November 2009

Richard Susskind uses a graph in his book, The End Of Lawyers?, and in his speeches that shows the pace of change as a "knee curve."  The graph shows that we have experience comparatively little change until now, but we stand on the cusp of a period of great change.  What does this mean?  Try this explanation, courtesy of the J curve:

In his forthcoming book, Kurzweil summarizes the exponentiation of our technological capabilities, and our evolution, with the near-term shorthand: the next 20 years of technological progress will be equivalent to the entire 20th century.

To put this in some perspective, the blogger notes that at the beginning of the 20th century, there were only 144 miles of paved road in the entire country, 94% of Americans were born at home, had no electricity and most never graduated from high school.

Coincidentally, my mother just sent me an email that contained these comments from 1955:

‘I’ll tell you one thing, if things keep going the way they are, it’s going
to be impossible to buy a week’s groceries for $10.00.

‘Have you seen the new cars coming out next year? It won’t be long before
$1, 000.00 will only buy a used one.

‘If cigarettes keep going up in price, I’m going to quit. 20 cents a pack
is ridiculous.

‘Did you hear the post office is thinking about charging 7 cents just to
mail a letter

‘If they raise the minimum wage to $1.00, nobody will be able to hire
outside help at the store.

‘When I first started driving, who would have thought gas would someday
cost 25 cents a gallon.. Guess we’d be better off leaving the car in the
garage.

‘I’m afraid to send my kids to the movies any more Ever since they let
Clark Gable get by with saying DAMN in GONE WITH THE WIND, it seems every
new movie has either HELL or DAMN in it.

‘Did you see where some baseball player just signed a contract for $50,000
a year just to play ball? It wouldn’t surprise me if someday they’ll be
making more than the President.

‘I never thought I’d see the day all our kitchen appliances would be
electric. They are even making electric typewriters now.

‘It’s too bad things are so tough nowadays. I see where a few married women
are having to work to make ends meet.

‘It won’t be long before young couples are going to have to hire someone to
watch their kids so they can both work.

‘I’m afraid the Volkswagen car is going to open the door to a whole lot of
foreign business.

‘The drive-in restaurant is convenient in nice weather, but I seriously
doubt they will ever catch on.

‘There is no sense going on short trips anymore for a weekend, it costs
nearly $2.00 a night to stay in a hotel.

‘No one can afford to be sick anymore, at $15.00 a day in the hospital, it’s
too rich for my blood.’

‘If they think I’ll pay 30 cents for a hair cut, forget it.’

Why is this important?  Read my last post about the leaders of 25% of the AmLaw 200 not seeing fundamental shifts in the profession.  But also think that if there is only a 25% chance that changes will be only profound instead of anywhere near what Kurzweil and Susskind are predicting, and think about what that means for you and your firm.  But then think about your clients.  How will their businesses change in a change environment?  Will you be as nimble as they will?  What are you doing now to prepare to be the lawyer they need in an environment that will be profoundly different.

 

 

From AmLaw Daily:

 We used our annual survey of the heads of The Am Law 200 to ask questions about the changes they’re seeing; 142 responded. . . . More than half the law firm heads report seeing a "fundamental shift" in the legal marketplace; only a quarter said they didn’t.

This result is staggering.  Not because of the significance of the fundamental shift in the marketplace.  But what does it mean that 25% of the leaders of the largest law firms in the country do not see that which is patent?  Can there be a more sweeping indictment of the leadership in those firms?

The same article reports on the fundamental shift in client relationships, citing Microsoft’s termination of its relationship with K & L Gates (and, yes, the Gates in the firm is related to the Gates in Microsoft) and reporting data on the number of corporate counsel who terminated firms in 2009. 

For those leaders who responded that they didn’t smell the coffee, er, see a fundamental shift in the marketplace, the data on on the law firm terminations should be profoundly troubling. 

 

I woke up this morning thinking how very lucky I am.  Valorem is almost two years old, and my worst day in those two years is still significantly better than my best day in the previous 25 years, at least from the standpoint of practicing law.  So I want to take a moment to thank the people who have brought such joy into my life.  From left to right, Mark Sayre, (then skip me), Lisa Castle, Hugh Totten, Shannon Bartlett, Reeghan Raffals, Hank Turner, Nicole Auerbach and Stuart Chanen.  Mark, Hugh and Nicole are the ones who started with me on this intrepid adventure, and I owe them special thanks. But as to the whole of our number, I have never had the pleasure of working with better lawyers or finer people, and I am forever grateful that you are sharing this journey with me.  Not pictured in this group are the people who make our lives immeasurably better and do such fantastic work for our clients–Doreen, Lori, Sarah, Sharon, Cherise, Ben and Cassie. 

I have much to be thankful for today.  Everyday.  I hope all that see this have something in their lives they can be thankful for this day too.

Happy Thanksgiving.

As National Litigation Counsel for a number of clients, I receive emails from local counsel around the country.  A few, but enough that I have noticed, send me emails that contain nothing other than an attachment of their status letter.  So I have to click through the attachment, wait and then read a report on something that is typically inconsequential.  Time to read email–significantly higher than if the substance of the letter was put in the initial email.

But it’s worse.

It should come as no surprise that may lawyers, myself included, travel from time to time.  And that we rely on our blackberries.  Those with any blackberry (or similar device) experience know the time to open attachments is not insignificant, and then the type size is microscopic.  The amount of time spent on any one email grows exponentially.  When i waste this time on reports that it was Tuesday on Tuesday or some other such nonsense, my blood boils.

In this regard, I figure it’s a safe bet that most clients are like me.  So here is my message to everyone who sends emails to clients that contain attachments you prepared:  STOP IT! There is no value–zero, none nada, to having a piece of paper that you prepare and then scan and email.  It is a waste of resources and a waste of your client’s time.

People need to stop focusing on what they do from their perspective and start considering it from your customer’s perspective.

Following up on my last post on how clients can determine whether the alternative fee quoted is a good one or not, I invite you to read this article from Corporate Counsel, United Technologies Takes a Stand, Puts Billable Hour ‘On Life Support.’  Here’s the punchline from the story:

These days it’s easy to find law firms willing to work for United Technologies under some kind of alternative fee arrangement. They’re a big customer; the Hartford-based global conglomerate raked in nearly $59 billion in revenue last year selling products like elevators and helicopters. But to truly impress United Technologies, firms now have to do more than propose working off the clock. They have to explain exactly how they came up with their flat fee, and how they’ll make money, something many can’t do. "Sometimes they tell me they have no idea," says associate general counsel Chester Paul Beach.

I know from experience that no lawyer can wake up one day and decide to quote alternative fees and be any good at it.  Being good is like any other estimator’s job–it takes experience and a detailed, nuanced understanding of your cost structure and your financial objectives for the engagement.  Kudos to United Technologies for asking precisely the right question.

 

 

Continue Reading Alternative Fees: So how’d you come up with that number? Part II

 

When giving a speech a few months ago, I was asked by an in-house lawyer how a client was supposed to distinguish a good alternative fee from a bad one. Great question.

My answer? Ask the firm to explain in detail how it came up with its number.

I recall the first time I quoted a fixed fee more than a decade ago. It was a very unpopular thing in my firm, and the “bosses” were heavily involved. I came up with number in a very granular way. How many motions? How many depositions? How much time reviewing documents? How long for summary judgment? It was an exercise designed to identify the number of hours we would spend on the matter. We then multiplied the hourly rates of the people who would be doing the tasks and came up with a total.

That was only the beginning of the process. Rates were likely to increase during the period the case was expected to be active, so we had to build in a “bump” for the fee increase. We had to build in another “bump” to protect us in case we were wrong about the hours. And finally, we had the self-congratulatory “aren’t we great for doing this for our client” bump. That was the number we gave to our client. As you can see, it had a huge amount of profit, indeed, a premium, built in.

These days, I’ve heard from a number of in-house lawyers that the alternative fee quotes they are getting appear to have gone through a similar design process. As I tell everyone who asks, any explanation that includes something to the effect that we calculated the hours we would spend and multiplied by hourly rates needs to be rejected immediately. The firm’s hourly rates are where their profit is located. Rates x hours = revenue. Revenue – expenses = profit. If the firm is not putting some of its profit at risk and altering the way it works, it is not using the alternative fee to client’s benefit.

So what’s a good answer? I’ll answer that question later.

Continue Reading Alternative Fees: So how’d you come up with that number?

Sometimes, you see something that is just a wonderful poignant reminder that you cannot win a battle with a customer, whether the customer flies your airline or purchases services from you.  Here’s the story:

A musician named Dave Carroll recently had difficulty with United Airlines. United apparently damaged his treasured Taylor guitar ($3500) during a flight. Dave spent over 9 months trying to get United to pay for damages caused by baggage handlers to his custom Taylor guitar. During his final exchange with the United Customer Relations Manager, he stated that he was left with no choice other than to create a music video for youtube exposing their lack of cooperation. The Manager responded : "Good luck with that one, pal."

So Dave Carroll posted a retaliatory video on youtube. The video has since received over 6.1 million hits.   Six million!  Plus the story has been told on several national network shows.  How much does United have to pay to reach that many eyeballs with a positive message?

United Airlines contacted the musician and attempted settlement in exchange for pulling the video. Naturally his response was: "Good luck with that one, pal".  Taylor Guitars sent the musician 2 new custom guitars in appreciation for the product recognition from the video that has lead to a sharp increase in orders.
 

Can anyone think of a circumstance where a service provider wins a fight with a customer?  Perhaps we should consider a case study about United’s lack of customer service.  Then again, United may well be thinking that their service is so dreadful to begin with that no song, no lampooning of them, could make the public perception of the airline worse.  If so, "good luck with that one, pal."

ACC’s Susan Hackett just posted Are Firms Tone Deaf? Why Push For Rate Increases In 2010?  Almost exactly one year ago, I asked the same question in my post The Economy And Rate Increases: Someone Is Not Listening. I had raised the issue in early October 2008.  As Susan’s post makes clear, law firms are not learning.  Myopically focusing on one driver of revenue is only going to cause more pain as clients rail against those requests for "more."  The driver needs to be increasing margins.  Just as our clients focus relentlessly on margins, it’s time law firms learn that they too need to do more with less.

 

Law firms frequently strive to identify and adapt "best practices" in whatever area is under examination.  I used to think that this approach was laudable.  Not anymore.  The Harvard Business Review just posted Why Do We Ignore Best Practices?, which suggests some reasons why companies (firms) ignore best practices.

I take issue with the fundamental assumption of the HBS piece, which is that "best practices" are something to which businesses should universally aspire.  In some areas, like IT, best practices may be precisely the right objective.  But in most areas, seeking to emulate best practices created by someone else simply fosters a herd mentality.  In areas like branding, this is obviously problematic, and it can be that way in substantive areas as well.  Simply seeking to do the wrong thing the best way is not a virtue.

In my recent panel discussion with noted legal futurist and technologist Richard Susskind, Richard introduced the idea of blank sheet problem solving.  It was brilliant,  When being asked to solve a problem, a group starts with a blank sheet of paper, with the charge being essentially, start from scratch with no limitations and design a solution. If something elegant or innovative is designed by that process, the issue then becomes an engineering one, how to get from here to there.  But notably absent in the process is an reference to what others are doing.

Of course, in this same lecture, Richard discussed his view that lawyers are more concerned about not suffering competitive disadvantage rather than interested in seeking competitive advantage.  In other words, lawyers enjoy the herd.  Which makes them perfect candidates for seeking best practices.

The punchline?  Think about whether you are a herd animal or something more.  If you want to live in the herd, best practices will be your friend.  But if you want to excel, to rise above the herd, then ask whether best practices will hold you back.  Create a system, whether Richard’s suggested approach or something else, that fosters creativity and encourages people to be more than a pack animal.  Challenge conventional wisdom, or as I see it, herd wisdom.