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In Search of Perfect Client Service

Why lawyers don't seem to get it

Recognition for “Timekeeping Company argues lawyers using AFAs still need to keep time”

Posted in Commentary, People, Places and Blawgs

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I am honored that my recent post, Timekeeping Company argues lawyers using AFAs still need to keep time, has been selected by the editorial team of SmallLaw, as its SmallLaw Pick of the Week.  SmallLaw is a popular email newsletter for solos and those who manage and work in small law firms.

This recognition was a complete surprise.  The email notifying me explained:

Many awards given out these days are meaningless because marketing can play a role in determining who wins. By contrast, those who win our SmallLaw Pick of the Week award don’t even know they’re in the running and cannot influence our editorial team. We think this makes the award meaningful.

Thanks to the editorial staff at SmallLaw.

Timekeeping company argues lawyers using AFAs still need to keep time

Posted in Commentary, Hourly Rates and Alternatives

One of the great things about non-hourly billing is that it frees you from the tyranny of timesheets.  You stop thinking about billing and start thinking about results, about outputs, about deliverables.  That approach is an anthema to the many vendors who specialize in products that help lawyers find more time to bill to their clients.  Timekeeping companies are not fans of non-hourly billing.

Smart Time is a timekeeping company that claims to have “reinvented” timekeeping for lawyers and others. It’s CEO recently identified 7 reasons why timekeeping is still essential to lawyers using AFAs.  Let’s explore these.

Reason 1: Measuring timeliness and compliance. Project managers still need a tool to evaluate how timekeepers are performing with regard to a project’s expected timeline.

Wrong! There is a huge difference between “how long” and “by when”.  Project managers and those performing a project need to be very focused on “by when.”  Timekeeping does not come close to measuring “by when.”

Reason 2:  Planning for estimates. While your client may perceive flat-fees as a good value, you must make them valuable for the firm, by accurately estimating to cover your costs and make a profit. Looking at previous time investments will help you to know exactly how much time it takes to perform specific tasks.

Most wrong! The truism that flats fees need to be profitable is not debatable, but timekeeping and cost, that is the amount that one subtracts from revenue to determine profit, have little to do with one another.  An the what value of knowing the amount of time one spent doing a project before brings to mind the saying about the value of learning to do the wrong thing better.

Reason 3: Client trust. Many, if not all, clients will still want the ability to monitor and check in on the engagement, and hours are one good way to do that. AFAs don’t do away with client-firm discussions on the progress of the matter.

Wrong! Clients are concerned about outputs, deliverables and results.  They care about strategy and the timely completion of projects and tasks.  Few truly care about the amount of time spent doing a task. They have been victimized by this approach for too long.

Reason 4: Keeping to budgets. How else can a timekeeper review and stick to a case or matter budget, if they don’t know how much time they’ve spent on it? In an AFA, following budgets strictly is key.

Wrong! The key is when, not how long.  The quality of the deliverable should not be artificially restricted.   The “budget” and the “fee” are the same–you make money by having the fee exceed the cost.  Cost and the time spent have little relation to one another.

Reason 5: Measuring profitability.  Without timekeeping its impossible to measure the profitability of the engagement.  Hours are still the best measure of cost. Understanding how much it costs, in time, to complete the engagement changes a firm’s focus to efficiency and value.

Really wrong! Hours are not the best measure of cost–they have nothing to do with cost. Cost is the best measure of cost.  You measure profitability by subtracting cost from revenue. Hours don’t fit into the calculation.  What the author appears to be suggesting is that one measures profitability by comparing the fee to what you would have made had you billed by the hour.  That’s not how business works.

Reason 6:  Continuous improvement of the AFA model. If you track time, you can refine your pricing based on increased understanding of costs and clients’ needs. Potential pricing systems might contain inclusion of some hourly rates, as well. Just remember to keep any pricing system easy for the client to understand.

Wrong! This falls in the close but no cirgar category.  The key for delivery of service is “by when.” Know when you can deliver something is important to pricing.  Just as focusing on learning how to accomplish delivery faster.

Reason 7:  Rules of professional conduct.  If you end up in a fee dispute with your client, you’ll need hours expended to defend your position in court.

Wrong! This is nothing but fear-mongering of the worst kind.  Restated, the argument is that if you get into a fee dispute with your client (how often does that happen, really?) and a court declines to follow the terms of the fee argeement, you’ll need to have hours recorded somewhere.  Does the concept of self-interest enter anyone’s mind here?

I get why companies that sell timekeeping software and services are concerned about AFAs. Freedom from the constraints of timekeeping is the dream of countless lawyers, as is the desire to avoid having to buy software and services that add no value to the business.  But these kinds of arguments are disingenuous and misleading.

 

Pinnache and Pizzazz or Milquetoast and Vanilla

Posted in Commentary, General

Some people speaking with style.  Some put you to sleep.  Most law firm websites are the latter.  Law firms are so afraid of offending someone that they fail to capture the hearts of anyone. We’ve tried to be the former, to let our personality come through in our website.  We believe it is better for people to know who we are before they hire us.

Virgin Hotels makes no effort to appeal to everyone.  They appeal to those who appreciate style and wit, who like the way they thumb their nose at convention. Sir Richard Branson has created an empire by simply being true to his personality. He made no effort to be all things to all people.

I took this photo outside Virgin’s new hotel in Chicago, which opened just a couple of days ago.  Welcome to Chicago, Virgin.  Thanks for bringing your style to this great city.

Firms that name a “Director of Pricing” miss the boat

Posted in Commentary, Hourly Rates and Alternatives

Many firms have created a job for “pricing.” The reason for doing so is that firms don’t have much experience with non-hourly billing, but clients are demanding non-hourly fee arrangements.  Since the firms want to make the same or more money on such engagements, they deploy a resource to help make sure the price offered to clients on any matter is profitable.  With due respect to these firms, I think they have missed the boat.

Pricing is a tool–one of several–that should be deployed to deepen and strengthen the relationship between lawyer and client.  It is not, of itself, the end.  Designating someone to be in charge of pricing is like putting a coach in charge of the 3rd quarter, not the entire game.

I know the argument will be that the relationship partner is “the coach” and the director of pricing is a resource for the coach.  Perhaps that is why the goal of so many firms when creating a non-hourly fee is to equal or exceed what the firm would make if it billed hourly.  Some have called such fees “hourly billing in drag” or a “wolf in sheep’s clothing.”  Whatever the characterization, the bottom line is that such fee proposals do not deliver value to clients.

If a firm is interested in delivering value to clients, perhaps the title should match the responsibility.  A few firms seem to get the issue.  But far too few for clients to breathe easy.

Upcoming Conference on Legal Procurement

Posted in Commentary, Hourly Rates and Alternatives, People, Places and Blawgs

My friend Dr. Silvia Hodges Silverstein leads the legal procurement organization, Buying Legal Council.  Silvia and her group are holding a conference in New York City on February 2, 2015, Pricing and Collaboration.  The program looks outstanding.  I wish I was able to attend.  I am sure there will be a twitter feed, and I look forward to “attending” remotely.

Why should you care?  Whether at the front of the table or not immediately visible, procurement specialists are influencing law department purchasing decisions and many if not most companies.  A chance to understand how is rare and should be taken advantage of when conferences like this occur.

Lawyers Can’t Help Themselves: Client Gouging is just a way of life

Posted in Client Service, Commentary, Hourly Rates and Alternatives

In reading my morning mail, this post caught my eye: Don’t Lose Your Shirt When Raising Fees.  So I read the post, written by the CFO of a firm named Rivkin Radler.  It contains 5 suggestions on how to raise your rates and feel good about it.  To me, it reflected all that is wrong about the way lawyers view their clients.

Let’s start with this:

Don’t let fear keep you from raising rates! Chances are, if you are making excuses to avoid a rate hike, those excuses are a cover for speculations based on fear.

WRONG!  All the data and reporting available show clients are incredibly concerned about their legal spend, are moving more work inside where the cost structure is materially lower that what is paid to firms.  Fear of how clients respond to rate increases should keep you awake at night, especially if you can’t demonstrate that you have reduced your internal cost structure with the zeal of a private equity investor.

Then there is this gem:

Keep in mind that smaller increases — 3 to 5 percent per year — are generally better, and are met with less resistance when they are implemented consistently (i.e., the same time each year).

I just did a quick Google search–the cost of living increase for 2014 was just less than 3%.  But the author suggests 3-5% as if lawyers have a right to not only COL increases, but also “more.”  Lawyers need to understand that clients see this as implicit greed.

There are other statements made in the post which I think a fundamental lack of appreciation for the changed dynamic between law firms and clients, but these points suffice to show how much I disagree with the author.  There is no business I know of that has an unfettered right to increase its price annually.  Many are required to reduce their price to reflect the benefits of increased efficiency.  When lawyers defend a system that suggests they are entitled to a greater more of their client’s wallet just because 365 days have passed (not to mention the hidden fee increase built into associate advancement), I just have to express my disagreement. It laziness, greed and imperiousness.  Valorem takes a somewhat different approach.

An open invitation

Posted in Client Service, Commentary

 

Sometime last summer, my friend Peter Carayannis of Conduit Law reached out and asked if Conduit could use our Value Adjustment Line on Conduit’s invoice. We were thrilled to say yes, much as our friends at Summit Law Group in Seattle had said yes when we made the same inquiry to them when we launched Valorem seven years ago.  As Ralph Palumbo said to me, “everyone should be doing this.”

After seven years of including a Value Adjustment Line on every invoice we have ever sent, I still marvel that so few lawyers are willing to let their clients be the judge of the value of the services provided.  I wish that wasn’t so.  Clients deserve to be the judge of value.

So, in the interest of making it easier, this is an open invitation to lawyers to copy the Value Adjustment Line and let your clients be the judge of the value you provide to them.

Effective torture does not make torture acceptable

Posted in General

Note: This post is a deviation from my normal topic and expresses a personal political view.  I appreciate your indulgence.

I can no longer remain silent.  I hope that others abandon their silence and speak loudly on this issue, particularly during this season of renewal.

I have been watching the discussions about the Senate Intelligence Committee with a sense of profound disappointment as the discussions devolved into a debate about whether torture was effective.  The premise of the argument is that if torture is effective, it is an acceptable thing to do.  As much as I hate the bad guys and despise what they have done and continue to do to my country, I reject the embrace of torture with every ounce of my being.

Torture is antithetical to the United States of America. There is no principled line to be drawn between what our government did and what every single one of us would decry as inhumane torture.  If the acts our government performed were performed on American servicemen, many would seek violent retribution against the offenders.  If those same acts were committed against American servicewomen, the offense and outcry would be even greater.  If another government rationalized the same acts if committed on civilians from our country, still more would be angered to point of demanding war as a response.  We all know—everyone one of us—that torture is damnedably wrong when committed against our families or our fellow Americans.

But look at other challenges to the unprincipled nature of the torture performed by our government.  Would we feel it was “okay” if the acts were committed on women instead of men who look evil?  What about children?  Could we torture children if someone believed doing so would save American lives?  There is no line to the drawn in the argument the torturer’s use to justify their behavior: whatever it takes to avoid another attack. We can only pray that as a country we have not sunk so low that any means can be justified because some politician self-righteously proclaims that the heinous acts “save American lives.”  Those claims are almost always impossible to prove true, but even assuming their truth should never justify the means to that end.

There are arguments that use of torture places Americans at risk in the future, servicemen and servicewomen, contractors and civilians alike.  There are arguments that America’s stature in the world has been irreparably damaged by its disgraceful conduct.  Those arguments are likely true, but to me, they are irrelevant.  Torture is wrong regardless of the outcome and ramifications.  It does not become right or wrong because of how other countries respond.

Perhaps not surprisingly, former Vice President Dick Cheney has emerged as the chief supporter of torture as a tactic, arguing that “what 19 guys armed with airline tickets and box cutters did to  3,000 Americans on 9/11” was worse. As if that is the benchmark for judging right and wrong.  As if being able to claim the high ground in comparison to terrorists is good enough for the United States of America. It is not a standard the America I believe in would use to judge itself.  I feel only sadness for amoral world that Cheney has created for himself.

The United States of America is a moral and righteous country.  At least we used to be. I hope we aspire to be so again.  It is not easy to be moral and righteous: it never has been and it never will be.  We have built a country where we do not give in to our basest instincts.  We fought a war to say no to slavery because there can never be a time when it is right to own another. We want to stifle the sound of speakers whose speech makes our blood boil. Instead, we embrace the First Amendment. We want to make others believe in the same God we do. Instead, we trust in the wisdom of the free practice of all religions.

The Bible teaches us to turn the other cheek.  My father taught me to never throw the first punch and to be first to protect those who cannot protect themselves.  I am pretty sure most fathers teach that same lesson to their kids.  I never heard of any father teaching their kids to torture the neighborhood bully just to avoid the possibility of a fight. These simple lessons helped guide the country before. Maybe we need to be reminded of them again, that there is a difference between right and wrong. Integrity is not easy. Honor is not easy. Right is not easy. Leading the world is not easy.  We do not aspire to these things because they easy.  We aspire to them because the world needs a beacon it can count on to decide between right and wrong and not be pulled to one side or the other because of convenience.

I do not consider myself naïve or foolish. In setting a moral and righteous standard, we will be hit and we will suffer.  But our principles must demand that we not let this risk of temporary suffering justify the alternative that might makes right, that the ends of protection justify any means, no matter how cruel, deviant or inhumane.  Being moral and principled may make us even more of a target, but if that is so, it is a price we have paid before and should be proud to pay again.  Our principles will not, indeed cannot, be so easily weakened or defeated. If we were to abandon our principles and morals simply because we are attacked, then we had neither morals nor principles to begin with.

My father’s generation, what Tom Brokaw called “the Greatest Generation,” had its moment.  It stood up to Adolf Hitler.  A later generation fought for civil rights, a battle that continues. But if it is true that every generation faces a moment where people have to stand up and be counted, to say “this is the line that we cannot cross”, perhaps this is our moment, or maybe it is just mine.  My line is America does not torture people. Ever.

The Vietnam Peace Talks and the Idiocy of Lawyers

Posted in Commentary, General

The talks to settle the war in Vietnam were stalled for five months while the participants negotiated the shape of the table at which talks would occur.  Five months!! I wonder how many mothers lost their sons during that five month period.  On the list of things are beyond idiotic, this example must certainly be near the top.

I was thinking about this because of a comment I saw in an interview of renowned consultant Jim Hassett by Bloomberg. (Corporate Counsel Weekly, December 10, 2014.  In the article, Jim quoted the remarks of a “senior executive”:

We were just at a board meeting last week where we were talking about whether we should do formalized project management training. My answer to that question is obviously yes, we absolutely should.  But first we need to agree on the shape of the peace talk table what legal project management is.

I had a number of reactions to this statement.  In no particular order of significance:

1.  What in the world have you been waiting for?  Good god, man, its 2014! What have you been doing for the last half decade?

2.  Committees (which is what a law firm board is) is where good ideas go to die.

3.  How long will it take to decide the shape of the table what legal project management is.

4.  This is a great example of letting good be the enemy of better.

5.  Tom Peters’ favorite comment is “Ready, fire, aim.”  Lather, rinse, repeat.

6.  How many client dollars will be wasted while the firm tries to figure out something simple like this?

7.   WTF is a decision like this doing at the Board level?  Does the Board consider paperclip purchases as well?

8.  Do your clients know that this is how you decide “no-brainers”?

9.  The odds are the best project management training/approach will vary from department to department.  Are you going to figure out the best approach for each department?  Starting with the smallest?

10.   Is this how you decide on your technology investments too?  How are those 386 computers working out?

Sorry, I had to vent.  I hope this is a firm where great lawyers overcome bad management.

For Law Departments’ consideration: Self Help is an investment in a solution

Posted in Client Service, Commentary, Selection of counsel

Ronald Reagan once famously said the nine most terrifying words in the English language are “I’m from the government and I’m here to help.”  His quote tapped into our natural fear of both the government and unsolicited offers to help.  When someone offers help, most believe the person is really offering to help themselves.

This fear should be juxtaposed with the admiration we sometimes have for those who engage in self-help. Our lexicon contains many phrases in which a person improves his or her position by self-help.  Many of those phrases contain an implicit sense of admiration.

So self-help is neither good nor bad.  It is the context that matters most.  When someone willingly offers help to another with the intended result of helping both parties, good things can happen.  Consider this point one.

My next proposition is it is better to proactively invest in solutions rather than hope somebody brings you a solution.  Some in need sometime wait for a solution to be proposed, while others make suggestions to those who can help solve the problem, hoping the suggestions will be heard, pursued and implemented.  I believe success comes to those who confront problems directly and design their own solutions or work closely with others to accomplish that end.  Not suggestions or wishful thinking, but a shared commitment to design a solution and work together to implement it. Consider this point two.

Consider this formula in the context of law departments: Point 1 + Point 2 = ?

Let me spitball a possible answer here.  Step 1: Law Department defines its objectives.  An example might be “we want a 25% reduction in spend locked in at the beginning of the next budget period, with no degradation in service, quality or output.”  Step 2: Law Department picks a willing law firm or a few such law firms.  Step 3: The parties meet and discussions ensue.  “What do you need from us to accomplish the objective?”  What resources can we provide to help you meet the objective?  How do you propose to meet the objective?  Why should we confident quality will be maintained?

And so forth.

This is just one idea.  Clients tend to be extremely smart and great collaborators.  But they need to act more like their business-side colleagues in addressing law department challenges. Own the problem. Design the solution.  Don’t wait for someone to suggest something that might help.  See what you want, and then in the immortal words of Captain Jean-Luc Picard, “make it so.”

One last point to consider.  When law firms design solutions, they are typically designed for more than just you.  So if “off the shelf” works or is good enough, fantastic.  But if you want a custom solution that meets your specific needs, off the shelf is not the way to go.