Happy New Year to you all, and welcome to the new calendar year that is 2022.
During the holiday period here in Australia (published 13 December 2021) I was fortunate enough to read a really insightful article in MIT Sloan Management Review by Andreas B. Eisingerich, Deborah J. MacInnis, and Martin Fleischmann titled ‘Moving Beyond Trust: Making Customers Trust, Love, and Respect a Brand’
which set-out how service providers, like law firms, could provide real value to their customers using the 3Es:
Where:
And the benefits of using this method?
Evidencing the research outcomes of this methodology, the article sets out 6 benefits you should see:
All of which – should – result in higher profit.
Well worth a look, take a read – and certainly food for thought!
As always, the above represent my own thoughts and would love to hear yours in the comments below.
(ps – I would recommend you add a 4th ‘E’ to this list – Empathy’ 🙃)
Photo credit to Jon Tyson
You’d have to have been hiding under a rock for past two years not to have seen an article or two on the benefits/pitfalls of remote working. But, as we move into the next phase of this pandemic/endemic, one in which we must start to learn to live with COVID, law firm management now need to be asking:
‘What does the future of the office look like for our firm?’
Truth is, there’s no simple answer to this question. On the one hand, we have those who advocate that “distance breeds distrust” and “out of sight, out of mind”. On the other hand, we have a lot of people saying we’re not going back to the old ways – and if you make us, we will part of the Great Resignation.
One answer to this issue might be in what the Australian Financial Review recently termed ‘Anchor Days’.
As per the AFR article, ‘Anchor Days’ are days on which a group of employees (in the same team) agree to go into the office on the same day each week with the aim of enhancing collaboration and ensuring a more lively office culture.
While I like the concept of Anchor Days, I think I should also point out that, from my reading, it comes with a couple of major misconceptions:
My final comment: if Anchor Days become a thing, what day(s) would you chose?
The Legal Marketing Association (LMA)’s Strategies + Voices blog has some great insights into what clients’ value in a recent post (16 September 2021) – ‘5 tips to deliver exceptional client service’ by Natasha Tucker.
The post starts out by stating that:
the tips shared are based on internal client feedback interviews and discussions conducted by the author with companies in the oil and gas, chemicals, banking and telecommunications industries in North America.
And the 5 ‘tips’ are:-
I’l go on record as saying I thought Tucker’s post was excellent. It turned my mind, however, to whether we in Australia would consider the same criteria as being critical to the delivery of exceptional client service?
So here are my thoughts:
Noting that it is easy to be critical without being helpful, here are a couple of issues that I see as being of increasing importance in the delivery of exceptional client service here in Australia:-
As always, the above represent my own thoughts and would love to hear yours in the comments below.
This week’s photo credit is to Rohan Makhecha on Unsplash
In Episode 748 (7 July 2020) of HBR’s Ideacast podcast (23.04), Curt Nickisch interviews Rafi Mohammed, founder of the consulting firm ‘Culture of Profit’, on the topic of ‘Pricing Strategies for Uncertain Times‘.
During the course of the conversation Nickisch states that with COVID-19 service/product providers will be under intense pressure from clients/customers to offer discounts, to which Mohammed replies:
Clearly, in the short-run, you have to offer a discount. And what I would be focused on is what I call discounting with dignity in a manner that doesn’t devalue your product in the long run. And so, that’s really important because once you set a low price, it’s very hard to recover when demand eventually does come back.
And so we turn to how this really important concept applies to law firms
Blind Freddy can tell you that clients are under intense pressure to cut costs. I doubt there is a CFO out there who has not phoned (or even Zoomed) his/her GC and told them to cut costs.
And I suspect there are few GCs out there who have not responded by calling, zooming or even emailing the law firms on their legal panel to tell them to reduce rates by X%.
And, having lived through the Asian Financial Crisis of 1997 and the GFC of 2008, I suspect there are few law firms partners who have not passed along this request to their Finance Department with a note to “make it happen“.
But if this sounds familiar, and if a law partner you know would or has done this (*because it is never us*), then you would be missing out on Mohammed’s very powerful ‘discount with dignity‘ concept.
Because, as much a I hate advocating or agreeing to discounts, Mohammed is right:-
If you offer a discount to customers/clients merely because we are going through turbulent (or should I be saying ‘unprecedented’ 🙂 ) times, then what you are really doing is devaluing your service/product in the long term.
Because what you are saying to your customer/client when you unconditionally agree to a discount request of this kind is that “you have been over paying me all this time” – I’m not really worth what you have been paying me.
A Suggested Alternative Approach
Much like scoping in Legal Project Management methodology, when it comes to discounting (and I’m realistic enough to know that there needs to be some consideration of discounting in current times), you need to be considering what you take out of the basket when you offer that discount.
Which is to say it isn’t a ‘like for like’ for less conversation – you don’t get the same for less. If you take 15% off, you take 15% out of the basket. And you look to alternatives to how that can be sourced – either in-house or some other way (including LPOs/ALSPs).
And, if it really does need to be ‘like for like, but for less’ then it needs to come with a risk sharing collar. For example, I will accept 80% of my fees, but if we get past COVID-19 and your share price returns to pre-COVID highs within 6 months of completing this deal, then you agree to pay me 120% of my fees.
And, in the very worst of scenarios, your invoice should include a line item that states the discount being given is a one-off COVID-19 discount (and Mark Stiving, of Impact Pricing, has an interesting thought on this issue).
Regardless of what it is, you do need to do something. You cannot standstill for less. Because we will get past COVID. And in the ‘new world’ (even if that is a world where we merely live with COVID) there will be a ‘new, new normal’. And if you have agreed to discount your rates now without taking anything out of the basket, then what you have actually done is recalibrated your value in the new world.
And you won’t recover from that.
As always, the above just represent my own thoughts and would love to hear your thoughts.
This week’s photo credit is Chrissie Kremer on Unsplash
‘Imposter syndrome‘: “The persistent inability to believe that one’s success is deserved or has been legitimately achieved as a result of one’s own efforts or skills.”
For some time, sparked through the conversations I’ve had on the topic with Katherine Mountford, I’ve been interested in the concept, theory, and roll that imposter syndrome plays within the legal profession.
My interest was given a nudge over the past week by a LegalSpeak podcast that included some great thoughts by both Albert Farr and Jay Harrington, who talked about their experiences with imposter syndrome in the early part of their legal profession [noting that Farr is actually just starting out his career in law] (Calming the Imposter Monster: You Don’t Know Everything, And That’s OK.) and a post by Susan Harper on the issue of ‘What is Imposter Syndrome and How May It Be Affecting Your Leadership?‘ which looks at the broader implications of imposter syndrome at a more advanced stage of your legal career.
Read together they give a pretty good balance on some of the major crisis of confidence issues that can plague lawyers.
What am I worth?
While I am in no way qualified – nor do I profess to be – to talk to the diagnosing and/or treating of any medical conditions associated around imposter syndrome, or mental health issues in the legal industry more broadly, with over 20 years’ experience in the industry, I have no doubt whatsoever that most lawyers wake up in the morning and ask themselves (if no one else) ‘What am I worth?‘ – ‘What is an hour of my labour worth?‘.
Adding to these frustrations, and doubts, is the fact that, in private practice, in most cases, a lawyer’s intrinsic value is not determined by them. Nor, importantly, is it determined by their clients in recognition of their craft.
No, more often than not, a lawyer’s worth is determined by the Accounts Department and/or a Senior Management committee who have worked out [this should probably read, “been told”] how much the capital [equity] partners want to be paid this year (including bonus). Having determined this we then work backwards and determine the number of hours that will need to be worked in order to achieve this, taking account of historic realisation rates, and minus any leave, and then looking at the relevant leverage and required multiplier needed to ensure that the required amount is met.
All of this is then wrapped around a completely meaningless ‘industry survey’ that costs a fortune and suggests your law firm’s hourly rates are 10-20% less than your competitors and you really should be doing a better job!
If this sounds convoluted and over complex, or if you have any doubts about my sincerities here, read ‘Associates Want a Break on Billable Hours as Pay Cuts Roil Law Firms‘ by Dylan Jackson.
Little doubt then, in my opinion, as to why lawyers would suffer from imposter syndrome (or mental health issues more broadly).
Taking back control – how to demonstrate value to your customers
Adding insult to injury, having not had much say in the hourly rate they charge, and with little or no training, lawyers are then asked to go to market and justify why they are worth the amount they charge.
So can lawyers take back some control?
The short answer is: ‘yes’; there are several ways that lawyers can take back that control – one predominately relates to internal processes and the other to external communication.
Change the internal process: Establish a Value Council
If you want to adopt greater transparency and conversation around the amount that your lawyers charge – relative to the value they are delivering to your customers – and at the same time get greater collective buy-in from your lawyers, then I would suggest you take the power away from your Accounts Department and establish a Value Council.
The mission statement of your Value Council should be to establish:
‘a collaborative platform to discuss and exchange views and information about value to ensure outcomes that are mutually beneficial to all.’
Progressive law firms will include customers of the firm in their Value Council and consider adopting a Pricing Charter.
To be effective, it is suggested that your Value Council consist of no less than six and no more than 10 participants who, crucially, are willing to invest time in the process.
Change the external communication
For years lawyers have liked to brag about the hourly rate they charge. It’s up there with the mount of billable hours they have worked this year as ‘badges of honour’. The reality that most lawyer’s Average Billing Rate – the amount clients are actually paying for that lawyer’s time – are nowhere in the region of that lawyer’s hourly rate is conveniently forgotten.
But there is an alternative. Rather than going to market bragging about how much you cost, why not change the conversation up and talk about how much value you bring to your customers. How you help your customers? How you change outcomes to their benefit.
Dare I say it, you move the conversation away from you and onto them. In doing so, it is hoped you will take a critical step down the path of the Value Conversation; because, as John Chisholm wrote back in 2018:
“Before we price, we need a scope of work; before we have a scope of work, we need to have a scope of value and you cannot have a scope of value without first having a value conversation.”
That seems like a good place to put a line in the sand to this week’s post. I will add though that if you are one of those lawyers who questions their value, who may question if they deserve to be where they are or who suffers some form of imposter syndrome, keep in mind that around 90% of the profession is right there with you (and listen to Episode #182 of the Soul of Enterprise) .
Annuity revenue – a predictable revenue stream from new or existing customers who buy products and services associated with new or previously purchased products.
As the Managing Partner of a law firm today, what would you say if I walked into your office and told you that I could:
Sounds great doesn’t it. Almost too good to be true.
Well all I can say is that if you were anything like one of the Managing Partners servicing customers who responded to the Pitcher Partners recent ‘Legal Survey 2020 Report‘, that’s exactly what you would be saying: “thanks, but no thanks we are happy with the billable hour”.
The fact that the billable hour remains the ‘go to’ method of billing (not the same as pricing) for Australian law firms and their customers does not, in and of itself, surprise me. I must admit, however, to being a little surprised with the 1% increase in this billing method (up from 58% to 59%) year-on-year.
Given the times (even pre Covid-19), I was also a little surprised to see that both ‘fixed fee’ and ‘value-based’ pricing remain relatively static (although it should be added that from what I could see the report lacks a definition of ‘value-based’, probably purposely so).
To me this represents a massive lack of foresight on the part of law firms and a significant lost opportunity.
In much the same way as software as a service (SaaS) companies have come to realise that one-off payments around shrink wrap contracts were not servicing the long-term financial interests of the company (unless it’s a legacy product that will no longer be supported), the time has come for law firms (and professional services firms more broadly) to realise that if we want to maximise revenue and, potentially, profit we need to rethink how we generate that revenue.
One alternative that the likes of Ron Baker and Mark Stiving have been banging the drum about for some time is ‘subscription based pricing’.
The benefits of adopting a subscription based pricing model
I have posted previously on this blog about the benefits of subscription based pricing (see here), but leaving all that aside for a second; as Amy Gallo wrote way back in October 2014 in the Harvard Business Review (see ‘The Value of Keeping the Right Customers‘) with the acquisition costs of acquiring new customers running being between 5 and 25 times more expensive than servicing existing customers, it makes economic and financial sense to find, and keep, the right customers.
How you price this is probably the most important step along that path.
The weakness of having billable hours as your default billing method is that you are pricing to the transaction. Whereas one of the greatest benefits of the subscription based pricing model – or even a retainer based pricing model if you must at the start- is that you start thinking about pricing the customer or even the portfolio.
In other words, you start to think about the customer and their needs first. And for an industry that always talks about the customer being at the centre of everything we do, doesn’t it makes sense that our pricing structure reflect this claim?
But it also makes sense internally, because it:
Not to say, in these COVID-19 times, when you are talking working capital facilities with your bank, it provides you with a guaranteed annuity revenue stream.
Now who would not want that comfort right now?!
These just represent my thoughts though and always interested to hear your views.
Recently I was listening to an encore episode of Season 2 of Scott McKain’s Project Distinct podcast on how to analysis your current client situation. In the podcast Scott suggests applying what he calls his ‘cub reporter’ questions to any stress test you undertake on the strength of your current client relationship, by asking:
Applying Scott’s approach to law firm client relations has me asking some of the following foundation questions:
Hopefully a useful starting list and if you have not previously listened to Scott’s Project Distinct – a daily podcast that runs for a relatively short 10 minutes, I would like to strongly suggest you do.
Following a conversation I had recently with John Chisholm, I had reason to revisit Patrick Johansen’s website patrickonpricing.com and re-read both his Continuum of Fee Arrangements™ and his Roll Call of pricing professionals.
Let’s get controversial. Re-reading Patrick’s stuff it occurred to me that there are an awful lot of law firms have hired pricing experts (Patrick has over 300, but it wouldn’t surprise me if that number were closer to 500) on -most likely- really good money who, get this: don’t really need them.
Why do I say that?
Looking again at Patrick’s Continuum of Fee Arrangements, Patrick has sixteen different pricing options available for law firms to offer clients:
So looking at this list I ask myself: “How much science is involved in pricing legal services?”. And the answer I come up with is: “Not a lot”.
Taking all this on board, I get why law firms hire ‘pricing experts’ out of accounting teams. And maybe that’s where the real opportunity is being missed.
But trust me, for all but two or three of the above pricing options, you don’t need a pricing expert – you need an accountant. So don’t waste your money hiring one.
In 2004, while working at Linklaters, Tony Angel – the then recently appointed Managing Partner of the firm – introduced a new strategic direction that was to become known as ‘Clear Blue Water-– A Vision for Linklaters in 2007‘. Much as was being advocated in Renée Mauborgne and W. Chan Kim’s Blue Ocean Strategy, published around the same time, the intention of Angel’s Clear Blue Water strategy was to create a clear space (as opposed to red oceans) between the firm and it rivals.
For many of us who worked in the firm at the time, this represented a high-water mark. It was made very clear to all that Linklaters was now very much a business: profit trumped culture.
Sure culture was nice to have, but not if it had any material impact on profit.
But was this such a bad thing?
As someone who lived through the 2004-2007 era at Linklaters, I can honestly say “no”.
To be clear, there is little doubt in my mind the firm became more “professional”. Many of the business development, marketing and knowledge management work that had traditionally been done by lawyers was taken off them and given to dedicated teams. The firm introduced key account programs around their top clients. Blue Flag (Linklaters online client portal – that included early use of HotDocs) was a flagship program. Precedents and ClauseBank were core strategic projects.
But importantly, financial analysis was undertaken to determine the difference between revenue and profit and how both revenue and profit could be increased (which didn’t necessarily mean a reduction in costs – for example, the business case behind Blue Flag was the first example of an alternative revenue stream I saw in a law firm).
All of this was then extended to sectors when clients started to say they valued, and appreciated, sector specialists (Linklaters was the first place I worked at that had a virtual practice – The Indian Desk, back in 2005-ish which operated from London, New York, Singapore and Dubai).
Despite – or even because of – an overall strategy to significantly increase profit, large amounts of money were invested in putting in place strategic teams that could help implement and execute on this strategy. Professional KM, marketing and business development people came in to the firm from all walks of life and people who had never worked in professional services firms previously were now doing so.
Importantly, my personal experience was that their voices, counselling and advices were being taken onboard. Sure partners may disagree – and ultimately we all knew that the buck stopped with them, but it was also made clear that they appreciated and valued our input.
Another important aspect of Angel’s Clear Blue Water strategy though was transparency.
Everybody in the firm knew what we were trying to achieve. We knew what was required to get us there (including I might add an absolute understanding that this would involve an incredible amount of hard work). We knew how we were tracking and which parts of the business were struggling to achieve their goals. From my memory (and it was 10 years ago now), this wasn’t done with malice but so that we knew who needed help.
In short, the strategy bred a culture. A culture that many who were not in the firm may have considered elitist, but a culture nonetheless: to be at Linklaters at that time was to know you worked among the best (and if you doubt that, track the CVs of many of the leading BD/Pricing/KM people around the world and see who they worked for during that time).
So why, 10 years after I left, have I decided to bring this all up now?
HSF
The answer to that lies in the decision this week by Herbert Smith Freehills (HSF) to open a second office in Sydney.
This second office will be at 66 Talavera Road, Macquarie Park, while the principal office will remain at 161 Castlereagh Street. It is currently being reported that between 200 and 300 support staff (that may not – for now – include BD people) will be moved to this Macquarie Park office.
To my mind, this move eradicates all pretence of a ‘one firm’ culture having anything to do with the running of this firm. Conversely, it cements the ‘us’ and ‘them’ culture. If you are in Castlereigh Street, you’re ‘in’. And if you are in Macquarie Park, well you’re not! Worse, if you get moved from Castlereigh Street to Macquarie Park, you could consider it a demotion (especially given there will be no train line servicing that office for 10 months in the next year or so!).
But again, as someone who has advocated for the outsourcing of support services in law firms (in much the same way as a number of firms in Asia did post the Asian Financial Crisis) for more than 10 years the question should be: is this such a bad thing?
And my answer to that is “no”.
But my answer comes with an important caveat from someone who has been through similar strategic processes, and that is this: everyone at the firm in now on notice – perform, or you’ll be in Macquarie Park – or even out altogether – before you know it!
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