Legal business development news

Why asking someone to work 2,000 billable hours a year will kill their spirit

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According to a post by Casey Sullivan of Bloomberg, earlier this week US law firm Crowell & Moring announced that it would increase its billable hour requirement for associates, from 1,900 hours per year to 2,000 per year. This new target will take effect 1 September 2016, but on the plus side 50 pro bono hours will count as billable.

15 Years ago I would have cried out “all kudos to you”. Back then my yearly billable target for an English ‘Magic Circle’ firm was 1,400 hours and I flogged my guts out to achieve that. So if you can effectively put 50% of billables on top of what I was doing (and trust me when I say I wasn’t going home at least one day a week), then you’re a better person than I (or so I would have said then).

But if you really need validation of what asking someone to work 2,000 billable hours a year means, then I would like to recommend you read “The Truth about the Billable Hour” by no less an institution than Yale University. In that publication, Yale caution aspiring lawyers that if you are being asked to “bill” 2201 hour, you need to be “at work” (includes travel time and lunch, etc.) 3058.

Taking that further, from an Australian law perspective, if you are being asked to bill 2,000 hours a year then you need to bill 8.3 hours a day (assuming a 48 week year and you never get sick; which, if you are being asked to do this, you most likely will be). That means you are very likely going to need to be “in the office” around 12 hours a day – and that assumes no write-off by your partner or leakage.

But here’s the question: “What difference does this make?

I ask this because I wholly agree with the following comment my friend Kirsten Hodgson made when I posted a link to this article on LinkedIn:

“why would you reward the number of hours someone spends working? Surely it would be better to focus on how to deliver value smarter and more quickly. This doesn’t incentivize innovation or any type of process improvement.”

Exactly right, you’re measuring all the wrong things!

Leaving aside the Balance Scorecard argument, asking someone to do 2,000 billable hours a year doesn’t take into account:

  • client satisfaction
  • realisation (it’s a utilisation metric)
  • working smarter
  • innovation

or many other metrics.

And for those who may point out the benefits of this including 50 hours pro bono I say this: the Australian Pro Bono Centre National Pro Bono ‘Aspirational Target’ (ie, where we would like to get to), is 35 hours per lawyer per year.

But probably more importantly than all of this is this:

–  if you ask someone to do this, then you really leave them very little time to do anything else.

This really should be a concern, on the business front because you leave almost no time whatsoever to train them in the business of law – ie, you kill any entrepreneurial spirit they may have. And, crucially, the only metric that really counts to them is that all important 2,000 billable hours (keep in mind that like I was, they’re very young). Which for a profession that has the mental health issues we do, is not good.

For all of these reasons, I’m hoping no other law firm follows this. But sadly I think they will.

Oh, and if you are a law firm client reading this post you might just want to look up whether your local jurisdiction has a “Lemon Law” rule that applies to provision of a service.

RWS_01

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How long before we see a ‘Red Team’ service in #Auslaw?

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Of note overnight (OZ time) was news that Bernero & Press (Wendy Bernero and Aric Press) have launched a service called: ‘The Red Team’.  Described as being “A Lifeline for Marketing and Business Development Departments” the aim of The Red Team is to provide:

“…high-quality, experienced marketing, communications, and business development professionals to law firms on a project basis or to fill temporary needs.”

Sounds very similar to the sort of lawyer placement service we are seeing from the likes of Crowd & Co here in Australia, only in this case the target market is specifically support services.

I have to say that outsourcing back office services such as marketing and business development was something I saw becoming popular in Asia during the Asian Financial Crisis in late 1998 and I have often wondered when we would see such a move take hold in the West.

Today may just be that day.

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$180K for a First-Year Associate – so what!

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One of the big news items this week has been the decision by Cravath, Swaine & Moore to raise its starting salaries for first year associates to $180,000. Cries of “Not worth it!” and “What value do first year associates provide clients?” (answer: probably none) can be heard from all four corners of the planet.

My view on this though is so what? I don’t really care what you pay your first year associates. In the same way I don’t really care what you pay your other associates or partners. Nor do I really care what your rent is costing you.

Unless, that is, I get to thinking that: I am the one paying for all this. In which case, I suddenly become very interested.

But here’s the thing: I’d only really start to think that I’m the one paying for all your luxuries – the boat you have moored at the marina, the sports car you drive, the house you live in, the first year associate you can call on day and night – if I didn’t value the service you provide me. In other words: If I didn’t think I was getting value for money.

So if you’re one of the many private practitioners questioning the move by Cravath, Swaine & Moore, my only comment/question is this:

If you are providing your clients with a value for money service offering – and you are able to communicate this, why should it bother you?

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The law firm disconnect in two images

This week saw the publication of LexisNexis’s Bellwether Report 2016. titled:- ‘The Riddle of Perception‘.

Based on structured interviews with 122 independent lawyers and 108 clients (all UK-based I believe), this year’s Report provides valuable insight into the thinking of lawyers and law firms and, incredibly, how far removed that thinking still appears to be from the views of their clients.

None so is this more starkly brought home to me than in two separate images in the Report in response to questions put forward around the issue of fixed fees.

The first (which is actually the second in the Report) can be found on page 22:-

Image 1

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where, in response to “Which of the following is an opportunity for your business going forward?” – 43% answered: fixed fees.

The second is found earlier in the Report on page 18, where when asked what “Changes forms implemented in the last year or plan to implement in the forthcoming year?” – a “deliberate shift towards fixed/capped fees” raked 12th. with only 13% saying there was anything planned around this for the forthcoming year.

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Now call me crazy, but that seems to be as close as you can get to madness.

Read the Report though, it really is very good.

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Exiting the ‘Valley of Despair’: Tips on rebuilding a book of business

Valley of despair

source: Emily Carr:- ‘Practical Change Management for IT Projects

The ‘Valley of Despair‘ is a term used in IT process improvement projects to describe the period of time where productivity decreases immediately after the implementation of a new process. In essence it describes that period of time during which you shift away from what you know and are comfortable with to what is new and unknown (but which will ultimately, hopefully, results in better processes).

Although a term commonly associated with process improvement, to me this has also become a good way to best describe a growing trend in the modern lawyer’s life; namely that particularly difficult period during which a disruptive element impacts on their book of business. Examples would include:

  • economic: with the GFC most securitization lawyers lost their practices overnight.
  • panel: when your firm loses a panel appointment with your practice’s biggest client as a result of the client rationalizing the number of its panel firms.
  • relationship: the key contact at your biggest client moves to a company your firm has no relationship with; or, worse, is promoted to a role where they no longer have influence over who gets the legal instructions.

There are many others, but you get the gist: your performance hits a wall called ‘change‘.

In my experience, partners who face this scenario come face-to-face with Elizabeth Kuber-Ross’ “Five Stages of Grief“:-

Denial —> Anger —> Bargaining —> Depression —> Acceptance

To overcome the Valley of Despair you need a sixth element: a desire to move forward.

  • Step 1: Accept your fate

The first step in any recovery program is accepting you have an issue. Too often law firm partners stick their heads in the sand and refuse to accept that anything is wrong until the Managing Partner is knocking on their door asking them what their plans are for the future (wink, wink: it’s not with us!). By then, you are well and truly in to the ‘bargaining’ and ‘depression’ phases. If you want to rebuild your book of business you need to be much further ahead of the game than that.

  • Step 2: Do an audit

Here’s the thing: things in life are rarely as bad as they first seem. So, as soon as you become aware of a change agent – such as those above – get out your pen and a piece of paper and write down a list of who you know, when was the last time you contacted them, what type of work could you be doing for them, are you already doing that type of work, etc.

In short, take stock of what you have and who you could be doing it for.

  • Step 3: Make a plan

Alan Lakein is reported to have said: “Failing to plan is planning to fail“. I’m not sure if he actually did, but it’s pretty accurate and if you want to rejuvenate your book of business then you will need a plan of how to go about this.

This plan should include the obvious, like:

  1. what type of work do I want to be doing?
  2. who do I want to do this work for?
  3. what do I know [commercially] about these businesses [tip: if the answer is “not a lot”, get a research assistant on to it ASAP]?
  4. who are the decision makers at these companies?
  5. how likely are they to give you / your firm the work [tip: rank the likelihood from 1 – 5 (very – unlikely)]?

Your plan also needs to include things you may not think of, such as:

  1. will my partners give me relief while I try and rebuild my book of business? If so, how long?
  2. what level of fees do I need to generate (cost +, times 3, times 5)?
  3. what rates will I need to charge to generate that level of fees? will the target client accept these rates? if I need to discount, will my partners accept me discounting to win work when their clients are paying full freight?
  4. who is currently doing the work for the target and what am I bringing to the table that would make the target move the work to me?
  5. how will my competition react to me invading their turf?
  • Step 4: Execute on the plan

I’ve heard it said that: “a plan without an action is a wish“. In the world of professional services, we see a lot of wishing!

So, as soon as you have your plan in place you need to get out from behind your desk and start to execute on it. Look at what

  • inbound and outbound related activities you need to do;
  • networking events are taking place and when;

then set yourself a 30-60-90 day action plan to work towards.

Most importantly, always be responsive and never, ever quit.  Building a book of business takes patience and repetition, you cannot adopt a “lottery mentality” as one shot actions nearly always lead to failure.

So if at first you don’t succeed, try again. That way, you’ll give yourself the very best chance of rebuilding your book of business and moving forward.

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Launched today – The Asian Business Law Institute

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Today, 21 January 2016, the Asian Business Law Institute (ABLI) was formerly launched in Singapore.

According to the ABLI’s website, the:

“…Institute based in Singapore that initiates, conducts and facilitates research and produces authoritative texts with a view to providing practical guidance in the field of Asian legal development and promoting the convergence of Asian business laws.

Among ABLI’s core tasks are:

  • to evaluate and stimulate the development of Asian law, legal policy, and practice, and in particular make proposals for the further convergence of business law among Asian Countries;
  • to study Asian approaches regarding business laws and practice in drafting legal instruments, restatements of law or model rules;
  • to conduct and facilitate pan-Asian research, in particular to draft, evaluate or improve principles and rules which are common to the Asian legal systems; and
  • to provide a forum, for discussion and cooperation, between the business community and the legal fraternity including, inter alia judges, lawyers, academics and other legal professionals, who take an active interest in Asian business law development.”

With the establishment of the ASEAN Economic Community (AEC) in December 2015 and the formal launch of the  Asian Infrastructure Investment Bank (AIIB) this month, there can be little doubt that it’s exciting times with plenty of potential for the legal industry in Asia at the moment so an initiative like ABLI should be warmly applauded.

If you’re on Twitter, the ABLI handle is @ABLIasia. Should be worth a follow.

Growth is not a strategy

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I read with interest yesterday‘s news item in the UK’s The Lawyer that Jones Day intends to double in size in Australia – with a particular focus on its Corporate practice following the recent lateral hire of ex-Herbert Smith Freehills (HSF) deputy senior partner Mark Crean.

I am  increasingly coming to the opinion that headlines like the one in yesterday’s The Lawyer represent as close as we will get to ‘clickbate’ in the legal industry.

Why do I think this? – because it is now well established that “growth isn’t a strategy, it’s a result“.

So, aside from being potentially good media exposure for the firm – in which case I do wonder why none of the Australian legal press picked up on this story – all this article does is highlight the misnomer that “growth is always good”, when all research around lateral hiring and aggressive purchasing of market share points to the opposite (think Dewey & LeBoeuf).

Going a step further, in a recent (23 November 2015) article in the Am Law Daily, Felix Oberholzer-Gee, professor of business development in the strategy unit at Harvard Business School, argues:

“If you start by saying that we want to grow our market share, or we want to be a particular size, as a strategic goal that is a terrible choice for a number of reasons”…

… “First, and most important, is that market share is not that correlated with profitability. The second is that the most natural way to gain market share is by charging lower fees, which is what we see throughout the industry in this misguided effort to gain size and market share.”

Have to say that I agree with Professor Oberholzer-Gee: – market share [ie, size] doesn’t matter, what matters is if your firm is profitable.

And therein lies the problem: I have yet to be convinced that any firm on an aggressive growth trajectory in Australia – and there are a few out there who are taking the same approach as Jones Day – are any more profitable for it. Conversely, I think that while being larger in partner numbers and office outlets many are probably less profitable with a lot more administrative headaches to boot.

So, while I feel for law firm partners who are continuously being told post-GFC that  mergers and market growth are safe haven ways to continue their existence post-2020, I would caution this approach and recommend, at an absolute minimum, that the firm:

  • take an audit of their client base to see who they do profitable work for;
  • ask your most profitable client if your firm’s growth plans will have any impact on them giving you greater levels of profitable work and, if so, who you need to bring on board to do that work;
  • analysis what your increased cost-base (and there will very likely be an increased cost-base) is going to mean in the medium and long term;

and to share this information as widely as you feel comfortable doing with your top clients so there is transparency around your strategic growth plans.

Otherwise you could always remember the idiom:

“Marry in haste, repent at leisure…”