The danger of discounted rates

At the risk of being mistaken for an Ayn Rand devotee, one of my favourite moments in The Incredibles comes when Helen (Elastigirl) is admonishing her son Dash, who’s upset because he’s not allowed to use the super-speed that makes him special. “Everyone’s special, Dash,” says Helen, to which Dash mutters under his breath: “That’s another way of saying no one is.”

I thought of that line when I read the results of a fees and pricing benchmark survey published by RainToday.com (HT to The Greatest American Lawyer via Legal Blog Watch). Headlining the uniformly interesting results was the observation that 78% of all firms discount their rates (a startling 89% of firms with ten lawyers or more) from what they’ve advertised or initially advised the client. The average discount is 9.9%.

When everyone is discounting their rates, then no one is.

When you hear “alternative billing” discussed by lawyers and clients today, what’s being talked about most frequently is rate discounts: the lawyer knocks X percentage or Y dollars off the “going rate” in order to satisfy a client demand. The client is happy because she feels she carries enough influence to force a fee break; if she’s in-house, she can report to her bosses that she haggled the lawyer down from the starting rate, thereby proving her negotiating acumen and hard-line position on costs.

The lawyer’s happy too, for a bunch of reasons. The rate is not nearly as important as the number of hours he can bill, which has a far greater impact on the final tally and is anyway the criteria that the partnership cares about most. Moreover, any halfway clever lawyer builds into his rate the distinct possibility of future discount, ensuring that the final actual rate doesn’t plunge too deeply below what he actually wants to make. And of course, the most important thing is to actually get the work and strengthen the relationship, to ensure more work in future. In this light, the rate is a card the lawyer can afford to play early and easily when negotiating the overall agreement to produce legal work.

This lovely scenario grows problematic, of course, when discounting becomes so ubiquitous that it loses its cachet as a real benefit to the client. Continue Reading

Twittering your clients

Every so often, a topic explodes into the legal blogosphere and gets everyone talking. We’re seeing one of those explosions right now, thanks to Twitter. If you haven’t heard of Twitter, or if you have but you’re not sure just what it is, you can read the Wikipedia entry for a general backgrounder. If you’re looking for the lawyer’s angle on Twitter, I strongly recommend this article by Steve Matthews at Stem Legal, (and check out Steve’s ingenious legal tweet site, Legal Voices), but there’s great stuff in recent blog entries by Doug Cornelius, Connie Crosby and Kevin O’Keefe too, to name just a few.

Unlike all these folks, though, and many more lawyers besides, I’m not on Twitter — not yet, anyway. This isn’t because I don’t see the value, which most certainly is there from a marketing or micro-blogging perspective (not to mention emergency communication uses). My primary obstacle to Twittering is that I don’t have a wireless PDA or Blackberry, and, the good Lord willing, I never will — I’m quite happy to be unburdened by the expectation of 24/7 reachability.

There’s also the problem of limited time and attention: I’m barely able to to get through the morning newspaper, and the only magazine I subscribe to (The Economist) can go unread for weeks at a time — if I subscribed to Twitter, I’d very probably miss most of the traffic. But maybe most fundamentally, I just don’t have enough interesting things to say that often. This blog is about it, folks. Status updates at home would look like “Refusing Claire’s entreaties to watch another episode of The Backyardigans,” while tweets at work would be a fairly constant stream of “Editing another article.” I think the world can get along without that, and maybe the Internet ecosphere would benefit too.

Anyway, my primary interest in Twitter is to wonder if there are lawyer applications beyond marketing and publishing, and I think there might be. I’d be interested in seeing how lawyers use Twitter as a client communications tool. Twitter offers lawyers the chance to issue instant, real-time statements wherever they are, to clients who avail themselves of the Twitter service (and more of them do every day). Here are some ways that might deliver value to clients: Continue Reading

Burn your newsletters

Ah, the law firm newsletter. The simplest and humblest of law firm communication vehicles – a collection of lawyer-written articles on new statutory or case law developments, bundled together into a stiff, saddle-stitched document that’s mailed out to clients on a regular basis (or more recently, placed online and e-mailed). What could be a safer and more broadly acceptable marketing tool? Well, there’s the problem, really.

The necessity and effectiveness of law firm newsletters have been long overrated. Partly this is because the content is written by lawyers, and is therefore a reliably tortuous read. Partly it’s because a general legal update is of limited interest and use to clients, who don’t really have time for FYI documents that don’t deal directly with an immediately relevant matter.

But mostly, I think, it’s because law firms have never given newsletters the attention, support and priority to be anything other than pretty mediocre and indistinguishable from one another (if I took the banner off two random law firm newsletters and switched them around, could you tell the difference?) That’s because firms don’t take newsletters seriously as publications in their own right.

Law firms sometimes seem to think their newsletters, print or e-mail, are competing only against other law firm newsletters for clients’ attention. They’re not. They’re competing against every business and industry publication their clients read, usually produced by large publishing companies with decades of experience. Unlike law firms, these companies don’t regard their periodicals as a sideline, a nice marketing tool – they treat them the same way law firms treat their work product, as the lifeline of their businesses. So it’s not surprising that in this competition, law firms are outgunned from the start.

Have you read any of the top publications in your clients’ industry sector? Gerry Riskin used to ask this question at managing partners’ conferences, and would get only a few hands raised in affirmation. If you did read them, and you compared them to the newsletters law firms produce for the same client audience, you’d feel embarrassed for the firms. The leading industry publications receive focused editorial direction and excellent quality control, are written by experienced staffers or freelancers, and are professionally designed and produced with high-quality magazine stock (or web architecture), art design and imagery. Law firm newsletters, it can safely be said, don’t and aren’t. Continue Reading

Life after lawyers

We need to start thinking about what the post-lawyer justice system is going to look like.

I can see how this might be an absurd or even heretical notion to some people. But there’s reason to believe that lawyers won’t be an essential part of the legal system in the future — and if so, our profession has to come to grips with what would mean, for us and for society generally.

I’m thinking about this because we’re preparing our cover story for National’s June issue, on the problems faced by family courts across Canada (and quite likely, in other jurisdictions) caused by self-represented litigants. if you’ve been inside one of these courts lately, you know what these problems are: backlogged dockets, mistreated witnesses, judges obliged to act as de facto counsel, wasted court time — and paying clients in the middle of it, wondering why they bothered to hire a lawyer since their spouse is doing nicely without one.

But here’s the problem: it’s been like this for more than a decade. We wrote about the pro se crisis in an October 1999 cover story titled “Who needs a lawyer?” (Sorry, no link — this was the Pleistocene Era, Net-wise.) And at a certain point, crisis becomes commonplace: we simply adjust to it. I think we’re perilously close to that stage in family law right now — people are getting used to the idea that family justice is a lawyer-optional event.

I’m coming to think that family law is the canary in the coal mine. Every day, more things that used to be the exclusive bailiwick of lawyers are automated, down-marketed and commoditized by non-lawyers. You already know this if your practice involves transactional matters like wills and real estate. But the pro se trend in family court shows that litigators aren’t immune either — as if the rise of mediation didn’t make that clear years ago.

We still talk about how we can “fix the problem” of people going without legal representation. But there are two big elephants in the room that few lawyers seem interested in talking about. The first is that the cost of retaining our services makes us largely inaccessible to all but the rich and the very poor, and that as long as we operate in a rarefied, self-regulated, protected marketplace, those costs are not going to fall.

The second is that a family court system with fewer lawyers and more self-represented parties is, no question, slow, inefficient, lopsided and chaotic. But you know what? It still works. Courtrooms still open their doors every morning, support is still mandated, and custody is still awarded — with or without lawyers’ involvement. We should be extremely nervous about the message that’s sending to the general population about just how indispensable we really are.

Lawyers are now a luxury good, but we increasingly deal in commoditized services. If you want to know where that disconnect leads, drop by your local family court sometime.

Why your client’s generation matters

In one of last week’s posts, I talked about inter-generational tension within some law firms and how it can undermine these firms’ succession planning efforts. But as important as it is not to alienate good young talent through something as silly as generational resentment, law firms that are clueless about demographic differences risk an even more damaging effect: alienating good young clients.

Law firm leaders who complain about the values of their Gen-Y lawyers need to remember that there are a lot of Gen-Y clients out there, too. On the corporate side, Millennials are playing key roles in many forward-looking industries like life sciences, biotechnology, new media, offshoring, financial innovations, and more. On the individual side, Millennials are buying houses, drawing up wills, getting married (and divorced) and starting up small businesses. Thanks to their affluent Boomer parents, they’re not short on funds, and there’s more of them out there every year. But if a law firm can’t even relate to its own Millennial lawyers, how can it realistically expect to gain the confidence of Millennial clients?

This isn’t just about Generation Y, though — this crosses all generations and touches on fundamental issues of marketing and client care. Part of really understanding your clients (something every successful firm has to do) is understanding the demographic leanings and preferences with which every client comes equipped — and having understood them, incorporating them into your strategies both for dealing with these clients and for seeking out new ones.

It’s more than just not sending the earnest Boomer to talk up the jaded Gen-X entrepreneur, or leaving the presumptuous Millennial alone with the distant Silent retiree. It’s about crafting a complete range of tactical approaches to clients — talent selection, methods of communication, service delivery vehicles, etc. — designed to increase a particular client’s engagement, comfort level, and resonance with the firm. Obviously, you can’t tell everything about clients from their year of birth, but generational influences are real, and they need to be factored into all manner of communication, from initial marketing efforts to ongoing service delivery.

Susan Cartier Liebel discusses these important points in a post at Build a Solo Practice LLC about generational relations in the law, which in turn refers to a Copyblogger post by James Chartrand that provides a quick-and-dirty summary of generational attributes. The upshot of James’ article is that marketing and publicity materials need to be targeted to customers in part depending on their generational influences. One of the points of Susan’s article is that this is especially true in lawyers’ relations with clients. Both posts make excellent points that lawyers should read and take to heart when framing how they deal with clients and designing the tailored vehicles by which they communicate to them.

Lawsuit investment and the limits of innovation

As you probably know by now, I’m a big fan of innovation in the law. But there’s good innovation and there’s bad innovation, and what’s emerging in the litigation field in the US and the UK looks to me like it belongs in the latter category.

LegalWeek reports that UK hedge funds are lining up to provide funding for lawsuits. This idea in itself isn’t breaking news: several US companies, often backed by massive hedge funds, already provide financing for plaintiffs in personal injury suits — and arguably, contingency fee arrangements in class actions accomplish the same end, providing funding in return for a piece of the expected damages award. Hedge fund investments in plaintiffs’ lawsuits has recently spread to the UK. But this newest British development contains a twist: the investors are looking to finance the defendant.

Here’s how LegalWeek‘s Editor’s Blog explains it:

The investor is likely to be a hedge fund or special situations fund looking to make high-risk investments. The investor gets a fee or premium and effectively offers to fund a substantial chunk of the defendants’ liability. The attraction for defendants is hedging and managing their exposure, despite higher upfront costs. And by introducing an outside investor that will look at a legal opinion to gauge the merits and risks of the claim, a company can effectively put a ‘market price’ on their litigation risk.

The concept of a market in plaintiffs’ lawsuits has its supporters, who contend that the benefits include creating a more level playing field between plaintiffs and defendants and bringing market-driven risk assessments to evaluate lawsuits’ chance of success. Opponents cite concerns about champerty and maintenance, though it seems to me these prohibitions have not been pursued enthusiastically by governing bodies and have lost some of their force over time (lawsuit investors argue that they’re not instigating lawsuits, which is forbidden, but financing suits already underway, which seems a distinction bordering on the specious).

There are access-to-justice arguments in favour of allowing plaintiffs to seek financial backing to bring a claim and sharing the rewards with those who do so, and reasonable people can differ on this. But when defendants start looking for investors as well, I start getting worried. Continue Reading

The view from the client’s side

Going through the stack of materials from my recent week of conferences, I was re-reading the notes I took at the Opening Plenary of the Canadian Corporate Counsel Association’s Spring Conference in Toronto, and thought you might be interested in some highlights from what was really a riveting panel discussion. The panelists, who offered valuable perspective on evolving client concerns and trends on the in-house side of the ledger, were:

  • Roger Fulton, EVP and GC of Canada’s Linamar Corporation,
  • Brad Brubaker Sr., SVP and GC of SAP America,
  • Ralph Ybema, President of the Hong Kong Corporate Counsel Association,
  • Peter Turner, CEO and GC of the Australian Corporate Lawyers Association, and
  • David McFadden, partner, Gowling Lafleur Henderson LLP, Toronto (chair).

Economic trends: North Americans Fulton and Brubaker spoke, as you might expect, about the anticipated impact of the recession, though they also pointed out that an economic downturn is a great time to locate and pounce on opportunities, including more efficient and better supply terms. Ybema and Turner, however, noted that in the Southern Hemisphere, the talk is not on recession but on China’s boiling economy, which has a far greater impact in that region. It’s easy to forget, wrapped up in our little bubble here in N.A., that the weather isn’t the same everywhere.

Litigation: As the recession gathers speed, legal departments can anticipate the usual uptick in litigation, especially on IP issues and with suppliers who are struggling to meet contractual obligations. In Asia, arbitration is strongly preferred for resolving disputes; Ybema noted that starting a lawsuit is an excellent way to end a business relationship there. Brubaker quipped, however, that in the U.S., litigation is often a good way to start one.

Risk management: All the panelists emphasized the importance of good, trusted personnel on the ground as a critical factor in good risk management. SAP manages risk in four steps: identify, quantify, prioritize and manage, but a “bottom-up” assessment process is also important. Brubaker noted that SAP workers in India were having problems getting to work, so the company set up an informal shuttle system; traditional RM tools would never have uncovered this. Fulton cited Toyota’s “go and see” policy to meet people and build relationships to improve risk management. Companies must be able to take risks, not simply avoid them: Legal’s job is to assess risk probability, and to offer unpopular opinions when necessary while still remaining a trusted strategic advisor.

In-house careers: Lawyers are becoming more involved in corporate decision-making, in part because most are fully integrated into the overall business strategy in terms of compliance, management and government relations. That’s terrific, except that successors to the GC position are becoming harder to find. Younger members of the department often leave, sometimes to run other departments with line function responsibility such as pensions or risk management, and sometimes because the high risk and heavy workload of the GC position can make it a less attractive position (the average tenure of GCs has dropped from 20 years to around four). Backgrounds in litigation or government relations have become as important as corporate experience when looking for GC positions.

There were all sorts of other interesting observations, especially about doing business in China — it would certainly be worth any law firm lawyer’s time to hear what these corporate counsel had to say. My impression is that too many firm lawyers attend these sorts of in-house counsel gatherings planning to talk, to create a marketing opportunity for their practices. Not enough, I think, go to these events to listen, gain the client’s perspective, and learn about what’s occupying his or her thoughts these days. Those who do will find themselves a serious step ahead of the competition.

NALP: the future of law firms

Back from a lengthy trip, I have a lot of catch-up blogging to do. Just to get the ball rolling, here are my speaking notes from last Friday’s plenary session at the NALP Annual Education Conference in Toronto, in case they’re of interest.

I was honoured to be part of a distinguished panel of speakers, moderated by Ida Abbott and including Ron Friedmann, Rick Matasar, Tim McManus and Vernā Myers, on the future of law firms. I’ll pick up on a few of the points raised during the wide-ranging 90-minute plenary later on, but for now, here’s what I prepared in advance: Continue Reading

There’s no such thing as work/life balance

There are a lot of reasons to dislike the term “work/life balance.” It’s grammatically absurd, for one thing, implying that work and life are two equal sides of a coin, which is a far more disturbing concept than any 2,500-hour billable target: work is part of life, not its opposite number. “Work/life balance” has also come to represent the great generational struggle between Boomer law firm partners and their Generation X/Y juniors, an oversimplification that reinforces labels and stereotypes when we need a better understanding of this far more complex dynamic.

But I think my primary difficulty with the term became clear to me after reading (with a hat tip to Legal Blog Watch for the link) this American Lawyer article by Denise Howell on work/life balance. There’s a lot of good stuff in the story, including the harsh reality behind producing even 1,800 billable hours a year (which at some firms these days is considered part-time work) and the gyrations large law firms now put themselves through to show their commitment to work/life balance (and the young lawyer attrition rates that demonstrate how these efforts continually fall short).

Denise also suggests that lawyers had work/life balance figured out pretty well in the 1970s, when a law firm lawyer could take an entire month off to go river-rafting with his family. My sense, though, is that law wasn’t the only line of work where saner hours prevailed nigh on 40 years ago.

It seems to me that North American business and industry in general led relatively uncomplicated lives back then in terms of pressure and competition, and so could proceed at what we now view as a somewhat leisurely pace. Right up until the early 1970s, North Americans could work about as hard they felt like and still rule the economic roost.

Then came oil shocks, Asian competition, the rise of the microcomputer, free-trade agreements, labour mobility, technology explosions, globalization, and the Internet. And within the space of a few decades, our work culture changed from moderate to frenetic. Continue Reading

The perils of client interviews

Via Larry Bodine comes this Legal Intelligencer article about law firm Ballard Spahr Andrews & Ingersoll, which has hired a 30-year veteran journalist to be a full-time client interviewer, asking clients about their needs, perspectives and complaints about the firm’s services. It’s a good, innovative idea, not least because it involves a tactic that too few law firms embrace: bringing in professionals from other fields. In particular, firms could benefit by adding more media expertise to their marketing and client relations departments, including print, TV, and especially online and new media. But that’s a story for another day.

What really struck me when reading this article was the question: what is the firm actually going to do with the information gathered through the interview process? The client has given up time and energy to speak frankly and at length about its relationship with the firm — what is the firm doing to respond? This is an especially important question in light of studies that show clients who fill out surveys or otherwise reply to feedback requests have heightened expectations of future interactions with the firm: having been asked for their thoughts, they expect those thoughts to have an impact or be implemented in some way.

Ballard Spahr will shortly have reams of data from their top 300 clients (aside: “top 300” clients? I don’t think so. Do you have 300 best friends?), all of which will dutifully be circulated to the management team and to the key contact lawyers for each client. That’s the easy and fun part — everyone likes to learn what other people think about them, especially when it’s good. But what actions is the firm prepared to actually take based upon that data, especially when it’s not so good? Is anybody going to prioritize and follow up on the implementation of client suggestions, in particular the difficult or challenging ones, in the midst of the constant fire-dousing and unrelenting billing pressures of your average law firm?

Any firm that makes a point of collecting client data is also going to have to appoint a senior lawyer to ensure that at least some of what clients are asking for actually gets done. This lawyer would be charged with reporting to the management team what actions have been taken to follow through on what the client talked about in the three, six and 12 months following any given feedback session. Call it a Director of Feedback Compliance, or the Advocatus Clienti I wrote about a while ago, but this enforcement position is critical if busy, independent-minded lawyers are going to take seriously the obligation to digest and implement the results of client interviews.

Law firms put a fair bit of pressure on their marketing professionals to show ROI on marketing; I’d be more interested in knowing the ROI on client communications. Interviewing clients is a great idea, but unless the suggestions they make are fulfilled with real change in how the firm and its lawyers operate, it’s not only a waste of time and money, it’s also raising client expectations that will never be met, which will only cause bigger problems down the line.

Frankly, I’d appoint the Compliance Director first and hire the interviewer later — create the structure for feedback follow-through first, then collect the feedback. Real change only happens when serious enforcement measures are attached to it.