strategy

“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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Game: ‘Questions to ask your deal team about why your customer is happy to pay your fee?’

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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):
  1. Demonstrated an understanding of the customer’s business/industry throughout the deal
  2. Demonstrated an understanding of relevant law
  3. Responsiveness to customer’s requests – phone/email/meetings
  4. Built good rapport and a trusting relationship during the deal (was in the trenches with the customer)
  5. Used expertise to help save the customer money (either on the deal or fees)
  6. Used Legal Project Management techniques to stay within the deal scope and didn’t allow scope creep without first taking to the customers
  7. Used technology, AI, Legal Process Outsourcing and value adds to make the customer’s life easier during the deal
  8. Offered the customer a great discount
  9. Hourly rate was attractive to the customer
  10. 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.

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Thinking of starting a podcast?

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Over the past week I’ve had three different people inform me that they were starting podcasts and ask me if I would be willing to be interviewed. Honoured as I am by such requests, I did also wonder why such interest in me and podcasts more broadly?

In mulling this over I recalled a recent podcast (5 June 2019, Podcast #227) between Sam Glover and Bob Ambrogi on ‘The State of Legal Blogging & Podcasting‘ on the Lawyerist podcast.  Listening to this again today it struck me how many great tips these two give out (for free) to anyone looking to start a podcast; some of which are (fast forward to 29 minutes into Sam’s talk to really get the best out of these):

  • are podcast a fad or here to stay?
  • has the revenue model for podcasts been worked out?
  • have we really thought through the market penetration issue (more people don’t listen to podcasts than do)?
  • is there too much content already out there? if there is, what are you doing to be a little bit different?
  • how often should you be producing material – daily, weekly, monthly?
  • should you be framing your podcast with music at the start and end?
  • what equipment should you be using?

Taking all that on board and still want to produce a podcast? Then these are three things that Sam and Bob say in their podcast that should also be considered:

  1. it’s more work than you think it is going to be
  2. it’s really tough to build a subscriber base
  3. the right people over lots of people (love this saying)

On that last point, independent of Sam and Bob’s chat, I also heard this week that the average podcast lasts 7 issues.

To help you overcome this, Bob makes a brilliant suggestion in the podcast – if you are attending a conference take your recording equipment with you. And someone who does that really, really well is Ari Kaplan.

I hope you enjoy all the links. Listen to them – they are great (and free!); and, as always, love to hear your thoughts/views/feedback.

Secondments, labour arbitrage and a new race to the bottom

Follow me:

  • In-house teams have been the biggest ‘growth’ area in legal post 2008 and some in-house teams are now bigger than the law firms they previously outsourced worked to
  • Most GCs report to the CFO
  • GCs are increasingly under pressure from the CFO to reduce their ‘cost’ (including bonuses now linked to reducing cost – note: not external legal spend)
  • GCs have effectively two cost centres: ‘labour’ or ‘ external legal spend’
  • Procurement tells GCs they can reduce both ‘labour’ and ‘spend’ at the same time – secondments (heavily discounted at daily or weekly rates in RFPs – don’t need to advise out and don’t need to hire in-house!)
  • Law firms enter the discounted labour arbitrage market

And a new race to the bottom starts*…

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

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*welcome to the party LoD

The big squeeze is coming: Why it’s important to know if your practice is bespoke or precedent?

Hall Wang penned an interesting post on the Tom Spencer blog over the weekend that looked at two of the different types of consulting – Bespoke and Precedent (Bespoke and Precedent Driven – Understanding the Two Different Approaches to Consulting).

Wang explains the difference between the two as being:

Bespoke: This approach is like making a custom-tailored outfit whereby the focus is on what is unique about a client’s situation and then crafting a customized solution for the client. The mindset in this approach is to think about what might be possible to best fit the client’s needs.

Precedent driven: This approach is similar to the way you bake a cake using a cookbook; following the recipe, but making adjustments as time and available ingredients necessitate. The mindset is to find proven precedents and use them as a guide to provide reliable client recommendations.”

I like Wang’s terminology. I particularly like Wang’s use of ‘precedent driven‘ – an alternative to the stale and often misused ‘commoditised‘. It’s smart language, but I think it’s really important that lawyers and their support team understand the difference and workout which of the two their practice sits in.

So why is this even important?

Here’s the reason:- because if you operate a predominantly ‘precedent-based practice’, then you’re going to be feeling the forthcoming ‘big squeeze’ way more than is likely to be the case than if you run a bespoke practice.

What ‘big squeeze?’; my practice is already seeing an uptick in legal work you may be asking – see the latest Altman Weil ‘Law Firms in Transition 2019: Change Efforts Stalled in 2018 as Business Boomed‘ report for why this may be the case.

Well, as I recently blogged The State of Australian Corporate Law Departments Report 2019 has stated that “45% of Australian GCs are forecasting a decrease in their 2019 legal spend” – so ask yourself:- “Where is this massive savings going to come from?” Add to this the recent Thomson Reuters ‘Alternative Legal Services Provider Report‘ (February 2019) stat that

In just two years, revenues for alternative legal services providers have grown from $8.4 billion in 2015 to about $10.7 billion in 2017. This represents a compound annual growth rate of 12.9% over that period.

and it doesn’t take Einstein to tell you that a big (or bigger) squeeze is coming and that the middle – precedent-driven – market (where the majority of the market players sit) is going to be the epicentre of that big squeeze.

But knowing and understanding this is very important. It helps take you – as lawyers, business developers or leaders – a long way to understanding that in reality very few people want or need bespoke legal services; but what the really really really don’t want is a precedent legal service dressed up with a bespoke ‘full service’ price.

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

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Would you use an unlicensed or unqualified legal advisor?

Last Friday’s (April 26) The Soul of Enterprise Free Rider Friday podcast (Millionaires, Marxists, and Minimum Wage) with Ron Baker and Ed Kless, included a ‘stack’ (their term not mine) by Ed on the news that “Kim Kardashian Is Right: Lawyers Shouldn’t Have to Attend Law School”. As someone who knows absolutely nothing about the Kardashian family (nor wishes to), not much in that – apart from the comment that Ed and Ron go on to make in respect of Episode #225 of their series of podcasts in relation to “occupational licensure”.

In short Ron and Ed talk about the fact that there are some jobs around the world where you need a ‘licence to practice’ – examples: a barber (hat tip to Ron’s Dad there), an accountant, and even a lawyer.

On the back of the Kim Kardashian issue, Ed and Ron then go on to ask this question:

If you know someone isn’t qualified (e.g., don’t have a law degree) or isn’t licensed (e.g. have a practising certificate), should you still be able/allowed to ask them for professional advice – provided that you sign a waiver/agreement/whatever stating that you know that persons isn’t qualified or licensed to provide the requested advice?

Never, no way, stupid idea.

And I would agree with you.

But wait, we’re all adults here and should be allowed to determine our own future and make our own decisions.

Exhibit A: this is an excerpt from the British Government’s website (April 2017) in relation to obtaining legal advice in Thailand:-

“There is no restriction on any Thai national , with or without a law degree [bolded and underlined for emphasis by me], to offer you legal advice.”

Now Thailand is a civil law jurisdiction with a codified law, but still…

…leaving aside the whole issue of how stupid you may or may not need to be take legal advice from a non-licensed, non-qualifed expert (bought a pre-pack will lately?) – here’s a precedent.

There are “lawyers” who advise “on the law” who are not educationally qualified (as opposed to possibly life) or institutionally licensed.

Interesting as that all is though, that’s Thailand – hardly the US, UK or Australia.

Well hang on a second…

Listening to Ed and Ron’s podcasts there are States in the US where you can now obtain ‘legal’ advice from someone who isn’t qualified or licensed, provided that you sign a waiver saying that you knew this to be the case.

And, in my view the following comment from legalfutures.com – reporting on The UK Legal Services Consumer Research Report 2019 yesterday:-

A smaller majority (58%) would be prepared to use freelance solicitors, due to arrive this November with other Solicitors Regulation Authority rule changes, if they could save money on fees.

means they are not a long way behind.

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

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* if I have misrepresented or misunderstood my take-outs from Ed and Ron’s podcast, then I apologise to them.

 

 

‘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

KPMG: “We are not trying to be a traditional law firm.”

“We are not trying to be a traditional law firm. Our approach is different, with a focus on offering our clients integrated global legal advice and solutions, where we are able to work seamlessly with existing KPMG clients who are looking for local and multijurisdictional counsel.”

The quote above, by Stuart Fuller of KPMG Australia, in today’s Australasian Lawyer is yet another great example of why law firms need to be on their guard and wary of the Big4’s re-entry back into the legal sector.

Why?

Well, here are my big 3 take-outs from Stuart’s comment:

  1. almost nobody is trying to be a ‘traditional law firm‘ – everyone is innovating and looking to reposition themselves as strategic advisors (the current Holy Grail). In short, if you want to be a ‘traditional law firm’ – unless you are really niche, which, like many, KPMG are not – then your days are numbered in my opinion.
  2. a focus on offering our clients integrated global legal advice and solutions” – what would DLA Piper, Baker & McKenzie, White & Case, Norton Rose, Deacons (just to mention a few) make of that comment? Isn’t that precisely what they would lay claim to be trying to do?
  3. but, crucially, the following sentence is the principal reason why law firms with more than 20 partners should be concerned: “where we are able to work seamlessly with existing KPMG clients“. Why? Because the Big4 get involved earlier in the advisory/transaction life-cycle than law firms have historically done, so if the law firm is only looking to advise on the law, and not act in any consultation phase (even as early as the pre-planning phase), then they are going to be in big trouble.

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

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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:

Screen Shot 2018-12-30 at 8.37.01 pm

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?