If you missed it, the recently published ‘The Legal Spend Landscape for 2022‘ by Apperio sets out the ‘Top 5 Measures Of Value‘ in the eyes of the survey respondents – aka, your clients!
In order, these included:
Outcome of legal matters – 66%
Hourly cost per lawyer – 60%
Spend forecast vs Actual spend – 46%
Risk exposure – 43%
Overall spend by law firm, matter type or business unit – 40%
Interestingly, in the same Report, the Top 3 answers to what the ‘Most Effective Techniques For Controlling Legal Costs‘ were:
Structuring more legal work under AFAs – 74%
Utilising specialist software for monitoring and maintaining cost – 63%
Centralising all legal spend through the legal department – 49%
And I very much suspect that the last of these – “Centralising all legal spend through the legal department” – is going to be a post in the near future, either here or on my other blog.
As usual, comments are my own and I welcome feedback.
First off, for those who don’t know differently: in the world of professional services firms an ‘Engagement Letter’ isn’t an expression of love to another. Indeed, for us an ‘Engagement Letter’ might better be phrased as a ‘Pre-nup agreement’!
What is an Engagement Letter and why are they so important? In the world of professional services firms, an ‘Engagement Letter‘ can generally defined as being:
“A document that sets out the business relationship between a client and their law firm. This letter serves as an agreement between the parties on the terms of their engagement. This includes details on the services being offered, client responsibilities, deadlines and compensation.”
Engagement Letters can include more, but in short they set out:
Exactly what the Scope of Services being provided are
Who is assigned to do what, and
How much the law firm will be paid by the client for doing said Scope of Services.
They are important for two main reasons: (1) on the part of the law firm they set out what the client’s expectations are – thus limiting the potential professional indemnity risk on the part of the firm; and (2) on the part of the client they set out the service standards, the expectations – they hold the law firm to account.
So, for both parties: a properly agreed to Engagement Letter sets out the expectations and assigns the risk – “win/win” as they say.
Two recent case studies So let’s take a look at two recent cases that evidence just how important Engagement Letters are.
In the first case (a US-based medical case), a [medical] patient was billed US$230K for surgery having previously been advised – in their Engagement Letter – that the cost of the said surgery was estimated at US$1,300.
The Supreme Court in that case held that the estimate was protected by contract law, as no formal extension of scope letter had been issued and so the patient was only required to pay the US$1,300 original estimate.
Lesson Learnt: Send your out of scope (or extension of scope or variation of scope) letter out as soon as you are asked to do something that is not in your Engagement Letter.
In the second case (UK-based legal matter), a properly executed retainer agreement allowed a law firm to keep its agreed £300K fee, even though the bond issue that it related to was aborted.
Interestingly, the judge in the second case, His Honour Judge Paul Matthews, previously (as in a week earlier) made a comment – in reducing costs sought by a receiving party because all of the work was handled by a solicitor claiming grade A rates, that:
“it was not for the paying party to identify which work could have been delegated.”
Lesson Learnt: Engagement Letters need to be properly drafted; but, importantly – get yourself a Project Manager to manage the case so that they can constantly review the work and ensure that any Out of Scope work is immediately communicated.
My 5 hints on how to manage Engagement Letters If you follow these 5 hints, I think you’ll find you have far fewer issues with getting your fees paid:
The most important thing to remember is to have an Engagement Letter with your client!
Once you have the Engagement Letter, remember that it is not a ‘set and forget’ document. Don’t sign it, then put it in the file and forget it. Keep a copy close to hand and review it daily.
If, at any time, you see Scope Creep happening, send an immediate notification to your client that you are being asked to do tasks outside of the originally agreed Scope of Works.
And by ‘client’ here, I don’t mean the person asking you to do the work, but the person who will be paying the bill (accepting they may be the same).
Finally, if your project is big enough, put a Project Manager in charge of reviewing and managing all of this.
As usual, comments are my own and I welcome feedback.
Happy New Year to you all, and welcome to the new calendar year that is 2022.
During the holiday period here in Australia (published 13 December 2021) I was fortunate enough to read a really insightful article in MIT Sloan Management Review by Andreas B. Eisingerich, Deborah J. MacInnis, and Martin Fleischmann titled ‘Moving Beyond Trust: Making Customers Trust, Love, and Respect a Brand’
which set-out how service providers, like law firms, could provide real value to their customers using the 3Es:
enable
entice,
enrich
Where:
Enable = help your customers solve problems in ways that are economically feasible, reliable, efficient and convenient
Entice = making your customers feel good
Enrich = build self-affirming identities.
And the benefits of using this method?
Evidencing the research outcomes of this methodology, the article sets out 6 benefits you should see:
Higher Revenue
Lower Costs
Higher Barriers to Entry
More Paths to Grow[th]
Stronger Talent Pool (within your firm as lawyers want to do this type of work for this type of client), and
Greater Retention Rates in your firm.
All of which – should – result in higher profit.
Well worth a look, take a read – and certainly food for thought!
As always, the above represent my own thoughts and would love to hear yours in the comments below.
We are more empathetic: right off the bat, I genuinely believe one of the biggest benefits of COVID has been that we’ve become more empathetic – toward both our internal and external clients, as well as our fellow team members.
We communicate better: turns out that individual silos can be a good thing – it’s when you have team silos that problems start to occur.
Personal space is actually a good thing: we are more respectful of others, more understanding – we get that people are human and have competing priorities – such a pick-up time.
We are better listeners: “I forgot to unmute myself” was the standout term of 2020, but the reality is we have become better listeners through this lockdown process.
We are better at giving constructive feedback: I have had way more constructive feedback (both good and bad) during COVID that I ever did in the 25 years prior to it. And not only has the quality of the feedback improved, but also the frequency in which it is given has improved dramatically too.
We use technology better: actually it might not be that use technology better, but more that we are using the right tech tools for the problem at hand better.
More team fun: not sure about you, but I don’t think I have been to as many team virtual quizzes or Friday afternoon drinks as I have during COVID. A relentless approach to real team building has been a big win during the past two years.
Open door policy: we have become much better at having an open door policy with our team members. No question is too silly to ask these days!
Better project managers: juggling all of the complexities of living and working from home has made us much better project managers. We have also become much better at prioritising what is truly important in the moment.
Last but not least, we are far more trusting that our team members are doing what they say they are doing. Monitoring other people at work now tells them that you don’t trust them; leave them alone to get their shit done on the other hand, and you may very well be surprised with the results!
As for my prediction:
A tight labour market is going to continue into 2022 and hiring ‘talent’ will be difficult. This doesn’t just apply to lawyers, but to anyone who works in the legal industry.
Have a great Christmas, New Year and Holiday Season all – and thanks for continuing to read and support this blog.
You’d have to have been hiding under a rock for past two years not to have seen an article or two on the benefits/pitfalls of remote working. But, as we move into the next phase of this pandemic/endemic, one in which we must start to learn to live with COVID, law firm management now need to be asking:
‘What does the future of the office look like for our firm?’
Truth is, there’s no simple answer to this question. On the one hand, we have those who advocate that “distance breeds distrust” and “out of sight, out of mind”. On the other hand, we have a lot of people saying we’re not going back to the old ways – and if you make us, we will part of the Great Resignation.
One answer to this issue might be in what the Australian Financial Review recently termed ‘Anchor Days’.
As per the AFR article, ‘Anchor Days’ are days on which a group of employees (in the same team) agree to go into the office on the same day each week with the aim of enhancing collaboration and ensuring a more lively office culture.
While I like the concept of Anchor Days, I think I should also point out that, from my reading, it comes with a couple of major misconceptions:
we all work in the same physical location (geographically in the same State/Cities, but also on the same floor of a building!).
that collaboration is more likely to happen in physical presence, when what we actually find is that collaboration more likely occurs with inclusion, and inclusion is more aligned with trust. QED, if you want more collaboration within your team, then trusting that your team can get it’s shit done here remotely/agile and not dictating collaboration top down, is a big step in the right direction.
My final comment: if Anchor Days become a thing, what day(s) would you chose?
Last week saw the publication of the 14th edition of CommBank’s Legal Market Pulse report for 2021. What I recall starting out as a quarterly, then half-yearly, report, now looks to be permanently set as an annual publication (feel free to do a search of my previous posts on the CommBank report to see some of the history behind this).
Anyhow, the overriding message of this year’s Report is that the pandemic had little affect on overall profit growth at most Australian law firms (probably as a result of dramatically reduced costs). And with year-on-year median 12.1% growth in profit, on first look it appears that the profession is going great guns. Which, as someone who advises to the profession, is great news!
But where do law firms think growth will come from over the next 3 years?
How Australian law firms are looking to grow over the next 3 years?
Looking at page 11 of the Report, Australian law firms will primarily look at the following 11 ways to grow their firm’s revenue over the next 3 years:
If you missed it, last week TikTok owner Byte-dance announced that it was moving its employees away from their 996 work week to a new 1075 work week.
For the uninformed, which included me until last week, 9-9-6 required Byte-dance employees to work from 9am to 9pm 6 days a week. A time schedule that would make most lawyers blush. Fortunately for Byte-dance employees, their new – light-on – work schedule is 10-7-5, or from 10am to 7pm 5 days a week.
Clearly a step in the right direction when it comes to employee well-being and mental health.
Anyhow, I comment on this for three reasons:
First, Legal Cheek recently published a post that revealed the average working hours of junior lawyers in the UK. Of the 2,500 junior lawyers surveyed, junior lawyers at Kirkland & Ellis racked up the longest average working day, clocking on at a tardy 9:14am and off at 11:28pm. The survey is silent on whether this is a 5, 6 or 7 day week. I recommend you take a look at the full list, makes for rather sad reading (if junior lawyer mental health really is an issue of concern for the industry)
Second, last week the New York State Bar Association Task Force on Attorney Well-being suggested that there be a cap on billable hours at 1,800 hours per year.
The announcement had no less than Roy Strom comment on Bloomberg Law that:
Firms are too scared to impose a cap because it would be hard to hire the number of additional lawyers the cap would require. It would also put a huge dent in profits.
And
The billable hour serves as something of a measuring cup ambitious people pour themselves into. The unfortunate truth about Big Law is that it doesn’t have many alternative definitions of success.
If Roy’s comment is right, and it is an unfortunate truth that Big law has little alternative but to measure success by the amount of hours billed then, in my view, that is a really sad reflection of our industry. Because surely other metrics, such as the quality of the work provided and client satisfaction should have equal weighting. Not to mention churn and retention rates.
My third and last reason for commenting on all this is a personal one. I have long said that asking lawyers to work 2,000+ billable hours a year wasn’t a good thing – and there must be a reason why that is my most read post, so there is some comfort in seeing such an esteemed group as the New York Bar Association finally agree with me.
I’m a cynic, so usually read industry reports published by industry providers with a huge pinch of salt, but every now and then you get an exception to the rule. So is the case with BigHand’s recently published ‘The Legal Pricing & Budgeting Report’, which is full of really insightful information (so read it!).
Here are my 10 take-outs (NA = North America and UK = UK):-
From
The damning:
1.
To the surprising:
2.
3.
To some obvious:
4.
5.
And some knowns:
6.
7.
With a few, “What the?” (as in, only…)
8.
9.
With a great conclusion:
10.
As I said, as a rule I don’t recommended reading these types of reports as they typically are a waste of time; but this is one I have no problem saying “go read it!” – and if you have any thoughts/comments, post them in the comments section below!
The Legal Marketing Association (LMA)’s Strategies + Voices blog has some great insights into what clients’ value in a recent post (16 September 2021) – ‘5 tips to deliver exceptional client service’ by Natasha Tucker.
The post starts out by stating that:
the tips shared are based on internal client feedback interviews and discussions conducted by the author with companies in the oil and gas, chemicals, banking and telecommunications industries in North America.
And the 5 ‘tips’ are:-
Care and Connection
Trust and Honesty
Price and Value
Experience and Expertise
Team and Resourcing
I’l go on record as saying I thought Tucker’s post was excellent. It turned my mind, however, to whether we in Australia would consider the same criteria as being critical to the delivery of exceptional client service?
So here are my thoughts:
Care and Connection – absolutely spot on. Here in Australia this would come under the banner of ‘responsiveness’, but many of the points Tucker makes are echoed in Australia.
Trust and Honesty – I would say this is a given here in Australia and not really talked about too much. Which is to say, in my experience, clients here don’t see trust and honesty as playing a big part in the perception of excellent client service delivery – because without it, you ain’t my law firm!
Price and Value – I struggled with this one because clearly price is important. And many would argue it is critical to the perception that the client has received good value. But here’s the thing, in Australia ‘price’ is an after-fact – the lawyer’s invoice comes after the deal is completed. So while price certainly plays a retrospective role in whether the client received exceptional client service, it is not a real time barometer – the client could believe they were getting excellent service until they receive the invoice and see how much they paid for that service! So I’m going to disagree with this one.
Experience and Expertise – again, I think this is increasingly a ‘given’ here in Australia. Sure it will have some effect on the delivery of client service, but the cases where it does will largely be the 1 to 2% of ‘top-end’ matters.
Team and resourcing – absolutely critical.
Noting that it is easy to be critical without being helpful, here are a couple of issues that I see as being of increasing importance in the delivery of exceptional client service here in Australia:-
Technology – increasingly clients want your technology to talk to their technology. If they want a Teams meeting and you say your internal systems only allow you to do Zoom meetings, they get frustrated. They are not getting exception client service. Likewise, while ‘client portals’ were all the rage 10 years ago, clients today want this information delivered in their tech echo-system and do not want to have to log-on to your platform to access this.
Process – linked somewhat to technology, clients today look for clear processes from their firms. For example, large institutional clients want one bill per month – not 20 different bills for each of the various internal service lines in your firm that may have acted on their matters. Process however extends to other areas, such as Legal Project Managers, Client Account Managers – so-called ‘non-lawyers’ who can keep the lawyers honest and on track.
Values – increasingly clients want to work with law firms who share their values, and they see this as part of the client service delivery. For example, if the client is passionate about the environment and your law firm doesn’t have a stance on this issue, then you’re likely going to have some issues. In short, in my view, the days of firms saying what they stand for has nothing to do with the service they provide are over – what you stand for is very much a part of the service you deliver in 2021!
Mentorship – clients have always enjoyed working with law firms that are able to mentor the in-house team. What’s changed is that these days this is a formal – out in the open – discussion; and it includes the tough discussion about how law firms manage their own internal mentorship, staff wellbeing and overall happiness.
Retained knowledge – this is a critical one to me. Most law firms have worked with clients for longer periods than the in-house legal team has. Their time with the client either pre-dates the creation of an in-house team or else General Counsel at the in-house team has moved on and that information has been lost. I cannot over emphasis therefore how important private practice law firms can be as the font of knowledge (for legal matters) for their client. But here’s the thing, at this level you are commercial confidants and so relying on legal conflicts as the rationale as to why you can act against a client will sure as Hell kill and perception of ‘exceptional client service’!
As always, the above represent my own thoughts and would love to hear yours in the comments below.
Overall it’s an interesting read and probably worth 45 or so minutes of your time (lots of graphics should mean it won’t take that much longer of your time), but it was the last section on ‘Five simple steps to transform your firm’ (which funny enough has very few graphics) that really grabbed my attention. I thought they were useful tips/insights to keep in mind, so I thought I would share them here:
Assess where your firm demonstrates value to clients – understanding where you provide value to a client will inform how you create a sustainable business model.
Implement innovative practices – finding opportunities where you can innovate processes within firms will keep it competitive over the long-term.
Harness the power of data and analytics – having a better knowledge of where your firm spends its time will help in understanding where potential client value can be added.
Construct, and embrace an employee value proposition – having a central purpose will go a long way towards unifying four generations of employees at very different stages of their careers.
Embrace diversity and inclusion – bringing a variety of perspectives to your firm will help in retaining your team at a time when loyalty is at premium.
Take a look at the report – let me know if you don’t agree with any of these or if you have any you would add, and enjoy your week!
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