Wired GC

law from the inside out

Billable Hour Promo Video Leaked

Fresh on the heels of yesterday’s discussion about the real meanings behind the Billable Hour debate, something showed up in my email inbox late last night.

I can’t confirm the authenticity of the video. One source said it is an early demo version of a promo video to be shown before the keynote at the next annual meeting of a major legal organization. Another source said it was commissioned by a major international law firm as a way to rally the troops at the next partners’ retreat.

Rear-guard act of desperation, or savvy disinformation by an AFA guru? Decide for yourself.

I anticipate getting a C&D sometime in the next 48 hours, so watch it while you can. Whatever the source, someone really dug deep for the archival footage of Honest Abe doodling after one of his many lost elections. Color, no less.

Wired GC: 10 for 2011 – Part II

Here are the final five for 2011 (along with a bonus). These are a bit more aspirational than the prescriptive initial five.

6. Time for No-Fault in Corporate Legal. It worked in auto negligence, then was extended to divorce. It may be time to put to rest any finger pointing regarding who is to blame for excess legal costs and practice complexity. Outcome-oriented GCs realize that they need to make business objectives clear to outside counsel. This includes risk and the competitive global landscape. The corporate legal client can’t expect platinum service at antimony pricing. Outside counsel are entitled to run a profitable enterprise, and gone should be the days where some corporate clients (or their advisors) want to fly-speck partner profits and law firm cost structures. Managing partners, however, need to understand and communicate that legal services are a cost of goods, and clients have options for every matter. To get to No-Fault Nirvana, we need data. Which brings us to number 7.

7. Transparency is More Than Talk. This T word is like the weather; everyone has an opinion, and nobody does anything about it. That is changing. Smart business minds are bringing the twin towers of good data and analysis to corporate legal clients, in a user-friendly package. Just what does a wrongful discharge lawsuit cost in Florida? What about California? Does law firm X really give better results than competitor Y in industry Z? The era of GCs trying to convince their CFOs during budget reviews that “legal is different” can come to an end. So much of what passes for legal spend management is really more like a forensic accounting exercise post-invoiced than a strategic planning tool pre-engagement. A lot of exotic Alternative Fee Arrangements will crash under the weight of real data, available anytime. Difficult to pull off? Maybe. Impossible to execute? Absolutely not; it’s happening now.

8. Incumbency is Good; Entrenched Status Quo, Not So Much. Many law firms talk about the value of existing clients, yet don’t really invest in this precious asset. There’s a lot of effort to market, and a constant search for new clients. Not to mention dealing with the onslaught of RFPs from companies that will probably never become clients. While GCs report a real willingness to change law firms, most would rather improve an existing relationship than blow it up and start anew. GCs know that all new law firms look good at the start. Law firms that resist change, cost effectiveness, and improving service will lose over the long run: first some clients, then the partners that managed these key relationships.

9. Hiring is Still Hard for Corporate Law Departments. Even though every new in-house counsel can pay for herself quickly, GCs will still struggle to add headcount. Many remain under pressure to reduce it to stay globally competitive. For law firms, it means there is still good work out there, but some may be priced out of a lot if it. For the GC, it means when a new position is authorized (or an old opening unfrozen), you have to hire carefully. Gone are the days when you could task a recruiter to place resume-roulette and pluck a smart specialist out of a large law firm and put him to work in a silo. All in-house lawyers will have to be business-savvy, and interpersonally optimized. There are so many good lawyers available out there right now. But you really can only hire the truly great going forward.

10. What About Time? Adrift in the sea of change is the lawyer’s day. More to the point, a look at how lawyers spend their time and whether they, the people they work with and corporate processes are getting better. Under the billable hour regime, inside and outside lawyers could always throw more time at a problem. It eventually made the problem go away for the GC and made most associates partner eventually. In-house lawyers live in the realm of overwhelm: do more things the same way, while reigning in outside spending without more internal resources. Yes, the time management industry tries to address this every year with new slogans and rebranded tools. But lawyers will have to consistently do some things better, outsource or automate others and drop the rest. It’s not us, it’s absent from our DNA, we are lawyers, and we just buck it up and stay later or come in on the weekend. If this is one area where the project managers, lean ninjas or six sigma black belts can help, so much the better.

And the obligatory bonus item.

11. Mobile Legal is On the Go. It’s coming to the corporate market and even faster to the consumer legal market. While many lawyers are still tied to a desk, many clients get outside in the fresh air and will increasingly have a smartphone in a purse or on the hip. Without totally geeking out, if the Apple iPhone comes to Verizon in 2011, the smartphone trend will really accelerate. If you are still using a BlackBerry, you likely haven’t seen what mobile search is like or what a newer Android phone linked to a 4G network will mean. Law firms will quickly see that their websites are totally inadequate for these computers on-the-go. Entrepreneurs will develop apps that strive to make legal practice more location-independent and cost-effective. Good if we get away from the office; bad if we have to work everywhere. Just a lawyer’s luck to be able to work all the time for clients who want to pay for results, not hours.

We sometimes forget how much fun legal practice can be when good people work on a key challenge together and get a great business result or best a worthy adversary. Many of our non-lawyer friends never experience this. When we do, we should party like it’s 2010.

And then say adios and give two cheers for a better 2011.

Wired GC: 10 Legal Trends for 2011

You can try to resist the list, but it’s part of being in the blog family:

(Here’s the link for those who can’t see Michael C.).

Here are my Top 10 trends for 2011, a look at the legal space from the inside out. The first five today relate to the large client, large law firm sector of the industry. We call this the legal military-industrial complex. Tomorrow, five more trends that break out of the white-shoe orbit, perhaps showing that there’s even less normal about the new than some think. Which is a good thing! This is all in fun, it’s the holidays, and your mileage may vary:

1. Value Hits a Wall. Not “the” wall, “a” wall. Value is good, value is important; a renewed focus on value helps drive change. But let’s be honest: some law firms practice denial by carefully pouring old service model wine in shiny new bottles with a “Value!” sticker slapped on the label. There is no line item in a GC’s budget for this “value premium.” Clients expect it from good law firms. It’s not a real differentiator for 80% of legal work. Which leads to pricing.

2. Alternative Fees, Good; Lower Costs, Better. General Motors emerged from its “quick rinse” Chapter 11 filing in 44 days. This is much quicker than the typical first iteration on an RFP-driven, multiple version Alternative Fee Arrangement negotiation. Law firms can’t internally support leaving money on the table; smart GCs know this so they have to scrutinize increasingly exotic proposals to find the “gotcha!” Meanwhile, other GCs decide that a lot of work can go to firms in lower cost cities that provide clear budgets and utilize lower effective rates. When you go from $550 to $375 per hour, now that’s alternative billing you can believe in! Which brings us to the gambit formerly known as convergence.

3. Convergence is Dead (As We Knew It). Ah, the concept was great for the GC: take your work to the legal Shangri-La called One Stop Shopping. The funny thing is after about a year in this jurisdiction you feel like One Shop Stopping. Consolidating work in one firm can be shrewd for common matters (e.g., liability litigation) or out of necessity (think international for many US clients). But true convergence was based upon the assumption that law firms were better at managing legal matters than their clients. Which was a real leap of faith that gave birth to a new legal trinity.

4. Project Management! Lean!! Six Freakin’ Sigma!!! When law firms start using these terms profusely it means (a) change is really here or (b) GCs should start adding a wallet chain to their attire. In-house lawyers know that their companies are built upon groups of projects aligned in a strategic direction. GCs know that law firms are enterprises built upon charging out many people on more matters at increasing rates. Most large law firms can’t really turbocharge service delivery when they buggy-whip their same economic model. Some in the industry even call for certifications in these areas, as if layering on more bureaucracy or CLE will solve things. Meanwhile, good partners with great clients are making a list and checking it twice, wondering if they will have to leave their firms before their clients do. Which (you guessed it) leads to number 5.

5. The Am Law 200 Becomes America’s Top 40. Before the cease and desist order forces a change in this one, here we go. There will be much less in common with similarly-ranked firms than ever before. In a given market, some firms are (relatively) thriving while others just (barely) hold on. Partners who can leave do so, either finding a better large firm for their clients or really going for it with a smaller practice that is built from the start without the legacy costs. This accelerates in 2011 after final 2010 distributions as the slowly improving economy puts a real spring in the relationship partner’s step. But what about the merger elixir, Santa? I’m sorry, Virginia. You know that’s been rare the last few years; and even those who aren’t naughty find it hard to do for strategic reasons. Funding equity partner retirements or paying off lines of credit doesn’t count (and isn’t nice). (Also see items 1-4, above for additional lumps of coal).

Tomorrow, trends 6-10. Time for the Grinch to grow his heart, let the GC share some responsibility and look at a few bright spots of opportunity…

Cultivating an Opening Day Mindset

Today is officially Opening Day for Major League Baseball. (Last night’s Yankees/Red Sox game was exciting, but all true fans know that Opening Day means day).

Among the great things about Opening Day is the fact that all teams and players start even, all have at least a chance to appear in the World Series. (Well, maybe not the Nationals…)

So here are three ways I think Opening Day can serve as time for reflection (and perhaps even optimism) for lawyers facing unrelenting change and the attendant uncertainty:

1. Strive for precision, not perfection. (The best lawyers have setbacks, too).

“Baseball’s best teams lose about sixty-five times a season. It is not a game you can play with your teeth clenched.” — George F. Will.

2. It is possible to do good work if you’re not overly focused on the meter. (Results, not effort, are what matters).

Baseball is infinite. It has no limits of time or space. There is no clock. The foul lines extend indefinitely beyond the field of play. Even the outfield wall is only there for convenience. — Bruce Hoffman

3. It’s not about brute strength, but also perseverance and agility. (Law is the great equalizer, and a source of fairness in an unfair world).

“There is no sports event like Opening Day of baseball, the sense of beating back the forces of darkness and the National Football League.” — George Vecsey

Most current discussions about the law and the legal industry are understandably serious. Baseball reminds us that sometimes you can see things as more of a game (play outside and have fun) and still be OK. So here’s a bonus thought from one of baseball’s best announcers, who wasn’t talking about the law, but could have been:

“I love the game because it’s so simple, yet it can be so complex. There’s a lot of layers to it, but they aren’t hard to peel back.” — Ernie Harwell

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Law Firms: Beware the Middle Market

Trying to be all things to every client may result in being few things to none.

Last week, I wrote in Why Value is not a Virus that I thought corporate legal work would diverge into lower-end, more commodity-like work and higher-end, larger risk/reward work. Both would be priced accordingly. There were some great responses, that I note in an update at the end.

Three observations follow for me:

1. Any size firm can work profitably in either market.

2. Since costs are crucial (particularly at the low end), few firms will be able to properly bundle lower- and higher-value work.

3. All firms will have to be experts in managing projects, collaboration and using technology and newer service providers.

So when I try to step away from the legal reading, something seems to pull me back in. This time, it’s an article by James Surowiecki in the New Yorker. He focuses on companies like Apple and Acer that price products either at the premium end or the low end:

These two strategies may look completely different, but they have one crucial thing in common: they don’t target the amorphous blob of consumers who make up the middle of the market. Paradoxically, ignoring these people has turned out to be a great way of getting lots of customers, because, in many businesses, high- and low-end producers are taking more and more of the market.

For my argument, “middle market” doesn’t mean the size of the client. It means the approach toward the market. Then Mr. Surowiecki brings up what is really different now:

The boom in information for consumers has also severely weakened middle-market firms. In the past, these companies were able to charge a premium price because their brands were taken as signals of reasonable quality and reliability.

For some law firms without a focused strategy, the middle market may become the muddle market.

This is why things like the ACC Value Challenge and other legal rating or cost/service information is so important. It is why the state of the economy is not what is driving change. As researchers like to say, it is a correlation but not the cause. The cause is the global competition that clients are facing. This cause was there before the downturn, it is here now, and it will accelerate change even faster when economic activity rebounds.

Since so much is happening right now, and much of it doesn’t fit in this space, I set up lawriver late last year. It’s just a simple site that’s easy to check from your desktop or mobile.

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