strategy

Which kinds of businesses are most threatening to your firm’s future?

The December/January edition of Briefing magazine includes a supplementary report looking at the Legal IT Landscapes 2019. It’s a very enjoyable read, and includes the following graphic (answering the question from which the title of this blog is taken):

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What this indicates is that despite my having blogged about this issue as far back as September 2017 (‘Do you know who your competitors are?‘) senior managers of law firms still hold that other law firms like theirs are the greatest threat to their ongoing commercial success (at 26%).

As I wrote back then,

With the level of work that clients are now taking back in-house, or not bothering to do at all, they are without doubt the “overwhelming competitive threat” to the current law firm business model. And, this is not cyclical but structural.

Crucially, understanding this is of paramount importance if firms wish to survive the next 5, 10, 15 years. Because it reshapes everything we do. How we try and win work. The type of work we are trying to win. And even the nature of the relationship we have with our client.

In the long term it will determine the way we measure and reward. It will dictate how we charge, and it will determine whether we succeed or fail.

and I still hold now, this view is misplaced at best, and out and out wrong at worst.

As the following quote taken directly from the National Profile of Solicitors 2016 report (most recent I could find) published by the Law Society of New South Wales, in Australia the seriousness of the threat that in-house legal teams have on  the viability of your firm’s future success should not be underestimated:

Legal employment sectors are shifting. The great majority of Australian solicitors continue to work in private practice, with 69% employed in a law firm. However, the proportion of solicitors working in private practice has dropped from 75% to 69% over the last five years. This is due to a significant growth in the number of solicitors working in the corporate sector and government.

Between 2011 and 2016, there was a 59% increase in the number of solicitors working in the corporate sector, compared to a 17% increase working in the private sector.

Let that sink in for a second: a 59% increase in the number of solicitors working in the corporate sector [in Australia] over a 5 year period post the GFC.

Even coming from a relatively low baseline, that’s a staggering shift (indeed, some may even argue seismic)!

But ask senior management of law firms and only 10% will tell you that “in-house/client” is a business that is most threatening to their firm’s business.

Misguided pershaps?

As always, would be interested in your thoughts, views, feedback.

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2018 was a great year for AusLaw firms*!

As we close out the year that was 2018, the graph below – from the recent (December 2018) Commonwealth Bank ‘Professional Services’ report – would appear to support the fact that 2018 has been a financially beneficial one for all those involved in private practice in Australia:

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The question I have though is this: is this a true correction?

And what I’m really asking here is this:

  1. have the underlying structural changes that we all know need to be made been put in place?
  2. if so, are we starting to see the benefits of these, or does this chart represent a false dawn?

And as we entered 2019 I’m going to leave those two questions out there, as I think many of us know what the real answers are here.

As always, would be interested in your views.

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* or was it?

My comments on today’s Lawyers Weekly article: ‘Observations on NewLaw in Australia in 2018’

Today (28 December 2018), Lawyers Weekly in Australia published an article by Lachlan McKnight, CEO of LegalVision in which Lachlan comments on his ‘Observations on NewLaw in Australia in 2018‘.  At the outset I should state that I don’t know Lachlan, and this post is no way directed at him, but is just a numbered-point muse on the interesting observations he makes in his article.

  1. ‘NewLaw’ (which is as meaningless a term as ‘Mid-tier’) is now an ‘industry’ – now that’s interesting.
  2. Agree with Lachlan’s comment in #1.
  3. While I agree with Lachlan’s comments in #2, I also believe the attitude here is changing within the more ProgressiveLaw firms. ProgressiveLaw firms realise that with greater risk (which fixed fees actually are), there should be a premium (much as there is with any insurance premium). EvolutionaryLaw firms go one step further and start to have a conversation about ‘value’ pricing.
  4. Three is an interesting comment: aren’t LegalVision in part owned by G&T  – as an aside (re #3 above), didn’t Danny Gilbert recently state that he thinks that clients don’t want move away from the #BillableHour?. Nevertheless, I agree with a lot of what Lachlan says in #3 but would probably set the bar at $75 million (we still only have a population of 25 million and IBISWorld still only puts the WHOLE legal industry revenue in Australia at $20bn [NB: the top 30 law firms in Australia make over $50m a year – in an industry this small!]).
  5. I would totally disagree with Lachlan’s comments in 4 and in my opinion you only need to look at the stuff MinterEllison and KWM are doing (with whom I have no association) to see this point – to me – is misplaced. In fact I would go 180 and say many BigLaw firms are going through their Arthur Andersen/Accenture moment (the original ‘child eat parent’?).
  6. The biggest challenge NewLaw (and Mid-tier law if such a thing exists) has to #5 isn’t OldLaw, it’s the #Big4.
  7. Number 6 is a point I have tried raising several times this year – scale. Law (Old and New) see ‘scale’ as being bodies (in part because of time-based billing). If it ever was it not longer is and any law firm, new or old, that get’s the right answer to scale will have a point of difference and in such a competitive market this is crucial. The reality is that potentially the biggest winners here should be the so-called Mid-tier (who have a lot of the grey haired industry knowledge without, currently, the scale – but I fear they have missed the boat because of lack of investment).
  8. For #7, see my comment in #3 re G&T.

As always, would be interested in your views.

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Why asking someone to work 2,000 billable hours a year will kill their spirit

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According to a post by Casey Sullivan of Bloomberg, earlier this week US law firm Crowell & Moring announced that it would increase its billable hour requirement for associates, from 1,900 hours per year to 2,000 per year. This new target will take effect 1 September 2016, but on the plus side 50 pro bono hours will count as billable.

15 Years ago I would have cried out “all kudos to you”. Back then my yearly billable target for an English ‘Magic Circle’ firm was 1,400 hours and I flogged my guts out to achieve that. So if you can effectively put 50% of billables on top of what I was doing (and trust me when I say I wasn’t going home at least one day a week), then you’re a better person than I (or so I would have said then).

But if you really need validation of what asking someone to work 2,000 billable hours a year means, then I would like to recommend you read “The Truth about the Billable Hour” by no less an institution than Yale University. In that publication, Yale caution aspiring lawyers that if you are being asked to “bill” 2201 hour, you need to be “at work” (includes travel time and lunch, etc.) 3058.

Taking that further, from an Australian law perspective, if you are being asked to bill 2,000 hours a year then you need to bill 8.3 hours a day (assuming a 48 week year and you never get sick; which, if you are being asked to do this, you most likely will be). That means you are very likely going to need to be “in the office” around 12 hours a day – and that assumes no write-off by your partner or leakage.

But here’s the question: “What difference does this make?

I ask this because I wholly agree with the following comment my friend Kirsten Hodgson made when I posted a link to this article on LinkedIn:

“why would you reward the number of hours someone spends working? Surely it would be better to focus on how to deliver value smarter and more quickly. This doesn’t incentivize innovation or any type of process improvement.”

Exactly right, you’re measuring all the wrong things!

Leaving aside the Balance Scorecard argument, asking someone to do 2,000 billable hours a year doesn’t take into account:

  • client satisfaction
  • realisation (it’s a utilisation metric)
  • working smarter
  • innovation

or many other metrics.

And for those who may point out the benefits of this including 50 hours pro bono I say this: the Australian Pro Bono Centre National Pro Bono ‘Aspirational Target’ (ie, where we would like to get to), is 35 hours per lawyer per year.

But probably more importantly than all of this is this:

–  if you ask someone to do this, then you really leave them very little time to do anything else.

This really should be a concern, on the business front because you leave almost no time whatsoever to train them in the business of law – ie, you kill any entrepreneurial spirit they may have. And, crucially, the only metric that really counts to them is that all important 2,000 billable hours (keep in mind that like I was, they’re very young). Which for a profession that has the mental health issues we do, is not good.

For all of these reasons, I’m hoping no other law firm follows this. But sadly I think they will.

Oh, and if you are a law firm client reading this post you might just want to look up whether your local jurisdiction has a “Lemon Law” rule that applies to provision of a service.

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Survey: The role pricing specialists play [or don’t] in RFP responses

Last week the USA’s J Johnson Executive Search, Inc and the UK’s Totum published their combined ‘RFP Survey Responses: U.S. and U.K. Data 2016‘.

A fairly evenly distributed demographic of large (defined as being 600+ lawyers), mid-sized (defined as being 100-600 lawyers) and small (up to 100 lawyers, for the U.S. only) law firm respondents, insights from the survey include time spent responding to RFPs, persons within firms charged with project managing responses, as well as tools and expertise made available to responding teams, in both the U.S. and the U.K.

As with most surveys of this nature however, it is the role that pricing plays that typically grabs my attention and given this survey’s combined U.S. and U.K. perspective even more so in this case.

Given ongoing market pressures, it should surprise no one that responses of “strong” from the U.S. (58%) and the U.K. (64%) to the question of what current “price pressure” for proposal & RFPs were fairly similar.

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A little more surprising to me was the difference in responses between the U.S. (40%) and the U.K. (60%) to the question “when developing proposals and RFPs, I have easy access to” the answer was “pricing guides/professionals“.

 

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Now don’t get me wrong, even these days I think it is particularly progressive and somewhat comforting to know that 60% of my colleagues in the U.K. have access to some sort of “pricing guide/professional”.

Until, that is, you get to see who actually gets to sign-off (i.e., the “decision maker”) on the all important issue of pricing in RFPs in the U.K.. Here, and I kid you not, the response in the U.K. of “pricing specialist” (that same person who 60% claim to have some form of access to – either via guides or in person) was 5%.

I think that is worth repeating – 5%.

Put into context, that means in the U.K. pricing in your RFP is more likely to be signed off by Marketing & BD (9%) or Finance (14%). Indeed, in the U.K., “It varies” is likely to have more of a say on final pricing in the RFP response than the so-called pricing specialist.

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I’m not so sure why the results of this particular survey so surprise me. After all, time and time again survey results show that we typically say one thing about pricing, but do quite another.

What I will say though is this: if you have access to a pricing specialist, and pricing by your pricing specialist is being determined in 5% or less of your RFP responses, my guess is going to be one of two things: (a) you have no idea if you are making money from your RFP “wins”, or (b) more likely, you are leaving money on the table big time!

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* images should be enlargeable, apologies if they appear a little blurred.

#BizDevTip: Develop Value Groups

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Over toast and coffee this morning I read a cracking post on the LexisNexis Business of Law Blog by Carla Del Bove titled “Understanding the Science Behind How Clients Think“. The post provides some good tips for law firm business developers and marketers, but includes an absolute gem of a tip: “Develop Value Groups” (number 2 in the list), which Carla Del Bove describes as being:

“A value group is simply a group of influential business professionals (e.g. CFOs of major corporations or office managers of the top five consulting firms across the country, etc.) who meet either quarterly, or three times a year and share a common interest.

The first step involves figuring out who the firm’s target group is and then finding a common theme that draws them in and keeps them engaged. Some examples of this include: inviting members of the group to a prestigious event or using a prominent key note speaker for meetings. Most important, they say, is there needs to be a clear purpose for getting together and participants need to get some value out of the meeting. Lastly, they agree, value groups are less about quantity as they are about quality.”

Really useful tip by Carla that I thought I would pass on to you. Make sure you read the rest of Carla’s post and if you would like to get updates on other business development and marketing related material I read each week, feel free to sign up to my free weekly Mail Chimp update (or email me if you want to be added to the subscriber list).

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How long before we see a ‘Red Team’ service in #Auslaw?

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Of note overnight (OZ time) was news that Bernero & Press (Wendy Bernero and Aric Press) have launched a service called: ‘The Red Team’.  Described as being “A Lifeline for Marketing and Business Development Departments” the aim of The Red Team is to provide:

“…high-quality, experienced marketing, communications, and business development professionals to law firms on a project basis or to fill temporary needs.”

Sounds very similar to the sort of lawyer placement service we are seeing from the likes of Crowd & Co here in Australia, only in this case the target market is specifically support services.

I have to say that outsourcing back office services such as marketing and business development was something I saw becoming popular in Asia during the Asian Financial Crisis in late 1998 and I have often wondered when we would see such a move take hold in the West.

Today may just be that day.

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