April 2005

I am a big fan a accountability.  There is a lot that doesn’t happen when no one is accountable.  Create a committee and there will be a bunch of meetings.  Tell someone they are responsible and will be rewarded (“carrot”), punished (“stick”) or both (“carrot and stick”), and something will get done. In my experience, the busier someone is, the more likely the carrot alone will not work.  Why, you might ask, is this relevant to client service.

So often, no one at law firms is accountable for key issues such as diversity, client service, using technology for the client’s benefit or restructuring billing arrangements to reflect the value of the service to the client.  I’ve seen this firsthand and talked about it with a number of people inside law firms and inside corporate legal departments. In this vein, I thought Robin Sparkman’s Editor’s Note in the May issue of Corporate Counsel was so very interesting.  She notes that its rare for law firms to be fired because of poor track records in diversity, technology offerings or use of alternative fee arrangements.  She mused that too often corporate counsel’s complaints in these areas are mere “window-dressing” and that “if in-house lawyers continue to huff and puff without really meaning it, its hard for law firms to take them seriously ….”

Maybe in-house lawyers have used the carrot (“more business”) when they should be using the stick (“no business”).  Growing up, I was taught that “money talks and bullshit walks-in more polite language, the stick works and the carrot doesn’t.  Unless my life experience is radically at odds with the way the world really works, broad, industry-wide change will occur when business moves to those who walk the walk instead of jaw boning.

I was having lunch with a close friend the other day.  He’s now the Managing Partner of a pretty large, well-established, regional law firm.  He was telling me a story about how he went to dinner with the CEO and General Counsel of a client he had just won a case for, and the CEO remarked that the firm had represented the company for all seven years the CEO had been in that position, and in that time, no one from the firm leadership had ever called him or gone to dinner with him. My friend rightly indicated that things were changing.

That story led to a discussion about client service surveys, which my former firm was doing n the 1990s and which Butler Rubin (my current firm) has been doing since I joined in 2000. These meetings are a unique chance to find out how things are going, to talk about real or potential problems, to find out what others are doing to impress your client, and to learn about the client’s developing needs.  The right environment needs to exist for these interviews to be useful and popular-we convinced everyone that criticism is not to be feared.  It is an opportunity to do something better.  Not responding to criticism-or not seeking it out-were both significant problems however.

My friend’s firm is planning to do client satisfaction surveys.  Now that they have taken their heads out of the sand, I think they will be impressed with the value of the surveys.  I know my friend’s leadership will make them a more formidable firm. But I am left to wonder why so many firms, particularly large firms, don’t really dig into their relationships with clients to find out how to deepen them.  I am always left with the vision of the poor ostrich with its head buried in the sand.

Well, the McGuire Woods ad campaign attacking the billable hour has started.  And its worse than I anticipated.  “The longer lawyers take the more money they make.  Does that align their interest with yours?”  Can you think of a less enlightened question.  “Does the fox in charge of the hen house have the same interest as the hens?”  What’s particularly scary is that this is the same McGuire Woods that said it wanted to be a “cutting edge” law firm in its release announcing this ad campaign.  Wow, they really are standing on the outside precipice with observations like this.

But it gets worse.  The ads continues: “Whether it be a fixed fee, success fee or some other alternative, we have learned that companies make better decisions when they know their cost up front.”  Really?  Does that mean McGuire Woods is penalizing all of its clients that continue to be charged by the hour?  I mean, McGuire Woods is preventing them from making better decisions by not insisting that they bill on some non-hourly basis.  At least according to the wisdom espoused in the ad.

My fear that clients would see this ad campaign as mindless pandering is greater than ever.  Trivializing the need to align economic interests, focusing on client service, providing real value to clients are more than marketing slogans.  I’ve written before on the separation of firms that talk the client service talk through their marketing departments and those that truly walk the walk.  From my standpoint, I see McGuire Woods lips moving with no evidence that their feet have gotten the message.

Last night, I was staying at a hotel in Houston.  My cell phone was running out of juice, and I had forgotten my charger cord.  I called down to the front desk and asked if there was a store nearby where I could buy one.  The person on the phone asked what my problem was, and when I confessed my poor packing, she asked what kind of cell phone I had.  When I told her, she said she would have a charger brought up to my room.  Three minutes later, my phone was charging.

Now, if a client was in your office, how many of us could offer this kind of service?  Its a little thing to have a bag full of charging cords, but it would be nice to meet that need when it arises.

My kids are now old enough to ask questions to which I have no answers-Which came first, the chicken or the egg-type questions. (At least we’ve moved on from why did the chicken cross the road types!)  But McGuire Woods’ shocking discovery that client service is a good thing and newfound commitment to alternative fees begs a similar question:  Do we not have greater movement away from the billable hour because clients don’t want alternatives or because law firms won’t offer them?  A vote please.

As I have mentioned before, I have the opportunity to host a series of roundtables of inside lawyers in a couple of weeks, and I am really looking forward to hearing the perspective of inside counsel.  But as I have prepared for these roundtables, my own thinking has evolved further.  I have to confess that I used to fall into the category that feels that inside counsel must demand the change and vote with their feet.  I still believe that to a degree, but I am starting to understand there is more there than I had allowed for.  If alternative fees simply become a surrogate for billable hours, the only real advantage is certainty, assuming the alternative used creates that element.

Perhaps the answer is that more must be offered for inside lawyers to feel use of alternatives on a widespread basis is something other than a play for enhanced profits per partner, a statistic that regrettably has become an industry driver.  But I found one piece of insight that I think might reflect the real situation:

“The most important and effective method for converting existing clients to a value system is to offer new value. There is no reason in the world for a client to move from the hourly or daily rate to a fixed fee for the exact same value the buyer is now receiving. Think about it: If people change only in accordance with their own self-interests, then “What’s in it for them?” Why abandon a clear, reasonable and long-standing billing arrangement?
Well, you abandon it if a new system provides more value and better appeals to your self-interest.”

Alan Weiss

Value Based Fees, 2002
(part of The Ultimate Consultant Series)
Perhaps the question we should be focusing on is what added value we can provide.
 
One thing seems clear-change is coming.  As General Eric Shinseki, former Chief of Staff of the U.S. Army, recently said, “if you don’t like change, you’re going to like irrelevance even less.”

I woke up this morning to this headline in the Business Section of the Chicago Tribune: “Hourly Legal Fees Under Attack.”  I thought to myself-finally!  But the article is simply a puff piece on how McGuire Woods is starting an advertising campaign touting its willingness to use fee arrangements other than straight hourly rates.  The advertising is limited to Crain’s Chicago Business and the midwest edition of Fortune Magazine, and the strategy is designed to grow the firm’s Chicago office.  According to the article, the firm has decided that one way to compete with the Kirklands, Sidleys, and Mayer Browns is “to be more responsive to our clients.”  The article concludes with a quote from Robert Pristave of the Chicago office: “We want to be a cutting-edge law firm.”

Forgive me if I stifle a guffaw.  Does anyone believe there is a “cutting edge” switch at law firms? “Yesterday, we were staid and conservative.  [Flip Switch!] Wow, today we are cutting edge!” It just doesn’t work like that, and it certainly doesn’t work that way in branch offices.  In my mind, this kind of marketing plays into client’s cynicism about lawyers use of alternative fees.  In the minds of many clients, lawyers take a “I”m with you win or draw” approach to alternative fees, taking upside risk for good results but never taking downside risk.  That approach will never work.

I honestly hope McGuire Woods is successful, since any progress in efforts to bill our clients according to the value (to them) of our work is a step forward.  But forgive me if I don’t bet the ranch just yet.

The floors in my house are being refinished this weekend, so my family and I were evicted and are “vacationing” in a hotel just a few blocks away.  I just finished reviewing my email, had a conversation with a colleague over Skype, and am now posting to my blawg, all while sitting on a lounge chair by the pool while my kids kill each other.  Life is remarkable.  The technology we use to make our life easier is remarkable.

All of this technology can really enhance client service.  Skype and other VOI technology can dramatically reduce overhead or pass along charges if bill your clients for long-distance.  Secure blawgs allow a client’s various lawyers to communicate with each other in a way that others can see and add to the value of the communication.  It occurs to me that one of the most critical people on a client service team is the IT person-someone who can speak English and tech, someone who can train many and teach one-on-one, someone who can see the value of technology and persuade others to use it.  The teaching/training role is not limited to the outside lawyers-frequently in-house lawyers are not given the resources needed to take advantage of certain technological opportunities.  The IT trainer can facilitate the use of technology with the client too (maybe even first!).

I’m certain that this blawg will provide ample opportunities to discuss billable hours.  We’ll read some story somewhere about some tireless associate billing a client 4,000 hours to write a motion to dismiss a complaint that has a minor pleading defect or some such nonsense, and I won’t be able to control myself.  But in the meantime, I am excited to announce that I will be hosting a series of roundtable discussions among General Counsel and other in-house counsel on the Norwegian Dawn cruise ship during the Corporate Counsel Forum, a partnership of Corporate Counsel magazine, an American Lawyer Media publication, and Richmond Events, the leader in senior-level executive forums held on ocean liners.  The event is happening during May 12-15.  I can’t wait to hear why more GCs are not pushing for their outside counsel to abandon the billable hour. 

In the meantime, all comments about the billable hour are welcome.

Is Budgeting!  I went through 3 years of law school and the only time I heard the word “budgeting” was when my mother told me I had to budget for food and beer money.  I joined a firm that grew to be one of the 50 largest in the country, and as an associate, the word budget was never mentioned.  When I became a partner, I heard about budgets for compensation and other business issues, but only rarely for a piece of litigation.  And even then, we had to make sure the client understood they couldn’t actually rely on the budget we prepared, nothwithstanding the signficant “fudge factor” that was built in.

I am at a smaller firm now.  We speak to our clients and many others in the industry.  Budgets are critical for our clients.  Some of them live and die by their budgets. 

If lawyers don’t learn budgeting in law school or on-the-job (at least at big firms), how are they going to meet this most important client need?  But its far worse than just not having training.  Everything about being an associate at a larger law firm (and many small ones too, I suspect) is anti-budgeting.  Associates are judged on work quality and hours.  The institutions brainwash associates into thinking more hours are better.  Bonuses are paid if you bill a certain number of hours, but I have never once heard of an associate paid a bonus because he or she exercised restraint on an issue that didn’t deserve to be treated like a Supreme Court appeal.  In other words, the way associates advance is to behave 180 degrees differently that what many businesses want. 

Great way to run a business.  More later. 

Remember the scene in the movie Analyze This where Billy Crystal is prentending to be Don Viti’s consigliere?  And Chilly tries to correct him and the Billy Crystal character slaps the crap out of him and tells him to never correct him in front of other people?  Everyone should have a client service consigliere–someone to slap him or her if they ever lose focus.  I’m fortunate enough to have two people who help me keep focus–Butler Rubin’s marketing director, Andrea Gordon, and Annie Gallagher of Extreme Marketing.  Gallagher has risen high enough in the pantheon of legal marketing that she has developed “one name status.”  Mention that you know Gallagher and everyone will know who you mean.