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In Search of Perfect Client Service

Why lawyers don't seem to get it

Renter v. Investor? Buyer v. Builder?

Posted in Client Service, Commentary

I have been a renter. I have been an investor in homes. I have been a buyer of homes and I have worked with a builder to design and build a home.  Each experience has its pros and cons.  The critical thing to making each role a successful one is to decide in advance what role you want to play.  The same lesson holds true for operating a business and for operating a law department.

Renting and buying are transactional experiences. They are two forms of acquiring a residence.  Investing is the act of using your resources to secure a return, generally both short and long-term.  Being a builder is using your resources to create something new, something that has your fingerprints on it, your DNA in the design.

Few law firms are anything but sellers and landlords.  They rent out their space to lawyers who rent themselves to clients for the duration of a matter.  It is a transactional experience for the law firm, and, in these cases, for the law department client as well.  Some clients make investments in their lawyers, knowing it is better to have a longer term relationship that will create returns for the law department over the duration of the relationship.  But a relationship with a builder is different.  It introduces the element of design and creation, going through an iterative design process to find out what is essential, what satisfies and what delights, and how those things can be accomplished within a budget.

These experiences caused me to wonder why most law departments and law firms fall into the renter/landlord or buyer/seller relationship, and not the investor, designer and builder type of relationships with their outside counsel. So many issues that cause discomfort between law departments and law firms would simply vanish if both sides came at the relationship with a different perspective.

Justifying shadow billing as promoting diversity? Much better ways exist.

Posted in Commentary, General, Leadership and Management

Earlier this year, Vincent Cordo, the Global Sourcing Officer for Shell, and Casey Flaherty, a consultant to law departments, wrote an article for the ACC Docket, Shell Legal—Shadow Billing. Let me begin by disclosing that I have enormous respect for the work Vincent Cordo has done at Shell and that Casey is a friend whose work I also respect greatly.  However, respect and friendship do not translate into complete agreement on all issues, and this article presents an area where I disagree. I know Casey won’t be surprised.

The authors identify the value Shell places on diversity and the role of shadow billing in promoting diversity:

Shell is committed to diversity — internally and throughout its supply chain. One of the many ways in which Shell Legal pursues this company objective is to track and report on how much of the business sent to outside counsel is distributed to women and minority owned firms, as well as how much of the actual work is allocated to diverse attorneys and allied professionals. Shell measures not only the general diversity of its law firms, but also the actual diversity of timekeepers assigned to Shell work down to the percentage of total billing for which they are responsible. Measurement is central to management.

Although we will later write a full article on Shell Legal’s diversity efforts, this article focuses on a form of cost accounting that is sometimes referred to as “shadow billing.” There is a common belief that companies like Shell that have moved to appropriate fee arrangements (AFAs) should no longer concern themselves with billing data. The diversity imperative belies that belief. Indeed, there are many reasons why Shell will continue to be interested in as much data as is available.

Diversity as a chosen value is laudable, but I believe there are superior ways to measure diversity if one really wants to promote the development of diverse lawyers.  Hours measure the quantity of time spent on a matter, but not on the importance (value) of one’s contribution to the matter.  If you want diverse lawyers to be involved, why not activities performed by diverse lawyers, such as:

  • The number of depositions taken, both alone and as a percentage of all depositions on a matter
  • The relative importance of the depositions taken
  • The number of depositions of client personnel defended
  • The number of expert depositions taken and defended
  • The number of court appearances
  • The number of court appearances where the diverse lawyer was the primary speaker
  • The number of motions argued
  • The number of client meetings led
  • The number of trials first or second chaired
  • The number of witnesses taken at trial

And so on.  It isn’t hard to identify easily measured activities that are far more indicative of the actual role diverse lawyers play on a given matter or for a given client.  Measure things that are actually substantive.

If a client wants to truly promote diversity, there are other actions that will have far greater effect.  These things will help diverse lawyers develop as important players in their firms, which will have ramifications for diversity beyond just one client:

  • Require, as other corporations have done, that the relationship partner be diverse. If not immediately, then within one to two years
  • Require that the lead lawyer on important matters be diverse. And if the firm cannot accommodate that requirement, find a firm that can. The first firm knows how to hire people laterally.  Make it important for it to do so.

And if a client wants to promote diversity generally within the bar and not just at a few firms, why not require firms to report on things such as:

  • Number of public speeches given by diverse lawyers, or things like publicly available webinars
  • Number of committees or bar groups diverse lawyers are both active in and have obtained a leadership position
  • Number of committees or groups diverse lawyers are active in that are involved in selection of judges or judicial review.

External activities such as these involve diverse lawyers in the broader legal community and enhance their stature before the bench and the bar.

Recent data has shown that firms have done a miserable job developing and promoting diverse lawyers.  If it was a handful of firms, such a failure could be chalked up to happenstance or something specific to a firm.  But the failure is too broad and too consistent to be anything other than systemic.  And while I am heartened when clients say they are committed to diversity, few have really taken the steps available to them that make a real difference. Relying on hours instead of seeking more important data is missing a valuable opportunity.

Getting to where you want to be–it’s like going on vacation

Posted in Commentary, General

If you want to take a vacation, there are a few basic steps.

  1.  Figure out where you are.  Travel requires a starting point.
  2. Figure out where you want to go.  Tropical paradise? Check. Ski chalet? Check. Great wall of China? Check.
  3. Figure out how to get from 1 to 2.  Plane? Check. Train? Check. Automobile? Check.
  4. With figuring complete, move.  Move to computer to book travel. Move to airport.  And so on.

It’s not a complicated process.

Figuring out how to deal with the massive changes in the legal landscape and the even greater changes that are plainly now coming is not any different, though some might be harder.

  1.  Figure out where you are.  What is your firm, really?  Are you innovative? Change-resistant? Cutting edge? Wedded to quill pens?  It is hard to conduct a candid and honest self-assessment. But it is essential.  And if you delude yourself, you’ll find yourself going to O’Hare for your flight when your train leaves from Union Station.
  2. Figure out where you want to go.  What type of business will be successful in 5 years?  Don’t look farther ahead. Ten years ago, most of us didn’t have smart phones.  Now, does anyone other than my 89 year-old mother not have one?  Five years is the right time frame.  Will artificial intelligence help LPOs or start-ups capture work you are now doing?  Very probably. If so, your leverage model might not be a good thing.  Indeed, your whole business model might be a liability.  I think you get the point–figuring on where to position your business is a difficult process.  But if you don’t engage in it, start getting used to the odor of the trash heap.
  3. Figure out how to get from 1-2.  Very. Detailed. Step. By. Step. Plans.  Timelines. Burden yourself with realism.  War-game the process.  This, too, is a very difficult step. People tend to turn into Pollyanna for this stage. Don’t, unless you really want to go to O’Hare instead of the true departure station.
  4. With the figuring complete, move.  To share a quote on my partner’s wall, “Vision without execution is hallucination.”

Saving your firm for the future is not like taking a vacation, except when it is.  But remember the role a travel agent can play in making your vacation successful. The odds are, you will need help going through this process.  Ask for it.

Is Time Really The New Black? Hardly.

Posted in Client Service, Commentary, Hourly Rates and Alternatives

I just finished reading Mary Juetten’s post in Above the Law, Time Is The New Black. I was struck by this statement:

“Also, all should reject the value billing theory that recording time is unnecessary.”

Since there are few statements with which I would disagree more, I decided to parse the article and respond to the arguments the author makes in favor of the necessity of timekeeping.

Argument No. 1: “Considering the Big 4 accounting firms track time, BigLaw should pay attention.”

Apparently, we are left to simply accept the notion that the Big 4 do everything precisely the right way.  I am not ready to make the blind leap. The leverage model is a dying one.  Most of what young lawyers and accountants do day-to-day will be automated in the near future. Indeed, a lot of it already has been. If a machine can do weeks and months of tasks in a milsecond, how is that hourly model working for you then?  Beyond that, real businesses don’t sell time—they sell outputs. Law firms provide outputs and that is what clients want to pay for.  Deal with it.

Argument No. 2: “Timekeeping is the key to understanding your costs and pricing because human effort is still the law’s largest expense.”

Again, the growing significance makes this statement less than accurate and less true with each passing day.  If a law firm invests in technology for the betterment of its clients, it should be able to charge for the value that software provides, not the time it takes for the computer to do a task. The author makes a nifty argument that “Ford knows precisely how much it costs to build my F150 for both materials and labor.”  What she ignores is that Ford knows that information before it begins to manufacture the vehicle and if there is a breakdown and the time to complete a vehicle is longer, the price does not increase.  Third, there is a discrepancy between using time as an element of “cost” when the resource devoting the time is not paid based on time.  A lawyer who works 7 hours to complete a task is rarely paid more than a similar lawyer who takes 6 hours. When that is true, what difference the difference in time make? And what about lawyer who can reuse work? If time plays a role in price, you end up overcharging purchasers of the work-product.

Argument No. 3:  “Recording the non-billable or non-client hours can also help evaluate the efficiency of the department or practice administration.”

The time from task assignment to task competition may be a slight indicator of efficiency, but the number of tasks completed over a period of time is a much more important piece of information, as is the number of tasks completed in a given time period to meet required quality standard. Time devoid of quality assessment is just not important.

Argument No. 4: “[T]he hour information will help you identify where attorneys and paralegals might be struggling or have gaps in their training.”

This necessarily implies you have an existing baseline you can use tocompare the hourly total. If you have the baseline, you certainly don’t need to hours for pricing.  And do you really think looking at time data is the best way to evaluate productivity?  Businesses around the world regularly evaluate productivity of their professional works and they manage to do so without requiring those professionals to keep time.  And they have been doing so for decades.

Beyond these arguments, the author wholly ignores the costs incurred by firms in recording and tracking time.  Timekeeping also allows firms to default to time as a basis for evaluating and rewarding their lawyers.  Not a good thing.  But most importantly, all of this focuses on cost of production and not on the clients’ interests in buying.  If Ford’s market showed that people did not want to buy F150s and instead wanted a low-priced vehicle, making the cost accounting for the F150 isn’t really worth much. The focus needs to be on the buyer, not the producer.

Lawyers always seem to look to our own profession for reasons to justify the practices we follow.  The horizon for such justifications should be our clients, not our competitors.  If a firm has clients where the law department professionals track their time and are compensated based on how much time they bill, then maybe the law firm can claim to track their clients as a justification for the focus on time.  But if anyone finds a department like that, let me know.  I have not heard of a single one in 10 years of practicing without time sheets.

HAL 9000, washing machines and AI in Law

Posted in Client Service, Commentary

I read this and immediately started thinking about my Saturday morning encounters with our washing machine. Walk by, put the towels in and then feed the dogs. Swing by later after grabbing morning coffee, put the towels in the dryer and put the whites in the washing machine.  Lather. Rinse. Repeat.  Episodic encounters with the washing machine while life goes on.  So as I returned my thought to the tweet, I wondered if this “washing machine” frame of mind was the right one.

Artificial intelligence aims–or at least it should–to solve a problem for the consumer of the AI.  If it doesn’t do that, I am not sure what role it will play for the user other than being a shiny new object.  Think

(yes, I confess to having one of these)  Don’t get me wrong, shiny objects can be fun and you can sell a lot of them.  But they don’t last and they don’t make an impact.

So, how my washing machine and shiny object obsession fit in with AI?  I believe buyers need something more than a washing machine to use it.  The AI must integrate with existing life and reduce or eliminate a problem.  If a General Counsel is forced to add a whole new platform or file system to get a benefit, I think the likelihood of success of the AI is reduced.

It seems to me a useful exercise would be to define the attributes that must be manifest if something new is to capture the market.  To me, a starting point would be: simplicity; ease of use; eventual benefit; time to achieve eventual benefit; “fit” with what I am doing now. I think the holy grail in attributes is holism. HAL 9000 offered these attributes.  Washing machines, not so much.

Thoughts?

Valorem recognized by in-house counsel as a Leading Collaboration Firm

Posted in General, People, Places and Blawgs

Valorem Law Group is honored to be one of the law firms “who leading legal decision makers say are the tops in collaboration.”  According to BTI Consulting, which reported the findings of its interviews with corporate law departments.

Clients say collaborative law firms show deep understanding of client needs across the team, are up to speed on all the issues whenever an attorney joins the team, and are all focused on the same overriding objective. The attorneys at the most collaborative firms work at it.

That last sentence is so important–we really do work at being collaborative.  We dedicate space to it.  We schedule it and we take pride in it.  We believe that collaboration yields better outcomes for our clients.  We put a lot of thought into collaboration, so it is so gratifying to be recognized as a leading firm in this area.

The importance of learning what does NOT need to be done, and other things.

Posted in Commentary, Hourly Rates and Alternatives

I just read an article in Law360 discussing Microsoft’s commitment to shift 90% of its work to alternative fee arrangements.  Michael Rynowecer of BTI Consulting is quoted as saying the move is “one of the most aggressive” adoptions of AFAs he knew of. “Ninety percent is on the leading edge. It’s an enormous step; it’s making a bold statement to all the law firms with whom they work, saying this isn’t an effort du jour.” If Microsoft is serious, and if it truly seeks the real value of alternative fee arrangement, the Microsoft law firms are in for a wild ride.

We’ve been a non-hourly fee firm for almost 10 years.  Our practice is complex commercial litigation and related areas of litigation. It was a wild ride for the first several years of our transformation.  When hourly billing is part of your DNA, you need to undergo surgery to alter your DNA. It is hard to overstate how hard it is for billable hour lawyers to make the transformation to being alternative fee lawyers.  There are so many areas where your view of the world needs to change.  Dramatically change.  If the firms want to get the maximum profit out of fixed fee engagements, they will need to change the way they handle matters, account for matters, determine value of lawyers and others, compensate partners and associates, and more. They need to learn how to litigate “skinny.” How to assess outcomes with less than perfect information.  To advise clients when less is more.  These things reduce the path to output. Clients, in turn, need to push firms to make these changes so they get more than billable hour fees using a different name.

It will be interesting to see if firms and clients go to school to learn the changes and create systems to be sure they are making these dramatic changes, or if they adopt a learn as they go approach.  The latter is a path to needless pain and waste. But the payoff can be great. For firms, high profit margins are a great thing.  For clients, the financial benefits and predictability are great, but the real payoff is in results.  As the Law 360 article noted,

“Most large companies are reporting that they’re getting better outcomes,” Rynowecer said. “They’re finding that one of the big benefits of AFAs is that it requires more discipline and planning than [billable hours], and it requires highlighting strategic goals earlier for clients.”

Better outcomes are a wonderful thing.  But the investment in them is a wild ride.  Here’s hoping clients and firms take advantage of the the lessons painfully learned by others who carved the trail.

Nicole Auerbach honored as one of Chicago’s most influential women lawyers

Posted in Commentary, People, Places and Blawgs, Uncategorized

Kudos to our very own Nicole Auerbach, who was recognized by Crain’s Chicago Business as one of Chicago’s Most Influential Women Lawyers.  Here is how Crain’s summarized Nicole:

After concluding that the billable hour model for pricing legal services needed to change, Nicole Nehama Auerbach helped form Valorem Law Group in 2008 to give clients an alternative. Valorem went from being one of the few firms created to provide alternative fee arrangements (AFAs) for commercial litigation, to being named one of the 22 Firms Best at Delivering AFAs by BTI Consulting in 2017 (along with such powerhouse firms as Kirkland & Ellis, Morgan Lewis and Seyfarth Shaw). Auerbach is a frequent speaker and writer on topics related to AFAs, innovation and the impact of the billable hour on women and minorities. In addition to her role as a thought leader on AFAs, Auerbach has had a notable year representing clients. In April, she obtained a $13.4 million verdict in federal court against the City of Chicago and six Chicago police officers for violating the civil rights of a client (Patrick v. City of Chicago, et al.). She is also the co-founder and current national board chair of the Coalition of Women’s Initiatives in Law.

And here’s what her Valorem colleagues thought of this honor:

 

 

 

 

 

 

 

 

 

 

 

 

We’re glad the rest of Chicago is learning what we’ve known for a while.

The importance of understanding context.

Posted in Commentary

Jeff Carr sent me a link to a post by Richard Smith of Sydney, Australia.  I don’t know Mr. Smith.  He is a “business development expert with over 20 years’ experience.” He works to develop and implement “successful business strategies for leading professional services firms; including working closely with stakeholders to maximise revenue potential from existing and targeted clients.” He recently wrote a commentary on an article by Firoz Dattu and Dan Currell of AdvanceLaw. I do know Firoz and Dan, both highly respected members of the legal service community.  I hope my acquaintance with them does not color this post, but perhaps its does. The Advance law post that leads to this article is here.

Richard Smith takes issue with this paragraph in the Advance Law article:

Third, flat fees. A natural question about flat fees or other alternatives to the billable hour is whether they are cheaper. You now know that we think this is a half-question (and not the interesting half). The whole question is: do alternative fees work better, all things considered?

Mr. Smith responds with this:

Let’s look at that third question again with highlights by me:

“A natural question about flat fees or other alternatives to the billable hour is whether they are cheaper.”

Actually, that’s a very, very long way from the natural question.

But then we get…:

“The whole question is: do alternative fees work better, all things considered?”

And while that question may seem a lot closer to the answer we seek, it is still – well – the wrong question.

Flat fees, or other alternatives to the billable hour, should not be about whether they are cheaper. In many cases they are more expensive.

Nor, per se, are they about whether they work better (and by that i am unfairly reading “easier”). In some cases they are far more complicated and getting them to work is a real art of communication (that is, if you have scoped the matter and given appropriate thought to LPM, etc).

But, crucially, what alternatives to the billable hour should be about is simple: ‘Do they offer better value?’; To the client? And to the lawyer?

And if they don’t, the simple truth is this: maybe you shouldn’t be using them.

It seems as if Mr. Smith ignores the fact that the AdvanceLaw team is writing about questions presented by data they have accumulated from their clients.  Of course it is interesting to know if flat fees have proven to be cheaper that hourly fees for similar work. Is Mr. Smith really suggesting we should not examine relevant data?  And then, even though the AdvanceLaw authors make it clear that there is a more important question that simply the comparison of fee totals, Mr. Smith quarrels further, leading to the conclusion that AFAs have to provide better value to clients and to the lawyer, or they shouldn’t be used.

Having been using AFAs for nearly 10 years, AFAs can provide great value to lawyers, but only if they change the way they do their work.  The old way is burdened with fat and excess, and it is why clients grew so frustrated with the billable hour.  Second, firms need to decide if customer service is a core value of the firm.  If it is, you find out what is of value to your clients and you figure out how to provide it.  It is an exceptionally rare matter in which, over the duration of a matter, an AFA cannot be used.  The challenge must be to carefully and precisely identify the client’s objectives. Once that is done, a fee to incentivize the accomplishment of those objectives is possible.

Forgive this rant–it is unfair to take a point made in one context and criticize it for not addressing points that are not in the context you want.

There is more to being innovative than simply deciding to be innovative.

Posted in Commentary, General

I was just having a conversation with a passing acquaintance, who runs a mid-size law firm.  He told me the firm had decided to be innovative, in the sense of saying “starting next Tuesday, we will be innovative.”  I hope I kept my smile inward.

Innovation is not something you simply flip a switch to turn on.  It is hard work, and there is no simple recipe for “doing” innovation.

I am a firm believer that every law firm should have an innovation lab, where the right people, in the right environment, with the right objectives, can undertake the work needed to become innovative.  A good starting point would be to debrief as many acknowledged innovators as possible so you can develop a working list of characteristics, tools, processes and kickstarters.  What are the things that make innovators innovative?

Research.  Learn. And then do the hard work.