In Search of Perfect Client Service

In my recent post, Want To Think About The Future Of Law?. I referenced Jeff Jarvis' fantastic new book, What Would Google Do?  Listening to my tape of the book this morning, Jarvis made two great points.  One is what the calls the "cash cow in the coal mine," a play on the idea of the canary in the goal mine, an early warning indicator.  His point is that when your business is generating cash, the cash can blind you to the problems ahead and the need to change to survive.  By the time you realize you need to change, it's already too late.  The cash cow effectively killed the business.  He offers several terrific examples.  Might some law firms be on his list in the next edition of the book?

The corollary point Jarvis made during my morning listen is the one that gives rise to the title of this post.  Preservation of the pat is not a strategy.  No matter how much an owner may wish otherwise, a business must be inherently forward looking.  The past is past.  Dead.  Gone.  Yesterday's customer is no assurance of tomorrow's.  Business owners who fail to see the future and the need to look forward, not back, are destined to fail.

These two points, it seems to me, define the challenge of the moment for most law firm leaders.

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The ACC Value Index, a new tool for in-house lawyers to rate law firms, has caused endless consternation among law firms.  First, it was the marketers, thinking it unfair that the system was closed to the firms.  "What if someone says something bad about us?," they worried.  "How will we market around that negative ranking?"  The firms next moved to more elaborate challenges.  "The questions are unfair!"  "How dare you condemn an entire firm if one partner screws up!"

Of course, no firm wants to be at the forefront of criticizing the organization that speaks on behalf of clients.  So it was hardly surprising that some consulting firm that sells its services to these firms would emerge as a spokesman for the large firms.  The Zeughauser Group's November 2009 "Call To Action" contains every criticism firms might have with the Value Index.  The criticisms really fall flat.

Criticism No. 1:  The law firms can't see the ratings.  This is called a "serious flaw."  This is a big yawn.  If firms were actually working with their clients, trying to better serve their clients' needs, they would not be surprised by any ratings.  That that don't know these things is an indictment of the firms, not the Value Index. 

Criticism No. 2: The Value Index asks clients to rate matters based on individual offices and practices areas.  That is unfair, according to Zeughauser, because firms "'strive to put the best team on the field' for each client matter, staffing matters with lawyers from several practice areas and offices if that is what will deliver the best and most cost-effective service, expertise and result for the client."  The language sounds like it was written by a second-rate PR firm.  Since when have firms been concerned about "cost-effective service?"  But to the point, Zeughauser surely knows that however many offices or practice groups are assigned, there is a primary locale and a primary practice group on virtually every matter.  Consider it an evaluation of team leaders.

Criticism No. 3: The Value Index does not "collect specific actionable data that would be helpful to law firms striving to better align the cost and value of legal services."  The Value Index is a tool for buyers of services, not sellers.  Get over it and go figure out for yourself how to provide more value.

Criticism No. 4: You damn firms instead of lawyers.  As one friend said of this criticism, "I think all of this is akin to suggesting that as consumers we should not hold Campbell's soup responsible because we discover rodent parts, when we open one of their soup tins. 'It was really only a small snag within the Ox Tail Soup bottling line, and should not be a reflection on the quality standards of the whole company.'"  Firms have spent millions (or more) trying to brand themselves.  They do not have standing to say their brand cannot be judged.

Zeughauser's actions are shameful pandering to their customer base.  Law firms, in turn, need to stop acting like spoiled babies and grow the hell up.  I'm not suggesting the Value Index is perfect, but the reaction of BigLaw to it reminds me of a spoiled child throwing a temper tantrum in a public place.  But instead of acting like a responsible parent and telling the child to stop and deal constructively with the circumstance, the Zeughauser Group is enabling the problematic behavior.

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If you want to stimulate your  mind to think about the future of the practice of law, read (or listen, as I am) What Would Google Do? by Jeff Jarvis who also writes the blog, Buzz Machine.  And if you really want to expand your mind, read Small Is The New Big by Seth Godin right after.

Jarvis' thesis is that Google succeeds because it shares everything and builds platforms for people to do stuff more easily, making the Google base more essential.  It is interesting to noodle about how one (or even groups of firms) could benefit by enabling their clients.  More to come on the ideas spawned by these two books, to be sure.
 

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I was recently having a discussion with a friend of mine who is the Managing Partner of a firm I love and greatly respect. We were talking about Valorem’s Advisory Board and what a great experience its been for us. She lamented that she would love to create a similar board for her firm, but had run into resistance from some of her partners. Her comment got me thinking about the difference between having an ownership stake in an enterprise and controlling its operation, traditionally the function of enterprise management.

Perhaps dating back to those “olden days” (a phrase my kids use with me all the time) when men were men and partnerships were collegial and law was a profession instead of a business, our profession has been burdened with the notion of decision by consensus. That is, partners will hash an idea out and eventually a decision on the issue at hand will be made by general agreement. Sure, the legal documents provide for votes, but consensus is the favored approach.

As firms grew in size, the folly of this approach became apparent. Key decisions were delayed because “Bob” was traveling. Not all partners had the same appreciation for financial dynamics or client relations or other practice nuances, and only a few seemed to appreciate the “ways of the future.” Because no one was accountable, lots of things never got done. Some firms did, in fact, embrace concepts of enterprise management that would be recognizable in at least some business schools. Still others concentrated power in the hands of a few partners, although this approach typically has led to turf wars. The common denominator among most of these newer approaches is that they lack accountability. The absence of change amongst the managing partners in BigLaw during the last two years illustrates that essential failing in the management models of most firms.

Let’s look outside the law for a minute. Can anyone imagine Mabel Jacobs, an 82 year old retired homemaker who owns a few thousand shares of stock in Microsoft walking into Steve Ballmer’s office to talk about her views on what Microsoft should be doing over the next few years? About executive personnel decisions? About how it should use its working capital? Can you imagine a line of shareholders waiting to have similar discussions? Of course not. In the real world, we distinguish between ownership and management. Ballmer may be elected by the Board which is elected in turn by the shareholders, but once in, he makes decisions until the Board decides to remove him from his position.

Why should law firms view management differently? Yet partners routinely mistake ownership interest--a right to profits--with management.  In my own experience, I’ve seen the interest of former partners in management issues vary greatly according to their workload. Get close to a trial and suddenly the business of the law firm is irrelevant. Some people are not interested in the economic circumstances of the business world. Why on earth would we want them influencing marketing and pricing decisions? I've seen firms elevate their primary rainmaker with a thirst for power even though that person could neither management their way out of a paper bag or lead a firm to ice in the Arctic.  And why, as the pace of change accelerates to a speed that will shake foundations of virtually every enterprise, would any group of rational actors embrace of form of business management that is the antithesis of nimble and effective?

I am not, by the way, suggesting that every decision be concentrated in one person’s hands. Decisions like admission of new partners, merger, and other core issues ought to be discussed and voted upon. But a decision on whether to create an Advisory Board and who would be on it would never qualify as a core issue. Certainly an effective manager and leader will prize communication with his or her constituents, perhaps embracing what Tom Peters calls MBWA—management by walking around. But firms that tie the hands of their senior managers risk paralysis and unfortunately, obsolescence.  

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Someone sent me an email yesterday passing along a blast email she had received from a listserv:

Our firm’s clients are regularly pressuring us to enter into alternative fee arrangements. It is quite an undertaking to consider a model for this approach, and I am wondering whether anyone has already begun the process. We already have some matters (transactional work) in which we bill a flat fee. Can anyone tell me if they have experience with an alternative fee arrangement for litigation work? Thanks.

What can we learn by dissecting this email.  In no particular order:

1)  The pressure is from the firm's clients.

2)  The pressure is regular.

3)  The firm has accurately determined that it needs a different model for this fee structure (though I am not sure they are using model in the business model sense)

4)  The firm has underestimated what it takes to change to the new model ("quite an undertaking" does not begin to suggest how radical and institutionally transforming the changes will be)

5)  The firm has not heard of Valorem, Bartlit Beck, Shepard Law Group or the others that do litigation on a fixed fee or alternative fee basis (or else they would have called those firms directly).

6)  The firm is now behind the curve.

The most important of these six points?  Numbers 1 and 2. 

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Ed Reeser is a fantastic lawyer and a great guy.  We were teammates during Professor Bill Henderson's FutureFirm 1.0 contest last April.  Largely because of Ed's insights and wisdom, our team prevailed.  Ed, Jeff Carr, Patrick McKenna and I recently co-authored 4 articles together, largely because Ed played the role of the rancher, sitting on his trust steed, cracking the whip to keep the rest of us moving toward the finish line. I thought my admiration of Ed knew no bounds, but then I received this email from him, which I quote here with his permission.  The lessons for lawyers and non-lawyers alike should be obvious:

Lessons from a Corsican Mouse on the Practice of Law

I have had one lesson, taught twice, that was very important to my career and life, and rather than have any of you subject to the abject humiliation of the experience, share it with you openly.

The first installment came during my training as a martial artist, which I pursued ardently for more than 20 years.  It had to do with developing the skill of the "eye of the crab" both for recognizing danger early and scuttling out of its way, but also intrinsically radiating the message, without being confrontational, that their taking a piece out of you was not a worthwhile exchange for the piece you would take out of them....and thus they pass you by. That all sounds great coming from a wise and ancient kung fu master, but it was not within the real world of experience that is so much better a teacher...if only we survive it!

The second installment came a few years later when, as a black belt and thoroughly self impressed 20 year old, I was crewing on a sailing yacht in the Mediterranean for a summer.  My berth was at the base of the stair ladder to the cockpit, next to the radio and navigational units.  We were tied up in "stern to" fashion at a quay in Calvi, a port in northern Sardinia.  It was hot and I was sleeping on top of the sheets wearing bathing trunks.  

I felt the little cold feet of a mouse, which had come up the hawser, along the deck, down the stairs, and across my forehead, cheek, chest and belly, as he worked his way towards the galley that was two compartments forward.  The shock of realizing I was a rodent highway on the road to dinner caused me to sit bolt upright......except the berth was tucked beneath the deck so I did not have enough headroom to sit upright, or anything remotely close to that......and proceeded to smash my head into the underside of the deck.  Hard.

Spluttering in pain and with a heart filled with vengeance, I rolled out of the berth with the intent of causing mayhem and death to the trespasser, and pursued him down the passage forward.  Seeing my clumsy pursuit, the mouse bypassed the galley and its goodies, and kept moving forward towards the focsle.  Of course, I thought this was great.  The most forward location was the sail locker, which had no windows, a roof top hatch through which the sails were passed, and mahogany bulkheads four and a half feet high, completely impossible for the little guy to ascend or leap on top.  "Gotcha" seemed to be the operative description of the tactical dynamic.  

The mouse got to the end of his course, ran in a circle three or four times quickly, and sizing up that he was trapped and had no way out.........turned to face me, rose up on his little hind feet, stuck out his front arms and showed his tiny claws like a grizzly bear, opened up his mouth to fully bare his little rodent incisor fangs, and gave a mousy, but audible, grunt.  The message was clear....."maybe you will kill me, but I am going to take as much of you with me first as I can".  

Harvard man in his bare feet confronts 2oz mouse, with god knows how many exotic transmittable diseases.  A split second of hesitation to reflect on consequences of trade off to stomping on the food bandit, in exchange for being bitten.  In that split second the initiative of decision making, choice and action shifted to our little Italian "Mickey".  He zoomed forward between my legs, down the passage, up the ladder, out the hatch, across the deck, down the hawser, onto the dock.......and into the night.

Totally outplayed by a Corsican Mouse.  And the invaluable lesson of course?  That irrespective of one's position of power and ability to wreak great havoc and harm upon the other's position, the operative issue is not necessarily what you can do, but what can they and will they do to you, and are you prepared to accept that for the exercise of what you can do to them.  Forget the relative weighting of the pain!  Forget what you thought was a “win”.  Rarely is another prepared to give up their life, or anything close to it, for the privilege of taking yours!   And when the roles are reversed, neither will you be so prepared. Think about it before you commit too much money and foolishness in the pursuit of something you are not going to ultimately be prepared to do.

It has led to some very good advice to clients from time to time. And saved me from some nasty bites too.

Two days later I am still laughing like hell at the picture in my mind of the Harvard black belt and the 2 oz. mouse.  It is an interesting variation on my favorite Bruce Lee scene from Enter the Dragon, where Bruce talks about "the art of fighting without fighting."  Especially for litigators, it is hard to resist the the fight.  That is why Ed's lesson, so wonderfully told, like the Bruce Lee scene, provide such valuable insights.

 

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In a private email, Jordan Furlong observed that most lawyers begin law school with little to no business experience or business education. Law School adds no relevant business knowledge. Yet when most lawyers begin to practice in whatever area they choose, they find themselves encountering businesses, whether as clients or the adversaries of clients, and business issues. And because they lack both business experience and training, they are poorly equipped to advise clients in the context of the problem the client faces or even to understand that which is motivating a client’s decision-making.

Take the simplest proposition: should I settle this lawsuit? Well, what is the cost? A certain number of dollars? Really? What’s the accounting treatment of the settlement? Do I have a borrowing cost? Do I want the settlement pushed into next year so that I can report higher earnings per share this year? There are even more questions, but with these basic questions, one begins to see that even the simplest decision is informed by a myriad of business and accounting issues. Even something as divorced from business as First Amendment/Free Speech law is dramatically impacted by global issues triggered by the Internet and the ubiquity of speech that really has no geographic origin. Lawyers and law students receive no training in budgeting or project management, or even a taste of things like Six Sigma and Lean—things that are close to the hearts of many businesses or from which many businesses could benefit.

I received an email yesterday from the Executive Education division of Harvard Business School that started this way:

In today’s business landscape, corporations look to their law firms to be more than the providers of standard legal services—they expect them to be trusted advisers and knowledgeable business partners. Those who cannot fulfill this role are being quickly relegated to commodity service providers forced to compete on price often with company’s own internal legal team. To meet these increase expectations and to ensure that they are providing the highest level of value, law firms need to be able to provide thoughtful guidance that accommodates not only the law, but also the strategic direction of client companies. This new HBS Executive Education program provides the business knowledge required to understand how clients formulate and execute strategy and how law firms can add value in this process.

It’s good to see a recognition that this type of education is needed. But much more fundamental knowledge is needed. For example, while excellent accounting skills are always helpful, even basic knowledge is helpful. Understanding the factors that go into Earnings Per Share and other critical numbers that influence the market’s view of a company or how a bank lending money to a company would view it are immensely  helpful in advising clients. Another critical thing is understanding the difference between cash basis and accrual accounting, as well as the process of setting reserves and what variations in philosophy are appropriate or permissible in that regard. It is essential to understand company budgets—how they are set, what they are used for and how management makes decisions in ways influenced by budgets.I am sure my own education is lacking and in-house counsel and business persons could add considerably to this list.

On a slightly more esoteric level, law school teaches people to be lone wolves and tear everything down, to identify risk rather that evaluate it. It requires a high level of certainty in order to offer an opinion. Businesses operate in a world of considerably less certainty, and that "certainty gap" is one of the fundamental causes of out of control legal expenses. 

Business school (indeed business in general), on the other hand, is more about team work and problem solving. While risk identification is part of that process, it is not the end result the way it is with lawyers. Business school can really foster creativity—I read where one Stanford professor gave her class an assignment where each team was given $5. The team had the weekend to invest the $5 into an activity and then would be expected to give the class a three minute presentation on Monday. While most teams organized car washes or sold lemonade or something similar, the winning team realized that $5 wasn’t important—it was the three minutes. It sold that three minutes as advertising time to some off-campus stores and generated $600. Law school ties people to prior decisions and doesn’t reward the creative thinking found in this business school example.

The deficiency in law school is not just on a subject matter basis, it is the entire way of thinking. Think back on the old movie “The Paper Chase” with John Houseman in the role of Professor Charles Kingsfield uttering that famous line, “ You teach yourselves the law. I train your minds. You come in here with a skull full of mush, and if you survive, you’ll leave thinking like a lawyer.” Great theater, but in today’s world, thinking like a lawyer leaves you so far behind the pace of movement in the modern world that you render yourselves a dinosaur before you even begin to work.

What’s the answer? Taking the long view, law schools need to change the way the teach, and partnerships with business schools should become the norm. Smart students are well advised to pursue joint JD-MBA degrees. But on a more immediate basis, I think the answer lies along the lines Harvard Business School is considering, though programs will need to be at a variety of levels and priced far more conservatively than the nearly $8,000 price tag Harvard has set for its 3 day program.

There is probably a real business venture here waiting for the right entrepreneurial person to step in a craft a curriculum to could be web-based.  The market? Well, there are over a million lawyers in the United States and 45,000 or so law school graduates each year.  You do the math (I'm a lawyer so I probably would get the answer wrong!).

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Client service is hard.  Thanks to Dan Hull at What About Clients? for the eloquent reminder.

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AmLaw Daily contains an interesting post today noting that several UK firms were cutting their profit sharing.  From the post:

Several big-name U.K. firms have cut or delayed quarterly profit distributions to partners to cushion the blow of the continued recession.

Interesting choice of words--"cushion the blow."  The translation is that we don't have enough profits to give them to the shareholders.  The post goes on to point out:

The same phenomenon has been occurring in the U.S. In March, we broke the story about Dewey & LeBoeuf severely cutting monthly draws to under-performing partners and holding back some larger distributions. Later that month, DLA Piper slashed partner pay by 11.5 percent.

Many other firms have been identified in various reports as having taken similar steps.  One reason may be the firm's covenants in their bank line agreements, many of which contain performance criteria.  But whatever the reason, the bottom line is that firms don't have enough money to make distributions to partners. 

Okay, so the firms have slashed expenses and personnel and there still isn't profit there for the partners.  So what kind of pressure to extract money from clients do you think partners feel from their peers?  If I were a client, I'd be watching my wallet more now than ever. 

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I've been spending a lot of time flying around, and one of the places was to Disney World for my nephew's wedding (which was spectacular, by the way).   I was struck by the incredible difference between the air travel experience and the Disney experience from a customer service perspective. 

Let's be frank.  Airlines don't give a damn about you.  I can't think of one thing about the air travel experience that is designed to make the customers feel good about flying that airline.  At best, the attitude is "my airline isn't any worse than the others."  Whoop-de-do.  The rich irony is that I spent my time on the flight reading Secret Service by John R. DiJulius.  I wish people from the airlines would read it.

Then there's Disney, who are so maudlin in their client service that it is sort of creepy.  It is so over-the-top as to not feel authentic.  You know why?  Because every person follows the same recipe.  Unlike Ritz Hotels or Nordstrom, which empower staff to solve customer problems on their own, Disney uses a recipe formula--systems and training.  The scope of their enterprise in Florida is so breath-takingly large that they probably have no choice, and they certainly rank high in customer satisfaction surveys.  So far be it from me to question what they do.

In terms of time and thought given to the customer experience, is your law firm an airline or a Disney?

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