Negotiating tips from Alan Weiss
One of the best consultants I've ever had the pleasure of learning from has put together several tips on negotiating:
- Start from a very strong position and work your way down from there. Surprisingly, your strong position may be accepted as is. That applies to payment terms, fee levels, etc.
- Understand your "musts" and don't sacrifice them for mere "wants." Give in on the discretionary things, fight to the finish on the critical things.
- Listen more than you talk. Don't attempt to fill silences.
- Try not to go one-on-ten. Negotiate with one person, not a team if at all possible. Otherwise, you'll have a roomful of people trying to impress each other at your expense.
- Don't burn bridges. This is business, don't take it personally. Neither gloat nor pout, do not celebrate or seek revenge. Move on.
Suggested Reading: Blink by Malcolm Gladwell
© Alan Weiss, 2005 All rights reserved.
Engagement agreement/letter
Written communications from lawyers to clients and prospective clients are very important to establish the expectations of clients. And engagement letters, in particular, are essential to establish the threshold of these expectations.
A recent article in the Los Angeles County Bar Association's Update sets forth a number of matters that should be included in an engagement agreement. These elements include the following:
*Who the lawyer is representing
*The scope of the representation including, when appropriate, what the lawyer is not undertaking
*The fee to be charged and the manner in which the fee is to be calculated
*When the fee is to be paid
*The consequences of non-payment, including the right to withdraw
*Staffing
*Communications
*The client's responsibilities, including the obligation pay the lawyer's fee in accordance with the terms of the agreement
*Dispute resolution
*Ethical issues, if any, including potential conflicts of interest
I would add another element: Add a signature stamp in the margin of the agreement at every point where fees and payment schedules are discussed. Ask the client to initial each of these, indicating his understanding and agreement with the provision next to his initials.
This will go a long way to assuring prompt payment by the client.
Then, it is the responsibility of the lawyer to carefully monitor the client's payment performance to be assured that the client is honoring his/her part of the bargain and to withdraw, if necessary, before the client owes the lawyer too much money, contrary to the parties understanding.
Care and feeding of Corporate General Counsel
General counsel say that they find lawyers from a number of sources including:
-Referrals from trusted sources (usually other general counsel)
-Publications they read in which lawyers write about the topics of their concern
-Networking
General counsel say they look for lawyers who
-Respond promptly
-Are expert in their field
-Have a good reputation
-Know the client's industry
-Have a relationship with the company in the past
-Are members of a firm that has a good reputation
-Are confident, but not arrogant
Reputation is very important to general counsel because they are always reviewed and criticized by someone - everyone - in their organization. While reputation is important in high stakes matters, cost is very important in commodity-type work.
Do what you can to relieve the stress of general counsel. That is their message. That's how to bind yourself to your corporate client.
These were the sentiments expressed at a recent meeting of the Los Angeles chapter of the Legal Marketing Association by several general counsel.
Another message that came through in the presentation is that the maxim that clients seek lawyers, not law firms, is not entirely true. Rather, it is true that clients -- Corporate America -- do look at the law firms. They have to in order to CYA because, as noted above, their every move is scrutinized by everyone else in their corporate organization. It's a lot easier to say a mistake was the result of an action by a major law firm than it is to say it was the result of a sole practitioner or small firm. This prejudice of large organizations (clients) regarding the size of their law firm is a fact of life. There are many ways to deal with size bias, but the prejudice must be met ...
Quote from Theodore Roosevelt
Delegation is the magic principle for successful small firms and perhaps best expressed by Teddy Roosevelt:
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Of 6 million annually reported car crashes, half are related to distracted driving, according to the American Automobile Association. The AAA suggests that it's not the act of holding the device, but rather the discussion that causes accidents.
If you're distracted by an intense conversation, and you're using a headset , you could still get into an accident. Sometimes you're not even seeing what's in front of you because your mind is somewhere else.
A small but growing number of companies are publishing guidelines for cellphone use inside the office and the car, as some high-profile liability cases catch the eye of corporate America.
"It's a hot liability topic," said Kathryn Lusby- Treber, executive director of the Network of Employers for Traffic Safety in Vienna, Va. "The company is certainly at risk. If they have an employee who's driving for business and they're in a crash, the employer can be held responsible for the crash."
Will these guidelines protect the company? Not necessarily.
In October 2004, Cooley Godward of San Francisco settled a $30 million lawsuit in the death of 15- year-old Naeun Yoon, who was struck and killed in 2000 on a busy highway outside Fairfax, Va., by one of its employees - a lawyer accused of making a business call on her cellphone while driving. After serving a year in jail and surrendering her law license, Jane Wagner was ordered to pay $2 million in damages to Yoon's family by a circuit court jury in Loudoun County, Va. While the firm's insurance company paid $92,500, according to its attorney, John McGavin of Fairfax, the firm was not held liable.
However, the case of Yoon v. Cooley Godward has broader implications. This decision suggests that employers could be "vicariously liable for the cellphone-induced distracted driving of their employees, even if phone calling is not within the scope of employment," noted Ross Guberman, an adjunct professor at George Washington University Law School who has written about the case.
Perhaps the use of cell phones, Blackberries and other mobile technology should be reexamined to take advantage of their benefits while not exposing our law firms to damages and concomitant loss of reputation.
Governance of a law firm can be complex
At the Managing Partners Forum being held in San Diego, CA, Larry Bodine of PM Forum, reports that Mary Cranston, chair of Pillsbury Winthrop in San Francisco, revealed how her firm grew from a California firm to an international firm.
What struck me about Larry's comment is the governance or structure that Ms. Cranston described; she revealed that the firm thinks in multi-dimensions:
Practice groups think of new "products" and new solutions to sell.
Industry teams, which are cross-office and cross-practice, take the firm's products and refine them for specific industries.
Client teams are the methods her firm uses to deliver the product to current clients.
This is sounding more and more like the corporate model where large corporations have R & D Departments, industry or product management leaders and client or customer account executives. Wow!
Look for more changes in the legal world that reflect our corporate culture.
Lawyers & Clients Collide
At a Managing Partners Forum currently being held in San Diego, CA, Larry Bodine Regional Diretor of PM Forum, writes that R. Bruce McLean, chairman of Akin Gump in Washington, DC, said that next year will mark the first time a lawyer charges over $1,000 per hour. He said that law firm pricing and client demands for lower rates are on a collision course. (Haven't we heard this before?) "There is a real opportunity to be a market leader in alternative pricing," he said.
You may want to review our earlier discussion about alternative fees becomes even more important. In Law Practice Management Review: The Audio Magazine for Busy Attorneys, we interviewed six major corporate General Counsel and Outside Counsel; they shared their concerns and expectations for future billing relationships. Now may be the time for you to review their conversations again.
Is a Large Law Firm a Partnership or an Employer?
Despite being called partnerships (or LLP's or PC's), the governance of large law firms has fallen to a very few in the organization ("the management committee"). And, the remaining "partners" have begun to look like, act like and think like employees, not owners.
The headline in the January 18th Los Angeles Times is: "U.S. Charges Law Partnership With Age Bias" ... In a class-action suit, the EEOC says one of the nation's oldest and largest (Sidley Austin Brown & Wood, based in Chicago, IL) law firms broke the age discrimination law by forcing out 32 older lawyers.
The EEOC's class-action suit - the first of its kind against a law firm - alleges that Sidley Austin has maintained an illegal "age-based retirement policy" since at least 1978 and that the firm arbitrarily forced out 32 partners in 1999.
Sidley has 1,500 lawyers in a dozen cities, including Los Angeles, spread over three continents. It represents a number of large corporations, including Tribune Co., the parent company of the Los Angeles Times.
Historically, law firm partnerships have not been subject to discrimination laws because partners, as the co-owners of an enterprise, were considered employers. Sidley consistently has taken the position that all its partners were employers, and therefore not covered by age-discrimination law.
The EEOC alleges that the "retired"/"fired" lawyers were partners in name only because they had no voice in the firm's management - including hiring, firing and salary decisions. Consequently, the lawyers were "employees" entitled to the protections of the Age Discrimination in Employment Act.
This is the traditional "form vs. substance" argument used by the Internal Revenue Service in tax cases. If it walks like a duck and talks like a duck, it must be a duck." The article continues by quoting Kimberly Yuracko, who teaches employment law at Northwestern Law School in Chicago, saying that "... ultimately, the case will turn on the real way Sidley operated, not the titles the individual lawyers held.
The facts of this particular case are not so important as is the fact that large law firms are becoming ... and are becoming viewed as ... what they are: employers.
Your most valuable asset: Human capital
Marginal Value of Smaller Clients
Most professionals who bill by the hour focus on their hourly rate ... to get it as high as possible. What they forget is that the client who may contribute either a lower hourly rate or a smaller total revenue contribution is still a
Position is Everything
Harry Beckwith, author (Selling the Invisible and What Clients Love) suggests that the number one marketing mistake law firms continue to make is their failure to establish a position.
"Specialists thrive, generalists die." This paraphrases Beckwith's belief. OR, "Generalists are flexible and survive during economic troubles." This paraphrases Alan Weiss' belief.
Another way to paraphrase these concepts is: "Specialize or die." "Generalize and thrive."
Beckwith believes that promoting one specific skill will provide a law firm with competitive advantage. And competitive advantage will yield more revenue and more profit.
What do you believe? What is the USP (unique selling position) of your law firm?
Under-promise, Over-deliver
It's always really tough to lower expectations of a client starting out and then over-deliver on a project. It's hard to sell someone on the idea of doing anything but a superlative job, so we tend to outdo ourselves with rosy promises up front.
But the opposite is deadly -- promising the moon and falling far short. We all end up doing that once, twice, or way too often.
Sometimes the best way to go, with a new initiative, is simply to limit yourself to very consistent, well-planned effort on ONE PROJECT ONLY until it's complete. Some projects don't lend themselves to this, it's true. And financially, sometimes you simply MUST do several projects at once to make ends meet. But if there is any way at all to focus on one thing at a time, it always pays off.
And never feel afraid to turn down a new project (client) when it will clearly steal time from other things you care about more. That word "No" is highly underrated.
by Halley Suitt on Business as seen in Worthwhile Magazine
Laws of Buying a Law Practice (cont'd)
Jungle Law #12: After Buying A Business, Do Not Change Anything (At First)!
In general, if the law practice you are buying is profitable, leave it alone while you learn how to manage it in accordance with the status quo. Then, slowly, make changes. Years ago, when I was observing the retail food industry, I saw major East Coast chains buy West Coast chains, until there were no more home-grown chains left. But, many of those folks failed and had to sell the chains back to their original owners or to third parties because they didn't understand that the Eastern and Western business cultures, even though both American, were different. They didn't allow themselves sufficient time to acclimate themselves to the new environment and then slowly change that which could/should be changed.
(Taken and adapted from "Strategies for Successfully Buying or Selling a Business" written by Russell L. Brown, a business broker.)
Laws of Buying a Law Practice (cont'd)
In another context, Russell Brown, a business opportunities broker, suggested several
Laws of Buying a Law Practice (cont'd)
In another context, Russell Brown, a business opportunities broker, suggested several
New Year's Resolution: Say "No"
What will you say "no" to?
1. What strategies, initiatives and activities will you say no to?
2. What measurements will you not pay attention to?
3. What customers will you not target?
4. What people will you not keep?
5. What competitors will you not follow?
6. What will you remove from your web site?
7. What money will you not spend?
8. What meetings will you decline?
9. What trips will you not make?
10. What slides will you not create?
11. What will you not say?
12. What thoughts will you not entertain?
and as seen at the nonbillablehour web log
Collecting Your Fee -- Or, Take My Wife, Please
A new approach to collecting your fees, that is, those fees that have already been billed but are languishing in the aged accounts receivable file, was suggested by Sean Carter.
His wife wanted to refurbish their house and he thought he had a clever way around agreeing ... Tell her to collect the outstanding bills and she could have anything she wanted! A novel approach, indeed.
Sean highlights, in a humorous way, one of the most significant challenges facing today's law firm: Collecting Your Fee.
Another significant challenge that comes before collecting is billing. Studies have shown that unless the lawyer bills his/her time as she/he proceeds through the day, there is a minimum 10 to 15% loss of revenue. Couple that loss with the further loss by having a realization rate on collecting that is less than 100% and you have a most deplorable situation.
With diligence and a greater focus on self-interest, the lawyer can increase his revenue and earn that to which he/she is legitimately entitled -- and the client agreed to pay!
Serving Small Clients Profitably
Ed Wesemann in his book, THE FIRST MYTH OF LEGAL MANAGEMENT IS THAT IT EXISTS, suggests that small clients disproportionately drain the resources of law firms while providing a disproportionately small contribution to firm profits. I agree that the size of the client is important; everyone wants to serve larger clients.
I am all in favor of seeking larger clients with more money and more interesting challenges. This effort, however, must be balanced to assure that the firm doesn't wind up with only a few clients, larger though they may be, who put the firm at risk if they should leave.
But, be sure that no long-term capital or other expenditures are made at the behest of such larger clients without some type of assurance or guarantee that the business will stay with you until at least the amortization for the new expenditure is completed. In the longer term, a strategy based on fewer, larger clients will almost always lead to disaster.
Business Plan - Good way to start the new year!
The importance of a comprehensive, thoughtful business plan cannot be overemphasized. Much hinges on it: outside funding, credit from suppliers, management of your operation and finances, promotion and marketing of your business, and achievement of your goals and objectives.
Despite the critical importance of a business plan, many entrepreneurs drag their feet when it comes to preparing a written document. They argue that their marketplace changes too fast for a business plan to be useful or that they just don't have enough time. But just as a builder won't begin construction without a blueprint, eager business owners shouldn't rush into new ventures without a business plan.
The Small Business Administration advises that, before you begin writing your business plan, consider four core questions:
-What service or product does your business provide and what needs does it fill?
-Who are the potential customers for your product or service and why will they purchase it from you?
-How will you reach your potential customers?
-Where will you get the financial resources to start your business?
See The Business of Law, 2nd ed. (ABA pub) and The Profitable Law Office Handbook specifically designed to help lawyers create a business plan.
Trash Talk -- Create a File Retention Policy
A good way to start the new year, by cleaning out your old files.
Lawyers know they have to retain, indefinitely, the valuable property that belongs to clients where they are unable to return such property to the client.
The better approach, of course, is to return such property and not pay the storage costs in an escalating real estate market.
The best way to handle this, it seems to me, is to have a provision in one's engagement agreement that allows the attorney to return the valuable documents and property to a last known address at the conclusion of a matter or by a date certain (e.g., in estate planning matters), whichever first occurs.
Valuable client property includes documents such as original notes or securities. This also includes original wills and settlement agreements.
There is another category of items, however, which is seldom discussed. That's the notes of the attorney and related items used by the attorney to represent the client, though not matters of original origin. What are the rights of the attorney to destroy these items?
Massachusetts Bar Counsel states the conclusion as succinctly as any I've seen: "...a lawyer may dispose of those parts of the closed file which do not constitute 'records of the receipt, maintenance, and disposition of [clients'] funds and other property' and are likely to have no continuing value or future use to protect the client's interests. Examples include copies of pleadings, correspondence, and other work papers..."
With real estate costs continuing to rise, it may well be worthwhile to cull old files to reduce required space for retaining old matters. Another approach being used by some is to image all old files and then destroy everything but original documents. One large firm in the Chicago area pays for its photocopy machine by the number of pages printed. However, the machine allows documents to be scanned without charge if paper is not used to print the image. And, the scanned documents are then stored on disks which are searchable ... much easier than finding a "needle in a haystack!"
The cost of labor is offset by the reduced real estate storage costs! And, documents which had to be physically searched for in the past (and often depended on the memory of an attorney as to which file the desired item might be located) can now be searched for electronically at a much faster speed.
See more from the Massachusetts Bar Counsel.
Also see a formal opinion of the California State Bar.
