In Search of Perfect Client Service

I woke up this morning thinking how very lucky I am.  Valorem is almost two years old, and my worst day in those two years is still significantly better than my best day in the previous 25 years, at least from the standpoint of practicing law.  So I want to take a moment to thank the people who have brought such joy into my life.  From left to right, Mark Sayre, (then skip me), Lisa Castle, Hugh Totten, Shannon Bartlett, Reeghan Raffals, Hank Turner, Nicole Auerbach and Stuart Chanen.  Mark, Hugh and Nicole are the ones who started with me on this intrepid adventure, and I owe them special thanks. But as to the whole of our number, I have never had the pleasure of working with better lawyers or finer people, and I am forever grateful that you are sharing this journey with me.  Not pictured in this group are the people who make our lives immeasurably better and do such fantastic work for our clients--Doreen, Lori, Sarah, Sharon, Cherise, Ben and Cassie. 

I have much to be thankful for today.  Everyday.  I hope all that see this have something in their lives they can be thankful for this day too.

Happy Thanksgiving.

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As National Litigation Counsel for a number of clients, I receive emails from local counsel around the country.  A few, but enough that I have noticed, send me emails that contain nothing other than an attachment of their status letter.  So I have to click through the attachment, wait and then read a report on something that is typically inconsequential.  Time to read email--significantly higher than if the substance of the letter was put in the initial email.

But it's worse.

It should come as no surprise that may lawyers, myself included, travel from time to time.  And that we rely on our blackberries.  Those with any blackberry (or similar device) experience know the time to open attachments is not insignificant, and then the type size is microscopic.  The amount of time spent on any one email grows exponentially.  When i waste this time on reports that it was Tuesday on Tuesday or some other such nonsense, my blood boils.

In this regard, I figure it's a safe bet that most clients are like me.  So here is my message to everyone who sends emails to clients that contain attachments you prepared:  STOP IT! There is no value--zero, none nada, to having a piece of paper that you prepare and then scan and email.  It is a waste of resources and a waste of your client's time.

People need to stop focusing on what they do from their perspective and start considering it from your customer's perspective.

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Following up on my last post on how clients can determine whether the alternative fee quoted is a good one or not, I invite you to read this article from Corporate Counsel, United Technologies Takes a Stand, Puts Billable Hour 'On Life Support.'  Here's the punchline from the story:

These days it's easy to find law firms willing to work for United Technologies under some kind of alternative fee arrangement. They're a big customer; the Hartford-based global conglomerate raked in nearly $59 billion in revenue last year selling products like elevators and helicopters. But to truly impress United Technologies, firms now have to do more than propose working off the clock. They have to explain exactly how they came up with their flat fee, and how they'll make money, something many can't do. "Sometimes they tell me they have no idea," says associate general counsel Chester Paul Beach.

I know from experience that no lawyer can wake up one day and decide to quote alternative fees and be any good at it.  Being good is like any other estimator's job--it takes experience and a detailed, nuanced understanding of your cost structure and your financial objectives for the engagement.  Kudos to United Technologies for asking precisely the right question.

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When giving a speech a few months ago, I was asked by an in-house lawyer how a client was supposed to distinguish a good alternative fee from a bad one. Great question.

My answer? Ask the firm to explain in detail how it came up with its number.

I recall the first time I quoted a fixed fee more than a decade ago. It was a very unpopular thing in my firm, and the “bosses” were heavily involved. I came up with number in a very granular way. How many motions? How many depositions? How much time reviewing documents? How long for summary judgment? It was an exercise designed to identify the number of hours we would spend on the matter. We then multiplied the hourly rates of the people who would be doing the tasks and came up with a total.

That was only the beginning of the process. Rates were likely to increase during the period the case was expected to be active, so we had to build in a “bump” for the fee increase. We had to build in another “bump” to protect us in case we were wrong about the hours. And finally, we had the self-congratulatory “aren’t we great for doing this for our client” bump. That was the number we gave to our client. As you can see, it had a huge amount of profit, indeed, a premium, built in.

These days, I’ve heard from a number of in-house lawyers that the alternative fee quotes they are getting appear to have gone through a similar design process. As I tell everyone who asks, any explanation that includes something to the effect that we calculated the hours we would spend and multiplied by hourly rates needs to be rejected immediately. The firm’s hourly rates are where their profit is located. Rates x hours = revenue. Revenue – expenses = profit. If the firm is not putting some of its profit at risk and altering the way it works, it is not using the alternative fee to client’s benefit.

So what’s a good answer? I’ll answer that question later.

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Sometimes, you see something that is just a wonderful poignant reminder that you cannot win a battle with a customer, whether the customer flies your airline or purchases services from you.  Here's the story:

A musician named Dave Carroll recently had difficulty with United Airlines. United apparently damaged his treasured Taylor guitar ($3500) during a flight. Dave spent over 9 months trying to get United to pay for damages caused by baggage handlers to his custom Taylor guitar. During his final exchange with the United Customer Relations Manager, he stated that he was left with no choice other than to create a music video for youtube exposing their lack of cooperation. The Manager responded : "Good luck with that one, pal."

So Dave Carroll posted a retaliatory video on youtube. The video has since received over 6.1 million hits.   Six million!  Plus the story has been told on several national network shows.  How much does United have to pay to reach that many eyeballs with a positive message?

United Airlines contacted the musician and attempted settlement in exchange for pulling the video. Naturally his response was: "Good luck with that one, pal".  Taylor Guitars sent the musician 2 new custom guitars in appreciation for the product recognition from the video that has lead to a sharp increase in orders.
 

Can anyone think of a circumstance where a service provider wins a fight with a customer?  Perhaps we should consider a case study about United's lack of customer service.  Then again, United may well be thinking that their service is so dreadful to begin with that no song, no lampooning of them, could make the public perception of the airline worse.  If so, "good luck with that one, pal."

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ACC's Susan Hackett just posted Are Firms Tone Deaf? Why Push For Rate Increases In 2010?  Almost exactly one year ago, I asked the same question in my post The Economy And Rate Increases: Someone Is Not Listening. I had raised the issue in early October 2008.  As Susan's post makes clear, law firms are not learning.  Myopically focusing on one driver of revenue is only going to cause more pain as clients rail against those requests for "more."  The driver needs to be increasing margins.  Just as our clients focus relentlessly on margins, it's time law firms learn that they too need to do more with less.

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Law firms frequently strive to identify and adapt "best practices" in whatever area is under examination.  I used to think that this approach was laudable.  Not anymore.  The Harvard Business Review just posted Why Do We Ignore Best Practices?, which suggests some reasons why companies (firms) ignore best practices.

I take issue with the fundamental assumption of the HBS piece, which is that "best practices" are something to which businesses should universally aspire.  In some areas, like IT, best practices may be precisely the right objective.  But in most areas, seeking to emulate best practices created by someone else simply fosters a herd mentality.  In areas like branding, this is obviously problematic, and it can be that way in substantive areas as well.  Simply seeking to do the wrong thing the best way is not a virtue.

In my recent panel discussion with noted legal futurist and technologist Richard Susskind, Richard introduced the idea of blank sheet problem solving.  It was brilliant,  When being asked to solve a problem, a group starts with a blank sheet of paper, with the charge being essentially, start from scratch with no limitations and design a solution. If something elegant or innovative is designed by that process, the issue then becomes an engineering one, how to get from here to there.  But notably absent in the process is an reference to what others are doing.

Of course, in this same lecture, Richard discussed his view that lawyers are more concerned about not suffering competitive disadvantage rather than interested in seeking competitive advantage.  In other words, lawyers enjoy the herd.  Which makes them perfect candidates for seeking best practices.

The punchline?  Think about whether you are a herd animal or something more.  If you want to live in the herd, best practices will be your friend.  But if you want to excel, to rise above the herd, then ask whether best practices will hold you back.  Create a system, whether Richard's suggested approach or something else, that fosters creativity and encourages people to be more than a pack animal.  Challenge conventional wisdom, or as I see it, herd wisdom.

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During today's panel discussion with Richard Susskind, he mentioned that he had recorded an interview with Leah Cooper, the Managing Attorney of Rio Tinto.  Fantastic discussion of Rio Tinto's outsourcing of a significant amount of work.  Well worth a listen.

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Did you ever notice how decisions seem to gain a momentum of their own?  A managing partner becomes enamored of an idea, and no one else spends time thinking about it.  Or, as is more frequently the case, a tough question, such as "Are we at the top of our game, or are we in decline?" never gets asked because the answer is assumed. 

This is not an academic exercise.  Jim Collins reveals in his book How The Mighty Fall that the inspiration for the book came from a question he was asked about a question he posed to a group of generals, CEOs and social sector leaders.  Here's the story:

I pondered and puzzled, and finally settled upon, Is America renewing its greatness, or is America dangerously on the cusp of falling from great to good?

                                             ************

At the break, the chief executive of one of American's most successful companies pulled me aside.  "I find our discussion fascinating, but I've been thinking about your question in the context of my company all morning," he mused.  "We've had tremendous success in recent years, and I worry about that.  And so, what I want to know is, How would you know?"

"What do you mean?" I asked.

"When you are at the top of the world, the most powerful nation on earth, the most successful company in your industry, the best player in your game, your very power and success might cover up the fact that you're already on the path to decline.  So, how would you know?"

Collins wrote a book to respond to that question.  My question is this: who in your organization is asking that question?  And since most law firms have highly skilled paid professional advocates, if I were running a firm, I would give my best professional advocate the task of making the case that our firm was in decline.  Why?  Because if I couldn't win that argument against a good advocate, why should I believe he or she isn't right?  Then I need to ask what I can do about it.

Good questions.  Hard answers.  But as important, getting somebody to make the debate robust is worth its weight in gold.

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One of the explanations often offered by managing partners to explain why lawyers (really, their organizations) are so slow to change is lawyers' well-establish aversion to risk.  Change involves risk, to be sure, though the assumption implicit in the statement--that the status quo does not involve risk--is demonstrably untrue.  That debate, however, can be had another day.  Rather, I wanted to share something I read in Jim Collins' How The Mighty Fall about how to look at risk and whether it is "too much:"

Bill Gore, founder of W.L. Gore & Associates, articulated a helpful concept for decision making and risk taking, what he called the "waterline" principle.  Think of being on a ship, and imagine that any decision gone bad will blow a hole in the side of the ship.  If you blow a hole above the waterline (where the ship won't take on water and possibly sink), you can patch the hole, learn from the experience, and sail on.  But if you blow a hold below the waterline, you can find yourself facing gushers of water pouring in, pulling you to the ocean floor.  And if it's a big enough hole, you might go down really fast, just like some of the financial-company catastrophes in 2008.

Just as an example, it would be an imprudent firm not doing something in the fixed fee arena these days.  Do you have the whole firm start doing all of its work on a fixed fee?  That would be a "below the waterline" risk.  But doesn't it make sense to start somewhere and develop data and experience?  On a measure scale, that effort would be an above the waterline risk.

This is a simple but effective device for analyzing risk to your organization.

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