Surveying 700 in-house and private practice lawyers across the US and EU in January 2020, this is probably the most comprehensive survey post COVID (although most of us were not entirely sure what this meant in January so I look forward to a survey report that has been conducted post March this year).
The Top 5 reasons cited as to why a client might leave your firm are:
The client no longer trusts your firm can meet their needs,
Your firm doesn’t specialise in the area of law needed by the client,
Your firm failed to communicate its value proposition properly,
Your firm did not demonstrate efficiency and productivity, and
Your firm’s leverage was/is all wrong.
And three of these are essentially because you messed up on sourcing, communicating and delivering on your pricing promise.
Take-away top tip: want to make sure you keep clients and keep them happy – make sure you (and your team):
understand(s) your value proposition and are able to communicate this,
get your team’s leverage right [hint: don’t hoard work at the top end just so you can meet budget this year!], and
understand the scope of what you are being asked to do and project manage both the scope and the client expectations (especially if out of scope creep occurs).
Manage this well, and you’ll be three-fifths of the way to keeping your client happy!
As a bonus, think about how you demonstrate efficiency to your client.
Is this by saying you have the relevant expertise/experience so that you can do this faster than others,
Is this by saying you have the appropriate IT systems that allow you to get the job done faster, or
Does efficiency even really matter – should the conversation not be about being an effective lawyer?
As always, these just represent my thoughts and always interested to hear your views.
The goal isn’t to find people who have already decided that they urgently want to go where you are going. The goal is to find a community of people that desire to be in sync and who have a bias in favor of the action you want them to take.
In around 2009 I recall reading Seth Godin’s, then recently published, blockbuster ‘Tribes: We Need You to Lead Us‘ and thinking this would have a profound impact on the way clients engage law firms. To give this thought some context, it was around the same time as we had started talking about a new fad called ‘unbundled legal services‘ (which would later also become known as ‘limited scope representation‘ – see ‘The great unbundling of legal work‘ in the Australian Financial Review). It was also a time when ‘disaggregation‘ and the rise of Legal Process Outsourcing (LPOs) (predominately in India at that time but later this would extend to South East Asia and South Asia) would have many of us who worked on bids and tenders discussing issues around disruption of the legal services supply chain – if for no other reason than clients were asking us to provide answers to these questions in their requests for tenders.
A cold wind, amounting to real structural change, in the way clients purchased their legal services was coming (Pfizer Legal Alliance).
THE ‘NEW NORMAL 1.0’
Fast forward a decade and probably the only person who still talks to me about Seth’s Tribes is my good friend Julian Summerhayes, and it is never within the context of an RFT or legal services more broadly.
Nope, in short tribes, disaggregation and unbundling, while definitely remaining vogue, never really had the impact and penetration that I – and I would suggest many others – thought they would.
The ‘New Normal 1.0’ had, to all practical purposes, failed.
KRYPTONITE TO THE ‘NEW NORMAL’ – TEAMS
Probably the biggest obstacle to the growth of tribes post 2009 has been the role that teams have historically played within the legal profession.
Since the times of Dickens a junior apprentice lawyer has worked with, and been mentored by, their senior (supervising) partner. It has always been thus, and with it has come an almost umbilical cord tie between lawyers who have worked in the same team.
Many an in-house General Counsel has sat at the foot of the table of the private practice partner to whom they send instructions. A relationship that has been forged within the confines of a team structure.
TRIBES REBOOTED – TRIBES 2.0
It’s my opinion that one of the biggest likely outcomes COVID-19 will have on the profession is the re-emergence of tribes – tribes 2.0!
There are a number of reasons why I think this might be the case, but probably the biggest is that in-house counsel have, over the past three months, become used to working with remote teams.
It should not, then, be too far removed to say that in-house counsel will be happy working with subject matter experts across firms who can enable them to achieve their objectives rather than with an individual firm that might get them across the line.
In short, on the right deal, in-house counsel will be happy to work with a group of lawyers from various law firms rather than one firm – a tribe over a team.
Moving from teams to tribes is not a foregone conclusion, it faces challenges.
High among these will be:
How is risk allocated?
Who wears the professional indemnity risk?
My own view is that these can be overcome with:
properly scoped Engagement Letters
proper use of Legal Project Management
a good understanding of Workflow Process Methodology
But that still leaves the issue: How do we price the ‘New Normal 2.0’?
HOW TO PRICE THE ‘NEW NORMAL 2.0’?
The cynic in me says that many law firms will not have the first idea how to price the New Normal 2.0. This presents a significant problem because if they cannot price it, then they cannot sell it (pricing still remains the principal form of credentialisation despite, or rather because of, whatever experience you claim to have).
ONE ANSWER – THE ROLE OF SCOPE PRICING IN THE ‘NEW NORMAL 2.0’
Scope pricing will play a critical role in the pricing in the ‘New Normal 2.0’.
Unlike a fixed fee, capped or fee estimate pricing, scope pricing does it exactly what it says on the tin – it prices to the scope of work being undertaken by the relevant lawyer. This means that proper use of scope pricing should allow in-house to teams to unbundle the legal work within their project – either between the role the in-house plays and the role the private practice firm plays; or, in the case of this post, the role that multiple lawyers with subject matter expertise from various firms play in a project.
And, if done properly, the biggest upside to scope pricing over any other type of pricing of legal services is that, by definition, there really shouldn’t be any scope creep – what you see [in the tin] is what you get!
Came across the bones of a really interesting game you can play with your deal team at your next after action deal debrief/lessons learnt meeting.
Handout a piece of paper to each of your deal team members and ask them to rank, in order of priority, the top 5 reasons – from the following list – why the customer is happy to pay your fees in full (no discounts/write-offs, etc allowed):
Demonstrated an understanding of the customer’s business/industry throughout the deal
Demonstrated an understanding of relevant law
Responsiveness to customer’s requests – phone/email/meetings
Built good rapport and a trusting relationship during the deal (was in the trenches with the customer)
Used expertise to help save the customer money (either on the deal or fees)
Used Legal Project Management techniques to stay within the deal scope and didn’t allow scope creep without first taking to the customers
Used technology, AI, Legal Process Outsourcing and value adds to make the customer’s life easier during the deal
Offered the customer a great discount
Hourly rate was attractive to the customer
Any other reason(s)
Remember, they can only pick 5. And they need to be in order of priority.
I would love to hear feedback on which five were the most popular chosen.
The State of Australian Corporate Law Departments Report 2019 – a joint publication between Thomson Reuters and Acritas – was published earlier this month. With more than 2,000 telephone interviews conducted and 73 interviews with Senior Legal Counsel based in Australia taking place, the sample for this report is robust. And while the usual rhetoric around “more for less” is reflected throughout the Report, one of the standouts is that Australian GCs are forecasting 45% projected budget cuts (over 2018 we have to assume):-
To put that into context, that almost twice the global average.
In a time when we have Royal Commissions being announced almost weekly, and compliance issues are on the front pages of the papers daily, you have to wonder where and how these savings are going to be achieved.
As to the ‘where’, given how much ‘top-end’ reputational compliance work that’s happening in Australia at the moment, and how little cost savings can be made from the margins in low-end commoditised work, you’d have to assume the most likely area will be in the mid-level contract drafting/negotiation/management space [the space in which about 30 out of the top 40 firms in Australia play].
As to the ‘how’, having read the Report my take is that Australian GCs will look to achieve this through:
the elephant in the room
‘Innovation’ has been a buzzword in the Australian legal world for over a decade. And, as one of the first jurisdictions to legislation the incorporation of law firms, to many outside Australia our system has been one of envy.
But when you ask Australian GCs to rate the innovation of Australian law firms, only 35% feel they’re working with service providers they find modern and innovative.
From where I sit this means that 65% of Australian GCs don’t think you’re really doing all that much in the innovation space!
Led by procurement, the dreaded ‘legal panel’s’ stated aim is to achieve:
cost efficiencies and predictability
relationship building (de facto another way of cost savings)
less administrative burden
quality [of work]
access to experts, and
value adds on offer
All great and noble aims if you are looking for a 45% cost saving year-on-year – until you take a closer look at the reality:-
This chart is from the ‘GC Thought Leaders Experiment‘ and it clearly indicates that having a panel in place isn’t saving you anything! Add to that lateral hire movement over the past 5 years, and I very much doubt any of the metrics of having a panel are being met.
It’s worth noting here that swimming against the tide of rationalising panels to fragment legal spend is A Verona Dorch – Peabody’s Energy’s Chief Legal Officer who stated (on the issue of appointing panels) that:
Expanding the pool allowed me to insert a few more midsize and non-money center firms than I otherwise could have. And that’s been incredibly helpful—just a few months in, I’m noticing that those firms are extra eager to impress and put forth their top talent.
So maybe, just maybe, if you get it right there is something to be said for legal panels – only not in the form we currently have them.
The elephant in the room
And so we come to the elephant in the room, where a lot of these savings are likely to be found:
40% of Australian in-house buyers of legal services have used alternative legal service providers (“ALSP”) for support on legal matters, and over half of those who used an ALSP did so as they felt it was a more affordable option.
Private practice we are on notice.
As always though, interested in your thoughts/views/feedback.
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:
What makes projects succeed (and by implication, fail)
The essential project management philosophy
The project life cycle
Project planning – project definition and scoping
Project planning – creating the WBS & schedule
Project planning – estimating
Project execution & control
In turn, if you were on a course where you learnt all about:
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!
Overnight, Australia-time, the Center for the Study of the Legal Profession at Georgetown University Law Center and Thomson Reuters Legal Executive Institute, relying on data from Thomson Reuters Peer Monitor, published the findings of its ‘2018 Report on the State of the Legal Market‘. Reviewing the performance of U.S. law firms in 2017, as well as looking at the trends expected in 2018, this annual report is typically the “first” big report publication of the year and so a trendsetter of where we may be going as an industry over the next 12 months.
As has been the case in other years, the first chart I typically like to see in this annual report is the one setting out ‘Collection Realization against Standard Rates by Law Firm Segment‘ – Chart 9 in this year’s publication – to hopefully give me an indication of how an industry that largely relies on increases in hourly rates each year to boost top-line revenue is fairing.
As you can see, yet again the results here can best be described as ‘disappointing’:
AM Law 100 firms are tracking an ever declining realised recoveries of circa 80 cents in the dollar. All others aren’t doing all that much better at circa 85 cents in the dollar.
Either way, those levels of realisation would have most bank managers in a panic. And the reason they don’t comes down to one small issue: in law firms this collection rate – other than telling you that the market doesn’t see your hourly value as highly as you do – is absolutely meaningless.
What it is, is pie in the sky internal budgetary metrics against market reality cash in the bank.
So we turn to my second “go-to” chart: ‘Collection Realization against Worked (Agreed) Rates‘. This year this is represented in Chart 10:
As the name suggests, what this chart is showing us is “Collected v Worked (Agreed)”. I’m assuming the “agreed” here is upfront, and I’m accepting that the picture is far from perfect, but there is a far better flatline realisation rate here of 90-ish per cent, or 90 cents in the dollar.
So, what’s my take-out from the two charts?
If you want to try and get a better handle on your projected cashflow, no doubt better to have an upfront conversation with your client about how much you are going to be charging them – however that is (fixed fee, hourly rates, etc) – than having an arbitrary, and less and less meaningful, ‘billable hourly rate’.
One of the more interesting articles I read over the holiday period profiled a Dutch company called Pitchsome.
Heard of them?
Maybe, but I doubt many have.
But they may just end up being a catalyst for of one of the biggest changes to the legal industry in 2018 – namely, how we tender for work in the future.
Under the tagline, “Show, Don’t Tell,” Pitchsome’s business model is a simple one: Show me how your product works in a video and don’t write reams and reams of marketing bluff and expect me to read it in order for me find out what you can do for me/help me fix my problem.
Supporting this business model, the article states that:
Cisco’s Visual Networking Index says video will account for 80 percent of all consumer internet traffic by 2019.
And that got me thinking:
80% of all consumer internet traffic by 2019 will be Visual Networking + pretty much 100% of Government and 70+% of ASX Top100 companies have legal panels in place
so, how long will it be before these government departments/agencies and companies decide to replace the long and tedious word/excel document tender responses with video tenders that ask law firms to:
profile key team members,
white-board how the law firm can assist the client,
evidence how Legal Project Management can be used,
visually explain the steps in the pricing,
have client referee testimonials,
have video of the pro-bono and community activities the firm is involved in, and
have other examples of how the value adds being offered are being implemented by other clients in the tender’s industry sector?
Will never happen I’m hearing many in Australia reading this say. “It’s not professional”. “It’s nothing short an advert”, etc., etc.
But I’m left feeling: what, just what, would have happen to the industry if those of us who started down this path in 2008 (and those of you who were involved know exactly what I’m talking about) continued the journey?
It very well may have been disruptive. And that word is a real catchphrase at the moment.
So maybe, just maybe, we will be seeing video tendering by the end of 2019 – and that leaves me asking: what are you doing now to make sure you can met this need?
There’s a lot to like about Kiron’s post, and many things in it really resonated with me from a business development perspective, but what I really want to share with you though is this brilliant piece of commentary by Kiron:
“As it is with jewelry, on projects gold-plating is all form with no substance. The increase in costs is rarely justified by the value provided by superficial “bling”.
It could be an analyst adding in requirements which they came up with on their own without ensuring that those are actually required, a developer who introduces a code change or feature they believe is useful without checking with others or a quality control specialist who decides to test above and beyond approved test plans.
Don’t get me wrong – the intentions are usually good and I’ve yet to encounter an instance of gold-plating which was done maliciously. But it doesn’t matter – gold-plating is work creep.”
and ask: “Does any of this sound familiar to you?”
Because I’m guessing that if you are being honest with yourself, it does. And trust me, there’s no quicker death nail in a client relationship than scope creep.
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.
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?
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.