Writing on the road

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Posted in: Law21

It’s been a few months since I last posted one of these roundups, so I thought I’d pull one together today. Here’s a series of articles I’ve written elsewhere or interviews I’ve given to various print and online periodicals. As usual, I’ve been busiest at Stem Legal‘s “Law Firm Web Strategy” blog, but I’ve also been working with several other sites and publications. As always, my thanks to the publishers for giving me the opportunity to address these topics — I hope you find them interesting and worth your time.

1. Stem Legal’s Law Firm Web Strategy

Where’s your fingerprint? Making your online profile unique

The 4 most frequent flaws of law firm content

How CLE providers can use social media

Crafting standout practice group descriptions

Big-picture thinking from a social media guide

Linkable content: The backbone of social media marketing

In our private universe: Being yourself on social media

2. Edge International Communiqué

Why are you recruiting? Time to rethink your approach to new lawyers

Managing partners: Stop fighting the last talent war

3. Attorney At Work

The do’s and don’ts of conference tweeting

Client-driven recruitment

Would you hire yourself?

4. ABA Law Practice Magazine

Lawyers and social media: Can legal advice be crowdsourced?

5. The Lawyer (UK)

Disenfranchising the turkeys: The decline of partner power

6. The Lawyers Weekly (Canada)

How David fights Goliath with social media

Rethinking legal ethics in a wi-fi world

7. Slaw

CPD and the presumption of competence

I was also fortunate enough to be interviewed for or mentioned in a number of articles published in other media, including:

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.

The limited-profit law firm

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Posted in: Innovation, Purpose, Uncategorized

What if your law firm were legally prohibited from making too much money? What if there were a fixed profit ceiling for equity partners, and any profit exceeding that amount had to be distributed to others? What if your firm explicitly placed social goals ahead of revenue goals — what would change about your firm’s culture, structure and position in the marketplace?

This is, perhaps needless to say, mostly a thought experiment, since the number of law firms clamouring for this kind of setup are vanishingly few. But a recent article in The Economist about an emerging corporate form called a “benefit corporation,” or B Corp, got me thinking. B Corps, the article explains, “must have an explicit social or environmental mission and a legally binding fiduciary responsibility to take into account the interests of workers, the community and the environment as well as its shareholders. It must also publish independently verified reports on its social and environmental impact alongside its financial results.”

Companies seeking to establish themselves as B Corps are those wishing to place social or environmental goals above profit and revenue objectives, but which find it difficult to do that under the traditional corporate form. These aren’t non-profit organizations, but you might call them limited-profit, qualified-profit, or “yes,but” companies: yes, they want to make money, but they want to accomplish other things more. The Economist cites other corporate vehicles in this vein like flexible purpose companies (FlexCs), low-profit limited-liability companies (LC3s) and in the UK, community interest companies.

Could a law firm become a B Corp? Several small firms in the US have already done so, but there are complications. Carolyn Elefant explores the problems with B Corp law firms in a detailed post that points out a fundamental conflict: lawyers are required to place their clients’ interests ahead of all others, so a firm whose founding documents placed the highest priority on, say, the environment, would be breaking the profession’s ethical rules.

For example, consider a situation where a client receives a generous settlement offer in a contingency matter against the Sierra Club or some other environmentally conscious company popular in the community, but the client, reasonably, does not want to accept the offer because of certain conditions attached to the offer. However, pursuing the case to trial will be upsetting to the community and further, force the lawyer to lay off several employees to conserve cash flow for remaining discovery and trial and could potentially limit the Sierra Club’s conservation efforts due to lack of funding.

Ethically, so long as the client’s rejection of the offer is reasonable (which it is here), the lawyer must abide by the client’s decision. But under the b-certification framework, equal consideration of the interests of firm employees, the community and the client would militate in favor of the lawyer either strong-arming the client to accept the settlement or withdrawing from the case.

This is a strong objection to the use of B-Corp status for law firms, and if push came to shove, I could see a regulatory body ordering a law firm to abandon a corporate form that explicitly placed someone other than the client at the top of the priority pyramid.

Nonetheless, I wonder if there might not be other solutions. Slater & Gordon, for instance, the Australian personal injury firm that floated on the stock market several years ago and is now an international behemoth, makes for an interesting case study. As my Edge colleague Gerry Riskin pointed out at the time, Slater & Gordon’s initial prospectus was very clear with potential shareholders where its priorities lay:

“Lawyers have a primary duty to the courts and a secondary duty to their clients. These duties are paramount given the nature of the Company’s business as an Incorporated Legal Practice. There could be circumstances in which the lawyers of Slater & Gordon are required to act in accordance with these duties and contrary to other corporate responsibilities and against the interests of Shareholders or the short-term profitability of the Company.”

This seems to me a good way of making clear to shareholders that their profits are a tertiary concern for the firm: the firm believes (correctly) that its first duty is to the courts and its second is to clients. A modified form of B Corp or other limited-profit corporate form could be envisioned that would similarly arrange the peculiar priorities of a fixed-profit law firm. Might this kind of qualification address the ethical concerns that Carolyn raises? I’m not certain, but it’s worth thinking about.

For myself, I keep coming back to ponder the strengths and weaknesses of a limited-profit or fixed-profit law firm. Disadvantages? Legion: rainmakers and high earners would desert a firm like that immediately, knowing that their hard work would quickly strike an immovable low ceiling of financial returns. The firm would be unable to recruit ambitious lawyers or high-potential law students for the same reason. Clients who want the very best lawyers would turn away from a firm of anti-capitalist do-gooders. As a vehicle for anything more than a modest mid-sized firm, it’s almost certainly a non-starter.

But there’s upside, too. A law firm that was precluded from chasing ever-higher profits would have to find some other guiding business purpose. Maybe, as with many B Corps, it’s an environmental target, a quest to reduce its ecological footprint and those of its clients. Maybe, more likely for a law firm, it’s a social purpose: serving only clients in low- or middle-income brackets, making access to justice its higher calling.

Alternatively, maybe the firm simply rearranges how its profits are spread. Partner profits would be fixed at the start of the year on a percentage basis (lockstep or otherwise), so that beyond a certain dollar figure or percentage of total revenue, the partners couldn’t make any more money. Accordingly, the excess would be divided equally among associates or staff — everyone gets a bonus when the firm succeeds, driving everyone to make the firm’s success the top priority. And if you want to really go around the bend, make clients the beneficiary of success: every extra dollar at the end of the year is returned to clients per capita, like a co-operative. How’s that for a marketing tactic? Hire our firm and you might get a refund on your fees.

Yes, I know I’m dreaming in technicolour. And anyway, law firms don’t need a special corporate structure to do many of these things. But what these new vehicles really do is allow us to re-envision the purpose of the corporate entity, enabling reasons for existence other than the generation of wealth for ownership. The great majority of problems afflicting modern law firms, it seems to me, come down to money: competition for revenue, fights over profit, arguments about who makes more. Imagine a law firm that was structurally relieved from any of those concerns. You think we could live with a few of those in the legal market today?

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.

Pricing to the client experience

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Posted in: Billing, Clients, Marketing

Many lawyers, gnawed by doubt, regularly ask themselves, “What should I charge?” It’s the question with a million right answers — which is to say, with no right answer at all. Whatever number you finally settle on, however, is less important than the process by which you arrived at it. As far as I can tell, lawyers’ most common methods of determining price are:

  1. Find out what comparable lawyers are charging and, depending on your self-confidence, charge more, less or about the same as them.
  2. Calculate your internal costs of doing business, tack on a percentage equal to your desired profit margin, and charge that.
  3. Keep quoting slightly higher prices for successive clients until one of them winces or balks, then hang out at that price for a while.

Each of these approaches has its merits, I suppose. But you’ll probably notice that each has one thing in common: the client is not asked to participate. Lawyers have rarely if ever invited the client into the pricing process, mostly because they assume the client will do everything in its power to drive the final price down. That’s not an unreasonable assumption, on the face of it, but it means that the lawyer is left groping alone in the dark for a number in which the client has an equal interest.

An emerging line of thought in alternative (non-hourly) pricing, one with which I’m in strong agreement, asserts that the client is in fact indispensable to the pricing process. “Pricing your product is actually simple, as long as you consider it from the buyer’s point of view,” says Seth Godin, who knows more about pricing than most people. “The real trick is gaining an understanding of what [clients] actually do and do not value in a given piece of legal work. … [and t]he only effective way to understand a client’s value priorities is to have a direct conversation with them,” says Toby Brown, who knows more about pricing than anyone else in the legal market.

Now, I’m certainly not saying that you let the client determine what the price is going to be. I’ve said elsewhere that it’s the seller’s job to take responsibility for price, Toby emphasizes that the client’s value proposition must be reconciled with the lawyer’s, and Danny Ertel adds for good measure how critical it is that the lawyer learn what line of reasoning led the client to its own price estimate. Pricing is a two-way street. More to the point, it’s a conversation — not a monologue or a directive or a statement of fact by the lawyer. You cannot have a grown-up conversation about pricing without the client.

I want to take this line of thought another step further. I want to suggest that not only does client participation make pricing easier and more satisfying, but that clients themselves can actually be the basis of your pricing. Matt Homann points us to a great article called “Pricing strategies for creatives” (a category that I think includes lawyers), which included this powerful excerpt:

It’s a little-known secret that you can charge not only for your creative work, but also for the client experience around the work you deliver. In essence, you can price things that have nothing to do with design, but have everything to do with the experience your client encountered throughout the process of engaging with you on their project.

I think this is completely applicable to the legal profession. So many lawyers (as so many clients will ruefully attest) can barely bring themselves to notice how clients experience the legal process. We pay close attention to the nature and quality of the legal work we do, but we pay relatively little attention to how we deliver that work, how our services are received, and how the client feels about it. A small minority of lawyers and law firms, for reasons of personality or branding or both, do pay attention to the “how” of legal services, and they reap the benefit of happier clients (and often, happier lawyers). But I’m not aware of any firm that has explicitly said, “The client experience will be a key component of our pricing strategy.”

Think of it this way. One law firm might say, “We have the very best lawyers in the city, and we charge a premium for that unique characteristic.” Another firm might say, “We are the biggest firm in the country, and we charge a premium for that unique characteristic.” What if your firm said, “We make the client the center and purpose of everything we do here — and we charge a premium for that unique characteristic.” The nature and value of how your client receives your services can be the basis of your pricing, so long as hardly anyone else makes that their unique competitive foundation — and that, in the legal profession, is not a concern that should keep you up at night.

Law, as usual, lags behind other sectors in this regard. In any other service business, how you are served is a differentiator, if not a full-scale driver, of pricing. If you don’t believe this, think back to the last time you tipped more (or less) than 15% at a restaurant, and ask yourself why. I can almost guarantee that it had nothing to do with the food or the decor; the menu already priced those out for you. The tip is what you pay for service. And what you tipped your server had everything to do with whether or not you received service that was cheerful, responsive, quick, inquisitive, memorable, and genuinely focused on your enjoyment of the experience — or that was the opposite. That’s what you pay for when you’re buying services. Why would your own clients be any different?

If the way you treat your clients is cheerful, responsive, quick, inquisitive, memorable, and genuinely focused on their interests, you can charge for that. In the legal marketplace, in fact, it’s such a huge differentiator that you can probably charge a lot for it. You can charge for hiring people obsessed with client satisfaction. You can charge for returning calls within 24 hours. You can charge for giving clients 24/7 access to their files and billing status. You can charge for entering your clients’ birthdays into your CRM system and sending them a card on the big day. You can charge for asking, “Is there anything else, anything at all, that we can help you with today?” For crying out loud, you can even charge for not charging by the hour! These are real client benefits. They make clients’ lives easier or happier. And most lawyers don’t offer them.

Are all these things entered as separate line-item charges in the bill? Of course not! But they’re part of the service experience at your firm. They’re what make you special — because they make your clients feel special. And that is not a commodity. That is not subject to the vagaries of the market. The price of almost every lawyer product — the deliverable or outcome at the end of the lawyer’s efforts — will decrease over the coming decade. But the price of a lawyer’s service — the personal, customized, convenient, anticipatory, strategic, counseling, caring way in which the client is treated and their interests looked after — will hold steady and will very probably rise.

There is always going to be exquisitely challenging or important legal work for which clients will pay virtually any amount billed in any format, even if delivered with an impersonal touch bordering on disdain. But most legal work is not in that category, an emerging fact that’s cutting the legs out from under the standard billable rates that many lawyers and law firms have traditionally commanded. We need a new basis for asserting our value and differentiating ourselves from each other. We’re all smart and knowledgeable and hard-working. But we’re not all great at service. We don’t all care the same about our clients. We don’t all engineer our billing methods and matter management and client communication so as to maximize the client experience.

Markets reward scarcity. Great client experience in the legal market is scarce. It’s time to think about client-experience pricing.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.