September 2009

  There is no bigger fan of Edge International than yours truly, and I’ve written before about my admiration for Edge’s outstanding work.  I’ve also written of my admiration for Jordan Furlong, author of the brilliant Law21.ca blog.  Today I learned that Jordan has joined Edge’s outstanding team.  It’s like adding Wayne Gretzkey in his prime to the team that already was the best team in the league, or adding an all-star to a team of all-stars.  Great move, my friends.

 

 


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I received an email yesterday that began "Hi Patrick J."  It caused a flashback to my childhood.  When my mother was angry with me, she called me Patrick J. When she was really ticked off, she called me Patrick John.  And when it was certain she was going to whip my sorry behind, it was

 

Ron Baker is one of the leading thinkers on the issue of value billing.  I take what he says very seriously.  In response to my previous post on Lean Client Service, Ron posted a comment.  Because comments tend to get buried or lost, I wanted to share his comment and offer a further thought.  Ron commented:

Hi Pat,

This is an enormously contentious issue. I don’t think Lean (or Six-Sigma) is relevant in a knowledge firm, where the talisman should be effectiveness, not efficiency. There’s an enormous difference between these two.

I have seen many professional firms attempt to implement Lean. Yet it was invented for manufacturers, not knowledge firms. Google and Apple don’t use it, for a good reason. It’s too focused on efficiency and not effectiveness. Lean would never argue for 20% Google Time.

If you want to read the debate on this issue, see:

http://www.verasage.com/index.php/community/
comments/book_review_is_mayo_clinic_efficient_
or_effective/

http://www.verasage.com/index.php/community/
comments/was_drucker_wrong_about_knowledge
_workers_a_book_review/

Regards,
Ron Baker, Founder
VeraSage Institute
www.verasage.com
Twitter @ronaldbaker

While I admire Ron greatly, I disagree with him on this point.  Some part, indeed for many, a significant part, of what knowledge workers do is process.  Accountants, for example, who do an audit, follow a series of protocols and procedures to ensure the process is consistent and complete.  So too for a review of a tax issue.  The same also holds true in a lawyer’s world.  Transaction documents, while not templates or boilerplate, do address common issues.  Most lawsuits involve collecting documents and reviewing them.  All matters can benefit from sound project management skills.  And so forth.

As my friend Jeff Carr, the GC of FMC Technologies, has described, in the practice of law, there are four buckets: process, content, advocacy and counseling.  It seems clear to me that there is a qualitative difference between process and content, on the one hand, and advocacy and counseling on the other.  Process and content seem perfectly situated for application of lean principles.  Consistent with the desire to reduce cost whenever possible in order to maximize profit margin, I think it valuable to look for opportunities to apply these principles.

The "knowledge workers are different" argument is a good one on many levels.  We want our surgeons to be good, not necessarily fast.  We want lawyers who get good results, not bad results efficiently.  But a lawyer who gets good results efficiently is more valuable than a lawyer who gets the same results inefficiently.  So the argument breaks down, or at least is inapplicable, at some level.


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I was listening to NPR today.  There was a story about how Congress could not work on climate change legislation because it was focused on the health care debate.  It reminded me of a time when I asked a colleague if we could schedule a meeting to discuss a new case, only to be told that the lawyer was not available for the next month because he was writing a brief.  He was serious.  And it wasn’t a big deal brief.

So my question is this:  aren’t we supposed to be able to walk and chew gum at the same time?  Or are those who can keep several balls in there just "special."

 


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Wikipedia defines "lean" this way:

Lean manufacturing or lean production, which is often known simply as "Lean", is a production practice that considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination. Working from the perspective of the

Earlier today, I wrote about the "efforts" of Reed Smith, Mayer Brown and O’Melveny to "transform" themselves by offering their clients alternative fees.  The reality is that the firms weren’t really doing anything.  They simply had formed committees to look at alternative fees.  Of course, anyone who has ever been in a big firm knows that committees are formed when somebody needs a place to send an idea so it will die.  My cynical view was these moves were simply PR.

Now a striking example of how the PR machine works.  Ashby Jones of the Wall Street Journal Law Blog wrote a post today, Is The Billable Hour Dying? Here’s More Evidence That It Might Be. This, of course, begs the question of whether forming committees to look at an idea is evidence that the status quo is changing.  How happy do you think the marketing pros at Mayer Brown and Reed Smith are at the moment?  They haven’t actually quoted a single alternative fee and the Wall Street Journal is now treating them committed players in the area.

Ashby Jones is a terrific reporter, but he got this one wrong.  The story about Merck actually doing something with its firms is a story.  Forming committees to "study" the issue is not a story.  The only real story would be to identify those firms that are not, at this moment, studying the use of alternative fees.  The story there would be whether those firms have what is needed to survive.


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A lot of people have been wondering whether we had reached a "tipping point" on alternative fees and there is some evidence that we have.  You see, when BigLaw starts talking the talk, it means they are playing catch-up.  In the past few days, if you believe the headlines, Reed Smith, Mayer Brown ("Mayer Brown and Reed Smith set to champion fixed fees")and O’Melveny ("new business model") have all made the jump.

In our "only headlines matter" world, these headlines suggest tectonic change.  But what’s the reality behind the headlines?  It’s an important question, since firms won’t deliver headlines to their clients, they will be delivering invoices.  And if the invoices don’t change, all the talk in the world won’t amount to anything.

The Mayer Brown story is easy to dismiss.  According to the story:

Mayer Brown’s senior management is in the process of reviewing how the firm bills clients and is considering proposals to overhaul fee structures for core transactional practices including corporate, banking and real estate.

So as I read this, the fact that Mayer Brown is thinking about changing its fee structure is newsworthy.  Frankly, any firm that isn’t at least  thinking about changing its fee structure these days is too stupid to continue to exist.  And it also bears pointing out that Mayer Brown’s review is limited to transactional areas.  Most clients, however, acknowledge that litigation is the area of greatest need of fee change.

Reed Smith is in much the same boat. Again, the story is pretty clear:

Separately, Reed Smith has also been looking at changing fee structures within its transactional practices. The firm has a committee made up of partners from across the firm reviewing proposals and is looking at an increasing use of fixed or capped fees for clients within its financial industry group (FIG), corporate and real estate practices, for transactional work.

A committee is studying the issue.  Wow.  Aren’t we impressed. 

The O’Melveny story is more interesting, because the firm at least understands that if anyone is going to really believe its changed its stripes, it is going to have to use the language of "business model change."  So it does.  But do the announced changes really change the business model?  Here’s the telling lie:

What changes have to be made to address these new realities? For one thing, the firm wants lower associate-to-partner leverage. O’Melveny plans to reduce its leverage to “as low as 2 to 1 in some practices,” although this “will be partially offset by increases in charge hours and by fortifying associate and counsel quality.”

The essential element of alternative fees that actually work is that they shift risk to law firms, meaning the value changes from leverage and body count to experience and fewer bodies.  More brain power, less body count.  So a goal of reducing leverage "in some practices" to "as low as" 2 to 1 will make anyone experienced with alternative fees laugh out loud.  O’Melveny might as well take out a full page advertisement saying it really won’t be changing a damn thing.

I have written before that it is not possible to be both an alternative fee firm and a billable hour firm.  I’ve also written that I didn’t think BigLaw could make the necessary change to become alternative fee firms.  I offer these two stories as Exhibits A and B in support of my hypothesis.

 


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