Author: RWS_01

Over 20 years’ experience developing and implementing effective business development strategies in law firms across Australia and Asia.

Do you know who your competitors are?

In a highly competitive market such as the legal industry, understanding and knowing who your major competitors are is crucial to the successful identification and implementation of your firm’s strategy.

When assessing this issue, most of us naturally look outward at our traditional, and even new, market competitors. In short, we try, as best as we can, to compare apples with apples.

That’s why the publication of results from a new survey in yesterday’s Legal Futures, one of the UK’s leading legal news websites, makes for an interesting read. Because, to my mind, understanding and deciphering who your firm’s principal competitor is would seem to  remain a misunderstood issue.

Why do I say this?

Well, in the article Legal Futures (quoting from a recently published market survey) states that:

“more than two-thirds [of London City firms] see other professional services firms as the overwhelming competitive threat among recent entrants to the profession.”

By “other professional services firms“, what they mean is the Big 4 accountants.

While the re-emergence of “other professional services firms” (and for that matter so-called “new law” firms) is concerning, they are currently a long way from being the “overwhelming competitive threat” to law firms.

No, that title belongs to another group much closer to home: your clients.

With the level of work that clients are now taking back in-house, or not bothering to do at all, they are without doubt the “overwhelming competitive threat” to the current law firm business model. And, this is not cyclical but structural.

Crucially, understanding this is of paramount importance if firms wish to survive the next 5, 10, 15 years. Because it reshapes everything we do. How we try and win work. The type of work we are trying to win. And even the nature of the relationship we have with our client.

In the long term it will determine the way we measure and reward. It will dictate how we charge, and it will determine whether we succeed or fail.

And for good measure, here is another thing that is rapidly changing: who the client is can no longer be taken for granted or assumed. Because more often than not, it’s no longer the person you have the working relationship with.

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Is anybody else getting tired of this NewLaw vs BigLaw debate?

Last week saw the latest publication of the Commonwealth Bank’s Legal Market Pulse Report. What was a quarterly report, became half yearly, and would now appear to be annual (a great shame if true as many of us saw this report as an important benchmark of how the industry was tracking).

Anyhow, leaving that aside – and despite some changes to the structure of the report (it seems to be missing growth practice and geographic areas for example – which I loved), it remains an important read for those of us in #Auslaw.

But now a brief rant:- as you would expect of a report researched/undertaken by Beaton (which I understand is the case), it’s almost zealous like in its consideration/debate of so-called ‘NewLaw’ versus ‘BigLaw’ (do a search of the term ‘NewLaw’ and see how many hits you get if you don’t believe me!).

And I don’t get this ongoing fixation.

And yes, I was part of the twitter conversation that saw the birth of the term NewLaw by Eric Chin (who was then at Beaton) and thought it to be an interesting term/concept at the time.

But I’m starting to seriously wonder if we haven’t moved on from all this? If, indeed, once again, we are having the wrong conversation.

So what I want to ask is this:

Shouldn’t we start to have a real discussion about whether or not your firm is ‘full service’ (BigLaw) or ‘specialised’ (NewLaw) – and what that actually means; rather than NewLaw versus BigLaw, with all the inferences that come with that around old ways of doing law versus new ways?

Because I genuinely believe that in a market that is increasingly hard to differentiate in, this is a far more important question.

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In response to Patrick Lamb

Overnight Australian time, Patrick Lamb wrote a post (‘The importance of understanding context.‘) in which he makes several comments on a recent post by me.

I will start by saying that I know Mr Lamb, by reputation at least, and I have very high regard for him. I was thinking about it when deciding whether to write this post this morning and I believe I have been a follower of his blog for about 10 years (could be slightly less, maybe longer).

The following are three brief responding comments I would make to Mr. Lamb’s post:

  1. I strongly believe that any discussion that includes a component that AFAs are cheaper than hourly rates is the wrong discussion. Data-driven or otherwise. Do I want to see data showing me that AFAs are cheaper than hourly rates? Probably not. Why – because it would assume like for like, and the fact is behaviours of lawyers differ under the two structures. And, the only way I can see of getting close to like for like comparables is by asking fee earners under a fixed fee structure to track time – and my own view is even then the statistical data that falls out of that will be tainted and virtually useless for any meaniful discussion. So I’m not really interested as I believe it will lead me – and many others – down a conversation path that I fundamentally believe is the wrong one to be on: which is that AFAs are not a comparable to hourly billing. [as an aside: any conversation I have been involved in which starts with “data suggests AFAs are cheaper than hourly billing” typically ends up being a race to the bottom and rapidly results in a commoditised product.]
  2. I believe a “value equation” is precisely that: value must be experienced by all parties. If the value discussion results in the client believing they are getting great value but the lawyer feeling they are being cheated, then you are going to have a problem. So my own view is that any “value conversation” is not a one-way street and, as with the case with any pricing discussion, lawyers need to know when to walk away from the discussion.
  3. My comment on “if you cannot do AFAs, stick to hourly billing” is somewhat tounge-in-cheek, but has a serious undertone. Value pricing/AFAs are not easy. It takes a particular skill. It needs to be learnt. So if you wake-up one morning and decide you want to do value pricing/AFAs, by all means get help. But, whatever you do, don’t set out on that road without some guidance because it will be a road to ruin – stick to hourly billing (if your clients are letting you) until you have learnt how to price otherwise. And it is also my view that too many lawyers in Australia are failing to understand this and are implementing AFAs that are fundamentally “hourly rates in drag” as Mr John Chisholm has been known to say.

I want to finish this post on what I consider a positive. I wholly agree with the following comment by Mr Lamb – and comments like this are largely why I read his blog:

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.

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‘Do fixed fees need to be cheaper than hourly rates?’

Earlier this week Corporate Counsel published an article (“What GC Thought Leaders Experiment Is About (Hint: Not Cost)“) by Firoz Dattu and Dan Currell of AdvanceLaw in which they comment on a recent open-letter by 25 GCs [‘GC Thought Leaders Experiment’], which rightly has received a certain amount of industry attention.

Despite indicating that cost is not the primary issue in the project, Data and Currell stated:

“Here are three of the questions we are excited about—and these are just the beginning:

[First]…

[Second]…

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?”

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.

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ACCA Report: there has been a 30% increase in external legal spend in 2 years

Last month the Association of Corporate Counsel Australia published its ‘2017 Benchmarks and Leading Practices Report‘. Two leading take-outs from this Report being bounded about are:

  1. ‘the average total legal spend for ANZ in-house legal departments has increased from $3.1M in 2008 too $4.3M in 2017’, and
  2. ‘[average] external legal spend has increased from $1.8M in 2015 to $2.6M in 2017, representing a 30% increase.’

In what many, including myself, have called one of the world’s most competitive legal environments, with most reports showing flatline revenue levels for law firms at best; the fact that a report by in-house itself shows that there has been a significant uplift in external legal spend over the two years between 2015 and 2017 should give us comfort. But for some reason that doesn’t seem to be the case. Clearly this uplift isn’t being shared equally among firms and there appears to have been some significant winners, with rather more losers.

Other take-outs from the Report include:

  • More than half (51%) of GCs time is spent on ‘urgent high importance/highly strategic work’ – with the most essential skills and attributes required to being a successful GC being ‘the ability to translate complex information into simple communications, active listening, strategic thinking, broad business understanding and influencing skills‘. I would argue that many of these skills need to be top of mind for private practitioners too.
  • 80% of organisations rate project management as an important tool for improving the efficiency of in-house legal departments – yet more than half of in-house legal team (63%) have ‘no formal workflow management system‘.
  • Worryingly, the dominate project management principle used for ‘complex matters’ briefed out to external providers is, to ‘scope the work‘ (49%) [‘Obtain quote(s)’ is number 3 among cited project management practices]. I believe that if external legal providers are genuine in their declared aim of being trusted advisors to their clients, they may want to look at helping in-house up-skill in this clearly important area.
  • The top three considerations used to determine when matters should be outsourced or in-sourced are: (1) Whether external expertise is required (82%), (2) Current and projected internal workloads (59%), and (3) Amount of budget available for outsourcing (30%).
  • Work types most likely to be briefed externally are (1) tax (33%), (2) litigation/arbitration/ADR (19%), (3) employment/workplace relations (17%), and (4) banking and finance / capital markets (17%).

All importantly, in such a competitive market, the primary reasons behind in-house legal departments choosing one firm over another are:

  • ‘the chosen firm demonstrates an understanding of their requirements’ (72%),
  • ‘has specialist expertise’ (67%)
  • ‘provides good value’ (53%)

With the drivers of satisfaction being:

  • ‘demonstrated understanding of the role of in-house counsel’ (91%)
  • ‘demonstrated understanding of the organisation and its goals and priorities’ (89%), and
  • ‘the provision of commercially applicable advice’ (89%).

On the issue of billing:

  • 42% said that ‘hourly billing was not ideal’, but no alternative was provided,
  • disappointedly, 71% cited ‘discount hourly rates’ as the most common form of billing arrangement, but
  • the adoption of AFAs has increased from 28% in 212 to 42% in 2017.

Nonetheless, 88% of in-house counsel are ‘satisfied with their top provider’, meaning it remains extremely difficult to break an incumbent relationship.

One final take-out from the Report that needs to be seriously taken on-board by external (private practice) legal providers is this: – “women now account for 50% of head of legal functions“.

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‘Coopetition’

“Coopetition” = Cooperating while competing.

I heard a new word today, ‘Coopetition‘.

In an article in Philippine publication Business Mirror, Stephanie Tomampos credits Philippine Science Secretary Fortunato T de la Pena with using the term during his keynote address at the opening ceremony of the 17th Conference of the Science Council of Asia at the Philippine International Convention Centre on June 14th.

Although not directed at lawyers, but at scientists who cooperate while competing for research funding, I thought the word summed up well the role of the modern law firm; where firms are increasing being asked to cooperate with each other in order to contribute towards inclusive overall development of the client’s business.

Whereas in the past this sort of cooperation may have been limited to unbundling, LPO or labour arbitrage, today cooperation between the various legal service providers of a client extends way, way beyond this.

We see it in the way firms are now required to cooperate with each with the IT platform(s)/environment the client uses. We see it in the way we pitch innovation to clients, where if we work with multiple firms servicing the client we cooperate with each other on innovative ways of doing the job. We see it in the way we are being asked to work with project teams, often with New Law providers such as Lawyers on Demand and Crowd & Co.

Driven largely by a need for cost efficiencies, what we are increasingly seeing is a demand by clients for a cohesive, inclusive, approach to their client experience (CX) from all of their legal service providers.

This means that while we very much remain competitors, in the new world order we need to cooperate with each other in order to be in a position to compete at all!

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How often does your law firm managing partner call clients to thank them for giving you instructions?

It may sound slightly crass, but when was the last time your firm’s Managing Partner phoned a client to thank them for giving you work? Indeed, have they ever phoned a client to say thanks for the work they give the firm?

Because, crass as it may sound, sometimes in life doing the really simple – right – things well gets lost in our haste to over complicate things and reinforce to all how important we are the role we play in this little merry-go-round.

All of this was brought home to me recently when reading an article on abovethelaw.com titled ‘Biglaw Idol’ — Or, How In-House Lawyers Actually Select Outside Counsel: Picking a law firm for a seven-figure engagement can take under five minutes by Stephen R Williams.

Stephen is in-house with a multi-facility hospital network in the US Midwest and in this article he sets out fairly succinctly and scarily (from an Australian business development perspective) near-verbatim transcript of a recent discussion on how the in-house team decided which private practice firm they would retain for “a rather sizable engagement” (the seven figure sum mentioned in the article’s title).

Turns out that once they had decided a select group of firms (5) who they thought could do the job, one of the deciding differentiators that set the winning firm out from the others was the fact that:

Their managing partner also called me this morning to thank me for considering them. He said he understood they may not be who we ultimately retain, but he appreciated the confidence we had in their firm for even considering them.

The GC’s response?

Well, it may surprise you:

GC: Wow, Managing Partner called? I passed over his shop a few months ago in favor of Biglaw 2 and thought he was still mad at me. I am impressed he called. Look, if we can’t get an answer from Biglaw 5 and Biglaw 4 is ready to go — I am signed-off, bring in Biglaw 4.

That Managing Partner just won his firm a seven figure engagement. With one phone call. And he didn’t even say thanks for hiring us. He said, “thanks for thinking about hiring us”. Pretty powerful stuff.

Food for thought…

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