law firms

Law firms need to move on from being ‘client-facing’ to being ‘client-centric’

Most law firms in today’s market accept the notion that they need to be ‘client-facing’. After all, as the saying goes:

“Without clients, there is no law firm.”

To help facilitate their client-facing business development and marketing activities, many firms have introduced Key Account Management (KAM) programs around their largest 10, 20 or so clients (depending on the size of the firm, this could be a lot more or slightly less).

Once fairly secretive – for fearing of possibly off-siding any clients who did not have KAM programs in place around them – the KAM methods and processes firms have put in place over the past decade or so are now transparent and open. Indeed, nearly every law firm now employs a client account manager for the designated KAM program client.

The problem I have with this currently accepted and exercised approach to managing client-facing relations is two-fold:

Firstly, ‘Key’ Account Management programs typically only include ‘key’ players of the firm, many of whom are very busy people.
Secondly, and far more importantly, in a world of ever increasing service provider options: being ‘client-facing’ is no longer a differentiator – in order to differentiate your law firm in today’s market you need to move both the internal and external conversations you have beyond being client-facing, today your firm needs to be ‘client-centric’.

So what do I mean when I say you need to move your firm’s conversations and behaviour beyond being ‘client-facing’ and towards being ‘client-centric’?

In short this means your firm needs to have a client-centric based philosophy embedded throughout the firm – from Managing Partner to Receptionist, from Secretary to Head of Business Development or Human Resources. In other words, all who work at the firm should know and understand the world in which your client lives in and what is important to them.

In today’s world, if your law firm truly wants to differentiate itself and be considered the ‘trusted advisor‘ to your client, then the firm as a whole needs to:

Understand the commercial and legal issues your client faces on a daily basis,
Understand why it is your client needs to use your firm’s services, and
Understand how your client uses your firm’s services (i.e., which lawyers/practice groups, etc.).

And you can help your law firm achieve its goal of becoming ‘client-centric’ by:

Viewing your client as a ‘client’, not as a ‘matter’ or ‘transaction’. This includes understanding that your client does not have ‘legal issues’, they have ‘commercial issues’.
Getting ‘continuous’ feedback from your client – not just once a quarter, twice a year or the never-ever but always promised client feedback sessions.
Promote the brand of your client internally – for example, maybe include details of the client in your staff break room(s), internal bulletin boards (including things your client is currently doing that’s important to them), or need the photocopier(s).
Always looking to the future. Don’t get hung up on the last thing you did with your client, look to the next thing you will do with them!

A tale of two Asias

Two separate comprehensive reports on the state of the legal market in Asia have recently been published. While both look to have been very thoroughly researched, that, and the shared (as in, this) week in which they were published, is, however, about all the two appear to have in common.

As to the two publications in question: one was published by the UK’s The Lawyer and the other by The Asian Lawyer – part of The American Lawyer stable. As such, the two publication represent a fairly comprehensive review of how international firms are fairing in the ever competitive Asian market.

The Lawyer

Turning first to the The Lawyer publication, the executive summary of which you can read here and the full report of which you can purchase here.

On reading this publication, “teething troubles aside“, you are left in little doubt that international law firms have positioned themselves well for the uptake in demand in the increasingly important Asia-Pacific legal market. Importantly, those who made the decision to invest in Asia a decade or more ago would appear to be seeing that investment finally paying dividends, with international firms in the region recording 5.7 per cent growth [in headcount] between 2013 and 2014.

In addition:

international law firms now make up 16 per cent of the Asia Top 50 (which is the same make up as two years ago).
five (six if you include KWM) of the Top 10 Asia firms hail from China – but number two in the list, Dacheng, has approved a merger with Dentons and so arguably is now an “international firm”.
no doubt because of the abundance of Swiss Verein these days, Australian law firm Minter Ellison sneaks into Top 10 Asia firms despite not being financially integrated but rather because the firm is integrated under “one brand”.
continued prosperity for internationals in the region is seen on the back of robust M&A activity and 5+ per cent growth predications by the IMF .

Overall though, content and opinion in this report can largely be summed by the comment that Freshfields Asia managing partner, Robert Ashworth, “is generally bullish about the region“.

The Asian Lawyer

Turning our attention now to The Asian Lawyer publication (and please do because the graph in this article is fantastic!) and we find we get a very different picture being painted of how the market is shaping up for US firms operating in Asia.

The context of this post, based on results of The NLJ 350 Annual Survey of the [US] Nation’s Largest Law Firms, can be summed up from its title: “Signs of Slower Growth for U.S. Firms in Asia“.

Although the post starts out saying: “Asia has been a powerful magnet for international firms over the past decade” – with the number of Am Law 200 attorneys having nearly tripled in that time, the latest year-on-year stats show a near flat-lining in these numbers.

It is also no secret that a number of US firms have been looking closely at their Asia strategy – the latest of which is Latham & Watkins, but even the US arm of DLA Piper has taken a financial interest in the Asia business in the hope of moving things along following some turmoil in the region.

It should not, therefore, be a surprise that this post finishes on the note: “Are more dramatic cuts to Am Law 200 lawyer counts in Asia coming? Stay tuned“.

So who is right?

I think you’ll agree that the two publications are very contrasting and paint different pictures of international law firms operating in the Asia legal market.

In a world of two Asias, a question arises: “Whose version is right?“.

My answer to that question is – probably both.

There is certainly some – finally some cry out! – positive signs for international firms operating on the ground in Asia (as opposed to those who may still operate a fly-in/fly-out operation). The market looks like it might start to deliver on some of the rich rewards it has promised for a long time. But to do this firms have to come to the realisation that they need to get over two crucial hurdles:

they must have a strategy for the whole of Asia and not just China, and
while staffing maybe cheaper in Asia, headcount doesn’t tell the story of financial size or profitability.

What law firms can learn from Taylor Swift

Unless you have been hiding under a rock, or living in a world of news blackout, you’ll of heard about Taylor Swift’s 21st June open letter (via Tumblr) to Apple (‘To Apple, Love Taylor‘).

As you will also undoubtedly known by now, the Tumblr post is Taylor’s way of explaining why she will be holding back her album – 1989 – from the new streaming service Apple Music (an album I understand she also doesn’t permit to be on another music streaming service, Spotify). And while I don’t particularly like Taylor Swift’s music (nor do I really participate in music streaming services), I have to applaud the reasons she outlines for her decision.

In particular, I like – and 100 per cent agree with – Taylor’s remark that:

“Three months is a long time to go unpaid, and it is unfair to ask anyone to work for nothing.”

Taylor’s right on the money there – so to speak, three months is a very long time to go unpaid.

But wait: what’s your law firm’s average lock-up days?

If you firm’s average lock-up days are anywhere near the industry average, then your firm’s lock-up is going to be somewhere between 100 and 120 days. Which means your firm typically gets paid 100 to 120 days after you have done the work for the client.

Aside from being a period of close to four (4) months to go unpaid for your work, you are also providing your client with an interest free working capital loan during this time – a period you will likely be paying interest to your bank on the working capital (overdraft) facility it has extended to you (otherwise known as a double-whammy)!

Simply put, that should be unacceptable and it is time law firms took a take a leaf out of Taylor’s book and started to tell clients (and some law firm partners I might add!) that four months is a long time to go unpaid!

Not possible? Will likely kill the client relationship?

Well, interestingly, in this case the giant corporate might of Apple has listened to Taylor’s complaint and has decided to back down. And I suspect your clients would be more than willing to listen to alternatives you could offer too – but you won’t know unless you have the conversation.

Only 33.3% of corporate counsel recommend their primary law firm to a peer

Anyone who has been in law firm marketing and business development for more than five minutes will tell you that word of mouth referrals are worth their weight in gold. After all, who needs to do marketing if you have enough advocates championing your business with their networks? And aren’t these potential clients going to listen to their trusted contacts way more than they do you?

Of course they are. Which is why cultivating a referrer network has always ranked high among the “to do” list of business development managers.

That’s why for many of these business development and marketing managers it may come as something of an unwanted shock to learn that according to the latest post by BTI Consulting Group’s The Mad Clientist:

Only 33.3% of corporate counsel recommend their primary law firm to a peer

Which marks the second biggest drop in 15 years and which The Mad Clientist puts down to a change in ‘The Client Expectation Gap‘; namely no matter how great or bad, whatever work you just did for your client will be the yardstick your client treats as your new minimum performance standard.

A little unfair maybe: but if only roughly one in every three of your clients is willing to go into bat for you and recommend you to others in their network with like-minded legal issues, then your law firm has an issue and there’s no time to waste getting to work on the firm’s word of mouth referral program and make sure you ask as many advocates of the firm as you can find to champion you within their networks.

Are law firms going to replace Client Account Managers with Client Project Managers?

Law firms have had, for some time now, a Client Account Manager support role within their Business Development and Marketing teams. Typically reporting to the Head of Business Development and the Client Relationship Partner, these roles have historically been focussed around a number of “key” client programs (aka Key Account Management programs or “KAM”) and can also be sector specific – for example, financial services, energy and resources and government. In the larger firms, the Client Account Manager may be required to look after up to three to four large client accounts, but normally the role is inward looking with little (in real terms) direct interaction with the client themselves (although in some cases you do find the law firm CAM and support personnel at the client talking to each other regularly).

There is little doubt these roles have served a significant purpose. One could even go so far as to say they have increased cross pollination (cross selling) among practice groups significantly. But, in these changing times, with law firms having significantly increased their investment in Client Relationship Management (CRM) tools and software, the following question does need to be asked:

is it now time to move on from the Client Account Manager role?

I recently watched an interesting video (27 minutes and 2 seconds) of a panel discussion filmed at the Briefing Operational Leaders In Legal 2014 conference (November 2014) that talked about, among other things, “client-facing account managers and better management information“.

Moderated by Julia Chain of JSC Associates, the panel included Jonathan Beak (chief counsel – legal, UK and Ireland, Thomson Reuters), Sarah Spooner (head of legal, Vodafone), Angela Williams (head of legal, global cash management and debt advisory, Barclays) and David Symonds (VP, regional general counsel EMEA, Tyco International).

The whole discussion is extremely informative and if you are a business developer looking for insight into how the leaders of some of the biggest in-house teams out there think, then you should watch it.

But, for the purposes of this post the most crucial part is the commentary by David Symonds who, discussing why Tyco appointed the law firm Eversheds as sole legal provider (in the now famous annual fixed fee arrangement tender), states that Tyco instigated what he calls certain grounds rules with Eversheds, including that only one lawyer acted for them and that the work was carried out at the appropriate level depending on what the matter is.

Nothing ground-breaking there. Until you get to 11 minutes and 53 seconds into the video. Here a general discussion is going on among the panel about what law firms do (or need to do) to differentiate themselves (the Holy Grail) and Symonds states that Eversheds were the only firm to offer a full time dedicated Project Manager to manage Tyco’s caseload.

Very interesting, but all the more so given today’s exclusive in The Lawyer by Tabby Kinder that Herbert Smith Freehills (HSF) (the merged international firm of Herbert Smith and Australian firm Freehills) is to “roll out legal project managers across firmwide practice groups this summer.”

Now this really is big news, because it cannot be long now before the rest of the international firms follow suit (Clifford Chance and Linklaters are already being mooted as implementing legal project manager roles later this year and, in addition to Eversheds, Hogan Lovells and Freshfields Bruckhaus Deringer are understood to already have these roles in place).

So, what can we expect from a Client Project Manager?

According to The Lawyer article:

HSF project managers will work with project teams and be involved in pricing negotiations with clients as well as providing coaching to partners on efficiency and best practice when managing complex cases.

which doesn’t sound all that different to the Client Account Manager role.

But, according to the team at The Project Management Hut, in addition to monitoring client matters against acceptable outcomes and strategy to ensure the relationship produces substantial benefits to both side, your typical Client Project Manager should also provide your law firm with the following five (5) sources of competitive advantage:

a better client service
better time management
better people management and supervision skills
better profitability, through project management (LPM) and process improvements (LPO), and
provide the team with client-based business thinking.

and it is #3 and #4 in that list that law firms really could benefit from.

Now all we need to decide is: do these roles sit in the finance department, the practice groups, or marketing and business development?

How well are we doing at exporting #Auslaw?

Finally, some years after the Australian Government first announced and then consigned to the dustbin its ‘Australia in the Asian Century‘ whitepaper, a fair amount is being written around the issue of exporting Australian professional – read, ‘legal‘ – services, including:

The Australian – ‘Service exports to Asia a $163bn opportunity‘ (subscription required),
The Australian – ‘Free trade opportunity knocks for services providers‘ (subscription required),
The College of Law website – ‘#AusLaw: Australian Legal Exports are Trending Globally‘ – from which the title of this blog post is derived, and
The Conversation – ‘Australia’s five pillar economy: services‘.

While it is undoubtable that the export of Australian legal and professional services is a trending issue on an upward trajectory, it is still probably a little early to say (as the College of Law post does) that “Australia is now trending on a global scale” (vis-à-vis the export of our professional services) – although, to be fair, the export of Australian lawyers (to which the College of Law would have a particular interest), particularly to the UK and New York, has been ongoing since the early 1980s and continues to this day.

Moreover, given that the Australian International Disputes Centre (AIDC) was established way back in 2010 (with the assistance of the Australian Government and the Government of the State of New South Wales) and still lags behind both the Singapore International Arbitration Centre and the Hong Kong International Arbitration Centre, the export of #Auslaw has undoubtedly been a slow burn.

So while I for one applaud the latest chatter around an impetus to export #Auslaw, I hope that this time we are serious and take the time to have a robust conversation about whether or not we wish to seriously promote (and lobby) the export of #Auslaw overseas. And, assuming we decide we do wish to progress with the export of #Auslaw overseas, we put in place concrete national plans to move this initiative forward rather than taking the lacklustre state-based approach we have to date.

National survey finds that there are 66,211 practising solicitors in Australia

The ‘2014 Law Society National Profile of Solicitors in Australia’ report was released this morning on the NSW Law Society website.

The first time this report has been updated since 2011, key findings include:

there are now 66,211 Practising Solicitors in Australia – a 12% increase since 2011.
of all practising solicitors in Australia:
- 34,10 (51.5%) were male, and
- 32,110 (48.5%) were female.

This represents a significant increase in the proportion of female solicitors since 2011 – when the percentage number ratios were 54.6% male to 43.4% female.

while the mean age of Australian solicitors has remained roughly the same at 41.9 years – compared to 42.0 years in 2011, interestingly the largest proportional growth age bracket is occurring in the over 65 years age group (with a 38% increase in this group since 2011).
as at October 2014, the majority of practising solicitors in Australia were private practitioners – 70.2%; with the percentage numbers in other major sectors of the profession in Australia remaining fairly static since 2011 – 15.8% were corporate solicitors and 9.6% worked in the government sector.

Most interestingly, while overall the Australian legal market remains represented by small practices – 2,155 firms (17.3% of the total) had 2 to 4 partner and 514 firms (4.1% of the total) had 5 to 10 partners:

there are now 77 law firms across Australia where the number of partners exceed 40 – representing a 300% increase from 2011, and
there are now 74 law firms across Australia where the number of partners range from 21 to 39 – representing a 111% increase from 2011.

In addition to potentially showing significant consolidation in the Australian legal market over the past three years (the overall percentage representative number of sole practitioners is actually down roughly 3% in 2014 from 2011), these numbers would appear to indicate that the slow death of large law firms, and the professional more generally, is being greatly over exaggerated in the Australian legal press.

Indeed, one could argue that now more than ever the market in Australia is highly competitive and that it is becoming increasingly important that you and your firm be able to communicate what differentiates you from the crowd.

If you haven’t already, I’d like to recommend that you take a look at the report – it contains some very interesting statistics; including, for the first time, statistics on the representation of Aboriginal and Torres Strait Islanders.

A quick test to help determine if you’re providing value to your client

In today’s legal world you often here people talking about “doing more for less” and/or that they are providing “value” to their clients, without much of an explanation as to what constitutes “value” – with the best shot usually being:

“value, like beauty, is in the eye of the beholder“.

Indeed many thousands, if not millions, of words have been written about making sure you “add value” – not to be confused with “added value”, which is a whole different subject – but very few of those written words have made any real attempt [from what I can see] to try and nail down a definition of “value” from a client’s point of view.

And while there is little doubt that every single person’s definition of value will be different – and in many cases, each individual person’s definition of value will alter depending on the circumstances they face at the time they are asked to define “value” to them – the following two-part questionnaire suggested by Nathaniel Slavin (of Wicker Park Group) in his recent post on the Bloomberg Big Law Business website, ‘The Perception of Value Differs Among Clients‘, probably goes closer than anything I’ve seen so far to answering this conundrum:

Does my lawyer understand how I define success and all the myriad components that impact that success?; and
Do they accomplish that goal in a manner, financially and otherwise, that helps us further our business goals?

And if, as a private practising lawyer, you can answer “yes” to both those questions – while you cannot be certain you are delivering “value” – you can be pretty sure you are delivering overall client satisfaction levels that are going to get you as close as you can possibly get to a modern day definition of “delivering value to your client“.

Some reasons why every lawyer should be encouraged to do fee estimates

Fascinating blog post over on the pmhut.com website recently (30 April 2015) by Terry Bunio, Principal Consultant at Protegra, on “Why I Like Estimates” that should be add to the “must read” list of every lawyer and law firm business developer who hasn’t already read it and adopted its principles.

Some of the things that Terry sets out that really resonated with me in this post included:

Estimates make me think through a solution

“When I estimate I am forced to examine project details and technology and think through the deliverables at a detail level and how we would build them. This helps to identify issues early and give the team and client lead time to decide on a resolution. When you discover issues late in the game, your options are limited and client anger usually follows.”

Precisely the same reason why lawyers should be doing cost estimates before agreeing to undertake a matter. It makes you think through what the issue(s) is/are, how you are going to deliver the desired result to the client and what sort of resourcing you’ll need. You should also be able to determine at this time what you cannot deliver to the client.

Estimates create a shared understanding

“…the discussions that occur while estimating are invaluable. These discussions create a shared understanding throughout the entire team.”

Terry is absolutely spot on here. It should also allow you to assign what work the firm will do, and what work will be outsourced (to an LPO) or insourced (to the in-house team). It sets out a task management process from the offset and reduces the risk of scope creep or out of service work being done. QED, if you follow this process at the end of the day you are much less likely to have an upset client.

Estimates allow Clients to allocate post Minimum Viable Product budget to other initiatives

“Clients are not going to reserve large budgets just in case an Information Technology project needs it. Clients have a very limited budget and there are always more initiatives than budget. Allowing clients just to stop projects at any point does not recognize the lost opportunity cost by not starting additional initiatives that could have placed them ahead of their competitors.

Again Terry is right. While lawyers rarely want to get their hands dirty talking money upfront on a matter, it should be kept in mind that money is a limited resource to your client (as it is to your firm) and every dollar your client spends with you is an opportunity cost to the client’s business – vis-a-vis that dollar being spent elsewhere. It should therefore be incumbent upon you not only to ensure that your client understands how much they will likely be required to pay for the matter but also for you to reduce any likelihood of your firm either having to write down time or simply not be paid for out of scope work done by your team.

In short, as Terry writes: “Estimates matter” and going through a robust matter cost estimate process with your client before any instruction to act on a matter should be recommended and adopted as best practice by all lawyers.

‘Stupid is as stupid does’

In the 1994 movie of the same name, Forrest Gump is asked:

“are you stupid or something?”

to which Forest replies:

“stupid is as stupid does”.

Some 20 years later (yes, it really has been that long!), in general parlance this phrase has come to mean that:

‘an intelligent person who does stupid things is still stupid’ – (Urban dictionary)

and I have to say that this thought went through my mind earlier this week when I read that a third of [UK] commercial firms are likely to raise their rates in a bid to boost their profits (Solicitors Journal 6 May 2015 – “Number of law firms planning to raise charge out rates increases“).

Leaving aside the issue of whether a direct raise in your rates will equate to increased profits (for example, the psychological impact of rising rates/budgets on fee earners with no increased salary (cost)) – what in the world would make 26 (1/3rd) of so-called intelligent finance directors of the UK’s Top 100 law firms say “it is likely their firms will increase their charge out rates in order to improve profitability in the year ahead“?

As I have blogged countless times before (the most popular being: ‘Is it time for law firms to break with the RULES when looking at profitability?‘), hourly rates are but one of the metrics in calculating profitability. And it’s probably not even the biggest metric driving your firm’s partner profit levels, which almost certainly would be better achieved via an increase in your realised rate.

Putting this mathematically (admittedly not my strongest area), say my hourly rate is $100 and my realization rate is 90%, then I’m being paid $90-. Taking this forward I’ve decided to increase my hourly charge-out rate to $110-, but find that my realization rate has now fallen to 80%. If my maths is correct, I’m now being paid $88-.

In other words, in real terms, I’m losing money!

Don’t think this could happen? Then take a look at Charts 4 & 5 from the ‘2015 Report on the State of the Legal Market‘ published by The Center for the Study of the Legal Profession at the Georgetown University Law Center and Thomson Reuters Peer Monitor (at page 5)

Those charts don’t make for pretty reading.

So when, as the article reports:

“…firms realise this is not going to be an easy sell to clients who are likely to negotiate hard to keep fees down, so their approach to increasing charge out rates is likely to be softly softly, rather than gung-ho”

my response would be: “why bother?”.

Instead,

try keeping your charge-out rate the same over the next 12 months;
try not to give discounts;
try to increase your realisation rate (by 3 to 5 cents in the dollar);
try to reduce your lock-up days;

and see where you end up.

You may just find that has a better impact on your partner profitability numbers than the likely impact that is going to come your way when you go annoying and off-siding your clients with the almost obligatory 1 July 10% rate increase letter.

But I could be wrong…