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In Search of Perfect Client Service

Why lawyers don't seem to get it

An example of where elite businesses go, but law firms fear to tread

Posted in Commentary, General

The title is simple enough: success = experimentation.  Here is Peter Diamandis’ thesis:

Today’s most successful companies, the ones that are “crushing it,” started as a series of crazy ideas, followed by experiments to test just how viable those ideas might be.

Experimentation is a crucial mechanism for driving breakthroughs in any organization.

If you want to create a successful, hyper-growth company, you’ve got to focus on empowering your teams to rapidly experiment.

The key is building a culture of experimentation.

The only constant is change, and the rate of change is increasing.

Ultimately, standing still equals death, and the only way to succeed is to be constantly experimenting and innovating (think of it as Darwinian evolution in hyperspeed).

Hyper-growth and experimentation are very closely linked.

Jeff Bezos likes to say, “Our success at Amazon is a function of how many experiments we do per year, per month, per week, per day…”

Is there a law firm, anywhere, that has built such a culture?  Doubtful.  But there should be.

Econ 101: If you increase expenses more than you increase revenue, profits will be lower

Posted in Commentary, Leadership and Management

You just can’t make this stuff up.  A recent ABA Journal article, Some law firm leaders question associate pay hikes amid tepid year, caught my eye. The Peer Monitor report stated:

Firms were squeezed by a perfect storm of slumping demand and rising headcount.

The ABA Journal article reports:

The economic forces have led some law firm leaders to question widespread associate salary hikes that raised starting pay to $180,000, according to Gretta Rusanow, head of advisory services at Citi Private Bank.

But here’s the money quote:

The associate pay hike is creating pressure for law firms that raised salaries for competitive, rather than performance, reasons, Rusanow writes in the Am Law Daily. “In our conversations with firm leaders,” she wrote “many express bafflement as to why so many firms adopted the increases when their productivity and profitability results couldn’t support them.

Firms may not have control over demand (arguable), but they have control over headcount and compensation.  It is pretty fundamental (perhaps day 1 of Econ 101) that if you raise expenses–like headcount and compensation–without a like increase in revenue, profits will decrease.  Were law firm leaders assuming growth in demand despite all the data that suggested?

I fully expect the reaction to this loss of profit will be to further increase rates to try to drive revenue.  (Now picture law firm managing partners with their heads buried in the sand over the caption “Addressing those pesky realization issues.”)

Links to my Art of Value podcast with Kirk Bowman

Posted in Pricing, Trends and Innovations, Uncategorized, Value Tips

Lamb--Art of ValueKirk Bowman has become one of the leading voices on value billing. Kirk produces the “Art of Value” podcast. He has interviewed an range of people who have offered so many great ideas on value, pricing and billing, including Ed Kless, Michele Golden, Peter Carayannis, the great Ron Baker, John Chisholm, and so many others whose names I did not recognize but who taught me so much. So I was honored to be invited to participate in a podcast, which you can find here. Thanks Kirk!  And if you are interested in value and value billing, you owe it yourself to listen to Kirk’s podcasts.

A personal reminder about the value of experience

Posted in Commentary, General

On Saturday, I was sitting in my home office and I heard an episodic beeping sound that sounded like a smoke detector with a battery that needed replacing.  I checked all the smoke detectors and none were chirping, so I continued my investigation.  I eventually discovered that the float trigger on our sump pump had failed.  I thought about waiting to call a plumber during the week when I would be charged normal rates, but the beeping was incessant and annoying.  So I figured this would be a good DIY project, and off to the local Home Depot I went.

Two and half hours after I successfully (I hope!) installed a new float trigger, I sat back and thought for a minute about how long it would have taken a  plumber to complete the chore.  I decided that a semi-experienced plumber could have completed the task in 15 – 30 minutes.  Using the longer time estimate, my pride in having completed the task evaporated when I realized it took me 5 times longer (at best!) to do so.  Plus I am left with the lingering uncertainty that I did it right!

The application of this to my on-going discussions about value billing and the value of experience is, I hope, obvious. Experience counts for much.  Experience creates greater value.  Or at least comfort that the best possible job was done.  But what is clear that that time, as in many instances, bears an inverse relationship with quality.

GE, like McDonalds, is outsourcing some corporate functions. How soon before it happens with law departments?

Posted in Commentary, Trends and Innovations

My last post recounted McDonalds’ creation of its own ad agency and posited the question whether bespoke law firms could be far behind.  Enter GE.  Yes, that GE.

According to CFO.com, GE is transferring about 600 of its tax professionals to PwC:

Reacting to what it sees as increasing uncertainty about tax rules in the United States and the rest of the world, PwC will hire more than 600 lawyers and public accountants from General Electric’s tax team and incorporate GE’s tax technologies and processes. In exchange, GE will get to shed salaries while still benefiting from the expertise of its legacy team.

The deal was further described:

Although GE declines to say what costs it will shed in the deal, Gosk said in the release that the company is “pleased to advance our longtime relationship with PwC in a way that provides an opportunity for other leading companies to tap into the world’s best tax team while providing outstanding career opportunities for those legacy GE professionals.”

Under the five-year agreement, which is slated to take effect April 1, PwC will be adding accountants, lawyers, and other tax professional from GE’s corporate division and the company’s other businesses, including GE Capital. About 20 corporate tax employees will stay on at GE to work on consolidated financial reporting, mergers and acquisitions, and other strategic efforts, along with managing the PwC relationship. An additional 250 tax employees will remain with company to service GE’s individual businesses.

The arrangement was struck after GE “looked to reevaluate the optimum delivery of these critical global tax services now and into the future,” the PwC press release said. “The new Global Enterprise Tax Solutions team will sit within PwC Tax and will provide managed services not only to GE but also to other PwC clients as well.”

So we have lawyers and others going to PWC.  The interesting part is that PWC plans to leverage the GE professionals to provide services to other clients, and GE will share in the revenue stream.

In the space of a week, we see two examples of major companies designing solutions to address ordinary corporate needs that involve custom designing a solution outside the company.  Shedding headcount is a positive for most companies and the idea of better leveraging what were corporate assets has to be enticing.  The question remains, when do law departments dip their toe in this trend.

McDonalds creates its own ad agency. Can bespoke law firms be far behind?

Posted in Client Service, Commentary, Trends and Innovations

Several years ago, I was part of a proposal to a large tech company to create a custom, build-to-suit, build-to-serve law firm to handle the company’s IP work.  The company showed interest, but ultimately it was too big a leap to make.

That was then.  Crain’s Chicago Business is reporting today on an ad created by “Omnicom’s We Are Unlimited, which was created and tailored for McDonald’s in late 2016 after a competitive review.”  So we have a piece of Omnicom now devoted exclusively to McDonald’s.  The question, obviously, is whether this foreshadows things to come.

When clients complain about their [fill-in the blank–ad agencies, law firms, accounting firms, engineering firms, etc.], one possible answer is “build-to-suit.”  The concept works incredibly well in the real estate area.  Why would it not work with a custom built law firm (or whatever)?  The answer is, it will.  It will just take one committed client to make it so.

Valorem turns 9!

Posted in Commentary, General

9th-birthday

 

 

Today, my partners and I celebrate Valorem’s 9th birthday.

When you celebrate a big birthday like this, you have to turn to the Chairman of the Board for insight. One of my favorite Frank songs is “That’s Life.”  While not perfect for the occassion (the message would be better if it were written in the first person plural), the gist of the song is the Valorem story.

“That’s Life”

That’s life (that’s life), that’s what all the people say
You’re ridin’ high in April, shot down in May
But I know I’m gonna change that tune
When I’m back on top, back on top in JuneI said that’s life (that’s life), and as funny as it may seem
Some people get their kicks stompin’ on a dream
But I don’t let it, let it get me down
’cause this fine old world, it keeps spinnin’ around

I’ve been a puppet, a pauper, a pirate, a poet, a pawn and a king
I’ve been up and down and over and out and I know one thing
Each time I find myself flat on my face
I pick myself up and get back in the race

That’s life (that’s life), I tell you I can’t deny it
I thought of quitting, baby, but my heart just ain’t gonna buy it
And if I didn’t think it was worth one single try
I’d jump right on a big bird and then I’d fly

I’ve been a puppet, a pauper, a pirate, a poet, a pawn and a king
I’ve been up and down and over and out and I know one thing
Each time I find myself layin’ flat on my face
I just pick myself up and get back in the race

That’s life (that’s life), that’s life and I can’t deny it
Many times I thought of cuttin’ out but my heart won’t buy it
But if there’s nothin’ shakin’ come this here July
I’m gonna roll myself up in a big ball a-and die

My, my!

Six Pricing Action Items from Buying Legal Council Procurement event

Posted in Client Service, Commentary, Pricing

Anyone who sells legal services to corporate America knows the important role procurement professionals play in the acquisition of legal services.  Dr. Silvia Hodges Silverstein leads the premier group for legal procurement, Buying Legal Council. The group allows procurement professionals to learn, from each other and from outsiders Silvia brings into group discussions.  The group also allows law firms to “listen in” on the procurement dialogue. Smart firms join so their proposals can reflect insights learned from the group.  In November, my partner Nicole Auerbach and I had the pleasure of leading a session at most recent Pricing Bootcamp.  We left the group with six pricing action items, and with Silvia’s approval, I wanted to share the list.

2016-11-03 Pricing Bootcamp

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If you are interested in a copy this list of action items, please let me know.

Valorem Honored to be Named to 2017 BTI Consulting Client Service A-Team

Posted in Client Service, Commentary, Selection of counsel

BTI_Client_Service_A-Team_2017_A-Team

 

My Valorem colleagues and I are honored to have been named to the 2017 BTI Client Service A-Team.   This is our fifth consecutive year to have been named to the A-Team.

BTI’s identified the firms awarded this distinction based on over 330 in-depth interviews of General Counsels, direct reports to GCs and other key decision makers from organizations with average revenue of $13.8 billion and median revenue of $4.9 billion.

Valorem was recognized by clients in the following categories:

Commitment to Help

Client Focus

Providing Value for the Dollar

Meets Core Scope

Handles Problems

Helps Advise on Business Issues

Innovative Approach

This recognition validates the efforts we have been making to provide a level of client service that distinguishes us from others, and we are humbled by the recognition from our clients.  We will continue to strive to be worthy of this recognition.

Prevention Is The Answer To The Question of How Law Departments Can Do More With Less

Posted in Client Service, Commentary, Prevention

According to a survey of corporate counsel at large U.S. corporations reported by Law.com, nearly 70% of law departments expect their annual operating budget to be flat or decrease in 2017.

Let me say that again—nearly 70% of law departments expect that annual operating budget to be flat or decrease in 2017. And we know that, in the face of this challenge, law firms will respond by….wait for it….raising their hourly billing rates. Because that’s what firms do.  Every year. Of course, it does not take an advanced degree to see the incongruity between the clients’ needs and firms’ response.

To make this statistic even more sobering, consider this: the amount of work that must be done by law departments with static or shrinking budgets likely has increased, not decreased.  Why? Because the world is smaller, businesses expand their offerings and operating geography.  Because that’s what businesses do.  And when they do, the work for the law department increases.  So demand for legal services increases while the budget to purchase legal services does not not. This is not good for law firms, especially large ones.  Nor is it good for law departments.

Faced with this, 43% of law departments expect to decrease their overall use of outside counsel. This work will be redirected to law department attorneys.  And, to be sure, there will continue to be efforts to shift work from higher priced lawyers to less expensive ones. Law departments will employ legal operations professionals to help improve operating efficiency within the law department.

The broad range of tools to reduce costs so more work can be done for the same amount is laudable.  But it is not enough, because it it not sustainable.  Once an efficiency is obtained, more work will still require more resources.  After some point in time, the issue will not be efficiency, but the amount of work.

Because of this, leading General Counsel are focusing on prevention, how they can work with the parts of their enterprise that generate legal work to operate in a manner that requires less involvement of the law department or produces less work for the law department.  A simple example is that improved contracting can reduce the number of contract diputes that the law department must handle.  Prevention is the key for long-term sustainable success—instead of having to do more with less year in and year out, law departments would have to do less and therefore be able to invest the less they get more wisely, on issues that better serve the corporation’s interests.

How many law departments have a structured preventive law program?  For those that don’t, what are the reasons they don’t?  For those with a structured preventive law program, what metrics on effectiveness are tracked?

These are interesting questions, and I am not aware of any generally available data.  Jeff Carr, Nicole Auerbach and I are conducting a preventive law survey for inhouse counsel.  We encourage all in-house lawyers to participate.  The results will be shared publicly.