Visiting ALM LegalTech conference today was eye popping in both its simplicity and complexity.
First, the simple: D. Casey Flaherty, corporate counsel at Kia Motors America, suggests that law firms don't need more software. They need to use their existing software more efficiently and effectively. What a concept. Reminds me of the scientists' suggesting that humans use only 10% or less of our mental capacity.
The difference between the two concepts is that inefficient use of existing technology increases the legal spend for clients. And only Corporate America can do what Mr. Flaherty did: subject his outside counsel to economic consequences when they are guilty. He recently reduced a law firm’s billing to Kia Motors by 40 hours because he detected they didn’t know how to use Word to print to a .pdf file and eliminate the scanning process which would have reduced associates time on his matters by the 40 hours. Multiply this scenario many times and you are talking about hundreds of thousands of dollars in lawyer billing. More on that in a later post.
Next, the complex: Owen Byrd of Lex Machina discussed the concept of Moneyball for Lawyers. He says that “Moneyball” applies data (any collection of facts) to analytics in order to understand trends and patterns that emerge from that data. This supplements legal research and reasoning with predictive analytics. This approach can help predict a party's behavior, likely outcome of a lawsuit and the results from a specific legal strategy or argument. The concept, emanating from Stanford studies, can be viewed merely as a new research tool. If so, it's rather expensive. It can also be viewed as a marketing tool by helping you refine your pitches for new legal work to prospective clients. In this case, the cost is insignificant when you attain one or more new clients. This is the future of the legal profession. Currently, Lex Machina and its approach can be utilized only by the larger organizations with big money at stake. But, the handwriting is on the wall.
Most important, these two divergent approaches to technology demonstrate the need to be proficient with current technology in order to satisfy rule 1.1 (definition of competence) and to run scared about the future if you fail to pay attention to the changes coming in the future. The bottom line is to serve clients well. Your awareness and proficiency with technology addresses that goal…and may provide a competitive advantage to some.
The following note is prompted by the comments of Susan Cartier Liebel of Solo Practice University® and her post about Kimberly, a young mother who just gave birth to her third child and was a 3L law student at Stetson. She became ill but failed to go to a doctor to address her own health. She was busy with her family and "stuff."
This is for all of you out there whether lawyer or law student, mother or father, who puts
themselves last. You put off going to the doctor for that chronic cough while you rush your child to the pediatrician for a hang nail. You eat your cold dinner out of a jar standing up and talking on the phone while you make sure your child’s meal is hot and she’s seated lest she choke on her food. You do so because ‘you can handle it’. Well, here’s the truth. You can’t.
You can’t care for your kids or your spouse if you break down physically. You can’t care for your clients if you don’t take time to reinvigorate and refresh. Remember the airline admonition: Put your air mask on first and then help your child and others around you. None of us are superhuman or immortal. There is nothing more important than your health, no final, no brief, no exam, no trial, no event. Remember this the next time you get no sleep or ignore that persistent cough or inexplicable pain in your side because ‘you don’t have time’ to slow down. Remember you can break down, too. No machine and certainly no human can work without stop and without repair from time to time.
MyCase features my guest blog post suggesting that there is plenty of work for those lawyers willing to be realistic both in the nature of the clients they serve and the fees they charge.
While you're at their web site, check out their software. It has been reviewed by many and is well - regarded.
There are at least two components of legal costs: Fees and expenses. When one is clearly out of line, the other is perceived to be out of line. Perception is reality.
Much has been written about the $1,000 per hour legal fee. It's out of line, too high, much too expensive, etc. But the writers fail to assess the competitive market for those services and whether those services have some very special expertise connected with the fee that justifies the fee. If, for example, you're in a "bet the company" situation, you want the best lawyer you can get. If you're in a criminal trial as was OJ Simpson, you want a particular lawyer and team of lawyers. You will pay the asking price.
If you're facing a normal contract dispute, one might consider this a commodity type of legal battle, one not requiring the best lawyer in the state; a good lawyer will suffice and the cost of his/her services will be adjusted downward accordingly. Some call this commodity pricing.
If you're a very large bankrupt company, you need specialized professional expertise. According to Bankruptcy Court filings (attorney fees need to be approved by the judge), many lawyers in this arena are receiving $1,000 per hour. Nothing out of the ordinary here.... this is reality.
However, when these same filings show application for expense reimbursements that are out of the ordinary, then questions arise. For example, why should the bankrupt estate pay for first class airfare, for normal photocopying charges, for faxes, for overnight hotel stays at the Waldorf-Astoria, etc.? Many such expenses are considered part of a firm's normal overhead; many such expenses can be lowered by conducting oneself in the "normal course of business," such as charging for coach airfare (not first class or business fare), hotel charges (at a Marriott, etc. rather than the Waldorf).
Any "over" charges should be at the lawyer's expense not the expense of the estate. After all, isn't that why the lawyer is receiving the larger per hour fees? It's when the lawyer begins to "nickel and dime" the client or take advantage by charging more than "ordinary" expenses, the perception of over-billing extends over to the fee itself. When asked, I usually advise my clients to reduce the expense charges and their fee charges will not be questioned. It's usually the $5.05 charge that brings the whole bill into question, not the other way around.
This issue has arisen in a number of conversations with clients.
Why would you engage a contract lawyer? For one of several reasons: (i) even out the work flow; ii) engage expertise you don’t possess at the moment; (iii) gain time to observe the quality of work of a potential hire; and (iv) determine if you have enough work in the long term to hire a permanent employee.
Once you hire a contract lawyer, whether for a designated number of hours or a specific project, do you know whether that lawyer is covered under your errors and omissions insurance policy? Often, policies are written to include all the attorneys you hire after your policy commencement date up to the end of that policy term period. Then, your premium is based for the following year on the higher number of lawyers now on staff.
But, the question remains, are you covered for what is, in essence, a part-time employee. Check with your broker; read your policy. Make sure you know the answer. Many lawyers require that their contract lawyers specifically name them on their policies with an endorsement. Of course, remember that most policies are claims-made policies, not occurrence policies. So, your policy must be written in such a way as to cover negligence asserted in the current period though the alleged negligence was committed by your contract lawyer in an earlier period and is no longer present. Ask. Be sure.
Most of us can notice when something “isn’t right” with our bodies, and we often are quick to jump to a conclusion about the cause. Yet what we perceive to be the problem, and the reality behind it, may be much different.
A urologist recently shared an example with me, saying that many people come to him to “fix the problem” of an over-active bladder at night. They typically attribute it to a “plumbing” issue that a pill or even surgery can cure. Yet this doctor suggested that, as people age, they sleep less and they’re likely to be awakened more easily by sounds that didn’t disturb them in earlier years – a dog barking, the house creaking. Once they’re awake, they decide to honor the bladder urge so they can go back to sleep. The perception is that there is a physical medical problem. The real cause is the natural aging process and the best “cure” is to accept it.
Transfer this lesson to a law practice. Most lawyers are quick to perceive a problem when there is less money coming in the door. They immediately jump to a conclusion about “the cure” – do more marketing, or raise rates. The reality is that declining revenue typically began long before as a problem with receivables. Generating new work to cover declining revenue simply isn’t the answer. The strategy is to make sure clients know they must pay their bills within 30 days. And the way to do that is specify clear collection terms in the engagement agreement. Lawyers perceive every client as valuable and hate to cut them loose; the reality is that continuing to do work for overdue clients who don’t pay shows those clients are not worth keeping.
A new study by George Washington Law School showed that realization rates (the amount of money billed that is collected) average 83.6 percent for all law firms, a figure that is a historic low. If you perceive your revenue is down, and the reality is that you only collect 80 cents on the dollar, you’re like the urologist’s patients – you won’t get many good nights of sleep.
“I’m so overwhelmed, I just don’t have time to take care of myself.” Those were the first and last words of a very short conversation I had recently with an obviously harried lawyer. Do you feel the same way? Are you in the same position? See our newsletter for suggestions on how to address this feeling.
Virtual veterinarian faces a legal test in Texas. He moved his practice online and talked to distressed pet owners by email and telephone. He charged a flat fee, generally, and recommended treatment options. The Texas State Board of Veterinary Medical Examiners suspended his license for violating the state law that prevents veterinarians from setting up a medical relationship solely by telephone or electronic means.
The AVMA claims that it is protecting the public's interest. The vet claims that the regulation is intended to protect the brick-and-mortar veterinarian practices.
Does this sound familiar? Every Bar regulation that I've ever reviewed (or testified against) has been sustained on the basis of protecting the public. Where are the interests of the membership, the very professionals who pay dues to keep staff employed? These interests seem to be relegated to the back of the bus, if not ignored completely. In the legal community, this "ship" has sailed. I don't think anyone would claim that a "virtual" law practice is illegal. It will be interesting to see how the Texas court rules in this matter.
Are contract lawyers an expense or a fee item? This issue has been litigated before and, according to my reading, has been resolved in favor of the law firm. The law firm is entitled to engage contract or temporary lawyers for one price and charge the client a higher price. One rationale for this is that the firm can engage lawyers on a short term basis, without a long term commitment, to provide the work for the client that is necessary. When that job or assignment is completed, the law firm can sever the tie with the contract lawyer and retain a lower overhead. Everyone benefits: the lawyer who otherwise would not have been employed; the law firm that can take on additional work and its resulting benefits; and the client whose goals can be met more efficiently and timely.
The issue usually arises from a complaint by an insurance carrier who is responsible for payment of legal fees under a policy of insurance or a creditors’ committee that wants a larger share of available funds and finds the law firm(s) an easy target. Currently, the Citigroup class action legal fees are being challenged by a group called the Center for Class Action Fairness.
The allegations in this case go beyond the assertion that a law firm cannot charge more than it pays for legal talent. If this were the only issue, the challengers would have no standing; this issue has been resolved and it would be a major reversal of thought for the court to rule otherwise. But, the real issues are whether the engagement agreement mentioned anything about contract lawyers and, if so, what were the terms; what risk did the law firm accept when its fee was based on a contingency (was this a novel area of law or one in which plaintiffs had not been successful before); what was the expertise needed in the matter for which contract lawyers were engaged, and what was the expertise actually engaged; and were the fees charged “reasonable” under all the circumstances.
In this case, the total fees amount to less than 17% of the class action settlement. The court will have to decide whether this was a reasonable fee overall and/or whether each component of the fee requested reasonable. The added risk for any law firm taking on this type of case is that its fee is always reviewed on Monday morning ... the Monday morning quarterback always has a better perspective than does the game-day quarterback. While the large company client can protect itself by hiring the contract lawyers directly, though they could then hardly expect the law firm to oversee that portion of the work product. The client can further protect itself by objecting to paying the legal fee and litigating the fee. But, how does a law firm protect itself against the client (usually someone else speaking in the shoes of the client) so as to avoid an after-the-fact conflict?
In a recent case, the 7th Circuit appellate court said that the law firm failed to comply with its contractual notice requirement to the carrier. The law firm was required, as is true in most such contracts, to notify the carrier of a possible claim of negligence. The law firm said that notifying the carrier of every possible claim would delve it into minutiae and was unreasonable. The Court said the facts of this case suggest that any reasonable attorney should have known that a claim was likely ... and therefore the firm owed a duty to the carrier to notify the carrier.
If you take the time and expend the funds to purchase insurance, you must review your contractual obligations of notice ... otherwise you're wasting your money and leaving yourself exposed to massive claims.
In today’s Wall Street Journal, the writer suggests that high priced lawyers are for sale, that is, that clients are pushing back and demanding lower fees irrespective of the stated hourly rates of their lawyers. The reporter’s perspective is skewed only to the larger law firms, “Big Law.” Small firm and sole practitioners have always walked this tight rope between client acceptance and lawyers’ fees, but this doesn’t make news.
The battle between lawyer as vendor and client as purchaser has always existed. The “battle” or adversarial conflict just never received so much publicity as it does now ... And yes, some clients have become bolder as a result of the recent Depression (aka Great Recession).
Also, however, some lawyers will raise their purported rates knowing the financial officer of the corporate client will demand a discount. This way, the law firm receives the engagement, the General Counsel gets served and can protect the rights of the company, and the finance officer can assert he/she saved money for the company. A nice game.
A lawyer who was interviewed for the article suggests the real issue for all concerned: The client must believe he/she/it is receiving value for the fee paid. In other words, it’s the total cost of the legal service, not the rate per hour, that is significant. With more clients and attorneys beginning to speak this language, the real issue is coming into focus.
Customer service is appreciated whenever it occurs. My wife and I (and I dare not forget Bandit) are spending a few days in Tucson, AZ at the Lazydays RV Park. Gathered with us are close to 100 other Airstream rigs, from trailers, to motorhomes ... from new to vintage as is ours. The amenities are outstanding and, as usual, it is the people that make an experience memorable. They go out of their way to be friendly and accommodating. Their brochure says that all their employees take weekly service instruction. Can you identify a law firm that has done that?
Once again, the issue of large law firm partners being terminated by their firms arises. In today’s Wall Street Journal, the moral of the story is that lawyers must contribute to the well-being of their firm. If they don’t, they will be terminated irrespective of whether they are a partner (equity interest) or an associate (employee). In other words, they must adhere to the formula of The Business of Law® ... P = R - E, the basic formula of all business. Or said another way, lawyers are now beginning to realize the practice of law is a business, just as every other service profession (and manufacturing and distribution) is. And, the line between partner and employee is becoming narrower each day.
In a recent article in the New York Times, the reporter focused on the proper issue ... the productivity of the lawyer. Age is irrelevant. There are 80-somethings who are contributing to the “bottom line” of the firm and there are 20- and 30- somethings who are not. Those who do not contribute to the bottom line can be sustained in the firm for only so long before their weight begins to cause the firm to collapse. That is one of the primary reasons for the failure of many large firms in the recent past ... the failure to address management decisions that impact the operation of the firm in a business-like manner.
Being a partner is no longer the key to the magic kingdom. Partnership agreements are written in such a way that a partner can be terminated from his/her equity position without much difficulty. “What have you done for me lately?” is not an idle phrase in the world of law firms. Just as every employee in every firm/company must contribute to the well-being of the organization. It’s for this reason that lawyers are concerned about maintaining strong client relationships and not willing to share their client information with others in the firm. Cross selling is a concept that is yet to be fully embraced because of this phenomenon.
Ways in which a lawyer can contribute to the bottom line and well-being of the law firm are contained in the formula: Increase the revenue of the firm (collected billings) or decrease the expenses of your efforts relative to the revenue you bring in. In other words, if you can produce client revenue that will keep other lawyers busy, if you bill a significant number of hours (or related value billing efforts) above the average, or if you have a key client relation that is significant for the firm, you will be viewed as an asset of the firm. If your collections decline, if your time expended doing client work declines or if you utilize a disproportionate share of the firm’s resources, then you will be a drag on the performance of the firm and, at some point, terminated.
If anything is different as a result of the Great Recession for law firms, it's the realization that P = R - E, and law firms are governed by this formula as is everyone in the commercial world.
In a recent USA Today article, texting and music listening while driving and walking are leading to an increase in the death of pedestrians. People are still talking on the phone and texting while driving, despite the statistics that prove it can be deadly and despite it being against the law.
But now, we have new statistics that show the same result -- injury and death -- arises from just walking and texting or listening to music and being in "another zone." All of which confirms that multi-tasking is a misnomer. We can do one thing at a time, not many different things at the same time.
Those who reach the pinnacle of success are able to do many things ... but focus on one thing at a time. There just ain't no such thing as multi-tasking.
Life After Law, What Will You Do For the Next 6000 Days? My soon- to-be-released book is a guide to why aging baby boomer lawyers should be planning for their next career. The ABA has concluded that 400,000 lawyers will retire in the next 10 years. That is equivalent to the entire membership of the ABA, the largest volunteer organization in the world!
According to a different report, without reference to law, 10,000 people retire daily!
Look for a dramatic change in our culture as we seek to learn how to live longer, productive lives in different careers. Of course, the economy will also change as older folks become the dominant consumers in this country.
At the end of the day, the value of our law practice is based on our success and the many people we have touched over the years. This is a significant legacy we will leave on retiring from the practice.
Most lawyers all around the country with whom I've spoken don't understand this and can't comprehend even the possibility that their many years of effort may actually have produced a monetizeable value of some significance. This value can enhance their retirement. It is a challenge to overcome such deep-seeded beliefs among many Baby-Boomers as they get ready to move on to their second season. This is the difference between personal goodwill and organizational goodwill. There is more of the latter than most people believe.
My conversations have convinced me that the most feared word in the English language is “retirement.” That may contribute to the refusal to consider an alternative to closing the office; we will maintain our office and work until our last breath. It is possible, however, to do both! The sale or merger of your law practice, rather than the closing of the office, should be an alternative that is kept open for your consideration.
In an earlier blog post, I talked about creating a digital estate plan. A family law attorney speaks of preserving what you already have posted in social media. She suggests that taking down what you have posted in advance of litigation, family law or otherwise, may be the destruction of evidence and a crime!
There is more to the internet than most of us ever imagined. Walk (or type) carefully. The life you preserve may be your own.
I’ve talked about a lawyer having an estate plan. I’ve talked about creating an estate plan for your law practice; this is an idea first generated by Ellen Peck, retired judge of the California State Bar Trial Court. Now, there is another estate plan to prepare: Digital.
What are you going to do with all your passwords, all your email accounts, all your accounts in social media and all your other accounts that reside in the internet?
Your virtual life doesn’t end just because you die. And in some arenas, the material you have on the internet cannot be removed or taken down. You may even have money residing in some of the internet residences such as PayPal, on-line gambling accounts, etc. Be sure to appoint or designate someone to be responsible for dealing with these issues. Be sure to write down all the accounts and passwords. And be sure to contact such companies as LinkedIn, Facebook, Google, etc. to comply with their policies.
There is little or no case law to date about planning for digital assets after death, and certainly no precedent of which I’m aware on this. But, for just that reason, it’s time to think about these issues.
Yesterday, I watched the Richard Gere film, Aribtrage. The film portrays a successful billionaire's moral decline as he attempts to save his failing company from his poor decisions. He "cooks" the company books by borrowing money that is not shown on the books as such in order to keep up appearances in order to complete a sale of the company, falsifies investors reports and otherwise plays "loose" with the truth. This is a man in trouble, but Gere continues to exude confidence in order to reach his goal.
Coincidentally, in today's Wall Street Journal, reporters once again discuss the Dewey & LeBoeuf LLP demise. Prosecutors are still questioning whether there was deception about the financial condition of the firm in the last few months. Were partners told the truth, were they given accurate financial reports, and were the firm obligations to pay down outstanding debt on behalf of terminated partners honored? And, were the transgressions that did occur a matter of a struggling business doing what it could to survive or a matter of criminal and/or civil fraud?
As a matter of "black letter law," it's clear that management (managing partner and management committee members) owe a fiduciary duty to others -- investors, lenders and partners. Did they breach this duty? How close to Arbitrage did the leaders of Dewey come?
Electronic and computer technology enable lawyers to do more and better work in less time, but this creates a new service dynamic where clients continually demand to pay less for what they increasingly see as a commoditized service.
Law firms must meet client needs through greater technology efficiencies. Not only does this seem obvious, it is an element necessary to maintain competence as required by the rules of professional conduct.
More efficient law firms that reduce client legal costs should gain new business that enhances revenue. However, the ability to increase billings while becoming more efficient depends on changing the billing system to embrace alternative fee arrangements. With greater reliance on contingent, fixed, capped or value fees where time is not the relevant issue to determine the fee; service to the client is the key metric of value to the client, not billable hours.
Ed speaks about positive and negative changes that affect the way lawyers practice law.
Are you billing appropriately? This week, Ed will offer handy tips that will help you collect what you billed to make sure that you're getting paid.
It's no secret - lawyers butt heads. But, when it happens, do you keep your clients' best interests in mind, or do you seek dominance instead?
Getting paid by the hour stresses us, according to Frank Partnoy. He says that "(i)nnovation doesn't occur in a year or a quarter---and certainly not an hour. So why measure work in too-brief increments?"
This is a novel rationale for moving toward the fixed or flat fee billing concept and away from hourly billing. During the 25 years of my law practice, I remember how stressed I was, always seeking to make sure that I had accounted for my time ... and correctly billing my clients. During the last 23 years of coaching and consulting .... and only flat/fixed fee billing, I'm focused on my clients' condition and how I can improve it, not on how much time it takes me to do so. As Partnoy says, "Clocks and calendars are not going to change -- so it is up to us to try to get off the clock, especially when we find ourselves watching it." (See Parnoy's "Wait: The Art and Science of Delay.")
Verizon - Redux: The power of blogging is apparent when Verizon calls me the day after my original post in this column about their service, or lack thereof, to ask how they can address the problems I raised. I glad to say that the issues I raised have been resolved. The process, however, is fascinating to me.
The day after my post, I attended a conference conducted by my own business coach, Alan Weiss. While there, coincidentally, Verizon Fios was conducting a sales training program. I talked to one of the folks running the program, who then introduced me to a district manager. He knows the store manager where my incident occurred and said he would contact him. (I have still not heard from him.) Also, during the day, another higher up attempted to reach me by phone. On my return later in the day, I returned the call ... and we finally connected.
The billing issue that arose after my purchases was resolved to my satisfaction, and I learned more about Verizon. One,I was told they outsource their collection issues rather than first seeking to resolve any questions internally. To my way of thinking, this is a mistake because most billing issues result from the actions of the creditor. And, in the case of lawyers, unresolved billing issues could result in a malpractice action. Wouldn't it be better to address the billing issue, resolve it and retain the goodwill of the client, not to mention the client's future business? Verizon, being in an oligarchic position, apparently, doesn't understand the nuance. Of course, collection is not their strength; sales and service is. But, I would think that better collection techniques could enhance rather than destroy customer goodwill.
Second, I learned that neither he store level nor the first contact person can resolve these issues. They have to be pushed "upstairs." In this case, it was another district manager who had the authority. One of the lessons learned from Ritz Carlton Hotels (now a division of Marriott) is that all front line personnel have the authority to spend up to $2,500 to satisfy customer complaints. SAS, the airline, after their bankruptcy, pushed all decision-making authority down to the lowest level. This process made sure that customer issues are resolved as quickly as possible; that the sour taste of complaints does not remain with the customer longer than need be; and that senior folks are focusing on what they are hired to do ... not to settle what usually amounts to "small" issues.
In the case of lawyers, value is in the eye of the beholder, the client. Lawyers can/should adjust bills in order to match value as seen by the client. Most billing issues, in my opinion, are set up by the lawyer in the first intake session. A full discussion not only of the matter, but also the fee to be charged for the matter, will likely avoid most billing problems ... and assure the lawyer is paid on time and in full.
Next, I learned that Verizon is experimenting in our geographic area (Southern California) with requiring appointments so that customers can better plan their time and be served without interruption. I commend the company for seeking to offer better service. I believe (this is unsolicited feedback) that a combination approach would work better .... that is, make appointments and serve "walk-ins" if / when their representatives are available. It is difficult to manage any large company. Verizon certainly is in this category. But, then, so is Apple and Apple, among others seems to be able to address appointments as well as walk-ins.
Bottom line, I'm pleased with my purchases from Verizon, which included the new iPad and Motorola Razr Maxx, and I'm pleased with finally dealing with the other issues that arose. It was unfortunate that Verizon could not have handled our issues more effectively, with less turmoil, in order to retain that sweet smell of consumer purchase euphoria.
In the Wall Street Journal, staff writer, Jacqueline Palank discusses the Justice Department’s attempt to control fees that bankruptcy lawyers seek. Creditors and employees may, at times, be a bit disgruntled by such fees. So, now, the U.S. Trustee Program appears to be entering the fray.
Before going further, it should be noted that i) any fee sought by an attorney must first be approved by the client going into bankruptcy; ii) the fee cannot be paid before a Bankruptcy Court Judge approves the fee request; iii) the legal fees most often are a pittance compared to the debts of the company and thus have little or no impact on either the creditors or the employees. In fact, the current proposal is limited to companies whose assets and debts exceed $50 million, hardly your "normal" bankruptcy.
The only reason for focusing on the legal fees is that this is a topic that makes good reading in the tabloids, including the WSJ. While the quoted hourly rate received by some attorneys seems high, it is insignificant in comparison to the compensation received by incompetent CEOs and others in the C-suite offices. Why don’t the tabloids focus on the cause of the bankruptcy? Why not focus on the compensation of the management team, which often is at astronomically higher multiples compared the lowest paid employees of the company? Why not seek redress against the management that is responsible for bringing the company to its knees? Although this focus may have more positive economic impact, it clearly is not sexy enough to sell many papers.
The U.S. Trustee is proposing, according to the writer, several new approaches to control lawyers’ fees, including:
• Though the lawyer applicant must disclose his/her hourly rate now, the Justice Department wants the lawyer to disclose the lowest, highest and average hourly rates the law firm charges in all its matters.
• The Department wants the lawyer applicant to create and disclose to the Court a budget for legal expenses. This budget would, necessarily, disclose to all involved, including the creditors who are adversaries of the bankrupt, the client’s planned legal strategy.
In the 1960s, the Supreme Court ruled that it was anti-competitive for bar associations to maintain a listing of suggested fees for different types of work. Such a listing, in particular, helped younger and newer lawyers set their fees at rates that were more in line with more senior lawyers. Not having such a list would compel lawyers to set their own fees, the theory being that lawyers would then be more competitive with one another to the consumers’ benefit. The Trustee by its first proposal ignores this. The existing disclosure already provides information that tends to be anti-competitive. Law firms can see what others are charging and price their own services accordingly, causing rates to slowly increase in lockstep over the years.
Intruding into the fees charged for practice areas, such as general business matters, estate planning, tax work, and other areas of work performed by the firms who also do bankruptcy work has no bearing on the special expertise of large company bankruptcy lawyers. No area of law other than bankruptcy requires such disclosure for court approval. Fees are left to be negotiated between attorney and client. Other than precedent, there is no reason disclosure should be made here either and the process should not be extended. “Transparency” is a bogus issue. There is no backroom conspiracy on how bankruptcy fees are charged. All the proceedings are public and must be approved by the Court before attorneys are paid anything.
Budgets are good. I recommend them to my attorney-clients with whom I consult. Budgeting is a process, however, between the client and the attorney. By requiring that bankruptcy budgets, which reveal legal strategy, be made public, the U.S. Trustee is saying that bankrupt companies have no rights. They have no right to advocacy; they have no right to develop a strategy that might affect creditors' claims; and they have no right of confidentiality. This is clearly contrary to the U.S. Constitution and our entire judicial system. While the bankrupts, and their inept management, may have proceeded down an economically unwise path, they still have rights to seek the best windup of affairs in their economic environment.
Don’t worry about the lawyers’ hourly rates once the bankruptcy petition is filed. They are regulated first, by the client, and second, by the Court. Who is watching the compensation of the management team before the company entered bankruptcy? Why are inept executives not punished with fines, or worse, for malfeasance and negligent management tactics? Why are they allowed to benefit so expansively at the expense of their workers? Why don’t the tabloids focus their sharp light there? Oh, I forgot, the tabloids need to sell papers, they are part of the industrial complex that both Presidents Washington and Eisenhower warned us about as they left office. Perhaps the fact that quite a few newspapers and newspaper chains (Tribune Co. and papers in Detroit, Denver, Minneapolis, Philadelphia and many other cities) have been mismanaged and had to file for bankruptcy has something to do with it, too.
Two weeks ago, I purchased a Motorola Razr Maxx from Verizon and an iPad. I'm happy with both, but both need some adjusting. Perhaps I would be more correct in saying that the owner of the devices needs some adjusting ... or relearning.
In any event, I went into Verizon this afternoon, the same store from where the purchases were made., and asked for assistance. I was told that they now have a new policy: They would help me if I want to buy a new device or accessory. But, they would need to make an appointment with me for another time if I want to ask questions or get some help about the devices I already own.
The old policy was to wait your turn until a representative had finished with a current customer and was available to meet with you. That seemed fair.
Apple, a much larger store, will put you on their list and you wait your turn. Yes, they will also make an appointment for you at the Genius Bar. And there are many knowledgeable sales people walking the floor who can answer most of the questions I've had ... and are willing to do so.
This reminds me of the lawyer who plays telephone tag with a client ... to the frustration of the client. If you're not in when the client calls and cannot return the phone call quickly, have your assistant make an appointment. It's clearly better, however, to take that call on the first attempt if you're in the office. Failure to connect is still the #1 complaint against lawyers.
Verizon does not seem to get this simple fact of customer relations! Do not let the customer go away angry because you are unwilling to answer his/her questions about the device you sold. Oh, yes, I forgot. They can be as nasty as they want because they have you tied to a two year contract! Just think what would happen without that contract? I'd be back at AT&T in a heartbeat!
Have you committed negligence in representing a current client? Do you suspect you may have committed negligence in a current matter? Don't talk about your mistakes with other lawyers in your firm! According to Richard Zitrin in his recent article in The Recorder, the courts have held that such internal discussions, even if used as a teaching device to make sure the mistake isn't repeated, can be discovered in a malpractice case. Only if you hire outside counsel and talk with such counsel are such discussions privileged. According to Zitrin, the client is owed the duty of competence as well as the duty of candid communications. These multiple duties trump whatever duty the lawyer may assert.
There is something wrong when you are not allowed to talk with other members of your own firm either to explore if something really was negligent, or how to deal with it for the betterment of all concerned and clearly how to make sure it doesn't happen again in the future. I suspect that talking internally about the best way to talk with your client about the actions taken or not taken would also not be privileged. This conclusion, at least to me, is counter-intuitive.
While the rule seems to be clear in California, the rule is not so clear elsewhere. It can only be hoped that as this issue receives more light, there will be obvious exceptions for issues as I've noted above.
In today’s Wall Street Journal, staff writer, Jacqueline Palank discusses the Justice Department’s attempt to control fees that bankruptcy lawyers seek. Creditors and employees may, at times, be a bit disgruntled by such fees. So, now, the U.S. Trustee Program appears to be entering the fray.
Before going further, it should be noted that i) any fee sought by an attorney must first be approved by the client going into bankruptcy; ii) the fee cannot be paid before a Bankruptcy Court Judge approves the fee request; iii) the legal fees most often are a pittance compared to the debts of the company and thus have little or no impact on either the creditors or the employees. In fact, the current proposal is limited to companies whose assets and debts exceed $50 million, hardly your "normal" bankruptcy.
The only reason for focusing on the legal fees is that this is a topic that makes good reading in the tabloids, including the WSJ. While the quoted hourly rate received by some attorneys seems high, by comparing this to the compensation received by incompetent CEOs and others in the C-suite offices, it is insignificant. Why don’t the tabloids focus on the cause of the bankruptcy? Why not focus on the compensation of the management team, oftentimes earning historically astronomically higher multiples compared the lowest paid employees of the company? Why not seek redress against the management that is responsible for bringing the company to its knees? Although this focus may be more important for us to understand how our economic system works, it clearly is not sexy enough to sell many papers.
The U.S. Trustee is proposing, according to the writer, several new approaches to control lawyers’ fees, including:
• Though the lawyer applicant must disclose his/her hourly rate now, the Department wants the lawyer to disclose the lowest, highest and average hourly rates the law firm charges in all its matters.
• The Department wants the lawyer applicant to create and disclose to the Court a budget for legal expenses. This budget would, necessarily, disclose to all involved, including the creditors who are adversaries of the bankrupt, the legal strategy to be engaged in by the client.
In the 1960s, the Supreme Court ruled that it was anti-competitive for bar associations to maintain a listing of suggested fees for different types of work. This listing, in particular, helped younger and newer lawyers set their fees at rates that were more in line with more senior lawyers. Not having such a list would compel lawyers to set their own fees, the theory being that lawyers would then be more competitive with one another to the consumers’ benefit. The Trustee by its first proposal ignores this. The existing disclosure already provides information that tends to be anti-competitive. Law firms can see what others are charging and price their services accordingly, causing rates to slowly increase over the years.
Intruding into practice areas, such as general business matters, estate planning, tax work, and other areas of work performed by the firms who also do bankruptcy work has no bearing on the special expertise of large company bankruptcy lawyers. No area of law other than bankruptcy requires such disclosure for court approval. Fees are left to be negotiated between attorney and client. Other than precedent, there is no reason disclosure should be made here either. But, the process should not be extended. “Transparency” is a bogus issue. This is not some backroom conspiracy. All the proceedings are public and must be approved by the Court before attorneys are paid anything.
Budgets are good. I recommend them to my attorney-clients with whom I consult. This is a process, however, between the client and the attorney. By requiring that these budgets, which reveal legal strategy, be made public, the U.S. Trustee is saying that bankrupt companies have no rights. They have no right to advocacy; they have no right to develop a strategy that might affect creditors' claims; and they have no right of privacy. This is clearly contrary to the U.S. Constitution and our entire judicial system. While the bankrupts, and their inept management, may have proceeded down an economically unwise path, they still have rights to seek the best of what is left to them in their economic environment.
Don’t worry about the lawyers hourly rates once the bankruptcy petition is filed. They are regulated first, by the client, and second, by the Court. Who is watching the compensation of the management team before they enter bankruptcy? Why are they not punished with fines, or worse, for malfeasance and negligent management tactics? Why are they allowed to benefit so expansively at the expense of their workers? Why don’t the tabloids focus their sharp light there?
Oh, I forgot, the tabloids need to sell papers, they are part of the industrial complex that both Presidents Washington and Eisenhower warned us about as they left office.
In the Opinion section of today's Wall Street Journal, two fellows from the Brookings Institute espouse their philosophy for deregulating the legal profession: Let anyone practice law; whether they've gone through law school or not, and allow anyone to own a law firm.
These are not new ideas, but the assertion that these ideas are the key to lowering costs of delivery of legal services is misplaced.
First, the licensing of lawyers is to protect the public; they are not there to protect the interests of lawyers. For example, an individual must be competent to represent and advocate for the interests of a client. It’s the same principle as licensing doctors. Incompetence either in court or in the operating room can cost people their lives.
Second, technology provides many avenues to reduce legal costs. Removing the licensing requirements has no impact on this issue. Yes, requiring a license does cost money and does cost time (opportunity costs for the student), but it also impacts the quality of services delivered ... just as in the case of medicine (oh yes, and plumbing), etc. Why not remove licensing requirements for everyone in everything, from medicine, to plumbing, to driving a car. Licensing assures a minimum standard of quality. Licensing requirements in specific areas of human endeavor are society's way of self-protection. Caveat emptor is acceptable, but not to the degree apparently desired by the authors of the Brookings report.
If lower legal costs are the objective, the argument should focus more on the pricing modalities as they impact the cost of legal services rather than the governance of the law firm. We've talked about this on previous occasions.
Third, the underlying premise that licensing provides an insurmountable barrier to entry and substantially raises costs by controlling supply might be true if one doesn't look at the facts of recent and current reality. There are many more lawyers than the current demand can accommodate. Many lawyers cannot find work. Thus, it is illogical to suggest that licensing is the cause for higher legal costs. Those lawyers who are working often provide legal services at lower rates than they used to charge. Even large law firms find significant resistance to raising their rates. Are legal expenses high? Yes, but compared to what? How low should these prices be before they are acceptable? And, if there is no regulation, we might likely see larger law firms pattern their pricing after one another, just as the unregulated airlines currently do, so that the benefit of lower costs would not be evident.
There is no price regulation now in the airline industry. Yet, it's remarkable how similar airline prices are. Yes, there are a few low cost airlines such as Southwest. And, yes, there are also lower cost law firms as we sit here today, even with the regulations we have in place. The only benefit of the authors' "non-licensing" proposal would be the destruction of minimum standards of quality. Caveat emptor might be acceptable if the public had a way of knowing what the quality standards should be ... but they don't and they won't.
Combining other skills such as accounting into one organization (the old "multi-discipline" argument) is not required ... many law firms already work closely with allied professionals for the benefit of clients. This is merely a non-issue.
Dewey, which went into Bankruptcy Court last night, did not fail for lack of credit. The firm had been extended bank lines of credit. It failed for lack of effective management. It's unlikely that investors or others would have given Dewey more money if they understood the true nature of the firm's economics and governance. Thus, this is also a non-issue for the authors’ arguments.
In sum, law firms function no differently from all other businesses. Good, solid business decisions must be made to attract customers/clients and operate cost-effectively. Dewey failed on both counts. The arguments put forth by the authors would not have changed this outcome. But, in the terms of business, by going into bankruptcy, the firm may be able to disgorge its unfunded pension obligations and become a viable candidate for acquisition by another large firm. That’s when the principle of caveat emptor really comes into play – as a normal risk that businesses take every day.
Letter to the Editor re Dewey LeBoeuf:
Your staff reporters, including Jennifer Smith, seem fixated on the Dewey law firm and its challenges. While one or two such articles would be of interest to both lawyers and your general readership, I suggest that recent articles have suggested nothing new and merely seem like “kicking a dead horse,” or worse, merely filling space in your paper.
Dewey highlights the unfortunate interplay of bad luck (the Great Recession and unexpected change in our economic health) and poor management (failure to anticipate alternative scenarios). Once again, it is confirmed that law practice is a business. As I've been saying since 1995 when I received the registered mark for The Business of Law®, law practice is a business. Yes, it's a profession AND also a business, a service business. Dewey & LeBoeuf confirms this as does the former chair, Tower Snow, of the now defunct Brobeck law firm, who said law is subject to the same economics as every other business and profession.
Among other challenges facing Dewey are: i) the “bleeding” of lawyers leaving the firm a few at a time until the firm will face hemorrhaging, ii) unfunded pensions that will be a drain on the firm assets and future revenue, thus setting up vicious generation warfare in the future, and iii) debt from their expanded lines of credit. Of course, none of these challenges are fatal in themselves, but are compounded by virtue of management in whom the majority of the firm has lost confidence.
Your reporters should give Dewey some space to work out their problems or, perhaps even better, talk about the issues (not the personalities or the law firms specifically) that the firm is facing. That would be interesting to your readers because it not only applies to the legal community, but to all of your readers in the companies they operate.
Judge Lippman, Chief Judge of the New York Appeals Court, announced a pro bono requirement to gain admission to the New York Bar. Every new lawyer will have to prove their performance of 50 hours of pro bono practice before being admitted to the New York state bar. Mandatory pro bono is now a reality in New York.
He said, "If pro bono is a core value of our profession, and it is—and if we aspire for all practicing attorneys to devote a meaningful portion of their time to public service, and they should—these ideals ought to be instilled from the start, when one first aspires to be a member of the profession."
His first error of judgement, in my opinion, is to conclude that pro bono is a "core value" of the legal profession. While many lawyers "give" many hours freely of their time and expertise, it is not the essence or "core value" of the legal profession. This has been substantiated many times over when bar associations call on their members to provide free services for low and moderate income people. Many do step up to the plate. But, not all. Thus, it's obviously not a core value of the profession.
He then said that "We think that if you want that privilege, that honor of practicing law in the state of New York...then you are going to have to demonstrate that you believe in our values." He is really saying that if you want to practice law in NY, you better meet my values. Interesting that he says that practicing law is a privilege, not a right. Seems as though we're taking a test to get our driving license. Driving a car is a privilege and in order to get you on the streets, you need certain requirements. I guess Judge Lippman equates getting a law license with a driver's license.
Why does this new requirement apply only to new lawyers? Why doesn't this requirement apply to all lawyers in NY, even those who have been practicing for a few years? Judge Lippman's excuse for this discriminatory practice is that existing lawyers' practices are very diverse and some lawyers already are having difficulty earning enough money to put food on the table. Thus, they should be excused from this requirement. The real reason is that the Judge would have a rebellion on his hands if he tried to spread the requirement to all present lawyers in the state.
In current times, we are becoming more familiar with law firms imploding, collapsing and even going bankrupt, literally. Wall Street Journal and it's reporter, Jennifer Smith, seem to be taking a great deal of pleasure in highlighting and repeatedly featuring the sad demise of the Dewey law firm.
Dewey highlights the unfortunate interplay of bad luck (the unexpected change in the general economy) and poor management (failure to anticipate alternative scenarios). One or two articles with new information would be illustrative; howevwe, the Journal seems to relish in "kicking the dog while down."
In the future, the Journal might do an article about how a firm in Dewey's position might avoid collapse. Would that be too much to expect?
In a recent issue of a major legal publication, as reported by the American Bar Association, the magazine looked at pension plans of law firms. It appears that a number of the country’s largest law firms have pension plans that are unfunded. In other words, these are firms with pension plans, but without money to pay the obligations of those pension plans as their lawyers retire. What we will increasingly see are law firms with the bulk of their lawyers leaving the practice for retirement with the hope and prayer that the fewer remaining, younger partners will be willing to fund the firms' obligations. We will also see many situations where these younger lawyers will find it to their economic advantage to torpedo the existing law firm and its pension obligations in exchange for creating a new firm with no pension obligations. Doing so will give them the opportunity to take on more of the revenue that is produced by their efforts. They will earn more and pay less.
This phenomenon will exacerbate the generation warfare that is building in today's law firms.
The Wall Street Journal, perhaps reflecting the concerns of its corporate readership, continues to emphasize what it considers to be the overpaid lawyers at the pinnacle of the profession. In a recent article that had the less-than-subtle title, “Biggest Lawyers Grab Fee Bounty,” the Journal reported that partners in the top 25% of more than 4,000 law firms examined in a new study boosted their average price to $873 an hour last year, up 4.9% from 2010. At the same time, the lowest-billing partners struggled to keep pace with inflation. Partners in the bottom 25% of surveyed firms charged an average of $204 last year, up just 1.3%. As the paper said, “That disparity between who can raise prices – and who can't – spotlights a growing segmentation in the $100 billion corporate legal market.”
Once again, it is confirmed that law practice is a business. As I've been saying since I received the registered mark for The Business of Law®, law practice is a business. Yes, it's a profession AND also a business, a service business. Dewey & LeBoeuf confirms this.
This large, national law firm has just retained outside bankruptcy counsel. Why? To consider whether they can create a controlled bankruptcy ... filing a bankruptcy application with creditors and potential acquirer already in place. The beauty of such a filing is that it will i) stop the bleeding of lawyers leaving the firm a few at a time, ii) eliminate the unfunded pensions that would be a drain on the firm assets and future revenue, and iii) enable another firm to complete an outstanding acquisition quickly with a clean balance sheet and revenue stream intact. A side benefit of eliminating the unfunded pension obligations would be to avoid generation warfare that frequently arises between retiring partners and younger partners left with the responsibility of using current revenue to pay for the old debt.
This process is precisely the same process used by so many other companies, including some of the large companies in the recent financial crises that survived, but in different configurations. This is the same process as the airlines are implementing today ... to reduce their obligations to labor. This is the same process being contemplated by a number of prominent government entities (cities and counties) to get rid of their unfunded pension obligations that are expected to require more than 60% of their current tax revenues.
So what is different about Dewey? Nothing. We are in the world of business, The Business of Law®.
Among the topics discussed on this day were:
- Social media
- Financial metrics of a successful law practice
- Marketing gravity and the need to have something in each stroke of the marketing wheel
- Cash flow as the single most important financial statement for a law office.
The Law Practice Management Institute raised a number of issues and produced great discussion among the attendees. Some of the issues in the first day were:
- Creating a marketing plan is important for success
- Alternative fee structures and billing modalities opened possibilities not previously considered
- Sending a satisfaction survey to clients helps maintain and build the relationship as well as provide a defense against malpractice and disciplinary complaints
- Guaranteeing satisfaction with the service of the law firm will reduce the hesitancy of many clients to engage your firm
- The statistics of why clients leave their present firm and why they refer their present firm to their friends and colleagues was an eye-opener.
- Always put yourself in the shoes of the client and seek to understand, and avoid, what makes the client unsure and/or angry about your service.
In a recent episode of Blue Blood, the granddaughter was lamenting that she didn't support a friend in need as much as she thought she should have, and that her grandfather would be disappointed in her. An uncle (son of the grandfather) of the girl said "(Grandfather) would say that 'its what you do next that counts...'"
As we review where we are n our career, in our law practice, it's not what we've done to get here that should be our focus, but rather what we will do next. Create the plan to seek your goals; move along the path toward your goals, one step at a time; and always keep your eyes open for opportunities along the way, some of which may cause you to change your plan.
See our soon to be released new book, 16th Anniversary Edition, Profitable Law Office Handbook: The Attorney's Guide to Successful Business Planning. Pre-publication offer: 30% discount! Good until May 31, 2012.
An interesting question was raised recently in the discussion about alternative fees. What happens in either of two scenarios: i) When the client terminates the relationship before the legal services are concluded and ii) When the fee is challenged in a dispute between attorney and client.
In the former case, how do you apportion work already done versus work yet to be done, especially when the fee agreement is silent on the subject? This question is set against the backdrop that a lawyer refund any advance payment of fee that has not yet been earned. And, though a fixed fee, the fee must be placed into the client trust account until earned. Does one have to refer back to the time spent (hourly billing)? And if the subject is covered in the fee agreement, are we building into the relationship all kinds of negative vibes between attorney and client?
And, though fixed fees/alternative fees are designed to reduce conflict between attorney and client, should a dispute arise, how do we test the reasonableness of the fee? Again, usually by reference to the hourly billing rate and time spent.
This subject once again points to the need for good client relations and effective, frequent communication between attorney and client to make sure such disputes don't arise and/or are settled quickly.
The Wall Street Journal seems to focus on fees being charged by large law firms to large clients. It seems almost every other week, there is an article on the subject. In today's paper, Jennifer Smith writes about the "resetting of legal costs." Her basic premise is that clients who obtained the "upper hand" during the Great Recession" in negotiating fees with law firms are not going back to the old ways of the billable hour despite the more robust economy today.
Alternative fees have become a larger percentage of law firms' revenue. To use alternative fees, usually meaning fixed fees, requires a trusting relationship between law firm and corporate client. Of course, alternative fees also depends on the practice area. For example, it's easier for lawyers to quote a fixed fee in areas such as estate planning or a percentage fee in personal injury or debt collection than it is in litigation. But, even litigators are moving to alternative fees when they can work with the client as a trusted adviser ... and both sides look out for the interests of the other side.
What Ms. Smith ignores, however, is the real impetus for alternative fees. It is technology. Because of advances in technology,some tasks such as document review that used to take hundreds of lawyers many hours can now be done in a fraction of the time with a fraction of the number of lawyers. Further, when lawyers charge by the hour and see their time reduced, and thus their revenue, there is an impetus to charge a fixed fee. The client gets certainty. The lawyer gets to keep a portion of the savings resulting from the technology. Both sides benefit.
This is classic in every industry where technological innovation occurs. The legal profession is now experiencing the same upheaval. And both clients and lawyers are benefiting.
From time to time, we have guests on our blog.
This week, Erik M. Pelton with Erik M. Pelton & Associates, PLLC is our guest blogger.
Excellent management of calendars and deadlines is critical for all attorneys. Big firms can afford dedicated staff and/or software for these matters, but small or solo law firms must properly and efficiently manage firm calendar and deadlines without such luxuries.
A law firm “docket” consists of calendar items such as meeting schedules, court deadlines, discovery deadlines, client obligations, marketing schedules, hearing dates, and more, for each of the members of the firm. Timely tracking of these matters is critical to increasing the chances for successful outcomes of matters. The key to successful docket management is to develop procedures, routines, checks, and backups so that the docket takes care of itself.
Here are some tips for setting up a docketing system:
- Find what works. There is no magic solution and there are many ways to reach the same goals. Be creative and experiment with different possibilities.
- See the big picture. Use a physical master calendar centrally located in the office. For example, I have a wall filled with four large calendars for the current month and the next three months (see photo below). Deadlines, travel, planned absences, meetings, and more are all labeled on this central calendar. I use dry erase so it can easily be changed, and it is color coded for different types of items. The calendars hang so that they can easily be rotated and updated as one month ends and a new month begins.
- A system for intake and inputting new docket items is key. When a new matter or item with a deadline comes in or is created, do not hesitate. Docket it immediately before any chance to forget is created. For example: when I receive discovery requests in a case, I docket the deadlines for when the responses are due before I even read the requests. I set a reminder of the deadline in Outlook as well.
- Err on the side of caution. I docket even potential deadlines and items. If I have to cross them out or erase them, it becomes one less thing to do. Proactively docketing saves having to scramble at the last minute if a “maybe” becomes a “yes.” (Example: a tentative deposition date in a case that might be settled first.)
- Document the office docket procedures and make sure everyone understands how to use and access them.
- Mistakes inevitably will happen when a new system is set up. Learn from them, and tweak the system to make sure that type of mistake will not happen again in the future.
- Have a backup. Even better, have two! (Example: I have a software-based docket, with backups in Outlook and on the dry erase boards.)
A solid docket with a backup does more than help you work efficiently and manage your time – it may reduce potential liability for malpractice and can also reduce malpractice insurance rates.
Managing a docket can certainly be stressful. The time and money invested into a great docket that works for your particular situation will not only serve clients and attorneys well, it will reduce an enormous source of stress and worry.
© 2012 Erik M. Pelton. All Rights Reserved.
Dr. Oz, the popular television medic, recently said that high blood pressure is the "silent killer." Stress, he said, is one of the major causes of high blood pressure.
Lawyers I talk with almost universally tell me about the stress under which they labor. Because of this, I am on the lookout for ways that my advice about improving the lawyer's operations may also have the impact of reducing his/her stress level. Thus, I am always viewing the practice from a holistic perspective, addressing revenue improvement, operations changes that impact profit, and stress reduction that improves both the professional and personal life of the lawyer. Just knowing that you now have an accountability partner (me as the coach) goes a long way to reduce the stress. For the first time, you really have someone to talk with who can be objective and with whom you can show vulnerability.
In the February 13th edition of the L.A. Times, an article featured a lawyer who clearly is a workaholic. But, she has a marvelous and somewhat unusual perspective of her workload. As the headline says, "stress can hinge on attitudes about work." In other words, if you love what you're doing, it's not work; if it's not work, you may be exhausted at the end of the day, but you won't be stressed out and unable to cope with your environment. Clearly, this lawyer enjoys what she does. Of course, the feature article didn't hurt her publicity efforts either.
With this article, came a new word or label, at least for me: "engaged workaholic." Said differently, if you are engaged with what you're doing, if you love what you do, then it's not "work." It's play ... and how can you get too stressed when you're playing.
Or, as my father used to say about his work, "... This is my hobby. This is what I love to do."
My hope for you (and therefore your clients) is that you love what you do ... and enthusiastically show your clients how to successfully address the challenges they bring to you.
One would think that lawyers could keep their eye on the ball. But, somehow, despite the importance of cash and cash flow to the very survival of the law firm, lawyers tend to focus their attention elsewhere. I find this to be true not only in the small firm, but also in some of our larger brethren as well.
Recently, I was asked to consult about "missing cash." The bottom line is that it's easy, for even a longtime and trusted staff person, to lose his or her moral compass ... when money is readily available ... and not regularly monitored! Establish policies for handling cash and for paying bills, the two easiest areas of manipulation by one so inclined. Be persistent in the application of these policies. Ask for an external review of these policies periodically ... and their application. Insist that there be no shortcuts in handling the finances of the firm.
Nothing less than the firm's reputation and standing is at stake! ... And the lawyer's license to practice law.
In 1995, the U.S. Government recognized my service mark, The Business of Law®. At that time, no one used the word “business” in the same sentence as “profession” when talking about the legal profession. Since then, more lawyers recognize that they are in a service business, but a business nevertheless. And the principles of business are now being reviewed and considered by more lawyers than before. Years ago, I wrote a piece that suggested that even sole practitioners would be well-advised to engage an executive director. The cost-benefits favor the lawyer many fold, though too few sole practitioners recognize this.
Today, large firms are engaging professionals to run their practice, their business. For example, Pepper Hamilton recently engaged a non-lawyer to be the CEO; this isn’t the first firm, though still only a select few, have moved in this direction. They are beginning to understand that it is the lawyer who can set the strategy ... and it is the lawyer who must do what only the lawyer can do, get the business (marketing) and do the work (production). But, others – professionally trained and skilled as support for the law firm – can take the law firm to higher levels of success than would otherwise be the case.
From time to time, we have guests on our blog.
This week, Erik M. Pelton with Erik M. Pelton & Associates, PLLC is our guest blogger.
Unless you are truly a solo practitioner, you will experience hiring and managing a staff (even a ‘virtual assistant’) at some point. In fact, unless you are super-efficient or already established, some form of staff is likely necessary to manage a growing firm and the marketing needs. For example, in my 12 years of practice (starting and managing a small firm), I have hired and supervised numerous associate attorneys, paralegals, and interns, as well as a variety of subcontractors.
Hiring and managing is no easy task – especially when you have no relevant training or experience. Law school gives most of us the experience of being interviewed, not interviewing others; of writing resumes, not reviewing them; of taking instructions, not giving them.
Use the following keys for making successful hires in a law firm, and you should fare well:
- Personality and character are at least as important as experience and skills. Skills can be taught, but bad character or clashing personalities cannot be overcome.
- Reward staff that are trusted and hard working. When financial raises or bonuses are not available, provide additional vacation time. While this represents and increase in expenses, the financial and other costs (time, risk, productivity) of replacing someone good who leaves for another job and training a new hire are generally far greater.
- Let employees develop their own “brand.” Encourage them to participate in associations, chambers of commerce, or other activities that are good for the firm and good for their professional development.
- Provide occasional non-work opportunities to socialize with employees and their families and significant others. Take them out to dinner, sporting events, or the like.
- Lead by example. Actions speak louder than words. These clichés are generally true and can have a big impact. If you expect your staff to do something in a certain manner or act a certain way, you must lead by example.
- Don’t micro-manage. Delegate and provide support to your staff, but allow staff the room to grow and to figure things out on their own.
- Provide periodic reviews. Offer constructive criticism and positive reinforcement. Provide a steady stream of feedback to your staff and encourage them to provide the same to you.
- When staff members do not work out, cut your losses and move on. Letting someone go is difficult, uncomfortable, and creates short-term stress and additional work. However, it is worth it. Bad situations only become worse over time, and the lost time and stress produced by bad or unproductive relationships can never be replaced.
The only way to get experience in a position of authority is to do it! Hiring and supervising can be great fun and lead to great successes by training and mentoring staff persons that blossom.
© 2012 Erik M. Pelton. All Rights Reserved.
There is much talk about how competitive the legal market has become. And this reminds me of an old Chinese proverb: “He who doesn't turn runs far. “
In track and field events, the coach tells you to look at the tape in front of you, not who is behind you. Likewise, in running your law practice, do the best you can, focus on your skills (and improve them), on the efficiency and cost of delivering your legal services (use technology to improve your efficiency) ... and, of course, on your clients and their needs (and wants). Then, you will have given it (your profession) your best shot.
John Wooden said, “The scoreboard? Championships? A sales quota? The bottom line? As goals, predictions, hopes, or dreams to be sealed up (in an envelope) and filed away, fine. But, as a day to day preoccupation they’re a waste of time, stealing attention and effort from the present and squandering it on the future. You control the former, not the latter.
“An organization - a team - that’s always looking up at the scoreboard will find a worthy opponent stealing the ball right out from under you....” Coach seldom scouted the opposition, focusing instead on what needed to be done to improve his team and prepare them to be the best they could be.
More elderly find they cannot afford to retire ... they must continue to work. The recent economic woes have taken a big bite out of the retirement hopes and plans of the Baby Boomers. And this includes lawyers.
Just today, a lawyer in his late 60's called me to talk about selling his practice and retiring. But, he said, he enjoys what he does and financially cannot see his way to retiring. For interesting tax reasons, he turned away from selling his practice. Of course, he didn't consult me before he made this decision.
But, I find it interesting that the prediction made by the ABA only a few years ago that by 2020 (or perhaps sooner), 400,000 lawyers would retire. As evidenced by the phone conversation today, I believe the numbers are correct, but the timing is not. Succession planning, whether a solo or large firm practitioner, will require more thought than we anticipated. And experts should be consulted to determine sales potential, tax planning (both estate and consequences of a sale) and future personal life planning.
In a December issue of the Wall Street Journal, the headline implies that lawyers are making far too much money in a Delaware case. This, despite the unheralded reduction in their fee request. But, it's easy too trash lawyers, and good headline writers (a special art in writing) are brilliant in getting readers to pick up the paper and keep reading ...
But, let's look at the facts:
First, the judge in the case said that the plaintiffs lawyers did an outstanding job, not just good, and such work should be rewarded. This is the same judge who historically penalizes lawyers when they fail to get results.
Second, the agreement between plaintiffs' lawyers and plaintiffs permitted counsel to ask the court for 30% and they applied for less, only 15%, not a normally outrageous percentage.
Third, the risk reward element of contingency cases should be evaluated as of the beginning of a matter. And in this case, the risk of no recovery was substantial. Victory was, by no means, assured. Monday morning quarter-backing is always performed by those who have a corporate bias, have no interest in the matter and just want to carp, are jealous or, worse, feel that lawyers should be heard, not seen. Reminds me of the criticism against lawyers who sued Ronald Reagan, as governor of California. Despite the fact that the lawyers won most, if not all, the lawsuits brought against the abuse by the State, neither the facts nor the victories was much discussed by those with a political agenda.
Last, these arguments that the lawyers' hourly billing rates were too high fly in the face of value billing, the new wave for corporate America. In other words, the results in this case were based on the value to the clients resulting from the effort and skill of the lawyers. In most cases, hourly billing results in higher legal fees ... fees unrelated to the value received by the client ... and fees that created certainty in the cost of the legal proceeding, an important factor to clients in most matters. It's important to know what the legal cost will be before embarking on a matter. Value billing provides this.
Thus, the criticism offered by the writer in the WSJ is off target, to say the least. Most criticisms against legal billings involve the hourly billings ... here, value billing was requested by the lawyers and their clients and approved by the court. Hoorays should have been the proffered by the writer, not whining.
How do we get from here to there? Jim Collins, in his Good to Great, describes CEOs with many different styles, but all successfully leading their companies to the pinnacles of success. How do we do that for ourselves? Is wanting something enough? Is the intention to be great, to be successful, to be rich enough? Is imagining or visualizing the "there" enough?
I suspect not. First, we must identify where we are. Then we must honestly address what our current state or condition is. And finally, we must develop new approaches to deal with the troubling challenges we face. As Dr. Phil might say, in the popular vernacular, "How's this working for you?" And if what you're doing now isn't working for you, you've got to change your pattern, your actions ... and not merely wanting the change. You've first got to think it through and, then as my coach, Alan Weiss, might say, develop the "Resolve" to change.
Are you in a good employment situation, do you have a good law firm partnership, do you have the kind and number of clients you want? If not, what are you going to do to make the change you want? One approach might be to engage a coach to provide you with meaningful feedback.
Corey Stephenson of Lawyers Weekly USA wrote an article about the Oregon Bar's position about metadata:
"If a lawyer receives a document and knows or reasonably should know that metadata was inadvertently included, the Oregon Rules of Professional Responsibility only require notice to the sender. The receiving lawyer is not required to return the document unread or to comply with a request by the sender to return the document, according to the opinion.
The Bar went on to say that the 2nd lawyer's client should be consulted about whether the lawyer should read the document. ".... (G)iven that the decision affects a client’s objectives, lawyers should consult with the client about the risks and rewards of returning the document versus retaining and reading the document prior to making such a decision."
It was my understanding that a misguided "hard copy" needed to be returned, unopened, if the lawyer knew the document was mistakenly sent. It seems we are modifying the rules a bit with technology.
But, there was a more fascinating pronouncement. The opinion went on to say that lawyers may not utilize special software to reveal the metadata in a document. “Searching for metadata using special software when it is apparent that the sender has made reasonable efforts to remove the metadata may ... constitute ‘conduct involving dishonesty, fraud, deceit or misrepresentation.'" The comparison was made to surreptitiously entering the other lawyer’s office to obtain client information.
Jane's comments about holiday cards vs email cards is are worth noting. It is a tough time of year for many with cards and gifts decisions to make ... But, as my mother used to say, "... if you don't remember me364 days of the year, forget me on my birthday!" In other words, the one day a year remembrance doesn't do much, especially for busy people.
Wisconsin is in the news again. A lawyer, who promoted himself as the "king of lemon law," won a judgment for $12,500 against an auto dealership for unauthorized repairs and an award of attorney's fees of $150,000. The Republican-controlled legislature was so incensed that they adopted a law (and signed by the governor) limiting attorney's fees at three times the judgment. With such limitations, lawyers will be less likely to tackle consumer abuses, the obvious intent of the legislature.
Wisconsin, the historical bastion of progressive legislation and politicians, has certainly served up a strange mixture of bedfellows in the last couple of years. It makes for interesting reading ... unless it's your ax that is being gored. The real question is whether this is limited to the state of Wisconsin or a harbinger of things to come on the national level.
Rules against lawyers sharing fees with non-lawyers might need to be loosened to allow U.S. firms to compete globally. The proposal says that any firm with non-lawyer owners must have “as its sole purpose providing legal services to clients.”
This is the foot in the door.The next thing you'll see is Latham & Watkins, or other billion dollar law firm opening offices in Wal-Mart or Target stores for curbside service. This is not necessarily a bad thing. It will certainly bring the law to the people ... And it will certainly change the perception of the law.
I've always maintained that the rules of professional conduct are controlled by the large firms, AmLaw 100 and 250. When their economic needs change, the rules get changed and the sole and small firm practitioners have to adapt accordingly. In other words, the rules are not made in a vacuum, not made because of their inherent righteousness or goodness. They change and are made to serve the economic interests of the few ... oh, if the public is served, so much the better.
But if you're a solo, watch out ... your interests may not matter. Such has been the case in recent times when solos' interests were not protected, in fact hurt, by changes in the rules .. But, here, to allow the larger firms to complete on a global scale, we see the rules begin to change and allow allied professions to join in the ownership of law firms, not merely as allied professionals independently serving the same client.
Economics control .. as always ... even here in the rules of professional conduct.
Target is. How long will it take for a law firm to be considered a "retailer"? Will size matter?
The Court, in the Target case said "... a retailer may be sued if its website is inaccessible to the blind, stating that the Americans with Disabilities Act of 1990 prohibits discrimination in the "enjoyment of goods, services, facilities or privileges... Until this ruling, commercial websites were not considered a place of accommodation and were assumed to not fall under the Americans with Disabilities Act..."
Robert Denney, a well -known and very capable marketing consultant, reports in his monthly newsletter that: "... an outsider ... joins DLA Piper as co-chair of the entire 4,200-lawyer firm. This is probably an unprecedented move, at least in BigLaw. Corporations frequently hire senior executives from outside the company – or even from outside their industry – but large law firms almost always elect partners to senior management positions. In most cases this means they have little senior management experience and must climb a steep learning curve..."
Perhaps the legal profession is approaching reality in letting lawyers do what they do best, lawyering, and leave the managing to professionals. Or, at the very least, engage a professional coach who has walked in their shoes (i.e., practiced law) and also has business experience. The idea of having a business professional at your side, or at least available by phone, works in industry and is beginning to work in the legal profession for mid-size firms as well as sole and small firm practitioners.
Large firms, more than we care to know, have made news in the last couple of years by "going under," i.e., defunct! Firms such as Howrey and Heller Erhman became the targets of personnel raids. Very good lawyers from these, and similar, law firms departed and joined other major, national law firms. Today's WSJ comments on the current state of affairs for some of AmLaw 100 law firms.
Some folks are asking whether your new lateral partner have any unwanted baggage? In some instances, the new firm accepted partners from the old firm with the understanding that the lawyer would bring over clients from the old firm as well as his "unfinished business." This provides for immediate billing .. and therefore an opportunity to acquire great talent at a very low or zero cost.
These firms, and others, have gone into bankruptcy to collect funds to pay the firms' creditors. In a law firm, the major assets "walk out the door every evening. Computers, furniture and real estate are of minimum value, if any, in a law firm. Accounts receivable are a major asset, though often difficult to collect from clients when they know there will be little serious effort to collect.
But, when the partners from the old, now defunct, law firm went, they generally took "their" book of business with them ... and the "unfinished business" of the clients that went with them. One argument is that clients have a right to seek their own choice of lawyer. And the other argument is that the partner and new law firm benefited, resulting in a profit to the new firm that truly belongs to the old firm.
This battle will be fought for years, I suspect. But, the reality of our world is that anyone can sue anyone else, even if wrong. In the meantime, the largest pool of cash available to the trustee in bankruptcy for the defunct firms is the new firm and, perhaps, the lawyers, individually, from the old firm. Whether legitimate or not, new firms have been economically compelled to settle many of such claims in order to go on with the new firm business.
The new firms thought they were getting a steal! Maybe. But, I'm reminded of the old say that "...if it looks too good to be true, it probably is too good to be true." There is a cost to everything, even a very attractive, new lateral partner with great talent and a great book of business.
Fee suit exclusions seem to be the latest insurance ploy to cheat unsuspecting lawyers.
An engagement agreement is designed to be a "two way street." The lawyer promises to do certain things... address the needs (and wants?) of the client; represent the client to address the challenge being faced by the client, whether it be a lawsuit or a transactional issue. And, of course, the lawyer is representing that he/she is competent to do so.
The client, on the other hand, promises to tell the truth to the lawyer, provide information and documents relative to the matter when requested by the lawyer to do so ... and to pay the fee as billed in accordance with their arrangement.
What are the consequences of failure to honor the respective promises? For the lawyer, it is a malpractice suit and/or a disciplinary proceeding. For the client, it's withdrawal by the lawyer (unless on the eve of trial or otherwise would prejudice the client) or a lawsuit for payment of the fee.
BUT, some insurance carriers are lining up with clients, saying that if the lawyer sues for fees, and the client cross complains or counter sues for negligence or files a disciplinary complaint with the state bar, the carrier will not provide defense costs or pay any judgment against the lawyer. The effect of this is to deny the lawyer the ability to collect the fee when the client fails to pay. Why pay insurance premiums for something you will not receive? The $64 question.
Fee suit exclusions are a veiled attempt by insurance companies to raise premiums without notice to the lawyer. And, the lawyer generally isn't even aware of this exclusion.
Both law schools and insurance companies conspire to keep lawyers ignorant of the business nature of their practice. In no other industry do creditors ignore their rights and fail to sue debtors for refusal to pay legitimate debts resulting from their purchases. Why should lawyers be placed in a different position? Why should clients be encouraged not to pay their lawyers' fees?
The reality is, according to people I've spoken with in the industry, that there are few lawsuits filed by lawyers. (Perhaps it's because lawyers have been scared away.) Further, the reality is that there are few counter suits for negligence. The further reality is that lawyers win most of these lawsuits; the figure I've been given is winning 9 out 10.
Seems that the lawyers face a big challenge: Failure of the law schools to teach business practices so lawyers can more effectively represent clients and efficiently deliver legal services; insurance carriers looking out for themselves, not their customers (lawyers); and bar associations believing their sole function is to protect the public, rather than a dual function of protecting the public AND helping their members (lawyers) to become better practitioners (including business skills).
Lawyers who survive in this environment should be commended.
Departures from large law firms continue. And more than one person is now asking what is the "normal" rate of departures? One estimate suggested 7%.
We are living in an environment that many people call a “new normal.” Our economy, as well as the legal community, has been turned upside down in the last couple of years. There is no ”typical” answer that has emerged yet. Departures are sometimes voluntary for better opportunities (or retirement) and sometimes involuntary where law firms are seeking to adjust their supply of lawyers with their clients’ demand.
As I mentioned in a recent interview in the New York Times, older lawyers are being asked to leave law firms when their productivity declines. That didn't happen so frequently in the past. Generally, the age factor is only coincidental with the decrease in productivity. Though sometimes it is directly correlated because of a change in attitude by the experienced practitioner who wants to slow down and spend more time in other adventures. This tends to be a personal decision, not a trend. We have many lawyers in their 70s and 80s still active and capable contributors to their clients and the profession.
At the other end of the spectrum, newer lawyers who are not asked to become a partner in a firm believe their opportunities will be greater with another firm. They seek to make a lateral transfer from their existing firm to another one. The second law firm may accept them because they see a skilled practitioner, someone who received training at the expense of another law firm, who will fill a gap in their business model. This comes when they want to grow and enhance their capacity for clients or begin a new practice area to enhance their service offerings for existing clients. The nes lateral fits well under these circumstances.
Then, there are the new law school graduates who are finding the pipeline from education to practice being clogged up by the decrease in client demands and oversupply in some law firms. It will take several years for this phenomenon to adjust. Until then, I don’t think we can say there is a “typical” law firm departure rate.
On one evening of the year, we can be legitimately scared. But, don't run your practice out of fear the rest of the year. Know the financial metrics for your success and how to achieve it by improving the condition of your clients.
The Haunted House:
From time to time, we will have a guest on our blog. This is something new for LawBiz Blog and we hope you find value in the expertise of those who will join us on occasion.
This week, Erik M. Pelton with Erik M. Pelton & Associates, PLLC is our guest blogger.
Creating and managing a successful solo or small firm is no easy task. But given the tools available today, it is easier than ever. And more and more clients today appreciate and even seek the personal relationships provided by boutique firms. Here are ten keys areas which every small or solo firm can master to propel it to greater success, growth and profit.Continue Reading...
A recent announcement touted the merger of two relatively large firms to make one larger firm of almost 800 lawyers. Why? One doesn't know the real reason, the personal agenda of the moving players. But one can look at the outside and prognosticate the likely success of the merger. What are the characteristics that will help achieve success?
First, and foremost, is the culture. Do the firms think and act in a similar fashion? This is perhaps the most difficult characteristic to address because it's subjective. And, in truth, sometimes different cultures can be blended, resulting in "new blood" being inserted into both firms creating a new, and revitalized "third" firm. But, a clear and conscious effort must be asserted. "Integration" is an overused word, but under-utilized activity in the merger field ... without which there will be a collapse of the new entity. As said, it's imperative that the leaders of both firms come together with an integration plan that is implemented with care and diligence.
Other factors can be more objective. Factors such as the differential in compensation levels and methodology, profitability and target clients are important when analyzing two firms. Another factor to consider is whether the rationale is to expand the services offered to existing clients or to enhance and make more effective existing services. Is this a sale of one firm to another? (Lawyers never speak in this language, so one must look at the economics to answer the question.) Or, is this really an amalgamation of two equal or nearly equal groups? The answer will determine the approach to be taken in putting the two together.
Mergers of larger service organizations are never easy ... Ego always is a significant factor ... and great effort is required.
“With these lawsuits,” Law School Transparency says, “nearly 10 percent of all ABA-approved law schools across eight states will be accused of tortiously misrepresenting job placement statistics and violating state consumer protection laws.”
The complaint says, among other things, that law schools' employment figures include work outside the law. And Senator Barbara Boxer of California wants the ABA to require all law schools to better determine where their graduates go after school and what kind of employment they get.
In a recent teleseminar I conducted, recent graduates were angry that they spent so much of their money (and incurred so much debt) to receive an education in a profession that does not offer them employment opportunities. They considered it fraudulent for the schools to have taken their money.
Those feelings and this law suit are different. On the one hand, the students want jobs and feel the schools have an obligation to help them get jobs. On the other hand, the current spate of law suits merely wants information -- consumer information -- to be accurate and available to law school entrants.
What is the obligation of the law school? How could anyone have predicted the shifts in our economy and the disruption of the profession? Not even senior partners are safe in their firm positions. Why should students be protected? We need to watch these developments as the profession continues to change ... caused by the economy ... and perhaps more significantly, caused by technology.
If you haven’t already, I suggest reading “Personal Best” by Atul Gawande on newyorker.com. Dr. Gawande examines the need for and nature of coaching for professionals of all walks of life.
Musicians and singers, he points out, think of their coaches as “outside eyes and ears”. They hear and see things that even the best performers can’t detect about their own performances. In endurance coaching, anyone can design hard workouts. Anyone can make you tired and push you into the darkness. In coaching lawyers, anyone can tell you what to do even if it is beyond your comfort zone.
But a good coach will help you understand where you want to go, devise a plan that is within your comfort zone and that will get you there, and then be your mentor and accountability partner to assure your success.
Who is your coach? Is it your colleague, your spouse or significant other or a professional whose career is devoted to helping others like you to succeed? Whomever it may be, we all succeed sooner and stay on top longer when we have a coach, our "outside eyes and ears."
I was asked again about percentages of expenses. The inquiry came as a result of a recent survey that was being reviewed. What is the appropriate expense percentage of revenue for health, etc. was the question in this instance.
This was my response:
I don’t worry about surveys or what percentages others manage. Every business/law firm is different … and there are too many variables to look at others’ operations and then get depressed because you didn’t meet them or elated because you bettered them … each feeling may not be justified. Do the best you can under your particular circumstances.
When I coach and consult with lawyers, that is one of the areas of my inquiry … how we can do what we do better. If your profit is 20%, for example, who’s to say that it couldn’t be 25%? And if another firm manages 30%, does that make your percentage a poor performance? Not necessarily. Remember that percentages of this nature are based off the beginning figure of revenue. How is your revenue? If you can get it higher, then your expense percentages will be lower/better.
There are too many variables to give a definitive answer. Thus, I distrust the surveys that are floating around.
Yesterday, one of the attendees at the Kansas City Metropolitan Bar Association suggested that increased competition was the largest challenge facing lawyers. He said that more lawyers are using television as a major promotional venue ... and it's very difficult to compete against. These are not just the lawyers on late night, early morning spot ads. But, rather, lawyers throughout the day and in a variety of practice areas.
Television advertising is an important marketing tool for many lawyers. It has become more important for some, despite the increasing importance of the internet.
One way to address these competitors is to focus on existing clients. Bond with existing clients, serve them in ways that creates loyalty, and have these very same clients be your advocates with others.
In such a case, you don't need television. You won't have competitors! You will be in your own bubble, growing your revenue and growing your profitability with clients who continue to return and who refer others to you.
In a recent study of the top 100 general counsel, a woman was listed as the top earner (more than $6 million) and more women (14) appeared in the list. This is the first and most since the study began.
One of my clients recently asked me why we all do what we know is not good for us, in fact, hurts us? If you’ve got a choice between option A that is good for us an d option B that is not good for us, why do we oftentimes select option B? To be specific, why do we procrastinate? Why do we fail to enforce our own engagement agreements? Why do we continue to work for clients who do not pay our billings? And we could go on …
In this specific instance, my client complains about his partners and associates not collecting billings for work performed. There may be several possibilities to answer the “why.” One is that, despite being in an adversarial profession, most of us dislike being confrontational, especially with our own clients. Second, lawyers like doing what they love to do … and collecting (or any business related matter) is not what they love to do. And third, they don’t perceive this as their business.
There may be a number of solutions that will get their attention. First, you sign the paycheck. That carries a lot of weight if you care to wield the “stick.” Two, engage a staff person to be the collections manager for the firm; don’t ask lawyers to do that which they’re both not qualified to do and which takes them away from doing what they do best. Third, read my book, Collecting Your Fee: Getting Paid from Intake to Invoice, and follow the scenario and script outlined to interact with slow-paying clients.
At a recent presentation on our Road to Revenue National Tour, a young lawyer was concerned. She said that she has a new practice and has been successful in keeping her accounts receivable to a minimum. In other words, she has been able to work, bill and get paid quickly, the three elements of my 3Dimensional Lawyer® . Her concern, though, is that her pipeline for new business seems to be empty. She is concerned that prompt payment has an impact on additional work to be lined up for her to do.
In order of priority, one needs to get the work … marketing. Then, one must do the work. Production. Next, one needs to get paid. Finance. These are the three legs of the stool. The successful lawyer/law firm must focus on collections. Less than a 90% realization/collection rate is a symbol of future trouble.
In this lawyer’s situation, she is successful in the collection phase. In fact, it’s difficult to imagine a higher success rate when you have little to no accounts receivable.
The focus, then, needs to be on marketing, getting more work to fill the pipeline. These are separate and distinct issues. Relish in your success collecting your billings and address the marketing to attract more clients.
Should a lawyer-employer lend or give money to an employee to improve her skills, to become a paralegal, when there is some concern that she may not remain with the firm more than 2 years more?
This is a question that is posed more often than we realize. How would you respond?
In my experience, the answer is determined by the contribution the employee makes to the firm. However, if there is concern about whether the employee will remain with the firm, my inclination would be to hesitate.
Continuing education,not only for lawyers, but also for staff is essential for improving skills and effective representation of clients. And we should do anything we can do to encourage staff improvement.
Bob Denney says "... “70% of the managing partners [or CEOs] do not have a job description and most partners do not know what their MP does. In addition, in firms of more than 100 lawyers, only 10% have full-time managing partners.”
No wonder that in 1995, the USPO concurred with me that "The Business of Law" was a unique phrase and granted my request for a registered mark. Major law firms still, as Denny confirms, require that "managing partners" maintain a full client load of billable time. There may be some concessions, but by and large, they are evaluated on their client production rather than their effectiveness in keeping the firm together and moving forward.
I think of the analogy with Lee Iococca. Though he was given credit for designing and producing the Mustang, he could no longer perform the design or product management functions in his position as CEO and later Chairman of Chrysler. How is it that law firms believe the managing partner (CEO) of a multi-million dollar professional service organization can do more than an industry giant?
More than 23% of the Washington State Bar Association, a mandatory bar, are 60 years or older. Several years ago, the American Bar Association, a voluntary bar, estimated that 400,000 lawyers would retire in the next 10 years. For the ABA, that’s equal to its entire membership. And that's equal to about 40% of all lawyers and a majority of private practitioners.Continue Reading...
The Oregon State Bar (OSB) Association was at its most hospitable best. The standing room only group of lawyers shared their experiences as I talked about how to create stronger bonds of loyalty between client and lawyer. When I asked why we should care about this issue, two very poignant answers were shouted out: i) We'd like to get paid and an unhappy client won't pay their bill; and ii) when we deal with disappointed clients, disappointed in us, not the other party to the transaction or result of the matter, our own stress goes through the roof!
Increased revenue and decreased stress, two outstanding reasons why we should care ... I think the members of this audience hit it on the nail!
Next stop is Seattle ... come join us if you're in the area..
Outsourcing jobs typically pay better than temp work — and certainly better than no work at all. This is the message of a recent article. The legal profession is developing its own caste system. We all understand some of the differences, or castes:
- Big Law vs. Small Law
- Sole practitioner vs. Large firm lawyer
- Specialist vs. Generalist
- Boutique vs. Full product line
- Domestic vs. Outsource (overseas as in India and Philippines)
And I’m sure there are other distinctions that I've overlooked. But, now there is another phenomenon appearing. ....
What are the more than 400,000 "baby boomers" going to do in the next 10 years? For some, who are working in private practice law firms, the issue may be particularly important -- because they may be "fired." This may not be the word used; it may be "eased out," "de-equitized," "transitioned to new status" within the firm. If the lawyer is lucky, he/she may still have a place to go and income (though reduced) to receive. But, egos will be bruised.
This topic is handled nicely by recent article in the New York Times. In that article, Norm Levine (a friend and client) suggests that the real issue is not age, but rather productivity. Even lawyers who are quite young can have productivity issues while "old" lawyers are still going gangbusters. The EEOC is examining this issue in a number of current cases. And the ABA Journal is following the dialogue.
This issue applies to many professions, such as the nursing profession, the accounting profession and others.
The only real protection is to make sure you're a vigorous rainmaker; don't let your skills deteriorate or your energy lag as you get older. Make sure you have very good client relationships and "control" the firm - client business relationship. And/or make sure you have a unique skill set that is hard for the firm to replace with younger lawyers.
Of course, if you're a sole practitioner, you can sell your law practice when you choose to vacate the office. I am find more and more lawyers calling me about creating their exit strategy, which they expect will include a sale. A client of mine wants to leave the practice later this year at the age of 80. He's had a great career ... and we/he just signed a contract for the sale of his practice. That's a great way to go -- on top, healthy and with time left to do other things you would like to enjoy.
Lawyers today are looking at this issue more closely than ever before. Succession planning is one of the hot topics bar associations are asking me to address as I start our on our Road to Revenue National Road Show. Call me if you want me to visit your community.
Despite today's economy, some law firms are growing ... by merger and acquisition.
In fact, I had lunch with such a law firm just this last week. They are an 100 lawyers firm that is seeking to grow. They are interested in acquiring my client, a substantial boutique that would add a significant presence for them both in the relevant practice area as well as the geographic area.
We couldn't seem to connect, however. I made it very clear that my client was talking about selling his firm. Their offer suggested that they were interested in "merging." The reason was simple: No capital outlay was needed for a merger. The "offer" was structured in a way that would pay my client several hundred thousand dollars more than he is currently earning. And 100% of the payment to my client would be tax deductible as an ordinary expense, not a capital expenditure. They structured the offer this way also in order to be sure that the "book of business" follows my client for several years. This, was not what we wanted ... we are not looking to become partners in the acquiring firm.
During our conversation, it became clear why we were communicating at different levels...Continue Reading...
Lawyers need to communicate. The ones who face malpractice actions typically fail to communicate with their clients to learn what clients want, how they want to hear about it, and where the client’s business or personal needs may be headed.
But I think lawyers – and most of the rest of society – have increasingly fallen into the trap of too much communication with their cell and smart phones. Cell phone use for many people seems to have become a natural extension of themselves – they inflict it on everybody around them. Just like drivers who hog the left lane while driving at half the speed limit and remaining oblivious to everyone else on the road, these cell phone users hog the physical space of those around them with the sound of their own voice, and are oblivious to how irritating it is.It’s not hard to create a list of pet peeves about these people.
Here are some of mine:
· People determined to shout their conversations as loudly as possible, presumably to show off their wit or importance or intelligence (and of course doing the opposite).
· People who board a plane and decide to place orders on their cell while sharing their private credit card information.
· People who look for the proper signal area – with a constant "Can you hear me? Can you hear me now?" – but never seem to find it.
· People who let their cell phone ring time after time, in a workshop or a concert or anywhere else where they can ignore the stares of those they annoy.
· People sharing half of their life stories in an elevator or a crowded vehicle, completely unaware that others don't care about all the “fascinating” details.
· People who absolutely must interrupt their call with me to get another call rather than letting it go to voice mail.
My “favorites” are those who talk while in the stall of a public restroom. When I encounter one of them, I make as much bathroom noise as possible (flushing toilets or urinals multiple times, using the hand-dryers). Anything to let the individual on the other end of the phone know that the person is talking to them from a bathroom....
I’m sure you have your own special list of such people. Share it and I’ll pass along the responses in a future post. Maybe all of us together can generate enough “shaming” to change some behaviors.
Even marketing folks are concerned about the return on the investment in one's daily activities. While some folks, yes, lawyers too, ignore the money, marketing professionals are trying to convince their management that they are important to the success of their organization, that they are responsible for a lot of new business.
AdAge says: "...Return on advertising investment has always been a priority for marketers, but in the recession it flew to the top of the list. As chief marketing officers fought to justify spending within their organizations -- often via spirited discussions with procurement departments about where the dollars are going... " The Days, the subject matter of this article, I'm pleased to say are friends ... and outstanding marketers who focus on providing a profit on marketing dollars spent.
Do you look at this issue? Can you determine whether the money you spend is producing a profit, is enabling you to expand in your practice area, is improving your skill as a lawyer, or otherwise contributing to the improvement of your law practice? You should. If not, you're in the gardening, playing with the dirt rather than growing gorgeous roses for sale to others who can appreciate your skills.
Alan Weiss, a noted consultant (and my coach) said today: "... I've never seen happy customers when there are unhappy employees (either naturally unhappy or angry at the employer). I have seen happy employees and unhappy customers (no supervision, lazy, entitled). Always hire enthusiasm, you can teach the content.(emphasis added) ... And make sure you demonstrate within the business the behavior you'd like to see bestowed on the customer. .."
Another way of saying this is what I've always preached: Hire for work ethic; hire someone who is passionate about their work, about making a contribution to the organization. and about focusing on the client, not themselves. The rest can be taught. Skills can be taught, attitude cannot.
"The NLJ 250 collectively employed 9,567 fewer lawyers in 2010 than it did in 2008, a decline of nearly 8 percent in headcount, with the 10 largest firms in the U.S. alone losing more than 1,000 lawyers last year. This is just the second time in the 34-year history of the NLJ 250 survey that the nation’s largest law firms have experienced a net reduction in employed lawyers for two consecutive years."
This group of law firms, the largest of which is Baker & McKenzie at 3,700+ lawyers, makes up less than 5% of the attorney population. Their growth, like all corporate growth, has its expansion and contraction phases. There are at least two questions that come to mind:
1. Is this contraction permanent? Is this contraction a reflection of the entire industry?
2. Does this contraction reflect a major shift in the way legal services will be delivered in the future?
My crystal ball does not give me the answers. But, I believe that
i) even sole and small firm practitioners felt the change;
ii) though the numbers in the survey reflect 2008 as the base year, there does seem to be a cautiously upbeat attitude among lawyers today. More lawyers are contacting me with the serious questions of how do we make our practice better, how do we grow our practice ... in other words, lawyers are starting to come out from their caves, a bit shell shocked, but ready to understand the needs of clients and focus on providing solutions to their clients;
iii) it's not the contraction that will cause the shift in the way services are delivered, it's the continuing evolution of technology that will impact the delivery of services. And this conclusion would have been the same with or without the contraction. It's just that, because of the contraction, we're more sensitive to the changes. But, these changes began before 2007-2008, and they will continue after 2011.
Lawyers have to be more sensitive to technological changes and how these changes can improve their efficiency and mode of delivery. Clients certainly are and they are looking for those lawyers who can reduce their legal costs (not necessarily hourly rate). Thus, even the decades-old billing and pricing models will be subject to pressures that mere conversation failed to impact until now.
As Oprah said yesterday while interviewing the President and First Lady, "... keep your eyes on the prize." Know what you want in your practice. Know what your clients want from you ... what is the ultimate solution they are seeking by engaging your services? Stay focused and you will have happy clients ... happy clients pay their bills ... happy clients refer their colleagues and friends ... While doing good, you will be able to do well.
In most states, strict compliance with trust accounting regulations is required. Where such regulations require a paper trail that includes retaining canceled checks and other features of an older era, lawyers are inadvertently out of compliance. How? Why?
The banking industry has moved on. They are into the electronic age and we have not kept up. For example, few banking institutions, if any, still return canceled checks. They send photocopies and, after a short time, destroy the canceled checks. See the federal Check Clearing for the 21st Century Act.
In August, 2010, the American Bar Association's House of Delegates adopted the new Model Rules for Client Trust Account Records to replace the Model Rules on Financial Recordkeeping, in effect since 1993. The ABA rules now enable lawyers to use electronic tools to comply with Model Rule 1.15 concerning holding clients funds and property.
Check your State rules -- not all states have updated their regulations.
McKinsey & Co. released a report stating that 'inadequate career development has kept women from reaching the top rungs of the corporate ladder..." The same is true in law firms who correspondingly have low numbers in top management.
The report said "...companies need to spend more time coaching women ..." Corporate America understands this; when lawyers learn to understand this, they will become better lawyers.
The coaching process works for athletes, works for top executives in Corporate America; and works for others who want to increase their revenue and decrease their stress. A side benefit of great importance an increase in one's self-esteem. Lack thereof is one of the greatest impediments faced by most professionals, probably because our standard is "perfection." I know no one who is able to reach that standard. Coaching can show us how important "progress" is without worrying about reaching an impossible level of perfection. Having someone walk the plank with you who understands these issues and can enable you to progress is important. As with an athlete, having a coach can be the difference between a very successful practice and a modest practice.
Yes, say some.
Only a short time ago, we believed that non-lawyers would be able to participate in the ownership of American law firms. The pressure, so we believed, would come from the British Empire. Australia already allows this and it will soon be permitted in England. But, not the U.S. ... until now.
The District of Columbia permits non-lawyer ownership to the extent of 25% interest in a law firm. And, now, North Carolina has a bill before its Senate that would allow 49% non-lawyer ownership.
One argument is that law firms have expanded and are now very large organizations. In order to grow, they need additional capital ... and capital is best raised in the capital markets, not from individual partners of law firms ... and that means non-lawyer ownership. While large law firms are looking more and more like their corporate clients, it is still a stretch to suggest that law firms should raise outside capital.
Do law firms need to grow? Why can't corporate clients' interests be served well by smaller regional law firms? Why does the corporate law firm have to be as large as the client? We saw unions grow in both size and power in response to corporate and management growth and power. And we now see unions fighting to stay alive. Will that also happen to large law firms of the future? Will technology enable small groups of lawyers to be effective in large corporate representation?
Some argue that the rules of professional conduct wouldn't bind non-lawyers in matters of confidentiality and charging reasonable fees. Further, the very independence of lawyer's judgment might come into question. But, the rules have been bent, if not changed or discarded entirely, when large firms' economic interests were at stake. So, it will be fascinating to see who argues on which side and how this issue develops.
Is it possible that this issue will finally cause the break up of the mandatory (integrated) bar association into State licensing agencies on the one hand and voluntary bar associations on the other hand ... with the latter being the home of sole and small firm practitioners banding together to serve their own economic interests?
In today's L.A. Times, a doctor talks about her reaction to meeting a patient in an airport restroom. The patient was out of context and the doctor was taken aback, at first not recognizing the patient. She concludes by suggesting how much she learned about the patient by seeing her in her own environment, the place where she works. As a consequence, she starts to think about how her future treatment of this patient will be altered.
How often do we, as lawyers, see our clients in their habitat? What kinds of information might we gather, mostly unspoken information, that would dramatically alter the advice we provide? In many cases, quite a bit! Yet, not many lawyers take the time, unbillable time, to visit our clients to really get to know more about them, their work and family environments, and the possible impact on the clients of the advice we provide.
Like the doctor writing the article, I suspect our approach would be somewhat different. And, perhaps more important, the connection the client has with us would be dramatically different! That bond, needless to say, would result in better representation and more referrals. Interested?
Someone said, "Business, by definition, is taking a risk. Law, by definition, is staying away from risk."
I look at law a bit differently. I think law looks to the past for today's decision with a view to guide tomorrow's action.
And accounting, is merely recording this period of time in order to tell the government what we did and, as a result, how much "protection money" we need to pay.
What do you think the functions or attributes of the three professions/businesses are?
I recently wrote in my LawBiz Tips Ezine about how law schools continue to churn out new graduates even as demand for them drops, and cited a New York Times article on this issue that concluded: “Today, American law schools are like factories that no force has the power to slow down – not even the timeless dictates of supply and demand.”
Now it appears that the law of supply and demand has not been repealed after all. The Wall Street Journal reports numbers from the Law School Admissions Council showing that the number of law-school applicants this year is down 11.5% from a year ago to 66,876. The figure, which is a tally of applications for the fall 2011 class, is the lowest since 2001 at this stage of the process, which is almost 90% completed.
The reasons aren’t hard to understand. Firms increasingly prefer to hire lateral attorneys who have already had on-the-job training and books of business, rather than new graduates who don’t understand “The Business of Law®” and will take years to begin returning a profit on the investment made in them. And from the student side, the realization that going six figures into debt to get a J.D. degree that offers no assurance of gainful employment is not exactly a smart idea – especially for those whose main motivation to attend law school was to make the supposed “big bucks” available rather than to pursue a legal career.
So who is hurt most if the law school bubble does burst? We can only hope it will be the law schools themselves, who continue to pour huge resources into “gaming” the law school rankings so that they can move up from number 19 to number 17 and thereby (they presume) entice more students to enroll. When the housing bubble burst, it was – and continues to be – the financial geniuses at the banks who were left holding the bag. Are law school administrators any smarter?
After my last post about customer service, Orbea, the manufacturer of the bike frame I was riding when I was involved in an accident, a company representative contacted me. His explanation for the less than appropriate company response was that it was sent from Spain, the company headquarters, and the sender had challenges with the English language.
Whether this is true, I cannot say. But, Mr. Paul Alexander of the U.S. Orbea arm said that I should visit a local Orbea retailer and I would receive a 15% - 20% discount on a new bike. He said, "I look forward to getting you back on your bike and leave you a satisfied Orbea cyclist."
Thank you, Mr. Alexander. That should have been the first response from Orbea. My wife asked for information about the company's "crash program." Even an expression of sympathy/concern and a statement that the company doesn't have a crash program would have sufficed ... and saved unfavorable ink in this blog. Commenting on Orbea's warranty program was not the subject of my wife's inquiry.
I'm glad to see that the company has recouped so gracefully. Some companies don't do even that. Some time ago, you may remember that United Airlines committed a major gaff. By not treating their customers with due respect, a song was written about the company and it appeared in the social media. The company stock dropped 10% as a result! That is still the subject of some discussion.
I'm glad that Orbea represented the cycling industry more professionally and with greater sensitivity on the rebound.
Last week, I had an accident. A preoccupied driver who admitted she didn’t see me failed to yield the right of way and turned left before I could see her. My bicycle hit her right front fender. You can see a picture of the damage to the car. Sometimes, it's better to hit than be hit. Because I hit her car, rather than she hitting me, I am alive and still walking, albeit with some difficulty. The fireman and paramedics said they'd never seen such damage to a car from a bike. “... Either the car was made of plastic or you are a man of steel!...”
If I were made of steel, I would not be so sore and bruised as I am still today. My thighs and quads have turned colors I never knew existed; like burnt toast. The bike down tube is cracked and very good, beautiful and cherished Orbea Orca carbon fiber bike is history. I'm lucky, frankly, to be alive ... The alternative is not appealing.
Once things settled down, several days later, and a mechanic suggested that some manufacturers offer deep discounts for bike frame replacements needed because of a crash, my wife found the e-mail address for Orbea and sent them this note: “...My husband was involved in a traffic accident with his 2008 Orbea-Orca .... He is apparently okay with major bruising but his beloved Orbea has a damaged frame on the post between the seat and the pedals. Is there an incentive Orbea offers to encourage customers to replace a damaged bike with Orbea? ... Thank you.
CANNOT MAKE THIS UP
The company response follows: “Good morning, Thank you for contacting with Orbea! In case of accident, Orbea’s Warranty is null and void. Sincerely, ...”
We never entered a warranty claim; that was never in my mind. My wife was merely checking out the status of their crash program. Some companies retain the loyalty of their customers by allowing them deep discounts to replace a damaged bike (product) and then studying the returned item for future research and improved manufacturing processes. My wife’s response was classic understatement: “We were not expecting to file a Warranty claim. We understand that some bike manufacturers give a discount on purchasing a new bike when a bike has been in an accident. You might consider doing the same. We are in the market now for a new bike. Thank you for your concern.”
Lessons here are legion.
First, listen to your customer’s comments and requests. This reminds me of the classic instruction from a lawyer to his client: Listen to the question. Answer only the question. Then shut up! Wait for the next question. Don’t answer what you think should have been the question.
Second lesson: Everyone in your firm represents the organization. If a receptionist is rude, if a secretary fails to give you a message; if an associate is ill-prepared for a conference or court appearance, this reflects poorly on you as the senior lawyer and the firm as a whole. Education and training is not limited to the lawyers in the firm. Everyone needs to take continuing education programs to maintain and elevate skills and service levels.
Third lesson, don’t “piss off” the economic buyer (in this case, my wife) in your organization or you will never retain the business, and accompanying revenue.
Fourth lesson, live your life for now. There may not be a tomorrow. Yes, we have to keep an eye on the future, saving, planning and preparing. But, don’t do so without having some joy and value (your subjective opinion here) each day that passes. For me, the pleasure and reward is a vigorous bike ride, especially as a reward for something I did during that day. Whatever it is for you, “just do it.”
I’m sure you can provide other valuable lessons from this experience. Contact me or write your comment below. Let’s see how many lessons we can create from this one true-life experience.
Effective March 15, the Howrey law firm, which once employed as many as 750 lawyers, dissolved. As in past megafirm failures … Brobeck, Altheimer, Thelen, the list goes on … there never is just one, but a variety of root causes that feed the primary death blow, an exodus of lawyers.
In Howrey’s case as a litigation-focused firm, according to the firm’s CEO (quoted in the ABA Journal), up to 11% of the firm’s billable hours were devoted to contingency matters. “Some people, including some fairly high-level people, sort of bailed on us when they didn't get exactly what they wanted,” the CEO said. “You have to ask your partners to be patient until it [contingency billing] pays off, and not everyone is patient enough.”
In pure contingency law firms, that's exactly what every equity lawyer does, wait. Wait until the judgment or settlement is paid. Why should that be different with the Howrey firm? Lawyers working on contingency matters bring no money into the firm, yet are responsible for many dollars flowing out ... in the form of lawyer and staff compensation and expenses advanced to sustain the lawsuit. And if the result of the case doesn’t benefit the firm, the loss can be substantial.
But, the lawyers of the firm knew that. Thus, the question, why is it now that there is objection? Though conjecture, apparently, Howrey partners wanted pure hourly billing, less contingency work … and were uncomfortable with advancing costs for matters in which they were at risk. They seemingly could not determine, to the satisfaction of enough, how to divide the compensation pool when revenues arrived out of sequence to the work performed connected with those revenues.
If fees to the firm based on contingency reached 11%, it’s almost like having one client exceed the 10% threshold, a level that I’ve said before is dangerous. Control of this much money was essentially out of the partners’ hands, unless the firm only took on matters that were virtually sure things … which conversely would lessen the likelihood of a big contingency payout.
Other factors to consider that would lessen the threat to my 10% rule is that it's unlikely that any one matter reached 10%; if the intake decisions were wise, the firm benefited more than it suffered from periodic big revenue bumps; in today's world of "value billing," the firm would be at the forefront of aligning its interests with those of its clients. The firm should have been able, with good cash flow management and a committed group of partners to the team concept, to marry both worlds of contingency and hourly billings.
The ultimate lesson in this dissolution seems to be that Howrey fostered an environment of solo silos (with some lawyers piling up cost but poised to earn a great deal of money if "their" ship came in), not an environment where everyone was pulling for the whole (irrespective of how they brought in the revenue.
Any firm that encourages lawyers to maximize their individual compensation may have fast near-term growth. But approaching compensation as an institution makes for greater firm harmony and longevity of the firm as an institution ... and, in my opinion, greater long-term value for all.
There is a song that suggests that "all things have a season ..." And perhaps the time has come for the dismemberment of the mandatory bar, especially in California. My last post on the subject suggested that the current president of the Bar is doing a disservice to its members by complying with the implicit demand of the Legislature to eliminate lawyers from participating in the Board of Governors; lawyers should not elect its own governing body.
And, if you believe that the Bar has no business in addressing the needs of its members, then Mr. Hebert is right; the Legislature is right; let's create a licensing agency and do away with the Bar as we know it. Let's call it what it is, a tax, a fee for the privilege to practice law. A fee for the privilege to help people address their legal needs. After all, we "tax" plumbers, accountants and others for their privilege of earning a living as they do and helping their constituencies. Why should lawyers be different? Assess the fee for licensing and keeping lawyers on the path (the disciplinary process). And let lawyers form a voluntary association to provide economic advice and continuing education and lobbying efforts.
Seems simple. But, the current discussions are off onto a different path. President Hebert says that the only goal of the Bar should be to protect the public; that any benefit to or for lawyers is incidental and of little consequence.
Yet, if he (the president and other members of the Board and Legislature) truly believed in protecting the public, the first step would be to understand what the public concerns are. And that would require looking at the state Bar's disciplinary report. If you did, you's find that more than 50% of the complaints there against lawyers relate to issues of managing a law practice.
The number one complaint is still the failure to respond timely to clients. To address this and other such time and practice management issues, one need only to provide appropriate education programs. Help lawyers be more effective with their clients and more efficient in the delivery of their services. And, again, but only if you want to protect the public, require malpractice insurance at affordable prices. With its enormous buying power, California ought to be able to craft an affordable insurance program. The cynic in me says this won't happen no matter how the Bar is re-configured.
Oh, the mandatory part might show up ... but not the affordable part ... Why, because neither President Hebert nor the Legislature cares much about the average practitioner who helps the average citizen. That may be a harsh criticism, but it is apparent from observable behavior to date of both.
Lawyers have a right to have spokesperson; lawyers have a right to have someone promote their interests in Sacramento. And lawyers have a right to organize for their own economic well-being. It's clear the State Bar of California is not doing any of this!
In today’s Managing Partners Roundtable, we talked about the costs of digitizing all files the firm maintains. One partner suggested that failure to do so might result in malpractice allegations. This is an interesting concept, one that I don’t believe has yet taken hold.
Cons: Expensive, time consuming, lawyers must be involved to determine which file matters can be "cleansed" and tossed, files must be taken apart to scan, decisions on what hard copy to toss now and what to save (and for how much longer)
Pros: Reduction in amount of real estate needed to store files, lower cost of occupancy resulting from a conversion, searchability by keyword rather than memory, one time investment.
Several years ago, a Chicago law firm began this process by scanning documents through a photocopy machine. Their contract provided for payment only when paper was copied and printed, not just scanned. Thus, this segment had limited cost. Disabled people were employed to do the work, thus enabling the firm to do well by doing good, and maintain its cost of labor at a lower cost than would have resulted with its own personnel. The entire process was conducted in the evening so the normal workflow of the firm was not disrupted. This firm was ahead of its time in this process.
In today’s meeting, I learned of a major firm that completed this project last year at a rather high cost. But, the investment was believed to be essential to an efficient future operation of the firm. And, of course, younger lawyers are so conversant with the electronic world that some seldom even touch paper anymore.
Technology has and will continue to have a major impact on the efficiency of the delivery of legal services and the costs to clients.
Have you ever had problems traveling, making connections or finding that weather is a great excuse to be surly to those you serve? If you've ever experienced any of these, or a myriad of other issues facing us when we travel, check out my latest commentary on having been stranded in Manhattan, trying to get home from JFK. While bad weather is a legitimate catalyst for scrambling (as in Chicago), just remember that you're in the business and know these things happen. Be prepared with a good attitude - your customers need all the help and pleasantness they can get.
Thus, as lawyers, you know that your clients will always be in stress. Make sure that you and your staff are pleasant. It will make the relationship go more smoothly ... oh, and yes, they will be far more willing to pay your bills timely! Heed this advice only if you understand that you are in The Business of Law®.
The article by David Streitfeld is a good piece. He's the housing reporter for the NY Times and spends most of his time in California. In response to an earlier piece by him on the subject, where he failed to mention California, I contacted him. He knew nothing about the law in California (since 2009) or the State Bar's modification of its Rules of Professional Conduct that made it a crime to take money from clients in advance of completion of the loan modification, not even for deposit into a client's trust account.
I told him about the new law and pointed him to several of my blog posts on this topic where he could learn more.
I'm glad that he's written about it now, in more detail and highlighted California's experience.
As a side note, an officer of Bank of America claims that of the Bank's loan modifications, more than 70% go back into default within 2 years ... a scary statistic. Should the Bank be responsible for maintaining a family in a home which it can't afford, even with a modified loan structure? I'm not sure ... Or, should the government offer some help. They have bailed out the big banks on Wall Street, how about some help for the people on Main Street? I'm not sure what is the right answer. It's clear, however, that if no one helps, we'll have many more foreclosures in 2011 and 2012. Our political spectrum is so polarized today that all we seem to hear is noise, white noise, and more noise.
BTW, it was a politician seeking headlines that started the ball rolling. And, it was the absence of lawyers in the legislature (only about 23% today) that permitted it. And, a non-lawyer governor who signed it. And, it seems, non-profit organizations who lobbied for it (a little competition there, would you say?). Who gets screwed? The people.
Too bad the State Bar president failed to support sole and small firm lawyers who worked in this area. Rather, he seemed hell bent on chastising the whole because of a few bad apples. Rather, the Bar and the District Attorney could have used the many rules (moral turpitude and others) and laws (Penal Code against theft) already on the books to protect the people scammed by lawyers without removing entirely the good lawyers from this process. Provisions on the books already protect against any lawyer taking money from a client under false pretenses (theft) and the rules of professional conduct protects against moral turpitude and for not performing work that was promised. The State Bar didn't have to follow the urging of the bar president to support this effort.
The state bar president, at the very best, gives no more than lip service to solos ... See my open letter.
(Note: The California State Bar President asked California lawyers to contribute to the State Bar's efforts to provide legal services to those in need. Following is an open letter to the President; his letter is set forth below.
I agree with you completely. There is a tremendous "justice gap." I'm glad the State Bar is seeking to do something about this. I wonder, however, why the State Bar doesn't expend the same energy on helping its own members, lawyers. One study reported by the State Bar several years ago indicated that 50% of lawyers in this state earn less than $100,000. Just think, if the State Bar would actually help its members be more effective with their clients, be more efficient in the delivery of their services and, yes, be more profitable, members of the Bar would then i) be less tempted to invade client trust accounts (a public service issue) and ii) have money to contribute to narrow the "justice gap."
Instead, however, the Bar does things that are perceived by our members to be antithetical to the interests of lawyers … The list is rather long and I won't bore you here with issues on which I've spoken before. But, until you (the organized, mandatory Bar) works with its members … until you (the organized, mandatory Bar) has as at least one of its primary goals the interests of its members, you have a great deal of courage (some might say gall) to ask struggling lawyers to contribute more than they already do.
If our Bar were a voluntary Bar, I suspect less than 50% would join … Then we would not have governance issues imposed on us by the legislature. Of course, we would also be far more interested in the thoughts and concerns of our members than is currently the case.
Clearly, these are my own thoughts, not those of any Section or other body of the State Bar … but these thoughts were clearly expressed to me just this morning by another attorney. I thought you should know, considering you're asking us for money.
And let me take this opportunity to wish you and your family the best of the holiday season. You've taken on a very tough job, some would say a thankless job, and I wish you great courage and strength.Continue Reading...
Psychologists at the University of Toronto and Tufts University say that people with powerful looking faces will be more profitable and that one's career success can be predicted as much as 30 to 40 years earlier simply by looking at their face.
Professor Nicholas Rule of the Department of Psychology at the University of Toronto, is the lead author of a new study published in Social Psychological and Personality Science. “This includes clothing, posture, and hairstyles, but the real window to judging people is the face. We developed a method to measure facial power and found that it is a strong predictor of law firm profitability.”
The ratings of perceived dominance from photos of managing partners were correlated with the profits of the leaders’ respective law firms; the findings were positively associated with one another, both for the judgments made from current photos and those made from college yearbook photos of the same people. Just think about the cute notes in your college yearbook. What if someone who predicted your success actually had the talent to read your face?
The psychologists studied only lawyers, but say the same principles apply to all people and industries. So, does this mean that we are trapped by our DNA, by the faces that nature provided us with at birth? Where does active will come into play? Oh, I'm sorry, this sounds just too much like my college philosophy class.
But, think about this for selecting your next law firm leader. Think about this for jury selection. The applications are endless ... if true.
For more, see the findings presented in a paper titled “Judgments of Power from College Yearbook Photos and Later Career Success”, published in Social Psychological and Personality Science.
Today, a client called me to ask whether I know a compensation systems consultant who can help their firm create the right environment for non-equity partners to become equity partners. My response was i) compensation systems are a function of the firm culture and governance; ii) one first must analyze what the goals of the firm are and ought to be; iii) for any system to work, it must have the acceptance ("buy-in") of the principle stakeholders in the firm.
Most systems will work so long as the participants deem the system in place to be fair and reasonable. The system is better, in my opinion, when there are objective metrics in place. But, even subjective metrics work as long as the participants think there is fairness and justice working ... with an appellate process in place that is also fair and just.
Oh, by the way, I concluded, I do that! <g>
As in most law firms, compensation systems is where governance and other issues are expressed.
In a recent matter, a female partner claims that Dewey & LeBoeuf, a law firm that has received diversity awards, discriminates against women. She asserts that women partners receive less compensation than men in the firm.
The firm's partner distribution system is apparently based on origination, not just billable work. This is the case in many firms. What do you do, however, when "the old boy network" was created years ago, when women were not major law firm players, and there is no "sunset" provision in the firm for compensation? Seemingly, this would entrench old relations as the basis for current compensation ... and allow little or no access to women, to younger lawyers, and to other diverse groups in the firm.
Firms unwilling to look anew at their compensation culture will continue to face challenges from within as well as pressures from clients from without.
A new report discusses how a law department can make money for its company.
Assertion of rights (warranties and other claims) and prevention of wrongs (preventive law) are two ways to protect clients. This report describes one of the two ways. In the assertion mode, there appears to be a metric of "counting" the benefit that lawyers provide to clients. This may be what is needed to persuade management to pay more attention to its legal department.
Yes, the numbers can be significant. In this case (the assertion mode), however, the client must be willing to engage the lawyer/law firm/in-house counsel to be alert to those opportunities. In the latter case, the client must likewise be willing to engage the lawyer to show the client how to negotiate and/or structure customer relationship so that challenges/problems do not arise or at least are minimized.
In both cases, there must be a willingness to include the lawyer in the business process. In the former, we wait for a problem to arise ... and then claim credit for a return on the investment in the lawyer. In the latter, we are inserted into the process from the beginning ... and the ROI is more difficult to measure. After all, how can you measure or take credit for something that didn't go wrong in the first place?
Lou Brown was the "father" of preventive law. I "grew up at his knee" and learned a great deal from him. The concept of "preventive law" was a difficult one to "sell" to both clients and lawyers, especially in an era of good times and increasing wealth for lawyers. I suspect it will be a difficult sell even today, despite the even greater need for it. It's always easier to claim credit and persuade management that the lawyer is an essential part of the recovery process when you can claim credit for the flow of recovery money.
Good work and congratulations to those who prepared this report. Perhaps we will get closer to preventing problems by showing how we can cure problems. I'm not so sure though. This reminds me of the search for cures for lung cancer. The American Lung Association raises a lot of money and makes millions of dollars of grants to research for a cure for lung cancer. Yet, less than 5% of their grants are for behavioral research that prevents smoking, the primary cause of lung cancer. Why cure cancer so patients can go back to smoking, why create a cigarette with fewer carcinogens, when not smoking at all will take care of most of the problems? Why set patients up so they can return to buying from the tobacco companies?
Seems to me to be the same here. Warranty work (cure) is important, but better customer relations (prevention) is the better approach.
In Friday's Wall Street Journal, there was an article about Bert Lahr's 1956 Broadway performance of Waiting for Godot.
The article was enticing and caused me to go to Amazon.com to order the mp3 download of the performance. I purchased the download, but had trouble viewing it. I went to Amazon's "help" section and followed the instructions for over an hour ... then I saw that I could contact them. They asked if I wanted email response, a phone call later or a phone call NOW. I asked for the latter and within less than a minute received a call. Now, that is SERVICE!
The person must have been from India (after all, it's a holiday week-end here <g>), but I could understand him. He offered to give me a refund or download the play again. I chose to download it again ... after all, I did make the purchase because I wanted it. But, we still had trouble and what was downloaded did not appear to be what the WSJ review promised. So, without argument, protest or difficulty, the man said I would get a refund.
While I didn't get what I wanted, my recourse is to go back to the journalist and determine what I didn't understand. BUT, I was super impressed by the detail to service presented by Amazon. They will now address the issue for me on their end, I was not charged for something I didn't get and I will sing their praises. (Oh, I guess that's what I just did.)
Amazon, thus, is not just a repository of books. That can be had in a library. But, they are a customer experience to satisfies. Congratulations to the folks at Amazon. I am one very pleased customer.
Do the clients of your law firm say the same thing about dealing with you? Is the experience of dealing with your law firm, despite the stress of their legal challenge, more than satisfying? Are they being cared for? Demonstrate that you care for them and care fully.
In August 2009, the California legislature enacted a law requiring the State Bar to examine how it governs itself. I don't think any other state in the Union has a legislature overseeing the bar. This is usually a function for the State Supreme Court. However, in California, since the 1920s, the Bar must get permission for it to send out dues bills to members; thus, the legislature has the power to impact the legal system through the back door.
Does this remind you of law firms whose compensation structures govern what its lawyers find to be important? If the firm emphasizes and rewards new client acquisition more than work performed, that is what lawyers will spend their energy doing ("eat what you kill"). If, on the other hand, the firm compensates more for hours expended, then focus on new client generation will go down and billable hours will go up.
The same is true in the relationship between the bar and the legislature. Today, with less than 30% of the members in the legislature having a law school degree, there surfaces an animosity between lawyers (the bar) and those (the legislature) who approve the dues to be paid by lawyers to retain their license. Oh, did I forget to say? California is a mandatory license state, meaning that you must be a member of the State Bar in order to practice law. Voluntary bars exist at the county and local levels, not at the state level. The state is mandatory. Voluntary bars exist, but only at the local (county and city) levels.
So, what's the big deal? The fear by legislators is that a self-regulating body (more than half of the Board of Governors are elected by lawyers; others are appointed by the Governor and others) will serve the interests of their constituencies, not the public interests. I thought that was the whole point of public members being part of the Board; they are, they participate and they have a significant influence from the Board. The legislature wants the Bar to "protect the public" only; the well-being of lawyers is unimportant.
More than 50% of lawyers earn less than $100,000, a relatively paltry sum when considering the number of years of education required and the good that lawyers provide. (Yes, I know there are a few bad apples, but that is true in every profession ... hmmmm, even with law makers.
If lawyers were helped by the bar and did earn more money, there would be far less temptation to invade clients' trust accounts. This would be real public protection.
I have yet to find a set of rules of professional conduct that favor lawyers over the public. And what the rules of professional conduct does not "catch," the penal code does. And sometimes rules are made that hurt the public. For example, in the loan modification fracas, the legislature enacted a new penal code provision that made it a felony to take money from clients for loan mod work before the work is done ... can't even take money for the clients' trust account! The rules of professional conduct were similarly altered. But, no intelligent, business savvy, lawyer would now represent such clients unless pro bono. If the client has insufficient funds to keep the mortgage current, what makes legislators believe such clients will pay their lawyers after the modification is completed? The clients didn't suddenly get flush with money! So, lawyers will not now help the people who need help the most, those about to be kicked out of their homes ...
A new wrinkle to this, however, is that the law seems not to apply when a lawsuit is filed. So, the lawyer might take the client into bankruptcy or sue the lender on some pretense, all with the ultimate objective of merely getting a loan modification. This is more costly and adversarial than needs to be ... if the law makers kept their hands off! There were already rules on the books sufficient to punish the "bad apples" in the profession who were guilty of fraud on the clients.
Back to the main point: If the legislature removes governance from lawyers, the resulting agency will be merely a licensing and disciplinary agency ... and lawyers who volunteered their time and expertise to the bar for the benefit of many in the public and produced much good work will go elsewhere. That would be a grave loss that will hurt the public.
The Bar should push back and fight the legislature ... All the more reason for the separation of powers! Let the legislature do its job ... and this does not include determining how lawyers govern themselves.
From Michael Bryant of CTS Consulting in Baltimore comes these gems of phrases to ditch now:
It isn’t fair.
Translated: I didn’t get my way.
I’m too busy.
You’re not “too” busy; you’re as busy as you are. “Too busy” means I over planned, or over promised.
Insurance companies hire lawyers as in-house counsel at reduced (wholesale) rates, pay lawyers in accordance with insurance policies for their insureds, and otherwise have a dramatic influence over the billing practices in the legal community. Wasn’t it insurance companies in or about the 1960s that demanded lawyers submit bills that showed the time expended in matters for which they pay? And then, as a consequence, lawyers began using time increments as a basis for pricing, not just as a management tool. Before then, lawyers based their fees on the value received by the client.
Perhaps the insurance industry will, once again, have a dramatic impact on the legal profession, but indirectly this time. In Rhode Island, it’s reported that the Lifespan hospital group and Blue Cross have reached an agreement intended to overturn the way hospital care is financed. The goal is to promote and pay for health (value) rather than episodes (hourly) of treatment. Currently, when you go to a hospital, you pay (and the insurance company reimburses or pays directly) for your stay in the hospital, for tests performed and surgeries and related care. Does this remind you of the hourly bill that lawyers produce monthly (hopefully no less frequently?.
The agreement is the first to meet Rhode Island's unique rules concerning health insurance policies and their premiums. Blue Cross, the largest health plan in the state, and Lifespan, the largest provider in the state, have agreed in principle (details yet to be worked out). The program will provide for fixed fees (alternative, or value, billing) for given procedures, thus discouraging tests and procedures that might not be needed – but usually performed because of insurance payments or attempts to make sure “no stone is unturned” in the treatment. Does this sound familiar? Performing more discovery than needed just to make sure “no stone is unturned” and to avoid an accusation of malpractice for failure to uncover the hidden evidence.
The hospital will be eligible for bonus payments when they meet as yet to be determined quality standards. Again, does this sound familiar? Bonus payments for faster resolution of the litigation, payment for results below the insurance company’s reserve or other standards determined by the parties. Almost sounds like a sport’s figure’s bonus payments when playing more games or hitting more home runs, etc. than set forth as minimums in the contract.
Increased and more effective communications and streamlining payment processes to increase the hospitals cash flow are also part of the agreement. Again, does this sound familiar? When lawyers have effective communications in place, it is seldom that the client is upset with the lawyer and it is seldom the client refuses to pay in accord with the engagement agreement, thus increasing realization rates for the lawyer.
Tying payment to quality care is available elsewhere, but to a modest extent and never before to an entire state. The insurance commissioner in Rhode Island is mandating change in connection with premium rate reviews. As they say elsewhere, “follow the money.” In this case, when customers demand change, suppliers change. Here, the review process for payment of insurance premiums and health care will change, not overnight, but quite assuredly ... only because the customer (or regulator) demands the change. When will clients of lawyers finally say “enough is enough” and demand change? Until then, lawyers are not likely to alter current billing practices
In today's WSJ, a lead article talks about the courts in New York requiring the lenders in foreclosure suits to be honest in the filing of their documents. This follows the Florida cases with "robo signers." Affidavits claiming full knowledge of the facts of each matter were signed by employees of the lenders and the mortgage servicing companies as well as improperly notarized. Lawyers are being blamed for filing defective documents.
Lenders made the loans, their servicing agents prepared the information and signed the affidavits under penalty of perjury. Yet, the focus of attention seems to be falling on the attorneys. Somehow, attorneys are expected to verify that their clients are telling the truth. I thought that was the function of the trier of fact, either the jury or the judge. What am I missing here? Or, is this just one more case of seeking to toss the blame anywhere but where it belongs.
Lawyers in our system of justice are the messenger. Lawyers present the evidence in the light best suited to tell the client's story ... but it is the client's story ... and the only obligation on the part of the attorney is not to allow known perjury to be placed before the trier of fact. How and why is that now being altered?
The mortgage companies are now saying that the cost of foreclosures and loan modifications will increase, hurting consumers! Wow, it is an affront to human intelligence to suggest that the cleanup of their corruption (filing false documents with the court) will cause consumers to pay more!
The current political mood of the country seems to be that "less is more," at least when it comes to government intervention. A student of American history will note the changes and mood swings between federal/national involvement and states' action. On reflection, we may be going through one of those swings now.
A similar reaction is being generated by the mere mention of the American Bar Association reviewing the Model Rules of Professional Conduct to determine whether new rules should be created or old rules modified in reaction to the new technology. The problem is that new technology such as social media is merely a distribution method of ideas. Rules already exist that deal with statements to the public, advertising, self-promotion and the creation of attorney-client relationships, just to mention a few.
There is nothing inherently wrong with the ABA reviewing the rules. But, sole and small firm practitioners are fearful that the ABA will not stop at merely a "review." And, as Carolyn Elefant so eloquently pointed out, the members of the task force/commission that are reviewing the impact of the social media are, themselves, devoid of any personal experience with the media. That would be like someone with no newspaper experience at all seeking to create rules of procedure for the newspaper industry. Or someone with no automotive experience trying to design a car.
Here, the case can be made that there are now rules on the books; more are not needed.
Strange how this discussion takes me back to the conversation about the Bar preventing lawyers from taking retainers to do loan modification and loan foreclosure prevention work. Who does the Bar represent anyway? Ah, but that's another question for another day.
I'm seeking to connect with lawyer(s) who either did or are currently doing loan refinance work for homeowners. In some states, the bar and/or legislature has created regulations preventing lawyers from taking money from clients for this work in advance of completing the work.
I've written about this and now have a major newspaper interested in talking with such lawyers to inquire whether such work is still available and how the lawyer is handling the fee.
Please contact me directly at firstname.lastname@example.org
There is a great deal of heat generated thus far over the ABA looking into the issues of internet marketing/advertising/promotion ... They have not overtly yet taken a position, only solicited commentary for the ethics commission to consider.
Yet, many bloggers and commentators believe that the ABA is seeking to destroy the marketing advantage gained in the social media by sole and small firm practitioners.
The mood of the country, as seen in the recent election, appears to be that less is more. (Though I believe that that is true only as an electioneering slogan -- just wait until "they" get into power.) Translating that feeling, though, into the legal world and we want fewer rules to regulate our conduct.
Yes, there are enough rules already on the books to protect the innocent and govern the "guilty." But, new technology does require a new look ... perhaps even a loosening of the current ad hoc rules. Frankly, I'd rather have the ABA review these issues than the many states who tend to take a far more restrictive stance than does the ABA.
A recent article in WSJ suggests that "Women in Finance Shrink." It's clear that women up for reelection may not all win their elections, thus reducing the number of women in Congress. And law firms have difficulty retaining women as they become more senior...and, proportionately, women are not advancing in the ranks of management as high or as quickly.
Are we losing gains made in earlier years? Were those gains only superficial? Or have we arrived at the point where gender is irrelevant?
I was wondering how long it would take?
Sarah Martinez, a recent law school grad, broke the ice. She has sued Howard, Rice, Nemerovski, Canady, Falk & Rabkin in San Francisco Superior Court for extending her an offer of employment, deferring it and now reneging, saying it didn't have the resources to hire anyone in the near future. Among the counts alleged are racial discrimination, sex discrimination, and breach of contract.
While every case stands on its own facts and merits, it's clear that Big Law will have to alter its offering policies in the future. The impact on law schools and those coming up through the grades is yet to be determined, but I suspect it will dramatically alter the economics of the future practice.
A major player in the IP field announced that its merger plans with another IP firm have been called off. The assertion is that there were conflicts issues with one major client that could not be resolved and the client would not waive the conflict. While I may be dubious about the veracity of this assertion, sitting on the outside, it does happen.
But, then the firm announces that "... the downturn in patent litigation persists, with fewer cases being filed and more settling earlier.... (C)ases coming in are smaller with tighter budgets and leaner staffing expectations...." And this results in firings/terminations/layoffs (say it anyway you want, the people are gone) of lawyers and staff. In other words, the troubled economy is still having its impact on law firms.
So far, so good. But, then the firm also announces that it sees an increase in patent prosecution, counseling and reexamination work, particularly in the electronics and software practice and the firm will hire first-year associates. Again, from the outside, it looks like the firm is firing experienced lawyers who get paid 3X and will hire first year associates who will get paid 1X. You fill in the numbers. When industry does this, it's called "age discrimination." It may also be called "stupid" because it negatively impacts the morale of the organization ... and you don't build a loyal, cohesive and capable workforce by seeking the least expensive team members. Why couldn't the firm offer the presumably lower paying jobs to the experienced folks? In this economy, they might not like it, but they'd rather stay employed and working with colleagues they know and like and trust. And, the organization will look like a caring place to work, making needed economic changes but also sensitive to the needs of its current work force.
Just seems to me to be a better way to do things. And, at the very least, the PR ineptness of these announcements coming on the heels of one another is just astounding.
I've talked about internships for lawyers. We've discussed articling in Canada. And now I find out that the State of Georgia has a mandatory mentoring program for brand new lawyers. Perhaps we're not so far away from the internship process. On the other hand, since Georgia has been working this path for quite a few years and others have yet to follow, perhaps it's still a pipe dream that even the current recession won't make happen at either the law school or Bar level. It may still take the combination of law firms and client demands to create an effective post-law school education program for learning how to become a lawyer.
Law practices sometime serve up challenges. With forethought (plan) and some courage (and, yes, good fortune), we can meet and overcome the challenges we face … and thrive. Here, at the Golden Gate Bridge, we had some challenges, from heavy fog on the Bridge to narrow passages to navigate on the Vista, returning to the highway under the Bridge. While the fit was snug, we did just fine. In this case, there was no plan, some courage and, yes, good fortune.
As in many instances, including the operation of your law firm, thriving is the intersection of preparation (hard work) and good fortune. We had that on this day. What are you doing in your practice to prepare for your future?
Today, I had a discussion with a very bright individual who is seeking new office quarters. He was having difficulty with the math, so he thought. He was seeking to understand the interplay between basic rent, common area charges (charges for maintenance, taxes, etc. that the landlord assesses at the end of each lease year to cover the cost of operating the building, paid pro rata by each tenant), and his actual cost of occupancy (total actual rent!).
I suggested that he walk away from this bottom down thinking. Instead, I suggested he look at the situation bottom up, and get his real estate broker involved to earn his keep.
First, figure out what you want to pay for monthly and/or annual rent. You can do this in a number of different ways. You can say that historically I've earned X% profit on Y number of revenue dollars; when I move into new quarters, I will earn more revenue because (better facilities, closer to prospective clients, larger space to hire more staff, etc.) and therefore, with the same percentage for occupancy cost, I can pay more .... and that number is $X.
Or you can say my revenue is likely to stay the same even after the move (or I'm not sure and I want to be conservative) ... and don't want to pay more than the same rent I'm paying now. That number is $X.
With that number in mind, tell your broker to find you the space you require (with the specifications you want) for that amount. Don't worry what words are used, whether base rent or common area charges, etc. The lease contract must state that the maximum annual rent will be $X.
If the broker says that you can find plenty of space for that amount, great; if he says you're crazy, there is no space for that amount, then you have choices to make: Work harder, work smarter to earn more revenue/profit to pay the higher rent, reduce your profit and take-home pay, or join forces with another to share the space and cost of the space.
But, don't let others dictate how you should think. Don't let the system force you into a thinking pattern that will confuse you or prevent you from knowing what your cost of operation will be.
While I was in Yreka, CA, I learned about The State of Jefferson. This was a political movement in the late 1930s. The focus of the movement was to create a new state out of southern Oregon (dissatisfied with the power of northern Oregon) and Northern California (wanting to keep its riches - water) out of the greedy hands of Southern California.
Pearl Harbor, December 7th, 1941, put an end to this effort. The entire effort of everyone was turned to the War ... Though I didn't know about this group, they surfaced again in the early 1960s, if not earlier. It was Pat Brown, the greatest governor (IMHO) California ever had. It was his focus that built the University of California into a powerhouse, and it was he that successfully lead the Feather River project on the ballot. This assured that water from the north would flow into southern California. This brought water for the farmers in the area as well as the growing population. With water connecting the State, there is very little likelihood the two segments will be separated at any time.
But, the State of Jefferson is still a state of mind. There are many folks who would like to see the separation. But there is no consensus. So, it appears to be more of an historical society.
In working with your clients, are you separate from them? Or are you able to create an inseparable bond, as Governor Pat Brown did for the people of California?
As quoted by Alan Weiss, citing an IBM survey, CEO's focus on three elements:
1. Embody creative leadership (take prudent risk, invite disruptive innovation)
2. Reinvent customer relationships (set priority of customer intimacy)
3. Operating dexterity (flexible cost structures and opportunistic capabilities)
Shouldn't this be what law firms do? Take prudent risk to grow the practice and enhance the well-being of its members and staff; focus their energies outward, to benefit their clients, which would include both pricing and costing flexibility.
Too often, law firms are all about their lawyers, and they forget the well-being (intimacy) of their customers/clients.
I've just talked with two legal industry "executive search" recruiters. They have never been busier in the last 5 years! And quality laterals are being sought!
That tells me that the economy is in recovery mode; that lateral partners are still being pruned from large law firms; that partners are getting tired of the politics in larger law firms where they see no rational basis for decisions being made that may very well impact their economic future; and that most law firms have yet to act as enterprises rather than as hotels for sole practitioners. Laterals with good books of business can just as easily move to another firm that will provide them with a larger umbrella and greater opportunity ... or even start their own boutique law firm.
This further suggests that while the economy has forced changes in law firms, the sea change some discuss hasn't yet taken place ... and may never. As I've said before, we're in an evolutionary, not revolutionary, mode. Write me with your thoughts and experiences on this.
Save the date! The Midwestern Law Firm Management Conference will be held in Chicago on September 21st and sponsored by West ... Save the date! And plan to attend at the Chicago Bar offices.
With John Wooden's passing, we have lost a true friend. While countless accolades have been heaped on him for his basketball genius, Coach Wooden was, in essence, a teacher, revered for his refreshingly pure and simple principles. These values guided everything he did, from developing young players into contributing and principled adults, to motivating executive teams to work together toward a higher purpose.
Coach's Pyramid of Success is a foundation for a balanced and generous life in full, and his passion in later life was to help educate people in these principles. We are blessed that Coach Wooden's commitment to developing and nurturing the next generation of leaders continues through the John Wooden Global Leadership Program, which he chose to locate at UCLA Anderson. A hallmark of the program is the annual John Wooden Global Leadership Award bestowed on an inspiring CEO who embodies Coach's values.
The UCLA Anderson website now features a compilation of videos of Coach's discussions on leadership at the John Wooden Global Leadership Awards, and with students and alumni, as well as an opportunity to express your thoughts about Coach Wooden and his leadership teachings. UCLA has also created a website in tribute to Coach Wooden, with an extensive collection of video and commentaries from players and many others who knew him.
A Texas law firm lost its defense against a lawyer whom it hired. The plaintiff worked for another law firm and was lured away based on alleged representations of the future of the firm and the collegiality of its founding partners.
In today's economic turmoil with an increase in lateral movement, does this mean there will be an increase in litigation from dissatisfied lawyers claiming negligent misrepresentation when their compensation is less than desired?
As my mother used to say, be careful what you sow - it impacts what you reap. If you encourage a lateral move and it produces less than outstanding results for all concerned, can you expect to be sued? And, depending on how you do entice the move, are you at risk of being sued by the first law firm for interference with contractual relations?
We may be encouraging a new specialty in the law ... lawyers who sue law firms for something other than legal malpractice!
I had the pleasure of keynoting a recent conference sponsored by LexisNexis. During a panel discussion among practitioners, technology consultant and myself, the topic of the cost of new technology was discussed. One of the suggestions I made was that the successful law firm of the future will use technology to create and enhance its effort at knowledge management. The firm that is able to retrieve its pre-existing knowledge and use it again will be more efficient, reduce its costs and therefore provide excellent results for clients at a lower price.
Then, the question arises: Who owns the knowledge, who owns the forms, the precedent knowledge? Does the client who paid for it own it? Does the law firm own it? Or does the lawyer who created it own it? This becomes more important in an age of greater lateral movement.
Some clients have as a condition of engagement that they (the client) own the intellectual property ... and that the law firm must share it with other law firms who handle the client's affairs (e.g., product liability litigation) in other parts of the country.
Do you have a firm policy on this? What do you do concerning your intellectual property when a lawyer leaves your firm? Is your policy different when the lawyer is a partner as contrasted to when the lawyer is an associate?
Join us on LawBiz Forum in the discussion about legal education and the current reexamination of its efficacy for teaching management skills for success. Will the law school tumble into the morass of being a trade school (heaven forbib!) by including such skills in its curriculum? Let us know what you think ...
If you're a golf fan, you've just witnessed an outstanding competition. Whether you support Tiger Woods or are turned off by his personal challenges, you have to admit that he causes the sport of golf to be viewed by many more people than when he's not playing.
I just read an article about a study that suggests that other golfers do not play to their potential when Tiger plays because they think he will win the tournament. Rather than the competition bringing out the best of everyone, others seem to do worse, giving up before they begin.
And, the same is true in law firms ... when associates "give up," believing the "star associate" will get the prime assignment. This is counter-intuitive to me. What has been your experience?
West Pub. Co. has announced the pre-release offering for my new book, Growing Your Law Practice in Tough Times.
I'm very excited about the new book ... and encourage you to take advantage of West's offer. You can also see the new offering at LawBiz.
Doctors, like lawyers, have little or no business education in medical/law school. Today's Wall Street Journal (Education for Executives) discusses doctors journey back to school (business) in order to learn skills that were omitted from their medical education. They need these skills in order to run their medical practices, medical groups and hospitals.
Doctors outreach for management training demonstrates a recent shift in thinking: "...we are much more similar to other businesses that we are different." Taking the business side of medicine more seriously can benefit not only doctors, but also patients, a fact slowly being understood in the medical profession.
Why is it that doctors are ahead of lawyers in this understanding? Why is it that medical schools are incorporating management principles into their teaching and few, if any, law schools do? Why is it that lawyers continue to be reactive, rather than be proactive? Worse still, why is it that lawyers fail to react to their clients wishes? Bar disciplinary proceedings continue to show that more than 50% of clients' complaints relate to poor management practices. Why?
It's reported in today's Los Angeles Business Journal that SBA loans have evaporated. "Banks really are stingy..." is the headline. Small Business Administration guaranteed loans, funded by banks, have fallen by 53% from the 2008 level, a year in which the number of loans also decreased from the preceding year. This is further evidence that banks' credit for business and for real estate ventures has been dried up. With TAARP money going to make financial institutions healthier rather than a stated purpose of loosening credit strings to jump start employment and business activity, the financial executives just don't get it. They wonder why Main Street is upset with them as they sit back and take large bonuses; if they also were to spend the funds to help as intended, I suspect the American people would not be so upset. Also, in U.K. where there will be a 50% tax on bonuses. Wow. Wake up Wall Street and bankers before we tumble backward ...
Law firms seeking either an extension or increase in their lines of credit are walking in this same environment. It's tricky, at best, and possibly disastrous. Creating and enhancing a good working relationship with your banker is even more critical in these times. That's the point I make in my book, The Successful Lawyer Client Relationship: A LawBiz Special Report. Just as lawyers are being told to create a "partnership" with clients, so, too, they should create a "partnership" with their banker. This will pay dividends.
Regular readers may recall my strong belief that young lawyers do not learn in law school the fundamentals of what they should know to practice law. In contrast to doctors (who put in years of residency, hospital and clinic work, and other apprenticeship before they begin their own practices), young lawyers begin their professional careers with little hands-on experience in “The Business of Law”® or practical client service. The result far too often is unhappy lawyers, unhappy law firms and unhappy clients as the young lawyers try to learn in “the school of hard knocks” what law schools did not teach them.
I’ve written about many possible models to provide this training – articling programs in
Especially interesting were a number of other ideas that the survey participants suggested. These practicing lawyers had some excellent thoughts on the type of training that would benefit those entering the profession:
· Work at a company under the direction of an in-house lawyer (admitted to practice in the state where the work is done) with management responsibility within the legal affairs department.
· Externships at government agencies such as the SEC, state securities commissioners, the Patent and Trademark Office, state corporations departments, state revenue departments, state legislatures and accounting/audit firms of a certain size.
· Law school placement of third year students in extern programs, with the success and extent of the placement becoming a major criterion in evaluation of the school’s performance by U.S. News & World Report, Barron’s and others that evaluate law schools.
· Requiring that all law school graduates who pass the bar exam serve an apprenticeship program under the direct supervision of a member in good standing of the bar who shall, at the conclusion of the apprenticeship, attest to the legal proficiencies of the new lawyer and recommend to the state bar that the apprenticeship be considered successfully concluded
· Turning the third year of instruction in law school into an apprenticeship program, replacing the courses that are taken in the final year just to fill out the time
If you have other ideas, I’d welcome hearing them. Perhaps together we can begin a groundswell of opinion in which real lawyers, rather than just law school professors, have a say in legal education.
Yesterday, a jury rendered a unanimous verdict in a very much watched criminal trial in Los Angeles Superior Court. This wasn't so spectacular as the O.J. Simpson trial, but to those involved, it was equally dramatic.
The courtroom gallery was filled to capacity Monday as a jury of seven women and five men announced it had convicted former emergency room doctor Christopher Thomas Thompson of assaulting a pair of cyclists last year by abruptly stopping his car in front of them. The jury found that Dr. Thompson ignored the rules of his profession and allowed road rage against cyclists in general to get the better of him in attacking two cyclists in particular. He will now pay the penalty.
So, too, lawyers must share the road ... involve staff and clients in the development of strategy and implementation of tactics in order to provide the best and most effective representation for the client. As I said in another context, there is no "I" in Team ... and teams almost always achieve better results.
It’s always gratifying when one’s opinions receive outside support. Sometime ago, I wrote that law schools really don’t teach the day-to-day aspects of being a lawyer – interacting with clients and running a practice – because such skills are seen as too “trade-oriented.”
That viewpoint was echoed in a Wall Street Journal column by Cameron Stracher, professor at the New York Law School. Stracher observed that law school students are “reading about the law rather than engaging in it,” with the result that “when they graduate, young lawyers rarely know how to interview clients, advocate for their positions, negotiate a settlement or perform any number of other tasks that lawyers do every day.”
What especially struck me in Stracher’s column, as I noted in previous writings, was the observation that, until our modern era, most lawyers learned their profession by apprenticing themselves to practicing lawyers, learning from them by watching and doing. It brought to mind the difference between the way lawyers and doctors are trained. Doctors, of course, put in years of residency as part of their training. They work in hospitals and clinics, treat patients, observe other doctors as they go on their rounds. Most doctors begin their medical careers with a very good idea of what they will face.
A number of larger law firms have or are creating education programs for their new, and even some continuing, associates. Just this morning, I learned from an “alumna” of the former Thacher law firm that she enjoyed her time with Big Law because this firm believed in continuing education for its associates. Also, Howrey recently announced the creation of an apprentice program for all of its new associates, rather than delaying their new hires as other large firms have done. And, in both Canada and England, there is a tradition of “articling,” very similar to an apprentice program. In other professions, such as accounting, an apprenticeship is required before granting the Certificate. There are other examples.
Should we return to an apprentice system for law school graduates before licensing them as lawyers? What's your opinion? Click here to take our short survey. Our survey will end at midnight, November 11th.
Today, I talked with a solicitor from London who is studying knowledge management and its implementation in UK firms to increase profits. Since much of their work is based on fixed fees, any improvement in efficiency will go directly to the bottom line.
They even employ a group of lawyers whose primary function is to improve their knowledge base, organize it and make it more searchable, all with the view to reduce the time needed to create documents for a new transaction and increase the margins of profit. These lawyers do not engage with clients; their focus is on the infrastructure of the firm and its improvement.
Since her firm (she says most are like hers) uses only the fixed fee billing model, there is no focus on the billable hour; this, then, allows the focus to be on efficiency. Thus far, American law firms do not use this model much ... and thus their focus on cost cutting today is primarily because of the decrease in demand they've experienced from the crises of their clients. That is a far cry, however, from having a focus on efficiency ... Cost cutting and efficiency are not necessarily the same.
An interesting contrast presented today by the solicitor: Increased profit by increased efficiency under a fixed fee engagement agreement. While the American law firm model is increased profit by incresing the hourly billing rate. As clients begin to revolt at annual price increases, American law firms will need to look at alternative fee arrangements to keep clients ... then, their focus might turn to efficiencies in the delivery of those services.
My wife is fond of say, "there is no free lunch." The fixed fee approach is not necesarrily a panacea for profitability. With a fixed fee, there is the inevitable pressure to reduce that fee and squeeze the firm's profit margins. It's an easier target than is the billable hour (where the number of hours can be fudged without much challenge). But, that's another story for another day.
There's much talk about the end of the billable hour. Because it's easy to administer, it will be stay around so long as clients accept it.
This highlights the difference between the large firms and others. The large firms deal with large clients ... who have purchasing power others don't.
The real question is not whether large firms will accept this new way of billing/pricing, but rather whether small firms will create a laundry list of unbundled services and fixed prices/fees. If they all do, then the consumer of these services may ultimately have more power ... by walking among lawyers to opt for the least expensive ... Until then, there are few ways, if any, for the consumer to make price comparisons among small firm or sole practitioners.
If they all don't, my prediction is that the billable hour will remain as the last vestige of a maturing legal community. On the other hand (said like a true lawyer), perhaps some will break with tradition and create that laundry list in order to differentiate their law practice from others ... and urge clients to come to them so they can know, in advance, what their cost exposure will be and so they can budget for their legal cost.
Where do you think your firm is headed? ... to undbundle and create fixed fees as in a laundry list ... or retain the billable hour? Please comment with your prediction.
A recent quote from Associated Press: "The economic downturn has meant less work for law firms, fewer experienced attorneys leaving jobs and thousands of lawyers laid off. From August 2008 to August 2009, total law office employment fell by nearly 26,000 jobs, a mere 2 percent but striking for an industry accustomed to constant growth."
Of course, these figures ignore the larger impact on the profession: small law firm lawyers who are being laid off, sole practitioners and small firm lawyers who are experiencing lower demand for their services and law school graduates who are not finding work in any size law firm.
Just today, I met someone who, in frustration, said to me that he’s a college graduate, yet has to sell vacuum cleaners. Will today’s lawyers find themselves in a similar state? How can today's law graduates who don't find immediate work and lawyers who have been laid off take advantage of their legal education and still feel good about their vocation?
I do believe times will be better. But, having gone through the last great meltdown after the Vietnam war, I believe it will take more than ten years to forget the current recession/depression ... For some, there are great opportunities even today; for others, adjustments will be needed, and the passage of time.
I was asked the other day whether I've seen an increase in lawsuits against law firms for the layoffs, firings and terminations ... or for postponing start dates for recent graduates that were "hired." What has been your experience?
Such lawsuits may not yet have surfaced; it takes awhile for the public to be aware of such litigation ... and statistics are hard to come by. I haven't seen any evidence of increased litigation. There seems to be enough problems for all concerned without adding the specter of litigation.
Bullies cost you money! Addressing this topic is not a "soft skill" but one that goes right to the "bottom line." Tolerate bullying in the workplace and you will experience lost time, lost ncentive and lost resources when skilled staff take time off from work, lose motivation or suffer stress burnout and leave the job for another. The cost to business is in the billions of dollars annually.
The converse is true. Creating a culture of collegiality, cooperation and teamwork creates enhanced performance, greater successes and even higher profits.
Bullying, by definition, is unwelcome behavior including unwarranted or invalid criticism, exclusion and isolation, being singled out and treated differently, and being humiliated in front of others. One study shows that younger women suffer bullying at the hands of older women ... but this phenomenon is not limited to women ... and sexual harrassment is only one aspect ...
Male clients find often find that how they respond to the bullying tactics of their male superiors is a critical feature of whether they succeed in the law firm and whether they make partner or are asked to leave. Irrespective of how they deal with bullying tactics such as imposition of unreal time deadlines and nitpicking of their draft documents, the psychological toll on the lawyer is humongous ... including stress in their home life.
In one such experience, I helped a client negotiate his way with the supervising partner through a particularly stressful project. On its conclusion, I suggested that he stop on the way home to buy flowers for his wife. I explained that his wife had been a "passenger" through his recent difficulties ... and that since he had come out the other side successfully, he needed to share some of the good times with her ... She had supported him without knowing the details and deserved recognition for her efforts. He later reported that his consideration was a huge success!
Had the firm's culture not tolerated this bully, their productivity and profitability and bonding would have been significantly higher.
Yes, bullying is exaggerated in times of recession and credit crunch, if allowed ... But, it need not be.
In a suit, Williams & Connolly, a D.C. law firm, is seeking payment of more than $2 million in legal fees. The client and law firm apparently resolved their differences and created a payout plan, with the client pay 1/3 of the amount ... and now refusing to pay the balance or 2/3 remaining amount.
What makes this case more interesting is that a resolution of the fee dispute was achieved. And later, the client refused to honor the settlement agreement. The client ostensibly believes it can harrass the law firm and then settle again for a lesser amount.
Questions for the law firm:
1. Why did you allow fees to get so high in the first place? Collections should have been more aggressive.
2. Did you have a budget for the litigation for the client that the client accepted ... or was nothing said about the extent of the legal services to be delivered?
3. Was the size of the legal fee a surprise to the client?
4. Why didn't you fire the client before $2 mil?
5. Why didn't you get security for payment of the settlement amount, such as a stipulated judgment in the event of a default or other guarantee such as a letter of credit?
Someone was asleep at the switch...both during intake and during the representation ... and seemingly also at the negotiation for settlement of the fee dispute.
News about the health care reform package is getting more interesting. As we get closer to a vote of some kind, the identities of the players and respective positions are becoming more clear.
In today's analysis, the drug companies are joyous. If universal health care is adopted, the pharmaceutical industry benefits ... with more folks insured, more drugs will be prescribed that will be covered by insurance ... to their benefit. However, insurance companies will hurt a bit ... no one is yet sure how much. With more people insured, their costs presumably increase. With the right to maintain - retain insurance despite the loss of employment, COBRA income goes down. With prior medical history being irrelevant for coverage, insurance carriers will have to take on some risks they would have eschewed earlier. Hmmmm. Sounds a bit like mandatory auto insurance. The details are not so significant to the ideas here and certainly not to some of the stakeholders. Can you name them all?
In your law practice, even if a sole practitioner, can you name all of the stakeholders? How do you seek to reconcile the differences among all of your stakeholders? As I mentioned in an earlier article, providing value is the name of the game in today's world. And how much more value could you provide with the stakeholders on "the same page," all working together for you and the same goal? And with that, how much more profitable would your firm be -- how much more income would you receive -- if you could create harmony among your various stakeholders .... such as clients, associates, staff, assistants, et al.?
Is the big firm salary model broken? That's the topic addressed by Michelle Lore in the Minnesota Lawyer. Associate pay is only one of many areas of cuts in expenses that law firms are reviewing. In our Managing Partners Roundtable, just yesterday, large law firm managing partners said that they are now "lean." They have cut all the "fat" or excess expenses they can, some of which have become evident in 2009 and others which will show up first in 2010 results.
What will the law firm model of 2010 look like? Or will law firms ignore the lessons of 2007-2008 and seek to go back to "normal" as the economy turns around? "Head in the sand" approach usually doesn't work for long term success.