How to compete on price

One of the oldest pieces of marketing advice in the legal profession is: “Don’t compete on price.” Wiser heads than mine constantly warn lawyers not to cut their prices to match what other sellers are providing, that engaging in a price war for legal services is as potentially ruinous as getting involved in a land war in Asia. There are at least three reasons for this:

1. Price wars are a death spiral. Every time you reduce your fees for a service to undercut a competitor, you set off a chain reaction whereby everyone in the market goes one step lower until even the “winners” can’t turn a profit. (Although read this James Surowiecki column for a counter-intuitive take on price wars.)

2. Price-cutting leads to quality reduction. It’s simple: if you’re not bringing in as much money for the same work, you need to cut back somewhere else: firing an able assistant, scrimping on new supplies, taking on more files than you can competently handle. (Although read the rest of this post for my thoughts on cutbacks.)

3. Price is an important marketplace signal. Unsophisticated buyers (and in the law, that’s most buyers) want the best deal, but they also worry about services that seem too cheap to be true. Lawyers offer a top-quality product, and a robust price for that product gives buyers confidence in its quality. (Although it’s perilous to count on the continuing ignorance of your customer base.)

So it’s both sensible and logical to tell lawyers not to compete on price. Yet for all that, I’ve come to believe that it’s not good advice anymore. I think we need to learn, as a profession, how to compete on price in ways that sustain our businesses.

It’s fine, in the abstract, for a lawyer to refuse to match or beat a rival’s lower price for a given product or service. The first few times a lawyer loses a client that way, she can content herself that she held the line against the devaluation of her services and that a client who only cares about price will be a difficult client throughout. But what happens when she loses the fifth client, or the tenth, or the fiftieth, because of price? What happens when clients start to consistently say, “I can get these services at a substantially lower price down the street,” or “I like working with you, but I can’t justify the premium that you charge”?

Many lawyers are already in this boat — much of the residential real estate bar, for instance. For these lawyers, refusing to compete on price is not a practical option, because their clients have made clear that price is the most important factor in their purchasing decision. There’s little point in charging what you believe is a fair price if no one’s buying at that price. Worse, more lawyers are going to join that boat over the course of this decade, as technology, collaboration, globalization, and regulatory change combine to rearrange the competitive landscape. We may complain about low-priced “non-lawyer” competitors and denigrate the quality of their work, but if clients buy what they sell at those prices, that’s going to affect what everyone else can charge. And not only will the quality of their offerings improve over time, but it also won’t be only “non-lawyers” doing it. Whether we like it or not, price will become a significant competitive factor, and it will be dangerous to run our businesses pretending otherwise.

So what can we do? The risks of constant price reductions detailed above are all too real, yet the day will soon come where we have to lower our prices just to stay in the marketplace conversation. If you can upgrade the type and quality of your services to premium or luxury levels and therefore maintain or even increase your prices, good for you. But there’s only so much room at the top of the mountain and not everyone can stand there; and in any event, raising the quality of what you offer often requires increasing what you spend to offer it, getting you no farther ahead.

But you don’t need to compete on price if you can go one better: compete on cost. Reduce the inefficiencies in your practice, streamline your processes, systematize where feasible, outsource if possible, reallocate resources to match the appropriate level of talent to the appropriate sophistication of tasks. This isn’t about freezing salaries or eliminating positions or taking away free coffee or all the other myopic expense-reduction steps many law firms took during the financial crisis. This is about restructuring your business in smart ways that reduce waste, cut down on system leakage, fine-tune your engines and upgrade your capacity.

Competing on cost means you spend less to get the same results as your law firm competitors, and puts you on an even footing with the non-firm competitors currently storming the gates. No matter what happens in the marketplace, one rule never changes: profit = revenue – expenses. Even if your revenue is down, you’ll still turn a profit if your expenses are down further: the lawyer who charges $500 for services that cost him $200 is doing better than the lawyer who charges $1,000 for services that cost him $900. You can’t control what the market will pay you; but you can control, to a large extent, what you spend to compete in that market. If you ever expect to seriously offer fixed fees to the marketplace, you absolutely must start by competing on cost.

Here are some examples of how you can compete on cost:

Install a legal project management system. Probably the simplest way to introduce business efficiencies to your law firm is to adopt the principles of legal project management. From a basic back-of-the-envelope process for doing certain tasks systematically all the way up to a full-scale Lean Six Sigma re-engineering of your entire operation, you’ll wind up with clearer goals, more explicit processes, more efficient systems and increased productivity.

Automate anything repetitive that moves. Your client intake system, your most frequent inquiries, your most common procedures, your most familiar routines: if the same basic task occurs more than occasionally in your firm, it should be converted into a template, a checklist, a document assembly system, or some other means by which completion is made faster, variation is made more difficult, and fewer resources are expended needlessly.

Move work up and down the talent chain. Move dictation and transcription from secretaries down to voice-recognition devices. Move legal research to freelance specialists across town or outside the country. Move administrative tasks to virtual assistants. Move e-discovery to people or systems actually qualified to do it. Then train the people who used to do low-value work in high-value skills like project management, business development, human resources and so forth. Same people, same resources, but better allocated and with new capabilities.

Use technology wherever possible. Practice management software, on your server or preferably in the cloud, delivers huge efficiency gains. Specialized accounting software for law offices reduces errors and improves productivity. Take advantage of low-cost, internet-based contact management systems. Give serious thought to going paperless, or at least paper-less. If you’re already using these tools, constantly train your staff to become more proficient with them. Exploit what Dave Bilinsky calls the “new leverage”: using technology to achieve higher rates of return on each hour of work.

Give serious thought to outsourcing. There’s one reason big firms like WilmerHale and CMS Cameron McKenna have struck deals with legal process outsourcing firms to move millions of dollars worth of business and back-office functions to smaller centers: efficiency gains that help them compete on cost. To be sure, there are human costs to be dealt with, but if you take a hard look at the numbers, you might find the logic of outsourced operations to be inescapable.

– Come up with a non-hourly billing and compensation system. It probably goes without saying that the single biggest inefficiency in most law firms is the fact that tasks are worth more the longer they take and the more resources they consume. Hourly billing — and more importantly in this context, hourly compensation — is a productivity hemorrhage that’s becoming far more damaging to firms than to clients. And it is not sustainable.

You can probably look around your office right now and find five ways that costs could be reduced or efficiencies could be introduced without a corresponding drop in quality (and maybe even an increase). Most often, the reasons why your firm avoids dealing with these inefficiencies are personal or political or both. But it’s not mission impossible, as the saying goes; only mission difficult. And I would suggest that as of right now, it’s also mission critical. Getting a grip on and eliminating inefficiency in a positive, sensible way is probably the most under-valued tool law firms possess to increase their productivity.

If there’s a downside to this approach, I don’t see it. Suppose that none of these dire warnings come to pass, and that the legal marketplace remains the safe, cozy, bloated anachronism it’s always been. By making cost competition a strategic priority, you’ll have increased your profitability vis-a-vis your rival firms, channeled more money to your partners, become more attractive to potential lateral hires, and given your firm the leverage, if you ever wanted, to make your rivals compete on price on your terms.

But say the marketplace erupts in the ways I’ve been describing, and hyper-efficient competitors emerge that can beat your usual fees by 30, 50, 70 percent or more. Without a streamlined operation in place and no time to install one in the chaos and pressure facing you, you run the serious risk of becoming another victim of market change. But if you’ve already prepared to beat these new entrants at their own game, you’ll at least have a fighting chance. Competing on price might be a necessary evil, but competing on cost can be the key to your success.

One week left to enter the InnovAction Awards!

If your law firm or legal organization has successfully introduced a powerful innovation in the last few years, then you have one week left to enter the College of Law Practice Management‘s InnovAction Awards, as detailed in this previous post here at Law21, and reap the rewards. At a time when innovation is valued by clients and demanded by the marketplace more than ever, the returns on this investment (one entry form and a US$325 fee) are tremendous. Nominations close on June 1, so if you’re looking to show off your innovation and gain the imprimatur of a world-class organization like the College, now’s your chance! As always, please feel free to drop me a line if you any questions, and good luck to all of this year’s entrants!

The end of inevitability

If you want an example of how the legal profession likely will respond to new competitors and a future marketplace very different than today’s, take a look at how Canada’s real estate agents are coping with change in their market. (Short answer: not well). The Globe & Mail reports on a rising wave of sell-it-yourself home realty, prompted by both Canada’s Competition Bureau and its intention to deprive Realtors of their near-monopoly as well as technological advances that allow people to buy and sell homes without professional assistance. Realtors — and this might sound familiar — have responded by fighting the Bureau’s efforts to open the market, scaring homeowners with the dangers of proceeding without professional assistance, and confidently predicting that these amateurs’ mistakes will simply produce more work for Realtors in the end. A few excerpts:

The letter, which comes from the Nova Scotia Association of Realtors, warns homeowners that they are “accepting with open arms increased risk of liability, threats to you and your family’s safety. Realtors protect you and your family from any ill-intended strangers that will come in to your home under the pretense of wanting to buy,” the letter advises, before it goes on to warn of lower sale prices and longer sale times. …

Jim Carragher insists a lot of his new business comes from private sales gone bad. “I’m telling you that it is so terribly sad when I get that phone call at the 11th hour from someone who was trying to sell their home who suddenly realizes they have made a terrible mistake,” he says. “Their deal falls through, they already bought something unconditionally. I try to help, but I tell you sometimes it’s just too late to undo the damage.”

Nonetheless, as the article explains, sell-it-yourself realty continues to grow, in part because the times are passing Realtors by. Read this excerpt from the article (and change “real estate agent” to “lawyer” throughout): Real estate agents … tend to be middle aged or older, and growing out of touch with a younger generation that prefers online options and is more comfortable with the idea of private sales than their parents would have been. “These kids aren’t going to use an agent,” he says. “That’s just the way this is going. The agents are older and the buyers are younger, and they’ve had the Internet their whole lives.”

Lawyers also are under regulatory pressure (in England & Wales through the Legal Services Act, in Canada by the Competition Bureau, and the Missouri lawyers suing LegalZoom for the unauthorized practice of law better hope their suit doesn’t produce the wrong kind of finding). But still we resist new competition through UPL restrictions, we seem to regard technology as a nuisance more than a service facilitator, we routinely warn clients of the dangers of going it alone, and we maintain (patronizingly) that we always end up fixing the messes left by unrepresented clients. And like Realtors, we remain amazingly confident, even smug, about our indispensability. I once sat through a focus session in which lawyers, asked what would happen if laws and their practitioners disappeared, solemnly predicted that anarchy and blood in the streets would follow.

The one thing that concerns me most, as an observer of the extraordinary change in this marketplace, is that the majority of the profession has no idea what’s coming. Most of the lawyers with whom I’ve dealt over the past several years simply can’t envision a world where lawyers aren’t considered essential to the social and economic fabric. They might recognize that times are tougher and costs are rising and prices have topped out and clients are more demanding. They might be resentfully aware that providers outside the profession are entering the market with lower-price offerings, and they might grudgingly accept that technology allows things to be done faster and cheaper than they used to be. But they’re not putting it all together. They’re not following this road to its conclusion, because they can’t really see how the world could get along without us. The inevitability of lawyers is our fundamental precept, and it has become a mental block.

It’s this sense of inevitability that we need to shake to pieces, because it seems to lie at the heart of the profession’s blasé attitude towards change. Lawyers are far too complacent for the circumstances we’re facing, maintaining a sense of privilege born from decades of profitable work in a protected environment. I’m not trying to persuade anyone that lawyers will disappear (although I’m no longer prepared to discount that possibility 100%), but rather to help lawyers understand that we face an immediate mandate of transformation in order to remain relevant to and valued by the marketplace. We can’t charge according to our time and effort anymore. We can’t use a model that sets our financial interests in opposition to our clients’  anymore. We can’t tell our clients who may and may not offer them legal services anymore. We can’t serve the market on our unilateral terms anymore. Many lawyers don’t believe any of those things, and very few lawyers believe all of them. But I believe them all to be true, and I’m not the only one.

The plight of Canadian Realtors probably matters little to us — in fact, to the extent we hear about changes in the real estate marketplace that increase consumer choice and lower prices, we’re probably cheering on the trust-busters and the innovators. It doesn’t seem to occur to us that we’re as vulnerable as they were — just as secure in our monopoly, just as highly rewarded for our efforts, just as dismissive of the potential power of the market. The inevitability of lawyers might once have been a fact. But now it’s fiction, one that’s sustained in our minds but less often in anyone else’s. The sooner we abandon that fiction, the better our chances of responding in time to survive in some recognizable and profitable form. And it has to be soon. Lawyers should know better than anyone else what a ticking clock sounds like.

Mind the dragon

I’ve written fairly extensively about India and its continuing and future impact on the legal services marketplace. I’ve not paid as much attention to China, but that country’s effect on the legal industry in the 21st century will be profound and could happen sooner than is widely expected. This is a brief note to acknowledge that fact and to suggest you keep a close eye on China’s developing role in the global legal marketplace.

We all know the basics: China is already an economic giant whose engine has kept the global economy from tanking completely over the last couple of years. It holds nearly $1 trillion in US currency, it’s gobbling up natural resources everywhere from Canada to Africa to feed its phenomenal growth, and it’s widely considered the odds-on favourite to dominate, or at least co-dominate, the world in the decades to come. But its legal industry doesn’t seem to be considered a global threat by its western counterparts, thanks in part to a paucity of English speakers, the lack of common-law fluency, and difficulties with the enforcement of the rule of law in China generally.

While all of that may be true, it’s no reason to dismiss or take lightly the opportunities and threats presented by China’s recent but substantial interest in the provision of legal services. Firms that look upon China solely as a source of clients, rather than of potential competition, could be making a mistake. Here are four quick reasons to take China’s legal industry seriously.

1. Growth. China’s legal profession is growing astonishingly fast, from a nearly zero baseline. Thirty years ago, the entire country had only 212 lawyers in 79 law firms; today, those numbers are 150,000 and 14,000, respectively, a huge jump but still proportionally well below the American lawyer-to-population ratio. And there are many more Chinese lawyers on the way: Sida Liu of the University of Wisconsin-Madison told the Georgetown Law Firm Evolution conference in March that China had opened a staggering 500 new law schools in the last ten years. That’s probably too many for anyone’s good, but the critical mass will be there.

2. Sophistication. Chinese law firms are acquiring business and management skills faster than their Western counterparts did at similar stages of development. Leading Chinese (and Indian) firms are moving from eat-what-you-kill arrangements to lockstep partnerships, seeking to establish long-term enterprises that prioritize the firm’s welfare above the individual’s (something that comes more easily in China, culturally speaking, than in the west). Devotees of David Maister’s one-firm firm will recognize this approach. And interestingly, some Chinese firms are already talking about merit-based pay for associates — something still not widespread among US or UK firms.

3. Talent. In China’s legal talent wars, Western lawyers and firms are more often emerging on the losing side. This is happening in law firms — one example that stunned the Magic Circle was the departure of a top Clifford Chance capital markets partner to Shanghai firm King & Wood. But it’s also happening, more importantly, among clients: homegrown in-house counsel are becoming far more common in the Chinese offices of global companies, particularly thanks to their skill at navigating difficult compliance issues in a still-developing business environment. These lawyers have often been trained in foreign firms and law departments, but they’re now flexing their muscles independently.

4. Power. China is working to minimize or overcome those features of its society and economy that limit its global capacities. While English is not nearly as common in China as in India, the Chinese government is busily teaching 200 million of its citizens the language. China needn’t depend heavily on American or English business, not when it’s cutting $60 billion gas deals with Australia or looking to increase $60 billion worth of annual trade with India. One scholar argues that the gap between Chinese law and that practised in the west is narrowing. And as my Edge colleague Rob Millard has pointed out, as economic power diffuses from west to east, the day may well come when Chinese law, not Anglo-American common-law, is the default system for business transactions.

These are all reasons why China’s law firms and legal professionals deserve serious pondering in any consideration of the future legal services marketplace. But here’s one more, and it might end up being the most significant: China’s government has no qualms about owning and directing corporate entities on a global basis. China boasts the world’s two biggest banks and five more in the top 50 worldwide, and the government is an extremely active stakeholder in those banks and their business decisions. Picture the law firm equivalent: a global legal services provider financed and directed by a Chinese state apparatus with pockets so deep it makes massive LPOs look like garage startups by comparison. If you think competing with privately funded service providers with billions at their disposal would be tough, think about competing with a law firm backed by about a trillion US dollars and an extremely persuasive board of directors. That’s a law firm business model no one is contemplating in the West, and it would be a game-changer of the highest order.

This is not, let me emphasize, yet another paean to China’s imminent and inevitable rise to mega-power status: this is a country with plenty of challenges and problems, many of which figure to cause significant trouble and misery inside its borders within the next decade. Nor does it pretend to be an in-depth examination of China’s legal profession, which has issues of its own to cope with. Many things can and likely will still happen to push China off its current trajectory and slow its progress — but these should be delays, not failures. Corporations and governments worldwide are thinking hard about what to do when China truly hits its stride; the legal sector should be doing the same.

Frugal innovation and the law

Lawyers need to learn a very important lesson from a salad spinner.  Specifically, we need to understand the implications of the Sally Centrifuge, developed by students at Rice University in Texas:

The necessary parts: one salad spinner, some hair combs, a yogurt container, plastic lids, and a glue gun. The finished product: a manual, push-pump centrifuge that could be a lifesaver in developing world medical clinics. … A team of college students invented this low-cost centrifuge, which can be built for about $30, as a project for a global health class at Rice University. The teacher challenged them to build an inexpensive, portable tool that could diagnose anemia without access to electricity, and the tinkerers got to work.

The students, Lila Kerr and Lauren Theis, found that spinning tiny tubes of blood in the device for 10 minutes was enough to separate the blood into heavier red blood cells and lighter plasma. Then they used a gauge to measure the hematocrit, the ratio of red blood cells to the total volume. That information tells a doctor whether a patient is anemic, which can in turn help to diagnose conditions like malnutrition, tuberculosis, HIV/AIDS, and malaria. … “We’ve pumped it for 20 minutes with no problem,” Theis said. “Ten minutes is a breeze.” It has proven to be fairly robust. “It’s all plastic and pretty durable,” Kerr said.

If you think the multinational makers of expensive medical devices would fight a cheap innovation like this, then let me also introduce you to the Mac 400, a hand-held electrocardiogram developed by General Electric’s health-care laboratory in Bangalore, as reported in The Economist:

The device is a masterpiece of simplification. The multiple buttons on conventional ECGs have been reduced to just four. The bulky printer has been replaced by one of those tiny gadgets used in portable ticket machines. The whole thing is small enough to fit into a small backpack and can run on batteries as well as on the mains. This miracle of compression sells for $800, instead of $2,000 for a conventional ECG, and has reduced the cost of an ECG test to just $1 per patient.

The Economist goes on to explain, in a special report on innovation in emerging markets, what these developments represent: a reinvention of the product development cycle for markets with very limited resources. Like Japan before them, which developed lean production systems to compensate for a lack of physical space and material, India and China (and a few other smart entities) are developing production systems for buyers without much money, mobility or infrastructure:

[Companies] are taking the needs of poor consumers as a starting point and working backwards. Instead of adding ever more bells and whistles, they strip the products down to their bare essentials. Jeff Immelt, GE’s boss, and Vijay Govindarajan, of the Tuck Business School, have dubbed this “reverse innovation”. Others call it “frugal” or “constraint-based” innovation.

Chances are that you, like me, live in an affluent society and are familiar with unnecessary options. Most of us have more consumer choices than we need or could hope to sample, choices that don’t make our lives that much better or happier. Most of us have never used 80% of the buttons on a standard remote control or could even identify what they do. Most of us with elderly parents wish someone would invent a computer with only four functions: “Read email,” “Write email,” “Send email,” and “Check the weather forecast.” Most of us can, for a few cents, supersize the meal we just ordered, even though what we ordered was enough to satisfy us just a few moments earlier. Collectively, we’re hooked on the idea that more is better — and in our low-cost, resource-rich world, that’s an idea both easy to indulge and profitable to sell. Continue Reading

Why the 2010 InnovAction Awards matter

When the College of Law Practice Management launched the InnovAction Awards in 2004, Western economies had just climbed out of a tough recession (and were busily laying the foundations for a much uglier one) and law firms were starting a run of several years of unprecedented growth and profit. It was a time when the profession’s desire not to rock its revenue boat was stronger than ever; but the College perceived (correctly) that innovation had also never been more important to the legal marketplace, and it wanted to recognize those firms that could demonstrate their commitment to doing things differently and better.

Today, in 2010, innovation in the provision of legal services is breaking out all over. I won’t even try to list all the innovations and inventions emerging from outside the profession — from LPOs to e-discovery software to online legal information to collaborative social networks — that have helped drive this change. But even within the profession, a quick review of reports just in the last month shows us that: Continue Reading

Book Review: The LegalBizDev Survey of Alternative Fees

The LegalBizDev Survey of Alternative Fees, by Jim Hassett, Ph.D. (Boston: LegalBizDev, 2009)

Okay, strictly speaking, it’s a report rather than a book. But I’m so interested in talking about this publication and its importance to the developing field of alternative fee arrangements (AFAs, a topic we’re focused on these days at Edge) that I’m willing to blur genres — and in any event, at 150 pages, it’s not like this is a pamphlet. The LegalBizDev Survey of Alternative Fees is written by consultant Jim Hassett, Ph.D., and is based on interviews with managing partners, senior lawyers and AFA managers at 37 of the largest 100 law firms in the United States. To a critic who objected that a self-selected 37% isn’t a statistically sound sample, Jim replied that while his results may not be scientifically “good,” they’re the best available resource on the subject. That is unquestionably true — but this report is also good, and is worth your time.

The Survey takes an start-to-finish look at AFAs: how they’re defined, how they developed, what drives clients to push for them, bidding strategies for lawyers who want to use them, nine common examples of AFAs, recommendations to both lawyers and clients for maximizing their effectiveness, and what the future holds. Although the author delivers content throughout, especially at the start and finish, the bulk of the Survey is drawn from the respondents themselves, in their own words. That last point is not insignificant: because Jim guaranteed anonymity to his interviewees (the 37 firms are named, but no comment is matched with a firm and all comments are anonymous), he received some wonderfully blunt opinions. Here’s one of my favourites, a quote from a law firm chairman that would never be made for attribution:

“I think it hurts lawyers’ egos to suggest that all of the work that they do is not brain surgery. And when you suggest that they might be able to get away with using people who are not junior brain surgeons, almost everyone will say, ‘Oh, no, no, no. To do my stuff, you really need to be a brain surgeon like me.’ And it’s just ridiculous. I think that there’s an odd and irrational pride in wasting money. It’s gratifying for people to brag to their friends about how much they have to pay summer associates, and how much they pay starting associates, like, ‘Isn’t this a crime? We’re paying young associates more than judges, but hey, they’re brilliant. And they work for me.’ It’s an odd situation. But I think we’ve been able to do that because the market has paid to deal with it. And that may all be over.”

This candour (which, by the way, speaks highly of the trust these lawyers place in Jim Hassett) pays great dividends in the form of unalloyed honesty from these law firm leaders, allowing us to see how they approach AFAs, what systems they set up to deal with them, and the successes (and sometimes failures) that resulted. It’s a pretty safe bet that these folks didn’t share everything they knew on the subject, and at least some of their reports and comments must have been a little self-serving or trumped up. But even if you apply that discount, the insights here are remarkable. I don’t want you to forgo the chance to read them all for yourselves, so here are two good ones:

“In the past, where we have proposed unilaterally various fixed-fee arrangements, the clients have turned them down, because they think that if we proposed them, there must be something wrong with them. We have proposed ten alternative fee arrangements for every one that is accepted. Maybe in-house counsel are afraid that outside counsel will sandbag them by building inefficiencies and excess margins into the fixed-fee quotes. … The larger problem with RFPs and alternative fees in general is really the trust issue.”

“One of our problems is that our partners seem to think they have a better product than the people we’re competing with. And so when the client compares our fixed fee with other firms’, they ask how come we can’t do the work for less. [The partners typically reply that competitors are] not offering the same product that we are, so I ask [the partners], ‘Why are we offering a product that the client won’t pay for?’ It’s a whole mindset that will require a long time to change.”

Much of the value in the Survey is derived from these first-person accounts, but Jim also does a service by rounding up, explaining and giving examples of nine common types of AFAs, along with their pros and cons, from fee caps (“the dumbest deal ever,” according to one law firm respondent) all the way up to portfolio fixed fees, limited contingencies, and holdback arrangements. And his recommendations for success in alternative fee arrangements — both to firms and to clients — are especially valuable. I won’t list them all, but it’s noteworthy that his dual sets of recommendations have two in common for lawyers and clients: improve management and focus on value.

Two things struck me when reading through this report. The first is the perhaps surprisingly high level of savvy displayed by these interviewees: contrary to the popular impression of large law firms in general when it comes to AFAs (an impression often reflected in this blog’s entries, it must be said), there are dozens of smart, informed and motivated lawyers in leadership positions within the AmLaw 100 who not only get the need for AFAs, but who are assessing the challenges, exploring options, and developing systems to implement them. If I were running a large law firm that competes with some of these firms, and I hadn’t done any serious work on AFAs within my organization, this Survey would make a chilling read. Most encouraging is the fact that these lawyers have identified the fundamental stumbling blocks to AFA implementation — cultural, financial, infrastructural — and are doing what they can to address them. That recognition doesn’t make these obstacles any less daunting, though.

The other thing that emerges from this Survey is that large corporate clients aren’t doing nearly enough to promote AFA relationships with their outside counsel. The number of times private-practice lawyers express frustration with in-house departments’ reluctance or intransigence to engage in serious AFA discussions is noteworthy: all too often, law firm AFA proposals to corporate counsel are greeted with polite statements of preference for a discount on hourly rates. Nor are corporate departments any better equipped to project-manage or otherwise administer an AFA system than their outside counterparts: more than one respondent cited the difficulty of trying to tell a general counsel that the lawyers in her department are as much the problem as the solution.

Overall, this is a powerful and important contribution to our collective understanding of alternative fee arrangements in law, a subject that Jim notes really is still in its infancy. For all that, the picture does feel incomplete: all the contributions and opinions come from law firms, and the absence of the in-house lawyer perspective leaves you wondering if general counsel might have a different view of the “reluctance and intransigence” problem about which their outside counsel complain. Perhaps a follow-up survey could speak with GCs of Fortune 500 companies, or be coordinated with the Association of Corporate Counsel as part of its Value Challenge, in order to provide another perspective, or perhaps be merged with the law firm survey to give a holistic view of this evolving area.

But on its own terms, The LegalBizDev Survey of Alternative Fees is a significant and very useful guide to understanding not just what AFAs are and how they work, but also the ongoing challenges and roadblocks to their implementation. Every law firm that seriously intends to tackle alternative fee arrangements would clearly benefit from reviewing this work.

Pieces of me

There’s now textual and videographic evidence that I’ve been kind of busy the last few weeks. If you’re interested, here are some links to assorted content I’ve been producing or helping produce elsewhere than Law21:

1. Two blog posts in the last month at Stem Legal’s Law Firm Web Strategy blog have focused on social media in the law firm enterprise context. Here’s what I had to say about Facebook for law firms and Twitter for law firms.

2. Also at Stem Legal is an announcement about our new Media Strategy Service, under which I’ll be providing communications, media and social media consulting to law firms and legal organizations.

3. Over at The Lawyers Weekly, my new column — a primer on legal process outsourcing and what its impact on the legal services marketplace will look like — has now been posted.

4. Christopher Hill at Construction Law Musings kindly invited me to provide a guest post on how to be an effective construction law client, but it applies to clients in any area of law practice.

5. Shortly after addressing the ABA’s Bar Leadership Institute in Chicago last month, I recorded a series of very short interviews with ABA Now, in which I talked about new mentoring approaches, the evolution of preventive law, and the importance of relationships for bar associations.

6. Before my presentation to a symposium at Georgetown Law School last week on the future of law practice, I recorded a brief interview with Greg Bufithis at MyLegal.com that talked about some of the changes now underway in the legal services marketplace.

How I learned to stop worrying and love project management

Project management is about as close to a silver bullet as the legal profession could ask for these days. Consider:

  • It’s easy to understand.
  • It’s inexpensive to implement.
  • It lowers costs.
  • It improves quality.
  • It enhances communication.
  • It facilitates lawyer training.
  • It makes fixed fees profitable.
  • It makes clients happy.

If it could cure cancer and direct an Oscar-winning movie, it could hardly be a more attractive proposition. For a profession suffering from aggravated clients, shrinking revenues, competitive inertia, archaic business practices and system waste, it’s the nearest we’ll come to meeting the definition of “panacea.” And yet, with few (but increasing) exceptions, there’s not much enthusiasm for it among lawyers and law firms — there’s an odd reluctance to embrace something that clearly delivers so many benefits. Identifying the source of that reluctance tells us something very important about lawyers and our capacity to adapt to the new legal marketplace.

The good news is that project management is starting to catch on within the profession. Two excellent recent articles in the legal press illustrate this, one in Canadian Lawyer (in which I’m briefly mentioned) and one in the Legal Intelligencer, which tells the success story of a law firm (Dechert) that took project management seriously, engaged a consultant (Pam Woldow) to help, and can already see the benefits. More good news comes courtesy of Tim Corcoran‘s terrific blog post that addresses common concerns about legal project management and should be read by every firm whose lawyers are generating static about LPM. There’s also a very good book and a very good blog about legal project management by Steven B. Levy. In short, there’s a growing wealth of resources and reasons for lawyers to leap onto the project management express — yet this train still has many empty seats.

These same articles point us in the direction of the problem. “It’s pretty tough to get lawyers to change their ways,” a big-firm partner told Canadian Lawyer. A regional managing partner at Dechert entered training with deep misgivings about its broad applicability. “Doesn’t legal project management apply only to commodity practices?” is a question Tim Corcoran has to address. Resistance to innovation, yes — we all know that fits lawyers to a T. But what really comes across from these accounts is a sense that lawyers aren’t trying project management primarily because they don’t want to. It’s a resistance that does not, I think, have much to do with lawyers’ inability to grasp project management’s features or benefits. I think it has much more to do with lawyers’ distaste for procedure, systematization, methodology, routine — with process. For most lawyers, as my Edge colleague Rob Millard says, “process is a dirty word.” Continue Reading