General business development issues

‘How much are you charging your client for that value add?’

It’s a question I often ask law firm partners:

How much are you charging for that value add?

And nearly always the response I get is the same:- *shocked face look*.

Why, well because in my experience lawyers are willing to give something of real value away for free to a client in the hope that same client will then given them their legal work.

But it rarely works like that.

And, more importantly, it shouldn’t work like that in today’s world (if it ever really did).

Don’t get me wrong, there will always be a cost of doing business component to our profession. CPDs/CLEs for in-house counsel would, in my opinion, sit in this category (but not all L&D activity) [tip: if you do this, open a ‘value account’ for your client and put a nominal value, say A$200 per 1 hour session per attendee, again this to try and show the client (in $$$ terms) the value you are providing here].

Rarely though do lawyers give thought to the ramifications of when they offer their clients something of real value, that really differentiates their firm, and then they give the IP away for free in the hope of getting the “more profitable” legal work.

Case in point is the following comment attributed to DHL Supply Chain Americas GC Mark Smolik in an article in yesterday’s The American Lawyer by Gina Passarella Cipriani [‘GCs Are Offering Work on a Silver Platter—and Law Firms Aren’t Taking It’]

“On the matter side, DHL Supply Chain Americas GC Mark Smolik gave an example of what he wishes law firms would do—and it’s something none of his firms ever has. He suggested a firm might want to look at, say, all of the employment cases emanating out of his California warehouses. Maybe they find that 50 percent of the cases are coming from one warehouse, and one person is the culprit. The GC can then take that information to its business units and work out a solution. It makes the GC look good and it makes the law firm look good to provide that kind of actionable intelligence. Other GCs echoed similar requests during Legalweek’s Business of Law Forum.”

Getting down to the bare bones of my point though:- Mark doesn’t suggest this be done for free. And, in my opinion, done right, there is every chance Mark will pay for this value add.

But that’s just my take – as always, would be interested in your thoughts, views, feedback.

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Which kinds of businesses are most threatening to your firm’s future?

The December/January edition of Briefing magazine includes a supplementary report looking at the Legal IT Landscapes 2019. It’s a very enjoyable read, and includes the following graphic (answering the question from which the title of this blog is taken):

image 201901

What this indicates is that despite my having blogged about this issue as far back as September 2017 (‘Do you know who your competitors are?‘) senior managers of law firms still hold that other law firms like theirs are the greatest threat to their ongoing commercial success (at 26%).

As I wrote back then,

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 I still hold now, this view is misplaced at best, and out and out wrong at worst.

As the following quote taken directly from the National Profile of Solicitors 2016 report (most recent I could find) published by the Law Society of New South Wales, in Australia the seriousness of the threat that in-house legal teams have on  the viability of your firm’s future success should not be underestimated:

Legal employment sectors are shifting. The great majority of Australian solicitors continue to work in private practice, with 69% employed in a law firm. However, the proportion of solicitors working in private practice has dropped from 75% to 69% over the last five years. This is due to a significant growth in the number of solicitors working in the corporate sector and government.

Between 2011 and 2016, there was a 59% increase in the number of solicitors working in the corporate sector, compared to a 17% increase working in the private sector.

Let that sink in for a second: a 59% increase in the number of solicitors working in the corporate sector [in Australia] over a 5 year period post the GFC.

Even coming from a relatively low baseline, that’s a staggering shift (indeed, some may even argue seismic)!

But ask senior management of law firms and only 10% will tell you that “in-house/client” is a business that is most threatening to their firm’s business.

Misguided pershaps?

As always, would be interested in your thoughts, views, feedback.

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Lawyers and ‘the amplifying factor’

On 11 January Seth Godin blogged ‘Good intentions (how to be on time)‘. Typical Seth, it’s a relatively short post; and typical Seth, it contains an important message – ‘The amplifying factor‘.

In Seth’s words:

The amplifying factor is that when they’re late, people wait for them.

So why is this relevant to your firm?

The answer:- how familiar does this [2015] post by Bruce MacEwen (Adam Smith, esq) sound:

(3) We recently had a meeting scheduled with the partner on the matter at the firm’s offices in midtown. (I was not present.) Our representative—one of the two wardens of St. Michael’s—arrived about five minutes early and ran into the partner in the firm’s reception area; he was heading for the elevator to go out to get coffee.

He kept going.

My colleague sat in the conference room for 15-20 minutes awaiting his return. When he did appear, the plan was to conference in the other St. Michael’s warden on the speakerphone. He didn’t know how to do that.

This is a perfect example of ‘the amplifying factor‘. And in law firms I see this behaviour every single day…

As always, would be interested in your views.

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2018 was a great year for AusLaw firms*!

As we close out the year that was 2018, the graph below – from the recent (December 2018) Commonwealth Bank ‘Professional Services’ report – would appear to support the fact that 2018 has been a financially beneficial one for all those involved in private practice in Australia:

Screen Shot 2018-12-30 at 8.37.01 pm

The question I have though is this: is this a true correction?

And what I’m really asking here is this:

  1. have the underlying structural changes that we all know need to be made been put in place?
  2. if so, are we starting to see the benefits of these, or does this chart represent a false dawn?

And as we entered 2019 I’m going to leave those two questions out there, as I think many of us know what the real answers are here.

As always, would be interested in your views.

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* or was it?

My comments on today’s Lawyers Weekly article: ‘Observations on NewLaw in Australia in 2018’

Today (28 December 2018), Lawyers Weekly in Australia published an article by Lachlan McKnight, CEO of LegalVision in which Lachlan comments on his ‘Observations on NewLaw in Australia in 2018‘.  At the outset I should state that I don’t know Lachlan, and this post is no way directed at him, but is just a numbered-point muse on the interesting observations he makes in his article.

  1. ‘NewLaw’ (which is as meaningless a term as ‘Mid-tier’) is now an ‘industry’ – now that’s interesting.
  2. Agree with Lachlan’s comment in #1.
  3. While I agree with Lachlan’s comments in #2, I also believe the attitude here is changing within the more ProgressiveLaw firms. ProgressiveLaw firms realise that with greater risk (which fixed fees actually are), there should be a premium (much as there is with any insurance premium). EvolutionaryLaw firms go one step further and start to have a conversation about ‘value’ pricing.
  4. Three is an interesting comment: aren’t LegalVision in part owned by G&T  – as an aside (re #3 above), didn’t Danny Gilbert recently state that he thinks that clients don’t want move away from the #BillableHour?. Nevertheless, I agree with a lot of what Lachlan says in #3 but would probably set the bar at $75 million (we still only have a population of 25 million and IBISWorld still only puts the WHOLE legal industry revenue in Australia at $20bn [NB: the top 30 law firms in Australia make over $50m a year – in an industry this small!]).
  5. I would totally disagree with Lachlan’s comments in 4 and in my opinion you only need to look at the stuff MinterEllison and KWM are doing (with whom I have no association) to see this point – to me – is misplaced. In fact I would go 180 and say many BigLaw firms are going through their Arthur Andersen/Accenture moment (the original ‘child eat parent’?).
  6. The biggest challenge NewLaw (and Mid-tier law if such a thing exists) has to #5 isn’t OldLaw, it’s the #Big4.
  7. Number 6 is a point I have tried raising several times this year – scale. Law (Old and New) see ‘scale’ as being bodies (in part because of time-based billing). If it ever was it not longer is and any law firm, new or old, that get’s the right answer to scale will have a point of difference and in such a competitive market this is crucial. The reality is that potentially the biggest winners here should be the so-called Mid-tier (who have a lot of the grey haired industry knowledge without, currently, the scale – but I fear they have missed the boat because of lack of investment).
  8. For #7, see my comment in #3 re G&T.

As always, would be interested in your views.

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Okay you can keep the ‘Legal’ tag; but it’s just Project Management!

I’ve been ‘white-boarding’ legal matters since my days helping out on front-end major projects back in 1996; so the concept of ‘mapping out’ how a transaction might progress, what may be ‘in scope’ and ‘out of scope’, the approximate amount of time the transaction may take and how we are going to resource it are not new to me. In more recent times (largely following the GFC in 2008) the legal industry has formalised my approach of ’white-boarding’ matters to become Legal Project Management. 

While I was never really that sure over the years how Legal Project Management differed from the more general Project Management, I have been assured – on numerous occasions – that there is a difference. When asked how, the most common response I received was that:-

  • Legal Project Management is the discipline of project managing ‘tacit knowledge’ – as ‘knowledge workers’, while
  • Project Management is the discipline of project managing tangible products, e.g., the construction of a hospital.

And until the last month or so I thought that was a pretty good answer.

So what changed?

Well, in the last month and a bit I have attended a collective 5 day (2 day and then a 3 day) course on Project Management Fundamentals run by PM-Partners Group here in Sydney.

The two day Fundamentals (essentially, theory) session was outstanding and broken-down into the following nine (9) modules:

  1. What makes projects succeed (and by implication, fail)
  2. The essential project management philosophy
  3. The project life cycle
  4. Project planning – project definition and scoping
  5. Project planning – creating the WBS & schedule
  6. Project planning – estimating
  7. Project risk
  8. Project execution & control
  9. Project closure

In turn, if you were on a course where you learnt all about: 

  • scope creep
  • the difference between what a risk is and what an issue is (hint, one has happened and the other hasn’t)
  • how to do a business case and a project plan
  • the triangle of scope, cost, time and quality
  • the four dependency types [finish-start; start-start; finish-finish; and start-finish], and
  • you get to work on creating a Work Breakdown Structure and Estimating (Optimistic, Pessimistic and Most Likely – also looking at the Cone of Uncertainty)

Wouldn’t you think you had been on one of the best Legal Project Management training courses around?

Well, that’s exactly what the two day PM-Partners run Project Management Fundamentals course taught me and I have walked away from that course thinking to myself that you can keep the classify ‘Legal’, at the end of the day it’s project management and it’s this type of project management we need to get better at.

My biggest take-out though?

Understanding the difference between a risk and an issue, because anyone doing pricing should get their head around this because it really is as important (and probably goes hand-in-hand with) as what happens with scope creep [helpful extra tip: want to understand scope creep, look up what happens with the formula: n (n – 1) /2].

Get in touch if you want to hear/find out more, otherwise get yourself on a really good PM Fundamentals course because I can guarantee it will pay for itself!

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#RIP to the #RFT?

I came to Australia in 2007 to fill a tender writing role. Till then, while I was familiar with responding to tenders, I hadn’t comprehended that responding to tenders could be a full time role.

Since 2007 though, on average, I’d guess that I have responded to one RFT – panel or project – per week (and I should add that during this period my roles have changed from tender heavy to tender light to tender heavy without that much difference in tender workload). I would guess that I also probably respond to one Request for Quote (RfQ) every two days and I must assist with at least two capability statements per week.

What I’m trying to say is this:- I’ve worked on a lot of proposals over the past decade.

And why wouldn’t I have? So far as I’m aware, in Australia:-

  • every level of government – Federal, State, Territory and Local – is panelled to some extent. A number of states, including NSW, QLD, Vic and WA also have collective Local Council panels.
  • approximately 80% of the ASX 200 is panelled.

That’s an awful lot of tenders – some of which are public and others invitation only.

Right about now you’re probably asking why this all matters?

The answer is this,  last Friday Corporate Counsel reported that ‘Barclays Looks to Shake Up Law Firm Panel Model in Coming Years‘, going on to state that:-

“Beginning in 2021, Barclays will ditch RFPs and adopt a more flexible approach to outside counsel management.”

[Noting that the terms RFP and RFT are largely inter-changeable]

Having been at the coal-face of requests for tenders for so long, this is music to my ears!

Only, as a half decent tenderer can tell you, on closer inspection it isn’t.

Chris Grant, the head of Barclays’s firm relationships, has come up with guidelines that the Bank hopes will allow them to build better connections with their firms. These include Barclays using a “gateway process” that includes a probationary period for new legal service providers.

Hang on a second – this is suddenly sounding like an ad hoc – as opposed to a structured – RFT process.

Shame really as one day B2B clients will come to realise that legal panels are a very costly and time consuming process.

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