The writing on the wall #4 – the commodity game

12 12 2014

 

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It seems that whatever the practice area, lawyers talk in hushed tones about their work becoming a commodity. Corporate law, employment law, technology law are among the areas where there is much gnashing of teeth and squeezing of margins.

Much of the debate focuses on whether to do the commoditized elements and if so how to do them profitably, but there is little discussion of what will replace that work at the high end. I suspect the implications of this will be felt in the not-too-distant future.





Why timesheets rule but chargeable hours suck

16 06 2011

There was something deliciously ironic about me trying some new time recording software this week. It’s many years after I left life as a private practice lawyer but I can still remember that huge sense of freedom at escaping the tyranny of the timesheet. The feeling of being able to work on what mattered most and be judged on results rather than be measured purely on how much time I had spent working on client matters was incredibly liberating.

The IT director proudly unveiled the firm's latest timerecording application - robust, wireless and mobile, it represented the future of the firm's management information system

Subsequent conversations with other in-house lawyers validated that I was not alone in those feelings.

After I moved in-house a huge number of conversations with peers included the words  “….. and no-more timesheets”, with knowing glances being directed at any private practice lawyer in the room.

But within a few years, I was voluntarily tracking my time as an inhouse lawyer. Admittedly at the time it was a pretty crude mechanism – I tracked data in hour long blocks in an Excel spreadsheet over a period of months, but it did the job.

I’d been inspired to do this after reading Drucker’s book “The Effective Executive” (well worth a read) in which he makes the point that an individual can’t maximise their effectiveness unless they know where they spend their time.

In practice what it meant was that I could have much more informed discussions with my major stakeholders around how best to allocate my time to achieve organisational objectives. It allowed sensible and transparent choices to be made around different priorities (if I support this deal and this HR project, the position paper on IPR ownership will need to wait until next quarter, or we’ll need to resource things differently) which I believe kept me more aligned with the company and led to some very productive conversations.

On the other side of the fence, I’ve written a fair bit around what I believe the problems with charging by the hour are, not least the impact this has on the firms as well as how it affects the client relationship. My mind often turns to a partner I know who runs a management consultancy business, who almost immediately on taking over the department abolished time-based billing. Profitability increased along with client satisfaction and employee retention.

However, to my mind there’s a critical distinction between tracking time and charging purely based upon time. The most obvious point is that as knowledge workers, typically the cost of labour is one of the largest components of the cost of providing a legal service. Without knowing what the cost is, running a profitable firm (file, project,team, department etc) is nigh on impossible.

It’s also important to understand cost in other areas too. Law firms often talk about the challenges of calculating return on investment for marketing events such as seminars and events, but when looking at how business development budgets are prioritised and spent, much of the focus is just on the hard cash being spent on venues and collateral, rather than the cost of the people involved in preparing and administering the event.

For example, having a top partner at a City law firm prepare for, attend and follow-up at a seminar overseas which takes him or her out of the office for a couple of days is a significant cost which can be accurately measured but is often overlooked.

The other non-chargeable area that it’s important to track is product development. As law firms begin to think more about efficiency and identify some more standard, repeatable services (some firms have been doing this for years) which are nicely packaged for clients at a set price, they usually “get” the idea that the service becomes increasingly profitable as volume of sales increase. The documents needed for the service are all ready and the people involved get quicker and more skilled at providing the service as they get more experienced. But often any upfront development cost in creating the service (market research, pilot projects, legal research, designing template documents) is lost because it is recorded under a general non-chargeable code. This makes comparing the return on investment for the project challenging and without an idea of these sort of development costs for previous legal products, makes forecasting and budgeting for future product development more difficult.

So back to my current quest. I was inspired to revisit this after reading tweet from a contact saying he was trying a web-based package called timerescue. This was a million miles away from the clunky, manual time recording systems I’d used in law firms (when I first started practice it was a paper timesheet pad) – running in the background and capturing application use, automatically learning behaviour and applying tags. All in all, a fairly sophisticated tool, with some nice web-based analytics to use to understand the data.

However, while I’m a big user of many cloud services, I wasn’t entirely comfortable with sending some of this data (document names, email titles) to a company I knew little about, so after a very short trial, I binned it. I then installed a similar piece of software locally, called Manictime. I liked this a lot, but it led to stability issues, so now I’m back to a more traditional system called Grindstone2.

The application is, of course, irrelevant other than it needs to be quick and easy to use, and provide the data in a format that’s useful.

The key point I wanted to make is that while the market may be (thankfully) steadily moving away from time-based billing, there is much to be said for the discipline of recording your time.





Inside out lawyers?

29 08 2010

An inside out lawyer would be messy, no question. I’m not sure exactly what lawyers are made of, but I bet the middle is pretty gooey, and you certainly wouldn’t want that stuff on your carpet. But law firms are different, in fact I think they are usually inside out…..

Angie's attempt to turn herself outside in to help with product development ended in disaster

Over the past few years I’ve spoken with a number of people in the profession  about product development, and have met varying responses, ranging from “we sell services, not products, and legal services don’t change so we don’t need any development”, to “how do we do that?” and finally “it’s a great product with a strong value proposition, you should meet the product manager”. Ok, so I exaggerated the last one, but not by much.

I’ve written about the need for innovation in law firms a number of times, but here my message is different.  One of the challenges law firms have in the way they approach the market, is they think “inside out” i.e. what capabilities do we have that we can sell (never mind if anyone wants to buy them or not).  I’ve often wondered about the reason for this, and when I was hammering through the reading for my MBA dissertation on law firm strategy, I came across some suggestions that this may be because lawyers have traditionally prided themselves on the quality of their work, viewing this as the critical success factor in the profession as well as a source of intellectual pride, and as result were disproportionately internally focussed.

However, it wasn’t until I read Tuned in (by Craig Stull, Phil Myers and David Meerman Scott) that I realised this phenomenon was just as common (or at least nearly as common!) in plenty of other businesses.  The book (which is a good read) explains that good product development starts with “outside in” thinking, which in legal terms means with the client. This makes absolute sense to me; if you are developing a product, it’s surely best to develop one that meets a market need.

Let me give you an example; I can remember being in-house just before the credit crunch really took effect. Many large companies were looking at restructuring and were going to need employment law advice. The in-house lawyers knew they could pick up the phone and get the advice they needed from their regular employment law advisors (no doubt at a competitive hourly rate), but how many times did the phone ring with a law firm pro-actively offering a nicely packaged restructuring service?

I’m talking about a service that gave me the advice I wanted, nicely presented, with a clear defined price. A service that the person calling could concisely and effectively explain the benefits and crucially, how it was different from other advice I might get on the subject.

Needless to say the phone didn’t ring much. Or indeed at all.

Now I don’t pretend this is easy: it’s not. You have to be close to clients and understand their industry to spot the market need. You have to be prepared to fail: it maybe you have a great product, but don’t get to market quickly enough. Maybe you get the product right but the price wrong. But to quote a cognitive hypnotherapist I met last week “there is no failure, only feedback”.

The ever changing nature of the law can be a blessing in that new market needs arise frequently. Why not turn yourself from inside out to outside in, and see if you can spot one?





That’s a really, er, interesting idea……

16 03 2010

Product development remains a concept that’s alien to many law firms. Firstly, the idea of highly tailored legal services being associated with something as, well, crude, as a “product” is just plain wrong. Secondly, the firms just deliver what the clients want, so that’s really a type of product development, right? Unfortunately there’s a world of difference between this approach, and actually spotting a market need, creating a service to meet that need, testing it, pricing it, crafting and communicating a value proposition, and then (horror of horrors) actually proactively selling it.

I thought the lightbulb was supposed to go on when we have a good idea?

Don’t get me wrong, some firms are very good at this, but they are still in the minority. When the credit crunch rolled round, most of my in-house peers knew that a restructuring was on the cards (and once the depth of the recession became clear, it was often a fairly severe one that was required). This often involved external counsel for specialist advice, and particularly support for the HR teams. Why, I wondered to myself, hasn’t a firm packaged up a nice, client friendly offer to help with this? Something a little different from hourly rate employment advice; maybe a slicker process, maybe different presentation, maybe a faster resolution, maybe priced more attractively; ideally all with proof points of the value that was captured, nicely wrapped up, and differentiated from the competition. But nobody did.

The next challenges for law firms that do “get” product development, is to keep the process client focussed. It’s all too tempting to base the service ideas on what the lawyers think the clients need, rather than what they actually need. Most clients love to talk about their business, and using those lawyerly skill investigating business problems rather than legal ones (when the clock is ticking) is, in my experience, always time well spent. A great read on this subject is Tuned-in by Stull Myers and Scott, and explains why it’s easy not to keep the client at the forefront of the product development process (and how to remedy that).

Finally, the last little nugget to chew over (watch your teeth), is the fact that good product development requires innovation, and I believe personally that the flip side of this is that it will involve failure, something lawyers generally don’t like to talk about. I don’t necessarily advocate the “fail big, fail often” approach of some innovation gurus, but I do think it’s important not to be scared to experiment, and to learn the lessons when failure does raise its poorly groomed head.





When fear stops you going forward

7 11 2009

Thinking about new product development in law firms, the word innovation pops up. That market is one that’s getting more and more competitive, and law firms need to be different to succeed.

The problem (as I see it), is that for many firms, as innovation become increasingly important, firms will run up against the widely accepted wisdom that innovation requires you to be prepared to fail (“fail big and fail often is a maxim oft repeated in the business books).

Why is this a problem? Well, lawyers are trained from an early age not to fail; in a sense many professionals (not just lawyers) are. Use the word “negligence” and see them twitch. However, for lawyers I think the problem is more acute; much of their work involves negotiating, arguing and looking for weaknesses in another person’s case or argument, while protecting and defending their own position.

oooops, it went wrong

Did someone say negligence?

To come up with big new ideas, particularly “game changers”, businesses and people need to be prepared to see some fail. Aside from the fact that if people are not prepared (or allowed) to fail they are much less likely to  try and innovate, there is often some great learning in failure, and if a law firm is not prepared to admit failure, it may miss some crucial learning.

I’m not saying all failure is good; far from it, people need to be accountable for their use of resources (particularly time in law firms), but a place where people are institutionally conditioned not to accept failure is very different. Different as well  from a culture where people understand the risks of failure and may take some informed decisions on new products and other projects that may (whisper it) fail. Fear can be a powerful motivator, but it can also be an insidious inhibitor, and at the very least people and firms need to be aware of the role it is playing in their work lives.

 

Related posts:

You are wrong and I am right

Inside out lawyers