that’s what I’d like to explore.

Firstly, as I’ve discussed before, cultural change can be particularly hard in law firms, and many of the reasons why organisational change is difficult apply equally to changing individual behaviour.  However, when it comes to large scale change, it maybe that to effect change firms dedicate resources and engage particular external expertise if they don’t have it in-house – This type of focus is unlikely to be applied to changing the sorts of behaviour we are looking at here.

But perhaps linking this type of behaviour with culture change is too abstract. Maybe it’s just a simple people management issue? Call in the HR team?

Alas, this is often not as straight forward as it is in a corporate environment. Firstly, the partnership structure of the majority of law firms means that the problem partner is likely to be an owner of the business, and as a result have a certain amount of weight (actual and perceived) that comes with ownership. By contrast it’s unlikely at the moment that the HR Director will have equal status, although this may change in the years to come.

In practical terms this can mean firstly that junior lawyers and support staff might be less likely to report the unacceptable behaviour. Secondly, it may mean that the HR team are not as empowered as their peers in corporate environments. One structural observation I’ve made in larger firms is that often the HR Director is a relatively senior professional, brought in to advise on strategic issues (such as talent management), but that they are supported by a relatively junior team on the operational side of matters. Thus the HR personnel at the “sharp end” of behaviour complaints can often be outgunned by the partner in question.

So if the HR department has challenges, how about peer group management? Surely the partnership as a whole will quickly identify and deal with the problem behaviour?

Maybe, maybe not.

It certainly depends on the firm (which circles back to the earlier link to the firm’s culture), but in my experience this is something that partners find very difficult. Perhaps again the partnership structure and the idea of relative equality among the equity partners plays a part, but I suspect more likely it’s that a large proportion simply prefer to avoid the conflict and hassle associated with peer-group people management, and critically that they haven’t been given the skills and tools needed to do the job effectively.

Given that exiting a partner does typically remain more complex than removing an employee (particularly if the law firm want to avoid any subsequent legal action and bad publicity), the last factor should not be underestimated. Law firm partners, even in the biggest firms, have often received a limited amount of management training, particularly when you consider that managing professionals is known to be among the most challenging categories of people management (good reads here are “When Professionals Have to Lead” by Delong Gabarro and Lees, and “Aligning the Stars” by Tierny and Lorsch).

The lack of training and reluctance to head into what might be a difficult conflict (another great read is “Difficult Conversations” by Patton, Stone and Heane) can be compounded by the fact that resolution may not be swift, and often partners get little credit for this type of non-chargeable activity, no matter how valuable it is to the long term health of the firm.

Finally, and perhaps most importantly, let’s not overlook the elephant in the room. Economics. In reality, the reason the unacceptable behaviour has carried on for so long is often that the perpetrator is a rainmaker. Huge billings = lots of power. While this may seem cynical, it might be that the firm management are aware of the behaviour, and are prepared to tolerate it to realise the revenue stream from the partner in question. In other firms it may be less overt, and the problem simply manifests through the fact that the high billing partner just has a lot of power.

Plenty of reasons not to deal with the issue, but I think we all know that’s not the answer. Aside from all the direct consequences of this behaviour (potential claims, loss of productivity, morale damage etc), it maybe that the junior assistant who walks out of the door, is the managing partner of the future.

The future of law firm sales?

Inspired by a recent dialogue on Twitter between Mike Ames (@Mike_Ames_Flair) and I (@intchallenge), I was struck by the similarity of some of our messages to law firms on the thorny subject of sales (talking about “client development” is much easier…). After posting some linked blog posts, we decided it was time to experiment with a social media-sales-mash-up.

James was not sure the practical sales training for lawyers was wholly relevant, but was willing to give it a try

Mike recently blogged about why lawyer’s don’t like the “S-word”, and I thought I’d add some of my thoughts to what I thought was a great post. It’s an interesting perspective, because while I’ve sold legal services, bought legal services and sold to law firms, I’m not an out and out sales person. Mike on the other hand has worked in business development for over 20 years, and has a history of both his own business development and coaching others to sell.

So, let’s mash (Italicised text is Mikes)!

Let me start by saying not all lawyers hate doing the “S” word. There are quite a few that I know who would prefer to do nothing but sales especially if meant getting away from all that tiresome law stuff and those impossibly demanding client-typesBut, whilst business development is an acceptable alternative phrase for sales (but not real work apparently) actually getting down to doing it is not top of the to-do list for most lawyers, but why?

Based upon my own coffee-house investigations (OK some of them weren’t carried out in coffee houses) these are my top 5:

  1. It takes too long – I just don’t have the time to fit it in. This is true, and the underlying cause is of course the tyranny of the chargeable hour. Maister talked years ago about the chargeable hour being today’s profit and the non-chargeable hour being tomorrow’s profit and nowhere is this truer than in the context of business development. How many other businesses would fail to recognise the importance of bringing work in to such a degree?
  2. It’s not my job – that’s what marketing are employed to do isn’t it? Sadly, the distinction between functions such as marketing communications, marketing strategy, pitch support and pure sales is often blurred in law firms, and thus the easy to understand link between sales and revenue often gets confused with other marketing-related activities that have much more difficult to calculate return on investment metrics.
  3. The law is more interesting – it’s what I was trained for and it’s what I want to do. This seems to me to be an entirely valid statement if you are working in a firm that can accommodate this approach. If not, then there may be a problem!
  4. I’m not sure what to do – I’ve had no real training or guidance. Definitely true at smaller and mid-sized firms. At the larger firms, I’d add a qualifier – the lawyers may well have had some training, but haven’t had the opportunity or encouragement to actually practice their skills and hone them. It might seem obvious, but selling is a skill – I remember first being taught Strategic Selling and SPIN selling as a circa 2 year qualified lawyer, but it wasn’t until I’d practiced them many times, often with an experienced business development professional at my side, that I began to internalise them and crucially, feel more comfortable using them.
  5. It’s just a bit grubby – I’m a professional not a used-car salesman. In my experience, while this attitude does exist, it’s dying out.

I’m not sure how close this to your own beliefs but they did crop up fairly consistently. By way of a response I would say: –

  • It is your job and is going to grow in importance. Accept it and move on. 
  • Sales is what makes the world go around – nothing happens until somebody sells something. If it helps consider yourself to be more of a facilitator. This is particularly true at the moment – you’ve cut costs, but revenues remain sluggish. Firms need revenue to grow. Of course it’s servicing the work that generates the revenue (and yes I know, managing WIP and aged debt are important too), but if you don’t sell effectively, the firm is unlikely to grow significantly – incremental growth of existing accounts in the current climate is unlikely to do the trick.
  • Like most things you can do it in a highly professional or decidedly sleazy way. You choose. This might seem like a no-brainer, but I’d go a step-further. If you are a lawyer with good client skills, the chances are you can be an excellent sales person. Professional, bright and good at asking questions, these are core selling competencies. Put some structure around them, season with a little theory, and then finish with a liberal serving of practice, and you’ve got yourself a rainmaker!
  • Once you have been trained it is easy and does not really take a lot of time. The sales cycle may vary depending on what you are selling, but importantly it will become a process that you can help shape, rather than just being on a treadmill of responding to client RFPs (requests for proposals).
  • It can actually be great fun, satisfying and very financially rewarding. Hell yeah. Closing a big piece of business can give a buzz that’s just as good as getting a deal signed, and you’re unlikely to have worked 48 hours straight to get it done!

I’m not a lawyer but I believe in the future the lawyers who get on most won’t necessarily be great at the law but they will be great at sales.

This I’d also agree with, but I’d also add some gloss. I think as more and more firms re-examine their business model, this will highlight the importance of the sales function. This may manifest as lawyers getting better at selling (more professional training, perhaps truly looking for sales skills and experience when recruiting), it may also result in the development of sales departments in law firms? Sounds a long way off? I’m not so sure. I’ve worked with firms who have business development managers who are very good sales people, and often accompany partners when they go out selling. This is a great model and it works very well. Where it falls short is of course scale, and for a large law firm (which is likely international), to have two or three really skilled sales people seems like an unnecessary restriction on revenue growth.

Now of course there are arguments that with professional services, clients are buying certain individuals, and to some degree I accept that. But even now there are challenges that can be made to that concept – when a partner pitches for work, will the client really be getting much of the partner’s time? The more efficient firms push work down to the minimum qualification level possible that will meet quality standards, and that will rarely be the partner. This of course helps keeps costs down, which translates into lower fees or higher profit margins, depending on the pricing structure.

In the IT industry, the concept of a pre-sales expert is common. This is someone with real technical knowledge who accompanies the sales force on prospect meetings to answer technical questions and demonstrate the company’s expertise. This model may need a bit of adapting for the legal profession, but I absolutely believe that the firms that invest in a highly skilled sales force, whether it’s lawyers, sales professionals or a mixture of the two, can really grow market share and win some serious business.

In that scenario, the losers? As Mike says, they’ll be those that turn their nose up at the S-word!

Mike’s website is here if you want to learn more about his approach to sales.

Beware – Psycho Lawyers!

One of the defining characteristics of a psychopath is apparently a lack of empathy. Now I’m not saying all lawyers are psychos (although I’ve certainly met some I wouldn’t want to meet in a dark alley!), or even that lawyers lack empathy, but I’ve got an interesting idea for you to play with, that might just improve your practice.

Alongside the obligatory Mt Blanc pen, Howard the senior litigation partner often brought a more unusual accessory to meetings

In the world of marketing, many of the leading professionals have long been creating “buyer personas”. The idea of a buyer personas is to create a model of a typical buyer in a market segment, and by making this model increasingly granular, the organisation creating the buyer persona can get a much deeper understanding of the clients in these segments.

So why is this important?

I’ve talked before about the tendency of many law firms to be quite introspective, and as a result they often focus much of their energy on their own firm and what they are doing, rather than externally on the marketplace (clients and competitors). With the marketplace becoming increasingly competitive, it’s a good time to really start thinking about clients and what they need, to ensure you protect the ones you currently serve, and are in with the best chance of winning new ones.

This is where the empathy comes in.

To share the love, you need to understand what your client needs.

The starting point is to create one or more buyer personas for your target market. Let’s say for example you are a large, National law firm and you are developing a campaign to target new clients in the technology sector (because as I’ve written before, many law firms segment their markets by vertical). You may have done some further segmentation analysis, and decided that your resources and experience best match up with the IT security software sub-sector, and in particular those companies who have a turnover of between £50m and £500m and are headquartered in the UK.

To create the buyer persona, I always suggest starting with a name for the persona to personalise the experience. At a very practical level, if a team is doing this exercise, the name makes the persona sticky, and people will often refer to him or her long after the exercise is concluded.

So, let’s say that our buyer from one of these software companies is Hilary, the general counsel. By answering key questions about this fictional (but typical) buyer, we build the persona. For example:

  • How old is she?
  • How long has she been practising law?
  • What technical areas of law does she know best?
  • How long has she worked at the company?
  • Where does she live?
  • What’s her family situation?

Ideally, if you are profiling a buyer from a segment that already buys your services, then these answers should be grounded in reality, and based on the experience you have with similar clients.

Once you have the buyer persona, it’s time to show some empathy.

Now it’s time for empathy mapping…..

This is a technique I’d seen before, but was reminded of by the awesome book Gamestorming (Brown, Gray and Macanufo). I revisited it last week with some colleagues as we did some empathy mapping around a particular segment of in-house lawyers.

Start by drawing a quick picture (don’t worry, it needn’t be the Mona Lisa) of the buyer persona on a flip chart, and label them with their name and job title. Then divide the white space into five.

Label the spaces: Thinking, feeling, seeing, hearing and doing.

This is the creative part, which if done correctly, can generate some really powerful insight into buyer behaviour.

Pick one of the categories – for example “thinking”. Ask yourself what the buyer persona will be thinking on a day to day basis? What’s taking up their head space in work? What are they dwelling on when they travel home in the evening?  What’s the first work-related thing that they think of in a morning?

It’s a great way to collaborate, particularly if you get members from different teams within a firm to participate. For example the corporate partner might assume that the buyer is 100% consumed by the M&A activity the company has just engaged with, yet the competition partner may offer the fact that recent activity in the industry suggests that the board may have some real concerns that need to be addressed as a matter of priority. The business development director may volunteer some insights based on recent pitches, and perhaps an associate from the commercial team might suggest that actually the GC is worried about how the hours she is putting in managing the day to day team activity are harming her family life.

As the ideas emerge, note key words and phrases on the flip chart, and then move round the other sections. The exercise needn’t take long – 30 minutes is plenty to get quite a rich picture built up, although building up a number of more detailed profiles can easily take a day.

Once the empathy map has been completed, the contributors should have a much greater understanding of buyer needs in their chosen sector, and can begin to consider what this means for their firm, its services and the way in which they interact with existing and prospective clients.

Most importantly though, it’s potentially a very small amount of time to invest, but forces the lawyers to focus on what matters most – the client.

If you like the sound of the exercise, why not try it out in your next team meeting? You can read a bit more on the gamestorming blog.

If you suggest it and one of your colleagues objects, perhaps check their desk drawer for sharp objects next time you are working late…..

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Presentation Shock and Awe

Ever sat through a truly awesome presentation? Seen one on TED?

 

Hardkins & Partners were determined to show the client all 114 of their slides in the allotted 45 min presentation slot

What about during a law firm pitch?

 

As a reader of this blog, you’ve probably had some experience of pitches. Been on the receiving end? Starred in one? Orchestrated one? Been shoved in one at the last minute as a “subject matter expert” or simply to make up the numbers?

In today’s post I’ll share an interesting technique that might liven up your pitch experience, but first let me tell you why I think it might be useful.

In my experience both as a buyer of legal services and during my time consulting with law firms, I saw a surprising variety of approaches to pitches to win work. Some presentation formats were prescribed by the potential purchaser, but more often than not the law firm were often left to their own devices. The results (in my experience) ranged from expectation-bustingly good to a straight up car crash.

The good firms had really thought things through, probably got some insight from people at (or at least who know) the prospect, and maybe had used a pitch consultant.

Those that hadn’t turned up, usually mob handed to cover ever possible question the client may ask (ostensibly to “show commitment”) and armed with a battalion of powerpoint slides to pummel the prospect into submission.

Here’s a slide showing where all our offices are in the world.

Here’s a slide with some client logos.

Here’s a slide with some directory quotes (which I’ll read out loud to you).

You get the impression.

Now, it’s no secret that I’m not a fan of overly complex (particularly text heavy) powerpoint slides.

Who is?

Yet why (oh why!) do a large number of sophisticated, multi-million pound law firms still use them as the back bone of a pitch?

But wait.

Not all powerpoint is bad.

Far from it.

Powerpoint can be beautiful.

My bible in this area is Beyond Bullets by Cliff Atkinson, but Presentation Zen and Presentation Zen design (both by Reynolds) are also inspirational and can fundamentally change the way you use the tool to communicate.

But today I want to talk about an approach called Pecha Kucha. This is a presentation methodology that emerged from the Japanese design industry in 2003. The format is breathtakingly simple. Twenty slides (I Like to select powerful visuals for my slides, and I don’t think this approach requires anything different), each with a time limit of twenty seconds before it auto advances.

20×20.

Six minutes and fourty seconds.

Beautiful.

It forces the speaker to be concise, ideally entertaining, and to know his or her material. Critically, it encourages flawless delivery, which must be the aim for an important pitch, right?

Always keen to “eat my own dog food” I tried this earlier this week, with a small audience of around 25 people comprising lawyers (from in-house and private practice backgrounds), sales professionals, editors, conference organisers, training specialists and marketeers.

Here’s how I did it.

I started by identifying the key messages I wanted to deliver, and then ordering them among the 20 slides so I told a coherent story. I then pulled out three key points for each message and bullet pointed them. At this point I searched for images to bring them for life, and once complete I had the basics of my structure. I then did an approximate run through (without the auto-timing on), and then used the flow to write the text for each slide. Five lines of text seemed about right.

Next I set the auto-timing part (much harder than it should be on Powerpoint 2007, thank you very much Microsoft!) and did a timed run through to tailor the text.

Finalise text, repeat. Practice.

It took me around 3 run throughs to learn the material (given the work I’d already put in to building it, which undoubtedly primed my memory). The delivery was fine (but not, by my standards perfect – always good to learn what I can do better), and most importantly the feedback universally positive.

Now it’s definitely not going to be appropriate for all situations, audiences or presenters, but why not add it to your armoury?

How about using it as a tool to see if you can summarise what your law firm is all about in 20×20? What if you got several different successful salespeople to do it and see how similar (or different) the messages were?

If you used it in a pitch situation, how could you use the time you’ve saved to create more value from the meeting for the prospective client? (Suggestion: ask more questions, create a real dialogue).

Could you get five different lawyers to sum up the recent activity in their practice areas in 6min 40 and present to each other as a form of “show and tell”. Great way to update teams without sending them to sleep!

It’s a deceptively simple technique, but one that to my mind has a great number of powerful applications.

Why not give it a go?

I’d love to hear how you get on.

 

A light sprinkling of vertical strategy

Think of a law firm in the top fifty in the UK or US. Got one? Ok. Now think about how they go to market. I’m going to guess their market strategy. Think really hard. Visualise their website. Hold, on. I’ve nearly got. Think a bit harder……. They’re vertically focussed, right? Right!

The vertical strategy contained a handful of technology, some property, a bit of pharma and of course plenty of financial services

These days pretty much every large law firm has a vertical market strategy. Ten years ago, it would have all been about the practice areas – who has the biggest and best litigation practice. Now, it’s all about the sectors.

And let’s be clear, there are great reasons for doing this. Back once again to our old friend Michael Porter and his great book Competitive Strategy (see last week’s post for more detail on this). One of the strategies set out in the book is for organisations to focus on a narrower section of the entire market, rather than address the market as a whole.

So law firms often segment the market (i.e. narrow it down) for legal services in a number of ways – for example, firstly they may make a distinction between consumers and business clients, then perhaps a particular size of organisation (for example large listed organisations or small owner managed businesses) they wish to act for, and then maybe geography (a particular country or City).

In reality, many of these decisions may be made without much conscious thought – a very small firm may not have the resources to undertake a particular type of work, or have the resources to serve clients outside its immediate “catchment area”.

However, the chances are, a firm will often still find itself with plenty of competitors, and will see the need to differentiate itself further. It can be difficult to demonstrate that its skill in a particular work type is higher than a rival firm, so thoughts frequently turn to a sector focus – “if we can show our clients and prospective clients that we know more about their industry than firm X, then that will put us in a much stronger position”.

At its most basic, I think this is sound reasoning – a vertical focus is not the only way to differentiate, but if done well it can provide the client real benefit.

Now often the initial vertical segmentation is driven by the make up of the existing client base, rather than market opportunity. Perhaps the firm already acts (because of reasons lost in the mysteries of time) for three airlines, and so decides to position itself as a travel sector specialist.

This approach certainly has benefits, particularly if the existing clients are well known brands and are referenceable. The firm will undoubtedly have to deal with conflict and competitive issues amongst clients, but once established as a genuine industry specialist, the benefits undoubtedly outweigh these type of challenges.

Another, perhaps more scientific way of approaching verticalisation is to assess the fit between the firm’s resources and the market opportunities. For example, which industries have the greatest need for the firm’s core skills (be they compliance work, complex litigation, volume property work etc.)? Of these sectors, what are market growth rates? Which are the most competitive in terms of legal service provision? What are the upcoming triggers in the industry for legal work?

However the firm gets to a vertical strategy, my challenge is to ask how deep the specialisation really is.

How much industry expertise do you have? Really?

One observation that I’d make, both from my experience in law firms and as corporate counsel, is that there are some firms whose vertical strategy only runs skin deep.

To me, if you are a firm that focuses on the technology sector, all the lawyers in that sector group should have a genuine understanding of (and even better, a real interest in!) that sector.

The reality is often a little different.

It’s often only the lawyers whose practice is most relevant to that industry that really understand the sector issues. So for example, staying with the technology example, it’s the IT lawyers who know what’s going on in the sector, and perhaps in the travel sector it’s the aviation lawyers who have their fingers on the pulse.

But what about property lawyers who are supposed to know about the media sector? Litigators in the financial services sector? I.P lawyers in the property sector?

Often the insight, the passion is just not there.

Scratch the surface, and all the expertise that’s trumpeted on the website and in the collateral dissolves. The sector focus is just pretty wrapping paper on the same old firm.

There are often plenty of reasons for this too. Perhaps rather than being recruited to work into a particular practice area, the fee earners have been shoe-horned into a sector group (“ok, you need to join a sector group, which one will it be?” or “Right, we need two property lawyers to join the financial services sector group”).

Alternatively, maybe the firm still remains structured internally around practice areas, so lawyers identify more strongly with their colleagues in those teams, than with clients in a particular sector. Financial metrics, reporting lines and performance management may also remain driven by practice areas, and so encourage behaviours which are inconsistent with the sector strategy.

Whatever the reason, a client looking for genuine sector expertise won’t be fooled for long.

But don’t get me wrong, some firms do get it right.

I try to avoid mentioning places I’d worked in the blog, but the UK firm  Olswang really did implement the sector strategy very well. And to give the article some balance, I was chatting with the Financial Services lead at Bird & Bird last week, and while he was a trained technology and outsourcing lawyer, he really impressed me with his knowledge of the F.S. industry, his contacts and what was going on in the market.

So what can firms do if they want to go beyond a skin-deep vertical focus? Investing time (yes, non-chargeable) with clients is a great place to start, because they are the ones that will really understand their industry. Actively working with/in trade associations works, trade publications should be required reading, and vertical training (even better if clients will come in and run sessions) can make a huge difference.

One big question the firm needs to answer is what they will do with clients and prospects that are not in their chosen sectors.

Will the firm continue to service and grow this mix of “miscellaneous” business, or will it begin to act only for clients in its area of sector expertise? In the current climate I suspect more firms will choose the former, although arguably the latter will give a sharper edge to the focus.

Perhaps a half-way house is to draw a distinction between reactive and proactive pursuit of business.

So, to finish, have a think about your market strategy. Are you vertically focussed? If so, how deep does the strategy run? Could it be deeper? Are the sectors the right ones? Look at your competitors websites and collateral – are they the same sectors?

And if you are vertical to the core, give yourself a pat on the back.

Can your clients say goodbye?

Regular visitors to this blog will know I’m a big fan of Michael Porter’s work, and have a genuine belief that all business people should read his two books (Competitive Strategy and Competitive Advantage). Competitive Strategy provides a framework for analysing industries, and helps the reader think about how attractive their marketplace is.

Wisto & Partners' client wanted to make sure the message was fully understood

One of the determinents of this attractiveness, are the presence (or absence) of “barriers to entry”.

If a market is particularly profitable, the high profits will attract new entrants who will join that industry and increase the competitive intensity of the market (ringing alarm bells any UK lawyers?!). This ultimately reduces profitability across the industry. Barriers to entry are factors that stop these new entrants, or at least make it more difficult for them.

One of the most obvious barriers to entry, is of course regulation. The legal profession has benefitted from this in most countries for many years, and only now as the cold wind of deregulation blows through town, do we see this barrier to entry crumbling.

However, this isn’t the barrier to entry I want to consider  today.

Rather, let’s spend some time thinking about “switching costs”  – essentially these are one-off costs that a buyer (i.e. law firm client) faces when switching from one supplier’s product or services to another’s.

Now on the face of it, the concept might seem  more relevant to industries other than legal services – for example if you were switching your CRM (customer relationship management) software from Oracle to Microsoft. There you might have data migration costs, systems integration challenges, and user training issues.

However, it was another book, Information Rules by Shapiro, that got me thinking about how the concept of switching costs could apply to legal services.

The situation I want to investigate is not whether or not a client wants to stop using a particular law firm or not (see some of my previous posts on client relationships or quality for factors that might influence THAT decision), but if they do make the decision to say goodbye, how hard is it for them to actually make the switch.

At the lower end of the spectrum, where the relationship between clients and law firm is pretty transactional, there are very few switching costs. The client takes their business elsewhere (probably not even telling the previous law firm), gets the minor hassle of identifying a new firm, making contact, and then after engagement letters and anti-money laundering checks are complete, they are up and running.

Another fairly unsophisticated, but surprisingly effective tool at the lower end of the spectrum, is the classic smaller firm technique of being named as the registered office of a company (possibly supported by company secretarial activities). Not a major block to an advisor move, but certainly another layer of inconvenience. There are plenty of similar examples for consumer based law firms (for example, retaining a copy of the client’s will).

Moving up a level, where the relationship with a corporate client covers multiple services, and includes a large degree of interaction, this can definitely make a move more difficult, particularly if both the legal team and business people (for example the HR vice president) at the company instruct the firm.

It might be that this type of broad relationship benefits not just the law firm, but also the client, in that the larger volume of work underpins significant price discounts. Subsequently trying to move one work type to a new firm could put those enterprise-wide discounts at risk. These broad relationships provide even stronger ties (higher switching costs) if the relationship is multi-jurisdictional.

Many firms try to achieve this type of model, but a much smaller proportion really do it effectively, frequently lamenting their failure to cross-sell and up-sell. Perhaps the notoriously protective attitude of many partners to their clients (and the firm cultures that support these attitudes) contribute to this, or maybe it’s the siloed nature of many larger firms that makes providing a truly integrated services to clients challenging, but either way, experience suggests it’s not as easy as it should be.

The other large switching cost that might cause a client to think twice about a move, is the depth (as opposed to the breadth) of the relationship with the law firm.

If the firm has made a large investment in understanding the client, this can be difficult for a new supplier to replicate. Here I’m not just talking about understanding the way in which the client works, but also things like their commercial models, their decision making process (formal and informal), the personalities involved, their history, their competitors and their products.

If this is done well (and both in private practice and in-house, I have seen firms do this VERY well), then this is a benefit which should be carefully weighed up before a relationship is terminated – it’s not the type of information that a new firm could harvest in an “investment in a new relationship” (such as spending two days on-site with the client, notionally free of charge).

Another area of potential switching costs can arise from technology and documentation ties. If a law firm provides a useful extranet for a client, or hosts a large number of important documents (having perhaps scanned and indexed them for the client), then a move may put these benefits at risk. Greater technical integration (such as access to time recording systems, maintained and automated precedent banks) offers clients higher benefits but may also increase switching costs.

So in my view, switching costs are alive and well in the legal profession, even if they are not recognised as such. With one critical barrier to entry being swept away in the UK with the full implementation of the Legal Services Act, it’s maybe time for law firms to look at the concept of switching costs a little more closely.

The one caveat I’d say, is that often creating switching costs requires an investment by a law firm. To know whether that investment makes sense, the firm really needs an understanding of the likely return from that client, and the concept of “lifetime customer value” is not often applied in the legal profession, but that’s a topic for another post….

Dude, your collateral sucks!

Off the back of attending a seminar for corporate counsel and risk professionals on the Bribery Act, and having previously worked with a law firm developing some anti-bribery products for their clients, I decided to see how law firms were marketing their services in this area.

Terry managed to get to the second paragraph of Hernshaw & Co's primer on the Bribery Act

My methodology was scientific and rigorous.

(not really)

A quick Google for .pdf files immediately pulled up a host of “briefing notes” (compelling title huh?), and I picked around 12 from top 50 UK law firms to read.

I can sum up the experience in a sentence.

They were ALL THE SAME!

Not just the content, but the structure, the style of writing and the design. So, so similar. In fact, you could have swapped the firm logos around and struggled to tell whose was whose.

The gist was essentially: “Corruption. New law. Bribery Act. Coming into force. Very serious. New offences. Directors, imprisoned. Very serious. Corporate hospitality. Unlimited fines. Very serious. Facilitation payments. Overseas. Public officials. Different cultures. Be careful. Very serious. New guidance. Contact us.

In essence, it was all very factual, and clearly provided some benefit if you wanted a brief overview of the Act. Most of them provided some very high level suggestions of what to do to prepare, and included a dusting of FUD (fear, uncertainty, doubt), to encourage the reader to pick up the phone.

But where was the engagement and creativity? Surely bribery is the great subject matter for telling some stories? Is there any relevant experience that they could have shared (obviously with client confidentiality and professional obligations respected)? How could they have brought some colour or added some value to the subject?

Something they could have done with the style or design to be a bit different? Maybe thinking a bit creatively about the content or structure?

How could they have made it engaging?

How could you make it something you’d like to read?

Something the reader would remember? Enjoy even?

An honorable mention goes to Addleshaw Goddard, who authored the only note I looked at that was slightly different. Titled “strawberries, cream and porridge” it looked specifically at the implications of the Act for corporate hospitality, and did stand out as a bit more useful than the vanilla briefings I found elsewhere.

One of the best examples of firms doing this type of thing differently, and doing it well, is Lewis Silkin’s employment team, who put out a great newsletter called (from memory) “Newsnotes”, which was one of the few regular newsletters I used to receive inhouse that I’d always take the time to read.

“Why?” I hear you ask. Primarily because it was genuinely funny, and in having a good chuckle, I’d always learn something.

So, apologies to those who spent the time writing the briefings (I don’t mean to offend, and because I didn’t name and shame, maybe I didn’t read yours!) and also to those who did do something a bit different but whose briefing I didn’t find.

It’s a crowded marketplace. Every now and then a change (new piece of law for example!) means clients and prospects will look to our profession for guidance. By all means educate, but also don’t miss the opportunity to engage and stand out!

What’s your career ROI (return on investment)?

A couple of interesting articles on the Careerist recently about law schools and their responsibility to law students. In particular there is a debate about the responsibility schools have to accept students (and their fees) when, in the current climate, job prospects can be slim.

Paying back the law school fees was never easy

Here in the UK, there is another dynamic that has come into play. With the advent of a serious hike in tuition fees, particularly at the top-end universities (that will undoubtedly attract a high percentage of aspiring lawyers), I think it is time to take another look at the cost of entering the profession, and see whether the end justifies the outlay.

The corporate world has shown me the value of pulling together a business case for any serious capital expenditure – the sums might not turn out to be 100% accurate, but the discipline of going through the process forces you to ask some sensible questions and can stop you wasting serious money.

But aside from my current struggles with the Spousal Budget Approval Committee (required in my house for gadget purchases), this rigour rarely makes an appearance in home life.

But should it?

While fees this side of the Atlantic remain below those in the U.S. a three year law degree will soon cost just shy of £30,000, with a year at law school costing £10,000, plus living costs, gives an overall investment of well North of £50,000.

In my book, that’s certainly the sort of money I’d want to stop and think about before spending.

In assessing the value of the education, there are many more factors than simply the straight forward ROI (return on investment), but the basic maths can’t be ignored. If you assume that you are going to come out and join a solid City firm, then chances are you’re on a salary of around £35,000, shifting to say £55,000 when you qualify two years later.

The traditional City law firm career sees salary then increasing every year (subject of course to the economy) with bonuses and perks thrown in, suggesting that it may take a while, but the debt for the not-insubstantial investment will be paid off in relatively short order (subject to any extravagant lifestyle choices!) and the investment then moves into the black and produces serious returns in the long term, especially if partnership in a profitable firm is achieved.

There is of course a “but”. These projections of profitability and a solid, predictable career path, a very much based on some assumptions about the legal market place. Assumptions which have been challenged over the last few years. Profitability at many firms has tanked and the annual salary rise was predicated not just on nice fat profit margins, but on a rise in the price of the lawyer based on higher levels of PQE (post-qualification experience). But if the hourly rate model is dying, and firms can no longer simply hike up fees because a lawyer has another year of experience (and arguably, it’s time served, rather than actual meaningful experience), then where does the annual rise come from? More chargeable hours anyone? In the efficiency-focussed law firm of the future, that might not be an option either.

Speaking of chargeable hours, the lifestyle is also something to factor into your decision. Lawyers in the firms that pay serious money work hard. Really hard. If you’re driven, motivated and enjoy the job, that might not be a problem. But while when my generation (qualified late 1990s) expected to clock serious hours in pursuit of partnership, conversations I’ve had with many partners these days suggest the current generation of trainees and newly qualified lawyers have very different expectations of work/life balance, which can lead to some firing the ejector seat early.

If that’s the case, then the return on investment is not looking quite so straightforward.

For time immemorial there has also been the question of what happens to those who don’t make it. Every year there are plenty who make the financial commitment, and either don’t make it through, or do get the qualifications and can’t find a training contract. Clearly this is particularly relevant in the current environment. If things take a while to pick up, and the graduates haven’t managed to build other experience and contacts in the meantime, then there is a real risk they’ll be passed over for fresher blood when the economy picks up again. Another situation when the initial investment is not looking so sound.

On the positive side, there are other ways of making a return which don’t involve the long game of partnership. As a lawyer, you’ll build up some great transferable skills. Because the profession can be quite insular, it can often be difficult for lawyers to identify these, but trust me, they are there and they are valued in many different arenas (one of the books I found most useful in assessing my skills when looking to career change 10 years after I qualified was “what colour is your parachute“). That said, it’s through the practice of law you will build these skills, rather than the academic training, so I don’t think it’s a question of a law degree opening a huge variety of doors, but in the medium term, other options become available.

Finally, the profession is changing. Big time. This will have implications for all of us in the profession, both the grey hair and the young blood. Given these changes, it also adds another angle to consider when assessing the law as a career. Some may see it as risky, others may see a wealth of opportunity. Much like any other investment, your tolerance for risk will play a part in your decisions, and is just one more component to factor in.

So, no answers, but hopefully some things to think about for both aspiring lawyers and any current or former lawyers feeling reflective. If you’ve just started on the path, I wish you all the best!

Outsourcing Armageddon!!!

There’s no escaping the “o” word in the legal profession at the moment, and for the past 18 months, the stories in the UK legal press have just kept on coming. Lots of words, but what’s really happening? What’s going to happen?

A suitably shocking image was required for a discussion of the "O" word...

Does outsourcing spell armageddon for the legal profession? Will all the jobs be swept up and done offshore? Will process and technology decimate the practice of law? Or will the hype die down and the business model be exposed as simply not working for the legal profession? The outsourcers might find small niches, but not penetrate the mainstream?

I’ve been connected with the outsourcing industry for about twelve years. In practice I spent six years as a technology and outsourcing lawyer, and then spent four years in a global outsourcer as corporate counsel. I moved into the business for the same company and after I left, I spent a year leading the onshore team for the legal processing division of another global outsourcer. So now, with the news full of A&O’s support centre in Belfast, and the continuing story of Cameron’s large scale deal with Integreon, it seemed like the right time to offer my thoughts on the topic, particularly as lots of the comments flying around seem to me to be made by people who’ve never seen an outsourced operation, let alone have any understanding of the underlying business models.

So buckle up, here we go…. (my blogging guide did suggest being controversial – how am I doing?)

Let’s start with the observation that the fundamental principle of contracting with a third party to provide services that are non-core to your business is pretty well established. Whether it’s finance and accounting, payroll, logistics, manufacturing or customer services, many of the largest companies in the world have outsourcing well established as a critical part of their business model. It’s been going on a long time, and the long-term success of the big global outsourcing providers suggests that this approach does work.

With providers leveraging both lower costs from economies of scale and labour arbitrage and providing the service using highly specialised staff, best practice process and technology the business case can be compelling. On the other hand of course concerns about data privacy, potential loss of control, cultural differences, brand damage and the political and social implications of outsourcing jobs appear to make the decision less clear cut.

So while the underlying business model clearly has pros and cons, with the profession having been hit hard by the recession, with traditionally high labour and property cost-base, and incumbent providers of legal services potentially facing a new wave of competition as a result of deregulation, it’s surely no surprise that outsourcing has finally become a reality.

Where I think the most interesting questions lie, are not around the question of whether outsourcing will succeed, but what types of work are most suitable for outsourcing and will provide the biggest benefits for law firms.

To investigate this, a bit of clarity is required about what actually constitutes legal process outsourcing (or LPO). I wrote in an article for Managing Partner magazine last year that one of the problems with the hype surrounding outsourcing in the legal profession is that any outsourcing gets labelled as LPO, when in fact, many deals don’t actually include the outsourcing of legal work.

A helpful place to start is to think of the firm in terms of back, middle and front office, terms that are often used in the financial services industry. The term “back office” means those parts of the law firm that run the business, but are largely invisible to the client – accounts, human resources etc. By contrast the meaning of “middle office” is a little more fuzzy, but I think of that as those support functions which either directly support the provision of legal advice (such as legal research, knowledge management) or are in other ways visible to clients (business development etc), but are not the actual service that the client pays for. Front office work is much clearer – the actual provision of legal advice.

So, with a sprinkle of added clarity (that if a law firm outsources some of its finance function, it’s not LPO in my book), what do I think are the prospects for outsourcing in the profession?

If we start with the back office, this at first glance would seem the obvious place to start. Generally speaking, it’s non-core and won’t provide much in the way of competitive advantage (in fact, by contrast there are plenty of firms that have challenges with billing) for law firms. The challenge is however, that for all but the largest firms, the scale of the accounting function is not large enough for the economics to make sense on a dedicated outsourcing project.

The answer of course would be a shared service, that law firms could simply plug in to. The difficulty here is that law firm IT systems are incredibly diverse, and a lot of them have been customised and patched together over the years, so simply moving to a new (outsourced) platform will not be easy.  I’m sure this conundrum will be cracked, but am not sure whether anyone is there at the moment.

Looking then at the middle office, the raft of deals among UK firms at the moment suggests there is appetite for outsourcing here, and looking at parallel operations in other sectors, there’s no question the model can work. At the BPO provider where I was working last year, their research and analytics function had over 1,500 employees, 70% of whom had advanced degrees (MBAs, PhDs etc). The quality of their output was excellent, and they provided comparable services (pitch support, business intelligence, research etc) for blue chip corporates, investment banks and management consultancies. The team was led by someone who set up McKinsey‘s knowledge management centre in India, and I certainly felt confident that a lot of that team’s expertise was transferrable.

The final area is of course the legal work itself, and this is perhaps the most emotive area for lawyers. There is a huge split of opinion here with, on one side, service providers who are selling, keen to make the most of their credentials, and confidently talking of their ability to “move up the value chain” (by which they mean demonstrating they are capable of taking more and more complex work). On the other side, are many lawyers who, having spent many years working hard to join and progress in the profession, do not believe their work can be done by less qualified personnel, especially those outside the jurisdiction.

So what’s the truth?

Well, I think the starting point is to establish that in the world of volume legal services (think conveyancing, remortgages, personal injury litigation etc) legal work has been successfully outsourced and off-shored for sometime. Undoubtedly if you had asked the question ten years ago whether this would have been possible, the majority of the profession would have shaken their heads and exchanged knowing glances.

These days, my experience is that talking to lawyers, many now see how an outsourcing model could work for certain types of legal work, “but mine is too complex/specialised/personal”!

My view is that their is a spectrum of complexity for legal work, and at the very bottom end (low complexity) more of this can and will be automated – seeing some of the latest document assembly tools is a good reminder of progress here.

At the next layer of complexity, there is a huge scope for the application of process to make the legal work more efficient. Having done some process mapping engagements for law firms, I can confidently state that when you get a process standardised and down on paper, the opportunities to improve it are many.

Improving process is not of course synonymous with outsourcing, and I expect in the next few months there will continue to be a huge rise in process re-engineering engagements at law firms (and in in-house departments) without perhaps those firms being ready to outsource.

This work will ultimately be capable of being outsourced (mapping and documenting a process makes outsourcing much easier), but whether or not this happens will depend very much on the individual firms, their cultures, their business models and their financial situations as well as the sales reach and delivery capacity of the service providers.

At the top level, there is of course highly specialised work that does not lend itself to process standardisation or outsourcing. With the blurring of the boundaries between the professions, the opportunities for top-end lawyers to provide advice that is strategic in nature, but perhaps not technically legal advice, will grow.

Finally, as one of the people leaving comments on the Legal Week article on Susskind’s appointment to Integreon’s client board noted, all outsourcing deals have to go through transition before they then stabilise and start delivering to service levels and providing the expected value. Even at this stage, it takes time to realise the full benefits and so expect a raft of noise in the media if some of the deals experience a few wobbles to begin with.

Personally speaking, having had the privilege of having been to several offshore outsourcing centres in Asia (as well as UK operations) and seen them in action, I would have a lot of confidence that long term, back and middle office services could be delivered effectively by the top outsourcing providers. For the front office work, I suspect success will depend much more on the type of work being outsourced and the provider’s experience.

To wrap up, I’m not saying that outsourcing is the right or wrong choice for any firm. I do believe that the business model has been proven in other industries and that certain functions in a law firm are sufficiently similar to other industries that there’s no reason why the profession should be any different. In one flavour or another, outsourcing is here to stay – watch this space to see how it evolves.

The price is right?

For a number of reasons, I’ve been thinking about price a lot this week.

The head of the dispute resolution team was unconvinced his business development director had got the price right on this bid

Firstly, the Holden Group’s excellent newsletter plopped through my virtual letter box with a leader on righting the wrongs of panic pricing. Next the Harvard Business Review had a very thought provoking article on adaptive pricing strategies, and finally, I went to an internal workshop with one of our group pricing specialists (looking at the link between product strategy and pricing).

Much is written about the death of the hourly rate and the new pricing models emerging in the legal profession, but there seems to be less material about the “why”, which to my mind is an important step before the “how”.

In the past, much law firm pricing often didn’t go much beyond volume based discount: If you spend £X (thousand/million – delete depending on size of account) with the firm in a year, we will discount our hourly rates by Y%.

The rationale presumably included a desire to make the pricing appear more competitive, to encourage a higher spend by the client, and to make the client feel “valued” (in reality of course, this strategy doesn’t do much to connect the firm’s activity to value delivered to the client at all, but that’s a subject for another post).

With law firm clients becoming more savvy purchasers these days, this type of model is likely to be met with questions about additional discounts for single sourcing, requests for further discounts coming from efficiency gains, and discussion about how the firm will provide an optimal team structure and resourcing model.

Now while it easy to find fault with what is a fairly unsophisticated model of discounts on hourly rates, I spoke to a general counsel of a listed company last year, who proudly told me how with one of his regular advisors, he regularly negotiates 50% discounts on his bills.

The idea of a notional discount (whether volume based or otherwise) clearly appealed to him, and he seemed genuinely surprised when I suggested that the law firm might be anticipating this conversation and factoring this into their pricing. I also made the point that negotiating bills every month might not be the best use of either his time or the partner at the (very well known!) law firm, but I began to wonder if he secretly enjoyed the process and the little victories it brought (I know, I know, I’m no Sigmund Freud).

When it comes to pricing strategies, the other other “old favourite” of the law firm tender is the “we’ll buy the work” approach – the idea that the firm will price very low (often at or even below cost) to win a significant piece of work, and then develop a relationship with a client which will allow the firm to secure an ongoing stream of more profitable work.

While of course penetration pricing is a proven strategy in plenty of other markets, my concern here is that many law firms don’t back this approach with the rigor needed to execute it successfully. Firstly, the scope of the project is often underestimated leading to higher costs than anticipated. Secondly, the price is set by reference to a figure that the law firm believes is needed to win the work. Rather than being based on real competitive intelligence, or with reference to a database of market prices, it is often just “gut feel” or based on informal signals from the client as to what will be needed. I’m a big believer in intuition in the right context (Blink by Malcolm Gladwell is well worth a read) but with a pricing decision, it should be one of many factors taken into account, rather than the only factor.

The post has meandered a little this week, but the key takeaway is before you start to build a pricing model, spend a few minutes to work out what you are trying to achieve. With that in mind you can then build a model that works, hopefully for you and the client, meaning that, as the game show says, everyone’s a winner…..

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