legal

‘Imposter syndrome’, how it effects your pricing, and what you can do about it

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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) .

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What will the business of law look like in a post COVID-19 world?

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uncertainty’:

The state of not being definitely known or perfectly clear; doubtfulness or vagueness.

Oxford English Dictionary

As we start to talk about the path/way out of COVID-19 lockdown, a number of pre-eminent thinkers in legal consulting have begun discussing what shape and form this might look like for our industry.

Notable among these have included:

  • Richard Susskind + Mark Cohen debating the future of the legal industry as excellently reported by Ron Friedmann on his Prism Legal blog
  • Patrick Lamb discussing ‘The Next Normal: Is There a Roadmap That Gets Us There?’
  • The team on the LawVision Insights Blog giving their views on ‘The Legal Profession in a “Post-COVID” World’, and
  • the excellent and very comprehensive series of blogs by Jordan Furlong under the themed title of ‘Pandemic’.

Then again, as Patrick Dransfield said in Asia Law Portal (Who knows what the future will hold?’) – nobody really knows what the future holds.

But isn’t that why we, as business developers, are hired? To try and give some insights to our partners on how the industry might look?

With that in in mind, for what it is worth , here are my two cents on some of things we may look forward to over the next 18 months:

  • The industry will remain fundamentally the same – as it was pre COVID-19 pandemic days unless there are structural changes to the business model. And, as I understand it, the trust partnership business model that is currently used in most common law jurisdictions makes the talk of change easier than the reality of change (in that nobody today would likely start a new law firm under a partnership trust structure).
  • Technology and working from home will play role – it goes without saying that both technology and working from home will play a part in the future, but how big that role will be in an industry built on presentism still remains to be seen.
  • Uncertainty will feature heavily –  we are flying blind here and most of us have no experience to drawn on. Even those of us who have been through this several times have now come to accept this time is different.
  • Consolidation will likely feature prominently – with The Law Society Gazette (England and Wales) reporting in the past week that ‘71% of high street firms face collapse‘ I would foresee a similar scenario playing out here in Australia. Only I doubt it will apply to high street firms, who should do well out of the expected growth in wills & estates and family law matters, as much as it will likely apply to the middle market where there still remain far too many firms representing far too few clients.
  • There will be an increase in lateral hiring – for the reasons above.
  • Cashflow/credit facilities will help – Warren Buffet is reported to have said that “Only when the tide goes out do you discover who’s been swimming naked.” Well, the tide has never been lower and we will see in the coming days who still has the ear of their banker. Arguably those with big trust accounts and/or on the panel of one or more Big4 bank panels will benefit.
  • How much office space do law firms really need? – it will be interesting to see if rent footprint decreases. Rental space – and whether to remove parts of the business to less expensive rental footprints (see Herbert Smith Freehills to Macquarie Park and McCabe Curwoods to Chatswood for example) – has been an issue for some time and one of the big take outs from this may well be a lot more Hot-desking!
  • The Big4 see opportunity – as EY reported this week, the Big4 are not going away. If anything, as this chart shows, they’ll be upscaling their charge

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  • A need to be even more client and sector focusses – with the team at Adam Smith, Esq looking at the following areas of need:
    • Insolvency, restructuring and distressed assets
    • Private equity (I’m not 100% sold on PE in Oz)
    • Regulatory investigations and dispute resolution a/k/a litigation
    • M&A
    • Tech and all the ancillary practices it spawns, including IP

From an Australian law perspective I would add Insurance law (going to be more claims made) and all forms of Government (Government will be spending big on Infrastructure, Health, Education and others).

But all of the above are my views and so to finish this post I’m going to turn to one of the great take-outs of this week for me – a post by Trish Carroll who interviewed 12 final year law students to find out how they were feeling in the middle of Covid – ‘Is Covid-19 the mother of all disruptors for the legal profession?‘ – and this is about as close as we will get to how the future of law will look.

As always though, interested in your thoughts/views/feedback.

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“This is not just a stop-gap solution…”

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…or is it?

For the past couple of weeks, one of the most common themes I’ve been seeing about COVID-19, insofar as it relates to the legal profession, is how it has changed, and continues to change, the industry/profession. COVID-19, I’m being led to believe, is a “game changer”.

To this end, I have seen (and read) articles that I would not thought possible three to four months ago written about:

  • the changing nature of remote working in the profession, and
  • the importance of Zoom/Skype and Microsoft’s Teams,

to name but a few.

But I want us to stop here, take a step back, and ask: “Is this really likely to be the long-term outcome?

When I ask this, keep in mind that this is a profession that has fought tooth and nail to keep to the same business operating model for over 30 years (if not 100) despite having already recently lived through one of the worst global economic downturns of all time (the GFC).

So I ask: “What can we really say is different this time?

For sure we can say we have given our business continuity plans (BCPs) a tough workout. And, to be fair, I’d bet that even the most conservative of BCPs didn’t factor in a COVID-19 event.

And while we now know that most of our workforce can work remotely and, ironically enough, with the use of timesheets, we can also claim that they remain ‘productive’ whilst working from home – whatever that term may actually mean to a knowledge worker, does this truly foreshadow a change in the manner in which the industry is going to be managed?

My take is this:- while all of the above is true, it is taking place in circumstances that most of us had not predicted and many of us feel uncomfortable even being in (I’d bet there are very few people out there who are happy being locked up at home for four weeks – family or no family).

But this is a far cry from saying we will see the dawn of a ‘new normal’ whenever normality (whatever that may look like without a vaccine, which I am told is no sure thing) returns.

Because, while it’s critical that understanding our purpose is now more important than ever, and while we cannot hope to survive if we do not look to find the solutions our clients seek and need – which (as I mentioned last week) will be changing – in a post-COVID-19 world these will not necessarily bring about a change to the structure of how a law firm operates and is managed.

As any reader of this blog would know, it has been my long and strongly held view that to see real change to the business model of law, we need to start with the way in which we incentives and reward our partners and employees.

And to start this process we need to start to truly align our firm’s internal incentives/rewards to those of our customers so that we start to help create value for our customers. In short, our incentives/rewards must be aligned with our customers’ needs and incentives.

And yet nothing I have read in the thousands – possibly even tens of thousands – of words on how COVID-19 will change the legal profession has this even come close to being suggested or even discussed.

So my take from all of this is this:

If we want what we are currently going through to be truly more than a mere ‘stop-gap’ solution, if what we want from a post-COVID-19 world is true structural and ongoing change in the profession, then we need to start to have a conversation around the fact that the way in which we incentives and reward our staff is broken and worry a little less about where our staff are doing their job from.

And right now is the time to be having this conversation.

Failing which, all we really have is a stop-gap solution.

These are just my views, as always interested in your thoughts/views/feedback.

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Survey: Is the perception of value geographic?

Page 7 of April’s Briefing Magazine has a couple of interesting charts on how:

2019 was a mixed bag of business for US firms operating in the UK, with headcount growth hitting utilisation and billing rates requiring attention

As someone who is fascinated in the ‘pricing’ (not costing) of professional services, it was the “billing rates requiring attention” part that caught my attention.

billing realisation rates

The chart above, as titled, is billing realisation rates for US law firms in both the US and the UK.

So: why do two different offices of the same firm have such different realisation rates just because of the Atlantic Ocean?

After all, you would assume the clients are largely the same. You’d also assume the work types are largely the same. You’d probably be okay thinking the leveraging is largely the same. You may even reasonable expect the person reviewing the bill in Finance is the same. And, you may reasonably expect the hourly rate in London to be lower than that in New York for all said lawyers.

So why is it that realisation rates are roughly 5% higher in the US than in the UK? Especially when you’d think it would be the other way round.

And what does this mean more globally? Where would Asia, Africa, and South America fit on this scale?

More importantly, does this say that the perception of value is geographic?

I have my thoughts/views, but as always interested in yours.

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My sole 2020 prediction

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I once wrote a long blog post predicting what would happen in the year ahead (‘10 things that could happen in the Australian legal market in 2013‘). It was a train-wreck (many of these ‘future’ looking predictions we are still waiting to see 7 years later!) and I promised I would never do it again.

But I recently listened to a podcast about the role of AI and the future of “back office support” (a term I prefer to call Allied Professionals) [hint: we are all doomed to automation] in the legal industry that has promoted me to break my 7 year rule and make this bold prediction:

More allied professional jobs (Secretaries, HR, Marketing, Business Development, Finance etc) will be lost in the next 5 years to both on and off-shore outsourcing than will be lost to IA and innovation.

Now remember that my track-record is rubbish; so always interested to hear your thoughts/views/feedback.

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Will We See Hourly Rate Load Pricing In The Legal Industry?

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Rational choice theory hypothesises that individuals use rational calculations to make rational choices to achieve outcomes that are aligned with their own personal objectives.

One of the biggest (of many) problems I have had with the hourly rate in the legal industry – dating back to my start in the early 1990s – is that it assumes every hour in the day is equal. But, as anyone who has worked in private practice law will tell you, this simply isn’t true.

What do I mean?

Well, to say that the value of the work that we do at 6am, is the same as the value of the work that we do at 12am, is the same of the value of the work that we do at 9pm, is the same as the value of the work that we do at 12pm is simply false in my opinion.

And, critically, this doesn’t take into account an important factor; namely to anyone who has worked in private practice for any length of time, saying that an hour of work (from a personal cost perspective) at 10% utilisation is the same as an hour of work at 130% utilisation is simply insulting.

So what’s the answer?

Well, if hourly billing is your thing, has the time come to consider load weighting?

How would load weighting work?

Well, if you’re a morning person, what if you told your customer that your time between 6am and 10am was going to be at a higher premium than your time between 6pm and 10pm?

Conversely; if you are an evening person, what if you told your customer that your time between 6pm and 10pm was going to be at a higher premium than your time between 6am and 10am?

Or, alternatively, if you haven’t seen your family for several days because of a busy workload, you tell your customer that your 40th working hour that week was (emotionally, because it will rarely be economically) worth than your first or tenth hour (as opposed to the scaling discount most firms apply)?

As an industry we need to move away from the one set billable hour value; but to do that we first need to accept that not all billable hours are equal and to start talking to our customers about charging a premium for those hours in the day/week/month/year that are worth more – to both us and them – than others!

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Is the legal industry undergoing its “Fosbury flop” moment?

Last week the Center on Ethics and the Legal Profession at the Georgetown University Law Center and Thomson Reuters Legal Executive Institute and Peer Monitor published their ‘2020 Report on the State of the Legal Market‘. This annual Report sets out the publishers’ views of the dominant trends impacting the legal market in the United States in 2019 and the key issues likely to influence the market in 2020 and beyond.

The Introduction of this year’s Report looks at ‘Incremental Improvement vs. Radical Change‘, as it might apply to the current state of the legal industry.

Drawing on the story of Dick Fosbury’s performance at the Mexico City Olympics in 1968, at which Fosbury stunned the world by setting a new Olympic record in the men’s high-jump event using a technique (the Fosbury flop) that had never been used in competition anywhere else previously, the Introduction to this year’s Report sets a great – and somewhat dramatic – backdrop to what it considers constitutes radical change against incremental change.

The Fosbury flop, without doubt, was radical change to a long held practice in 1968. But, post 1976, when all three medallist used the technique, it can also claim to be the victim of incremental improvement/change, as there hasn’t really been any great leap forward in high jump technique since.

So what has this all to do with the legal industry?

Well, it’s like this, probably since the mid-1980s the legal industry has undergone a series of incremental improvements, without really being the subject of any radical change. But, as the Report eludes, the last 12 to 18 months in the legal industry may have seen a shift here. The re-emergence of the Big 4, growth of legal tech, alternative legal service providers suggest a cusp of radical change is on the horizon (if it hasn’t already arrived).

So has it?

Well, I’m not so sure. Let’s take a look at some of the graphics in the report:

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The graphic above looks at leverage of lawyers in US firms. Aside from the ‘Midsize’ firms, where a type of diamond is forming, the AM Law 100 and 200 look like very traditional law firm pyramids to me.

1 This second graph looks numbers of hours worked per lawyer and this looks to have flat-lined since the GFC in 2008. So no real change there.

4This third – and last – graphic looks at collection realization against agreed worked and, again, has pretty much flat-lined over the past 5 years at a relatively horrid 89.5%.

Collectively these three graphics paint a rather sad story to me. There may be change in the industry. But it is far from radical. And one may argue it really hasn’t even been that incremental post 2008; with the caveat that you also need to be mindful that not all industry segments are now equal, as some are clearly more equal that others!

As always though, read the Report as I’d be interested in your thoughts/views/feedback.

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