LPO

‘Alternative’ – but to what?

For an industry that claims to make its livelihood on the definition, use and interpretation of words, in my opinion the legal industry has become rather lax in our use of the word ‘alternative’.

Big claim. So what do I mean by this?

Well, let’s look at the word ‘alternative’:- post GFC we hear the term ‘alternative’ almost daily in respect of ‘alternative fee arrangements’ (AFAS); and, ever increasingly, we now hear ‘alternative’ in respect of ‘alternative legal service providers’.

But how often do we ask – ‘alternative to what’?

Are we talking about ‘alternative’ to what we already have and do?

Because if that’s the case then we are not being true to our esprit de corps, namely ‘words have meaning’.

i.e. there is nothing ‘alternative’ in the term ‘alternative fee arrangements’. There are merely hourly rates, fixed fees and some sort of risk sharing arrangement fee agreement. In short, fee agreements.

And, as Heather Suttie eloquently put in her post today, there are no “alternative” legal service providers. There are just legal service providers (some of which, surprise surprise, serve different clientele).

But that’s just my take – as always, would be interested in your thoughts, views, feedback.

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ps: the only thing I would add to Heather’s post is Pangea3 – 2004

Survey: The 5 Biggest Challenges Facing Australian Law Firms in 2019

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Happy New Year and Welcome to 2019!

The recent (December 2018) Commonwealth Bank ‘Professional Services’ report highlights five challenges law firms in Australia are likely to experience further pressure on in 2019, which are:

  1. ‘Clients demanding more for less’
  2. ‘Downward pressure on fees’
  3. ‘Willingness to switch firms’
  4. ‘Clients in-housing work’
  5. ‘Clients directly using legal process and services outsourcing ‘

Each of these has it merits, while none is particularly new. So let’s take a quick look at each and assess them on their merit.

The call for ‘more for less’

It’s true, the call for ‘more for less’ continues. But I believe we may be misinterpreting the call a little here between what in-house really want (see Ann Klee, VP of Global Operations — Environment, Health & Safety, at General Electric Company – ‘less for less’) and what law firms believe they should be providing – a Rolls Royce service for a Toyota price tag.

My take: Neither client nor law firm are currently getting what they want and the net result is that nobody is happy with the relationship. Law firms need to get a better understanding of what is being asked of them. Scoping work properly – by experts – and then the subsequent professional project management of that is where the greatest return can come from here.

‘Downward pressure on fees’

Admission time!!:-

“I have never really understood the ‘downward pressure on fees’ argument”

Why?

Because, in order to be putting downward pressure on fees, surely you need to know upfront what that fee is – right?

However, if what you are saying is that this is actually a downward pressure on hourly rates argument, then I get where you are coming from.

But this is not the same thing as a downward pressure on fees argument, because there is little doubt in my mind that clients are willing to pay a premium on fees when the value of those fees have been fully explained and justified.

My take: despite the rhetoric, law firms still have a long way to go in understanding what in-house General Counsel are actually saying when they say “no surprises” on fee issues. And here’s a working reason why:- because while the GC can talk to legal issues the company faces, it’s the CFO who is responsible for explaining costs; and in more Australian companies than not, the GC reports to the CFO. A lesson in that for most private practice firms here.

A ‘Willingness to switch firms’

I often laugh when I see this one, because, really, ask yourself this: if most of your partners and lawyers are willing to switch to another firm, why shouldn’t your clients?

My take: if you want client stickiness, why not start with re-engaging with your own staff and get loyalty in your firm brand (something that hasn’t really happened since 2008 in Oz). Because while attrition will never be zero, if you can get your own staff on board as brand advocates you may find it a lot easier to convince your clients to hang-around.

‘Client in-housing work’

Without a doubt the biggest change in my working life has been the increase in in-house practitioners. A career in-house is now a very viable option for someone leaving university, something that was never even thought of in my day!

My take: the biggest competitors most law firms are not other law firms. It’s not even the #Big4. Don’t get me wrong, these are competitors, but nothing compared to the CFO of your major client working out its cheaper to hire a new lawyer in-house than pay your fees (see here for more on my views on your in-house competitors).

‘Clients directly using legal process and services outsourcing’

Not 100% sure what is meant by ‘outsourcing’ here. If this includes ‘on-shoring’, then I agree it’s a real threat.

My take: law firms in Australia will face a number of challenges over the next 12 to 24 months. Outsourcing, on-shoring will be among them, but I’m not sure I give them the same weight as the Commonwealth Bank Report does.

Some of the other issues I believe law firms here need to be aware of include further consolidation of the market (it remains too big for such a small market), staff retention issues, profit squeezes, technology and process improvements (and how, through change management champions, these are being handled within law firms because currently we are failing badly).

And finally, some 750 words into this post, we can mention the “innovation” word 🙂 .

Anyhow, guess you get the gist of where I am going with these so best of luck for 2019!

As always, would be interested in your views.

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“… we are being asked to do less with less”, Ann Klee of GE

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Work in the legal profession for more than 5 minutes and you’ll hear someone say that clients today are asking the law firm to do “more for less“. It is probably one of the fastest terms to become a cliché in the English language.

So imagine my delight, when watching a video of a presentation given by Ann Klee, VP of Global Operations — Environment, Health & Safety, at General Electric Company at the recent Big Law Business Summit, in describing how (in part) GE managed to reduce its outside legal spend by $60 million in a year, she says that the bottom line is that the role of a lawyer today is about managing more risk, it’s not about just being asked to do more for less, it’s being asked to do less with less (see 16 minutes and 15 seconds into video).

This absolutely spot on.

Law firms today need to:

  • partner with the business to empower their clients,
  • always be looking to deliver on outcomes, not to be following procedure for procedure’s sake (or, worse, following procedure to blow out legal fees),
  • through the use of legal project management, agile or some other mechanism that works for you: identify and eliminate any workflows that are adding no value to the deal/advice.

In short: we need to be doing ‘less for less‘, but we need to be doing it in such a way that is “faster, better, and smarter” for our clients.

At the end of the day, clients like GE are already doing this – so law firms today can either get on board with solving their clients’ problems from their clients’ perspective, at a standard of accountability that their clients are being held to; or they face the very real prospect of becoming irrelevant.

How about applying the “Moscow” process to your next costing letter

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Over the weekend I read a post over on the www.pmhut.com website by Chuck Snead – An Agile Primer: Agile Estimating and the “MoSCoW Process” – which contained an interesting process that I would like to share with you today.

Although the www.pmhut.com website (the “pm” here standing for “Project Management”) doesn’t do posts that relate directly to either law firm business development or marketing, I enjoy reading their posts as I find many of the concepts they cover can easily be applied to the industry. As was the case this weekend, with a guest post by Snead which threw up a very interesting acronym and concept that I had not previously heard of – the “MoSCoW Process”  – and which I now believe should be tailored to form part of any law firm costing/engagement/fee proposal letter process with your client.

So here goes.

Snead stipulates that:

MoSCoW is an acronym for prioritizing feature development along the following guidelines:

  • MUST have features that are required for the project to be called a success.
  • SHOULD have features that have a high priority, but are not required for success.
  • COULD have features which would be nice to have, but are not high priority.
  • WON’T have features that stakeholders agree should be in a future release.

Now let’s apply this to the law firm costing/engagement/fee proposal letter process you go through with your client and agree that your next costing/engagement/fee proposal will include the following:

  • a section in the letter setting out all of the actions/tasks that MUST be done in order for the client’s objective to be met [Category 1 critical]. Here, assign who will be given the task and either the fixed or estimated cost to achieve these tasks; next
  • a section in the letter setting out the actions/tasks that would it would be ‘nice’ (SHOULD) if they were done, but they are not critical to the achievement of the client’s objective(s)[Category 2 critical]. Again, assign who would be given the task if there is sufficient time/budget/desire, etc and either the fixed or estimated cost to achieve these tasks; next
  • a section in the letter setting out the actions/tasks that are [remote] ‘possibles’ (COULD) that may arise out of the client undertaking the action they are planning to take. It should be noted that this should be remote variables/possibilities [Category 3 – variables]. Again, assign who would be given the task if one of these remote variables were to arise and wherever possible attach a fixed fee or estimate against the task; finally
  • set out clearly in the letter those actions the law firm WON’T be taking (is not instructed to take). Now it could be the case that these actions are still needed in order for the client’s objectives to be met, but they will be undertaken elsewhere (eg, in-house or through an LPO) [Category 4 – won’t dos]. Note, this is not a ‘disclaimer’ or limitation on liability section per se, but assigning tasks so that each party knows exactly what is and what is not required of them.

Anyone else out there think we may just have a few less angry client complaints if we went through a process like this each time we took on a new matter?

This process might not be perfect, and it could well need a tweak here and there, but I do think it will go a long way to helping lawyers fully understand the scope and nature of the instruction(s) they receive from their client(s) and lead to less misunderstanding in the industry.

And if that’s the case, the result is a win-win all round.

Law firms: cannibalisation is the only way you can beat cheaper competitors

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The only way for a company to deal with cheaper competition was to set up a different company with an “invitation to kill its parent”

So says Harvard Business School professor Clayton Christensen during a recent visit to Hong Kong – as cited in an interesting article published in the South China Morning Post on Friday 20 March.

With the fairly recent introductions to the legal market of:

to name a few of the internationals, as well as Corrs Chambers Westgarth’s Orbit closer to home, makes me wonder if the legal sector has taken this message to heart and is now processing this strategy to their business.

All of this activity also reminds of the time I once overhead someone saying the day would come when Riverview Law would be bigger than DLA Piper. Might not happen in my working life, but not totally unthinkable in this day and age.